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<SEC-DOCUMENT>0000891092-01-500184.txt : 20010516
<SEC-HEADER>0000891092-01-500184.hdr.sgml : 20010516
ACCESSION NUMBER:		0000891092-01-500184
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20010331
FILED AS OF DATE:		20010515

FILER:

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

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	333-64641
		FILM NUMBER:		1638387

	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
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>FORM 10-Q
<TEXT>


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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

      (Mark One)

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

                  For the quarterly period ended March 31, 2001

                                       OR

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

             For the transition period from _________ to __________.

                        Commission File Number 333-64641

                                   ----------

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

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

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

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

                                   ----------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                  Yes |X|                             No | |

Number of shares of each class of common stock outstanding as of May 1, 2001:

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


<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.

                                TABLE OF CONTENTS

                                                                          Page
                                                                          ----

PART I    FINANCIAL INFORMATION (UNAUDITED)

      Item 1. Condensed Financial Statements 3
              Condensed Consolidated Balance Sheets ....................   4

              Condensed Consolidated Statements of Operations
                and Comprehensive Income ...............................   5
              Condensed Consolidated Statements of Changes in
                Stockholders' Equity ...................................   6
              Condensed Consolidated Statements of Cash Flows ..........   7
              Notes to Condensed Consolidated Financial Statements .....   8

      Item 2. Management's Discussion and Analysis of Financial

              Condition and Results of Operations ......................  22
      Item 3. Quantitative and Qualitative Disclosures
                About Market Risk ......................................  27

PART II OTHER INFORMATION

      Item 5. Other Information ........................................  28
      Item 6. Exhibits and Reports on Form 8-K .........................  28

SIGNATURES .............................................................  29


                                       2
<PAGE>

This Form 10-Q  contains  "forward-looking  statements"  within  the  meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain factors that might cause such a difference are discussed throughout this
Form 10-Q and are  discussed  in Item 2 of Part I of this  Form  10-Q  under the
caption "Certain Factors Affecting Future Operating Results." Unless the context
otherwise  requires,  references in this report to the  "Company"  refers to the
Company and/or one or more of its subsidiaries, as applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Financial Statements


                                       3
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                        March 31,             June 30,
                                                                                           2001                 2000
                                                                                        ---------            ---------
                                     Assets
<S>                                                                                     <C>                  <C>
CURRENT ASSETS:
   Cash and cash equivalents ......................................................     $  15,084            $   2,403
   Trade receivables, less allowance for doubtful accounts of $869
     at March 31, 2001 and $756 at June 30, 2000 ..................................        79,626               79,376
   Other receivables ..............................................................         4,829                8,479
   Inventories ....................................................................       102,289               50,405
   Prepaid expenses and other current assets ......................................        14,100                9,098
                                                                                        ---------            ---------
   TOTAL CURRENT ASSETS ...........................................................       215,928              149,761
PROPERTY, PLANT AND EQUIPMENT, NET ................................................        98,204               76,180
INTANGIBLES .......................................................................         6,049                6,297
OTHER ASSETS ......................................................................        27,867               26,213
                                                                                        ---------            ---------
                                                                                        $ 348,048            $ 258,451
                                                                                        =========            =========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Cash overdraft .................................................................     $   4,805            $   2,120
   Loans payable to banks .........................................................        62,900                8,650
   Current portion of long-term debt ..............................................         3,639                2,296
   Accounts payable ...............................................................        38,735               32,642
   Accrued expenses and other current liabilities .................................        36,367               24,157
                                                                                        ---------            ---------
     TOTAL CURRENT LIABILITIES ....................................................       146,446               69,865

LONG-TERM DEBT ....................................................................       131,690              139,722
OTHER LIABILITIES .................................................................        10,478               13,282
                                                                                        ---------            ---------
     TOTAL LIABILITIES ............................................................       288,614              222,869
                                                                                        ---------            ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SECURITIES:
   Series B and C preferred stock .................................................        47,250                   --
   Common stock ...................................................................         1,226                3,513
   Common stock of subsidiary .....................................................            95                  451
                                                                                        ---------            ---------
     TOTAL REDEEMABLE SECURITIES ..................................................        48,571                3,964
                                                                                        ---------            ---------
STOCKHOLDERS' EQUITY:
   Series A preferred stock .......................................................           521                  521
   Common stock ...................................................................             2                    2
   Paid-in capital ................................................................           878                  878
   Retained earnings ..............................................................        16,780               32,808
   Accumulated other comprehensive loss ...........................................        (7,318)              (2,591)
                                                                                        ---------            ---------
     TOTAL STOCKHOLDERS' EQUITY ...................................................        10,863               31,618
                                                                                        ---------            ---------
                                                                                        $ 348,048            $ 258,451
                                                                                        =========            =========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                       4
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF
                 OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
                                 (In Thousands)

<TABLE>
<CAPTION>
                                              Three Months Ended         Nine Months Ended
                                                   March 31,                 March 31,
                                              2001          2000         2001         2000
                                            --------      --------     --------     --------
<S>                                         <C>          <C>          <C>          <C>
NET SALES ...............................   $ 102,203    $  79,443    $ 255,329    $ 226,661

COST OF GOODS SOLD ......................      75,312       57,934      188,912      163,992
                                            ---------    ---------    ---------    ---------
   GROSS PROFIT .........................      26,891       21,509       66,417       62,669

SELLING, GENERAL AND ADMINISTRATIVE
   EXPENSES .............................      25,575       18,856       66,083       55,887
                                            ---------    ---------    ---------    ---------
   OPERATING INCOME .....................       1,316        2,653          334        6,782

OTHER:

   Interest expense .....................       5,183        3,777       13,202       10,765

   Interest income ......................          16         (292)        (387)        (467)

   Other expense, net ...................       1,137          743        1,234        2,778

   Gain from property damage claim ......          --         (550)          --         (550)

   Gain from sale of asset ..............          --      (14,195)          --      (14,195)
                                            ---------    ---------    ---------    ---------
   (LOSS) INCOME BEFORE INCOME
      TAXES .............................      (5,020)      13,170      (13,715)       8,451

(BENEFIT) PROVISION FOR INCOME
  TAXES .................................      (1,171)       3,687       (4,129)       1,699
                                            ---------    ---------    ---------    ---------
   NET (LOSS) INCOME ....................      (3,849)       9,483       (9,586)       6,752

OTHER COMPREHENSIVE (LOSS)

   Loss on derivative instruments .......        (168)          --           --           --

   Change in foreign currency translation
     adjustment .........................      (3,955)      (1,087)      (4,727)        (177)
                                            ---------    ---------    ---------    ---------
   COMPREHENSIVE (LOSS) INCOME ..........   $  (7,972)   $   8,396    $ (14,313)   $   6,575
                                            =========    =========    =========    =========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                       5
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                        STOCKHOLDERS' EQUITY (Unaudited)
            For the Three Months and Nine Months Ended March 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
                                           Preferred Stock    Common Stock                   Accumulated
                                           ---------------   -----------------                  Other
                                                 Class       Class     Paid-in   Retained   Comprehensive
                                    Series A      "A"         "B"      Capital   Earnings   Income (loss)    Total
                                    --------    --------    --------   --------  ---------  --------------  --------
<S>                                  <C>         <C>         <C>        <C>        <C>         <C>          <C>
BALANCE,
   JULY  1, 2000 ................    $    521    $      1    $      1   $    878   $ 32,808    $ (2,591)    $ 31,618
   Foreign currency
     translation adjustment .....                                                                (1,161)      (1,161)
   Net loss .....................          --          --          --         --     (3,119)         --       (3,119)
                                     --------    --------    --------   --------   --------    --------     --------
BALANCE,
   SEPTEMBER 30, 2000 ...........    $    521    $      1    $      1   $    878   $ 29,689    $ (3,752)    $ 27,338
                                     ========    ========    ========   ========   ========    ========     ========
   Accretion of redeemable
     preferred securities to fair
     market value ...............          --          --          --         --     (4,192)         --       (4,192)

   Dividends on series B and C
     redeemable preferred stock .          --          --          --         --       (563)         --         (563)
   Gain on derivative
     instruments ................          --          --          --         --         --         168          168

   Foreign currency translation
     adjustment .................          --          --          --         --         --         389          389

   Net loss .....................          --          --          --         --     (2,618)         --       (2,618)
                                     --------    --------    --------   --------   --------    --------     --------
BALANCE,
   DECEMBER 31, 2000 ............    $    521    $      1    $      1   $    878   $ 22,316    $ (3,195)    $ 20,522
                                     ========    ========    ========   ========   ========    ========     ========
   Dividends on series B and C
     redeemable preferred stock ..         --          --          --         --     (1,687)         --       (1,687)

   Loss on derivative
     instruments ................          --          --          --         --         --        (168)        (168)

   Foreign currency translation
     adjustment .................          --          --          --         --         --      (3,955)      (3,955)

   Net loss .....................          --          --          --         --     (3,849)         --       (3,849)
                                                                        --------   --------    --------     --------
BALANCE,
MARCH 31, 2001 ..................    $    521    $      1    $      1   $    878   $ 16,780    $ (7,318)    $ 10,863
                                     ========    ========    ========   ========   ========    ========     ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                       6
<PAGE>

                PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                For the Nine Months Ended March 31, 2001 and 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                          2001        2000
                                                                        --------    --------
<S>                                                                     <C>         <C>
OPERATING ACTIVITIES:
   Net (loss) income ................................................   $ (9,586)   $  6,752
   Adjustments to reconcile net (loss) income to net cash provided by
      (used in) operating activities:
      Depreciation and amortization .................................     10,256       9,223
      Gain from property damage claim ...............................         --        (550)
      Gain from sale of asset .......................................         --     (14,195)
      Other .........................................................     (2,038)     (3,258)
      Changes in operating assets and liabilities:
        Accounts receivable .........................................      1,138       5,165
        Inventories .................................................     (1,202)    (10,779)
        Prepaid expenses and other current assets ...................        854         184
        Other assets ................................................     (3,165)       (805)
        Accounts payable ............................................      5,683      (2,520)
        Accrued expenses and other current liabilities ..............       (360)         (8)
                                                                        --------    --------
        NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .........      1,580     (10,791)
                                                                        --------    --------
INVESTING ACTIVITIES:
   Capital expenditures .............................................    (10,326)    (13,921)
   Acquisition of a business ........................................    (51,700)         --
   Proceeds from property damage claim ..............................         --         872
   Proceeds from sale of assets .....................................         37      18,700
   Other investing ..................................................       (494)     (3,000)
                                                                        --------    --------
        NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES .........    (62,483)      2,651
                                                                        --------    --------
FINANCING ACTIVITIES:
   Cash overdraft ...................................................      3,344       1,845
   Net increase in short-term debt ..................................     25,485       2,076
   Proceeds from long-term debt .....................................      1,578      19,249
   Proceeds from issuance of redeemable preferred stock .............     45,000          --
   Payments of long-term debt .......................................       (836)    (11,414)
   Other financing ..................................................       (942)         62
                                                                        --------    --------
        NET CASH PROVIDED BY FINANCIAL ACTIVITIES ...................     73,629      11,818
                                                                        --------    --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .............................        (45)         --
                                                                        --------    --------
        NET INCREASE IN CASH AND CASH EQUIVALENTS ...................     12,681       3,678

CASH AND CASH EQUIVALENTS at beginning of period ....................      2,403       2,308
                                                                        --------    --------
        CASH AND CASH EQUIVALENTS at end of period ..................   $ 15,084    $  5,986
                                                                        ========    ========
</TABLE>

       See notes to unaudited Condensed Consolidated Financial Statements


                                       7
<PAGE>

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

1. General

      In the  opinion  of the  Company,  the  accompanying  unaudited  condensed
consolidated  financial  statements contain all adjustments  (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
as of March 31, 2001 and the results of operations  and cash flows for the three
months and nine months ended March 31, 2001 and 2000.

      The condensed  consolidated  balance sheet as of June 30, 2000 was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting  principles.  Additionally,  it should be noted
that the  accompanying  condensed  consolidated  financial  statements and notes
thereto have been prepared in accordance with accounting  standards  appropriate
for  interim  financial   statements.   While  the  Company  believes  that  the
disclosures  presented are adequate to make the information contained herein not
misleading,  it  is  suggested  that  these  financial  statements  be  read  in
conjunction with the Company's  consolidated  financial  statements for the year
ended June 30, 2000.

      Certain  prior year  amounts in the  accompanying  condensed  consolidated
financial  statements and related notes have been reclassified to conform to the
fiscal 2001 presentation.  Such reclassifications  include a reclassification of
customer rebates of $1,132 and $3,561 for the three months and nine months ended
March 31, 2000, respectively,  from selling, general and administrative expenses
to net sales on the  consolidated  statements  of operations  and  comprehensive
income,  as a result of the adoption of the Emerging Issues Task Force Issue No.
00-14 "Accounting for Certain Sales Incentives."

      The Company adopted  Statement of Financial  Accounting  Standards No. 133
"Accounting  for Derivative  Instruments and Hedging  Activities"  (SFAS 133) on
July 1, 2000.  SFAS 133 requires that all derivative  instruments be recorded on
the balance sheet at their fair value. Gains or losses resulting from changes in
the values of those  derivatives  would be accounted for depending on the use of
the derivative and whether it qualifies for hedge  accounting.  The Company uses
foreign  currency  forward  contracts as a means of hedging  exposure to foreign
currency  risks and foreign  currency  options as a means of hedging  forecasted
operating  costs.  The  Company  also  utilizes,  on a  limited  basis,  certain
commodity derivatives, primarily on copper used in its manufacturing process, to
hedge the cost of its anticipated  production  requirements.  During the quarter
ended  March  31,  2001,  the  Company's  foreign  currency  options  have  been
designated  and qualify as cash flow hedges under the criteria of SFAS 133. SFAS
133 requires that changes in fair value of derivatives that qualify as cash flow
hedges be recognized in other comprehensive income while the ineffective portion
of the derivative's change in fair value be recognized  immediately in earnings.
The Company's foreign currency forward  contracts and commodity  derivatives did
not meet the  criteria  of SFAS 133 to qualify  for hedge  accounting.  SFAS 133
requires that  unrealized  gains and losses on  derivatives  not  qualifying for
hedge accounting be recognized currently in earnings. The cumulative effect of a
change in  accounting  principle  due to the  adoption of SFAS 133 as of July 1,
2000  was not  material.  The  Company  recorded  a net  loss  of $168 in  other
comprehensive income for foreign currency options, a net loss of $147 in cost of
goods sold for  commodity  contracts and a net loss of $567 in other expense for
the foreign currency forward contracts and the ineffective portion of the option
contracts  for the three month  period ended March 31, 2001 and net losses of $0
and $143 and a net gain of $60,  respectively,  for the nine months  ended March
31, 2001.

      In December 1999, the  Securities and Exchange  Commission  ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition",  which provides
guidelines  in applying  generally  accepted  accounting  principles to selected
revenue  recognition  issues.  In October 2000,  the SEC issued an  interpretive
release to SAB 101, clarifying certain of its positions on revenue  recognition.
The SAB is effective  in the fourth  fiscal  quarter of fiscal  years  beginning
after  December  15, 1999,  or as of April 1, 2001 in the  Company's  case.  The
Company anticipates  recording the effect of adoption of SAB 101 as a cumulative
effect adjustment,  retroactive to July 1, 2000, however,  the Company continues
to assess the  impact of the SEC's  interpretive  release  and the amount of the
cumulative effect adjustment will not be known until the fourth fiscal quarter.

      In October 2000, the Emerging  Issues Task Force ("EITF")  issued guidance
on  how  to  classify  certain  revenues  and  costs  in a  company's  financial
statements.  EITF No. 00-10  "Accounting for Shipping and Handling  Revenues and
Costs" requires that companies  classify all amounts billed to customers related
to shipping and handling  costs as revenue.  This statement will be effective in
the fourth fiscal quarter of fiscal years  beginning after December 15, 1999 and
is not expected to have any effect on the financial statements.

      The results of operations for the three months and nine months ended March
31, 2001 and 2000 may not be indicative of results for the full year.


                                       8
<PAGE>

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

2. Acquisition

      On November 30, 2000,  the Company  purchased the Medicated Feed Additives
(MFA) business of Pfizer, Inc. and certain of its subsidiaries  ("Pfizer").  The
MFA business was a group of products within  Pfizer's  Animal Health Group.  The
business  produces and sells a broad range of Medicated  Feed Additive  Products
(MFAs) to the global  livestock  industry,  either directly to large  integrated
livestock  producers  or  through a network  of  independent  distributors.  The
activities of the MFA business  (production,  sales and marketing,  and finance)
were integrated within Pfizer's Animal Health Group.

      The purchase price of $74,434  (including  cost of  acquisition)  was paid
with cash of  $51,700  and the  issuance  of a  promissory  note to  Pfizer  for
$22,734, which matures in 2003 with interest payable semi-annually in arrears at
13%. The purchase price continues to be subject to finalization based on certain
working  capital  adjustments  under the  agreement.  The Company  financed  the
$51,700 cash payment  through the  issuance of $40,808 of  redeemable  preferred
securities  ($45,000 of redeemable  preferred  securities,  less costs connected
with the issue of those  securities  of $4,192),  and the remainder was financed
through an amendment to existing bank credit facilities.  In addition, under the
terms  of the  purchase  agreement,  the  Company  is  required  to  pay  Pfizer
contingent  purchase  price based on a  percentage  of future net  revenues of a
particular  product.  The term of the  contingent  payments  is five  years from
November  30,  2000.  The  maximum  contingent  purchase  price due  under  this
arrangement  is limited to $55,000,  with a maximum  annual  payment of $12,000.
Contingent purchase price paid will be allocated to related production equipment
and product intangibles and the Company accrued $3,406 under this arrangement as
of March 31, 2001. In addition, the Company is required to pay Pfizer contingent
purchase  price up to a maximum  of $10,000  over five  years on other  products
based on certain gross profit  levels of the MFA business.  No amounts have been
accrued under this arrangement.

      The  acquisition  was accounted for in accordance with the purchase method
and  results  of  the  MFA  business  have  been  included  since  the  date  of
acquisition.  The purchase price has been  preliminarily  allocated to inventory
and property,  plant, and equipment.  Property, plant and equipment includes two
facilities,  Rixensart,  Belgium and Guarulhols,  Brazil. Following the closing,
the Company is operating under a supply  agreement with Pfizer in respect of the
manufacturing facility in Belgium pending regulatory approval of the transfer of
title.  In  addition,  the transfer of employees in Belgium is also pending such
regulatory  approval and is also pending further  negotiations of the settlement
of the pensions.  The Company expects the transfer of pension  obligations to be
fully  funded by Pfizer.  The final  allocation  of the  purchase  price and the
determination of the useful lives of the long-term assets acquired will be based
on an independent  valuation to be completed prior to the Company's  fiscal 2001
year end.

      The unaudited  consolidated  results of operations on a pro-forma basis as
if such  acquisition  had occurred at the  beginning of the  nine-month  periods
being reported are as follows.

                                                   Nine Months Ended
                                                       March 31,
                                                   2001         2000
                                                 --------     --------
          Net sales                              $305,940     $348,433
          Net (loss) income                       (10,243)      18,386

      The impact of purchase price  adjustments  to the inventory  acquired from
Pfizer increased the net loss in 2001 by $3,335.

3. Inventories

      Inventories are valued at the lower of cost or market. Cost is principally
determined using the first-in, first-out (FIFO) and average methods; however,
certain subsidiaries of the Company use the last-in, first-out (LIFO) method for
valuing inventories.

      Inventories at March 31, 2001 and June 30, 2000 consist of the following:

                                                  March 31,     June 30,
                                                    2001         2000
                                                  --------      -------
          Raw materials                           $ 27,117      $21,457
          Work-in-process                            2,832        5,340
          Finished goods                            72,340       23,608
                                                  --------      -------
                                                  $102,289      $50,405
                                                  ========      =======


                                       9
<PAGE>

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

4. Contingencies

   a. Litigation

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

      Phibro-Tech,  Inc. has also been named as one of several  defendants  in a
suit brought by Communities  for a Better  Environment  in California,  alleging
violations under California's  Proposition 65, the Safe Drinking Water and Toxic
Enforcement  Act,  relating to its Santa Fe Springs,  California  facility.  The
Company is not, at this time,  in a position to assess the extent of  liability,
if any.

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

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

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

      b. Environmental Remediation

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

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

      Based upon information available, management estimates the cost of further
investigation  and remediation of identified  soil and  groundwater  problems at
operating sites,  closed sites and third party sites to be approximately  $1,737
as of March 31, 2001, which is included in current and long-term liabilities.

5. Business Segments

      The  Company  operates in two  business  segments:  AgChem and  Industrial
Chemicals.  The  AgChem  segment  manufactures  and  markets a variety of animal
nutrition and health products,  copper based  fungicides and growth  regulators.
The MFA business is included in the AgChem  segment.  The  Industrial  Chemicals
segment  manufactures  and markets a number of specialty  organic and  inorganic
intermediate  chemicals  for  use in a  broad  variety  of  industrial  chemical
applications.  The  Company  aggregates  certain  operating  segments  into  its
reportable  segments.  Management  evaluates  the  performance  of its operating
segments and allocates  resources based on operating  income.  Transfers between
segments are priced at amounts that include a  manufacturing  profit except that
transfers  of $2,751 and $2,014 for the three  months  ended  March 31, 2001 and
2000,  respectively,  and $9,215 and $6,157 for the nine months  ended March 31,
2001 and 2000, respectively, from the Industrial


                                       10
<PAGE>

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

Chemicals  group  to the  AgChem  group  are  recorded  at the  cost of  product
transferred.  Other includes  corporate expenses and elimination of intersegment
revenues.

<TABLE>
<CAPTION>
                                                        Industrial
                                              AgChem    Chemicals
                                              Group       Group     Other          Total
                                             --------   ---------  --------       --------
<S>                                          <C>        <C>        <C>            <C>
Three Months Ended March 31, 2001
Revenues - external customers .............  $ 68,049   $ 34,154   $     --       $102,203
         - intersegment ...................     1,622      5,847     (7,469)             0
                                             --------   --------   --------       --------
Total revenues ............................  $ 69,671   $ 40,001   $ (7,469)      $102,203
                                             ========   ========   ========       ========
Operating income (loss) ...................  $  3,113   $    479   $ (2,276)(1)   $  1,316
                                             ========   ========   ========       ========
</TABLE>

- ----------
(1) Represents corporate expenses and intercompany profit eliminations.

<TABLE>
<CAPTION>
                                                        Industrial
                                              AgChem    Chemicals
                                              Group       Group      Other       Total
                                             --------   ---------  --------     -------
<S>                                          <C>        <C>        <C>            <C>
Three Months Ended March 31, 2000
Revenues - external customers .............   $43,892   $35,551   $    --       $79,443
         - intersegment ...................       806     4,652    (5,458)            0
                                              -------   -------   -------       -------
Total revenues ............................   $44,698   $40,203   $(5,458)      $79,443
                                              =======   =======   =======       =======
Operating income (loss) ...................   $ 2,989   $ 1,842   $(2,178)(2)   $ 2,653
                                              =======   =======   =======       =======
</TABLE>

- ----------
(2) Represents corporate expenses and intercompany profit eliminations.

<TABLE>
<CAPTION>
                                                        Industrial
                                              AgChem    Chemicals
                                              Group       Group     Other          Total
                                             --------   ---------  --------       --------
<S>                                          <C>        <C>        <C>            <C>
Nine Months Ended March 31, 2001
Revenues - external customers .............  $156,272   $ 99,057        $--       $255,329
         - intersegment ...................     3,896     18,025    (21,921)             0
                                             --------   --------   --------       --------
Total revenues ............................  $160,168   $117,082   $(21,921)      $255,329
                                             ========   ========   ========       ========
Operating income (loss) ...................  $  5,634   $  2,257   $ (7,557)(1)   $    334
                                             ========   ========   ========       ========
</TABLE>

- ----------
(1) Represents corporate expenses and intercompany profit eliminations.

<TABLE>
<CAPTION>
                                                        Industrial
                                              AgChem    Chemicals
                                              Group       Group     Other          Total
                                             --------   ---------  --------       --------
<S>                                          <C>        <C>        <C>            <C>
Nine Months Ended March 31, 2000
Revenues - external customers .............  $122,573   $104,088   $     --       $226,661
         - intersegment .................       3,654     15,521    (19,175)             0
                                             --------   --------   --------       --------
Total revenues ............................  $126,227   $119,609   $(19,175)      $226,661
                                             ========   ========   ========       ========
Operating income (loss) ...................  $  6,126   $  7,687   $ (7,031)(2)   $  6,782
                                             ========   ========   ========       ========
</TABLE>

- ----------
(2) Represents corporate expenses and intercompany profit eliminations.

6. Credit Facility

      In  connection  with the MFA  acquisition,  the  Company  has  amended its
existing  $35,000  revolving  credit  facility  with  PNC Bank to  increase  the
facility  to $70,000  and to provide  for an  additional  $15,000  facility  for
capital expenditure spending.  The Company,  under the amended credit agreement,
may choose between two interest options: (i) base rate, as defined and


                                       11
<PAGE>

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

(ii)  Euro  Rate,  as  defined,  plus  21/4% - 3% per  annum,  depending  on the
Company's  operating  performance  and  whether  the  drawdowns  are  under  the
revolving credit facility or the capital  expenditure  facility.  The facilities
have a maturity date of three years from December 1, 2000 and required the grant
of security interests in substantially all the Company's domestic assets as well
as certain of the capital stock of the Company's  foreign  subsidiaries.  Due to
the nature and terms of the amended  credit  agreement,  which  includes  both a
subjective  acceleration  clause  and a  requirement  to  maintain  a  lock  box
arrangement,  all  borrowings  against  this  facility are now  classified  as a
current liability.

7. Redeemable Preferred Stock

      Redeemable  preferred  securities  were  issued on  November  30,  2000 to
Palladium Equity Partners LLC and related entities ("Palladium") as follows:

            Preferred B - $25,000 - 25,000 shares

            Preferred C - $20,000 - 20,000 shares

      The redeemable  preferred  stock is entitled to cumulative cash dividends,
payable  semi-annually,   at  15%  per  annum  of  the  liquidation  value.  The
liquidation  value of the  Preferred B stock is an amount  equal to $1 per share
plus all accrued and unpaid dividends (the "Liquidation  Value"). The redeemable
Preferred C stock is entitled to the Liquidation  Value plus a percentage of the
equity  value  of  the  Company,  as  defined  in  the  amended  Certificate  of
Incorporation.  The equity  value is  calculated  as a multiple of the  earnings
before interest,  tax, depreciation and amortization  ("EBITDA") of the combined
Company business  ("Equity  Value").  The Company may, at the date of the annual
closing  anniversary,  redeem the Preferred B stock,  in whole or in part at the
Liquidation Value, for cash, provided that if Preferred B is redeemed separately
from the Preferred C, then the Preferred B must be redeemed for the  Liquidation
Value plus an additional  amount which would generate an internal rate of return
of 20% to  Palladium  on the  Preferred  B  investment.  Redemption  in  part of
Preferred B is only available if at least 50% of the outstanding  Preferred B is
redeemed.  On the third  closing  anniversary  and on each  closing  anniversary
thereafter,  the Company may redeem for cash only in whole the  Preferred  C, at
the Liquidation Value plus the Equity Value payment.

      At any time after the  redemption  of the  Company's  Senior  Subordinated
Notes due 2008,  Palladium shall have the right to require the Company to redeem
for cash the  Preferred B at the  Liquidation  Value and the  Preferred C at the
Liquidation Value plus the Equity Value payment.

      The redeemable  preferred  securities were initially  recorded at $40,808,
representing  proceeds  of  $45,000,  net of costs of  issuance  of $4,192.  The
Company  has  recorded a charge of $4,192 to  retained  earnings  to reflect the
accretion  of the  preferred  securities  to their fair  market  value as at the
closing date.  Dividends of $2,250 have been accrued on the preferred securities
and charged to retained earnings as of March 31, 2001. No equity value accretion
was required as of March 31, 2001 under the applicable formula.

      In  addition,  an annual  management  advisory fee of $2,250 is payable to
Palladium  until all of the  Preferred B and  Preferred  C shares are  redeemed.
Payments are made quarterly in advance.

8. Subsequent Event

      On May 4, 2001, the Company sold its Agtrol U.S.  business,  a division of
the Company's Phibro-Tech,  Inc. subsidiary,  to Nufarm, Inc. ("Nufarm"), a U.S.
subsidiary of Nufarm Limited,  a publicly listed  Australian based company.  The
effective  date was May 1, 2001 and the sale included  inventory and  intangible
assets  to  Nufarm.  The  sale  did not  include  plant,  equipment,  and  other
manufacturing  assets.  The Company also  entered into a five-year  agreement to
supply  copper  fungicide  products to Nufarm from its  Sumter,  South  Carolina
plant.

      The sales price was $16,000, of which $14,775 was paid in cash plus a note
for $1,225  payable on June 30, 2001.  Additionally,  the purchase price will be
adjusted  upward or downward for any inventory in excess or less than the amount
of inventory at June 30, 2000.

      The parties are  involved in ongoing  discussions  relating to the sale of
Agtrol's European operations.


                                       12
<PAGE>

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

9. Condensed Consolidating Financial Statements

      In June  1998,  the  Company  issued  $100  million  of its  97/8%  Senior
Subordinated  Notes due 2008 (the "Notes").  In connection  with the issuance of
these  Notes,  the  Company's  U.S.   Subsidiaries  fully  and   unconditionally
guaranteed such Notes on a joint and several basis.  Foreign subsidiaries do not
presently guarantee the Notes.

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

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

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


                                       13
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                              AS OF MARCH 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>              <C>
                      Assets
Current Assets:
Cash and cash equivalents ......................       $   2,007        $     473        $  12,604                        $  15,084
Trade receivables ..............................           5,251           36,992           37,383                           79,626
Other receivables ..............................           1,445              435            2,949                            4,829
Inventory ......................................           2,987           59,678           39,624                          102,289
Prepaid expenses and other .....................           6,909            3,700            3,491                           14,100
                                                       -----------------------------------------------------------------------------
     Total current assets ......................          18,599          101,278           96,051               --         215,928
                                                       -----------------------------------------------------------------------------
Property, plant & equipment, net ...............             694           29,074           68,436                           98,204
Intangibles ....................................              87            2,009            3,953                            6,049
Investment in subsidiaries .....................          66,467            1,530           (6,126)         (61,871)             --
Intercompany ...................................          78,946          (39,030)          (4,498)         (35,418)             --
Other assets ...................................          95,154          (69,531)           2,244                           27,867
                                                       -----------------------------------------------------------------------------
     Total assets ..............................       $ 259,947        $  25,330        $ 160,060        $ (97,289)      $ 348,048
                                                       =============================================================================

     Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft .................................       $      13        $   4,791        $       1                        $   4,805
Loan payable to banks ..........................          53,708               --            9,192                           62,900
Current portion of long term debt ..............           2,304              398              937                            3,639
Accounts payable ...............................           3,672           15,890           19,173                           38,735
Other loans payable ............................             688               --               --                              688
Accrued expenses and other .....................           9,485           15,386           10,808                           35,679
                                                       -----------------------------------------------------------------------------
     Total current liabilities .................          69,870           36,465           40,111               --         146,446
                                                       -----------------------------------------------------------------------------
Long term debt .................................         121,330          (52,674)          98,452          (35,418)        131,690
Other liabilities ..............................           2,100            4,543            3,835                           10,478

Redeemable securities:
Series B and C preferred stock .................          47,250               --               --                           47,250
Common stock ...................................           1,360               --             (134)                           1,226
Common stock of subsidiary .....................              --               95               --                               95
                                                       -----------------------------------------------------------------------------
                                                          48,610               95             (134)              --          48,571
                                                       -----------------------------------------------------------------------------
             Stockholders' Equity
Series A preferred stock .......................             521               --               --                              521
Common stock ...................................               2               32               --              (32)              2
Paid in capital ................................             878           33,941              100          (34,041)            878
Retained earnings ..............................          16,780            2,911           24,887          (27,798)         16,780
Accumulated other comprehensive
   income (loss) ...............................            (144)              17           (7,191)                          (7,318)
                                                       -----------------------------------------------------------------------------
     Total stockholders' equity ................          18,037           36,901           17,796          (61,871)         10,863
                                                       -----------------------------------------------------------------------------
     Total liabilities and equity ..............       $ 259,947        $  25,330        $ 160,060        $ (97,289)      $ 348,048
                                                       =============================================================================
</TABLE>


                                       14
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    FOR THE THREE MONTHS ENDED MARCH 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>              <C>
Net sales ......................................       $   8,795        $  58,957        $  50,888        $ (16,437)       $102,203

Cost of goods sold .............................           7,156           43,864           40,729          (16,437)         75,312
                                                       -----------------------------------------------------------------------------
     Gross profit ..............................           1,639           15,093           10,159               --          26,891

Selling, general, and
   administrative expenses .....................           4,161           13,812            7,602                           25,575
                                                       -----------------------------------------------------------------------------

Operating (loss) income ........................          (2,522)           1,281            2,557               --           1,316

Interest expense ...............................           3,639              (71)           1,615                            5,183

Interest income ................................              (5)              (9)              30                               16

Other expense ..................................              29              340              768                            1,137

Intercompany allocation ........................          (4,699)           2,991            1,708                               --

Loss (profit) relating to subsidiaries .........           2,445               --               --           (2,445)             --
                                                       -----------------------------------------------------------------------------
(Loss) income before income taxes ..............          (3,931)          (1,970)          (1,564)           2,445          (5,020)

(Benefit) for income taxes .....................             (82)            (471)            (618)                          (1,171)
                                                       -----------------------------------------------------------------------------
Net (loss) income ..............................       $  (3,849)       $  (1,499)       $    (946)       $   2,445        $ (3,849)
                                                       =============================================================================
</TABLE>


                                       15
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
          CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    FOR THE NINE MONTHS ENDED MARCH 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>             <C>
Net sales ......................................       $  25,439        $ 147,776        $ 114,376        $ (32,262)      $ 255,329

Cost of goods sold .............................          20,603          108,471           92,100          (32,262)        188,912
                                                       -----------------------------------------------------------------------------

Gross profit ...................................           4,836           39,305           22,276               --          66,417

Selling, general, and
   administrative expenses .....................          11,165           36,815           18,103                           66,083
                                                       -----------------------------------------------------------------------------

Operating (loss) income ........................          (6,329)           2,490            4,173               --             334

Interest expense ...............................           8,882              (10)           4,330                           13,202

Interest income ................................             (49)             (10)            (328)                            (387)

Other expense ..................................             150              336              748                            1,234

Intercompany allocation ........................         (11,594)           9,500            2,094                               --

Loss (profit) relating to subsidiaries .........           6,062               --               --           (6,062)             --
                                                       -----------------------------------------------------------------------------
(Loss) income before income taxes ..............          (9,780)          (7,326)          (2,671)           6,062         (13,715)

(Benefit) for income taxes .....................            (194)          (2,490)          (1,445)                          (4,129)
                                                       -----------------------------------------------------------------------------
Net (loss) income ..............................       $  (9,586)       $  (4,836)       $  (1,226)       $   6,062       $  (9,586)
                                                       =============================================================================
</TABLE>


                                       16
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                    FOR THE NINE MONTHS ENDED MARCH 31, 2001
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>             <C>
Operating activities:
Net (loss) income ..............................       $  (9,586)       $  (4,836)       $  (1,226)       $   6,062       $  (9,586)
Adjustments to reconcile net (loss)
      income to net cash (used in) provided
      by operating activities:
   Depreciation and amortization ...............             528            3,805            5,923                           10,256
   Other .......................................            (878)             320           (1,480)                          (2,038)
Changes in operating assets and
   liabilities:
Accounts receivable ............................             920            8,255           (8,037)                           1,138
Inventory ......................................             280           (9,834)           8,352                           (1,202)
Prepaid expenses and other .....................            (434)           2,910           (1,622)                             854
Other assets ...................................            (918)          (2,286)              39                           (3,165)
Intercompany ...................................          (3,517)           4,116            5,463           (6,062)             --
Accounts payable ...............................           1,532              573            3,578                            5,683
Accrued expenses and other .....................          (2,476)           1,491              625                             (360)
                                                       -----------------------------------------------------------------------------
Net cash (used in) provided by operating
      activities ...............................         (14,549)           4,514           11,615               --           1,580
                                                       -----------------------------------------------------------------------------
Investing activities:
Capital expenditures ...........................            (236)          (6,845)          (3,245)                         (10,326)
Acquisition of a business ......................         (51,700)              --               --                          (51,700)
Other investing ................................              --               --             (457)                            (457)
                                                       -----------------------------------------------------------------------------
Net cash used in investing activities ..........         (51,936)          (6,845)          (3,702)              --         (62,483)
                                                       -----------------------------------------------------------------------------
Financing activities:
Cash overdraft .................................            (145)           3,489               --                            3,344
Net increase in short term debt ................          24,592               --              893                           25,485
Proceeds from long term debt ...................              --               26            1,552                            1,578
Proceeds from issuance of
   redeemable preferred stock ..................          45,000               --               --                           45,000
Payments of long term debt .....................             (24)            (806)              (6)                            (836)
Other financing ................................            (942)              --               --                             (942)
                                                       -----------------------------------------------------------------------------
Net cash provided by financing activities ......          68,481            2,709            2,439               --          73,629
                                                       -----------------------------------------------------------------------------
Effect of exchange rate changes
   on cash .....................................              --               (4)             (41)                             (45)
                                                       -----------------------------------------------------------------------------
Net increase in cash and cash equivalents ......           1,996              374           10,311               --          12,681
Cash and cash equivalents at
   beginning of year ...........................              11               99            2,293                            2,403
                                                       -----------------------------------------------------------------------------
Cash and cash equivalents at end
   of year .....................................       $   2,007        $     473        $  12,604         $     --       $  15,084
                                                       =============================================================================
</TABLE>


                                       17
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
                CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
                                AS OF JUNE 30, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>             <C>
                     Assets
Current Assets:

Cash and cash equivalents ......................       $      11        $      99        $   2,293                        $   2,403
Trade receivables ..............................           6,172           45,378           27,826                           79,376
Other receivables ..............................           4,855              550            3,074                            8,479
Inventory ......................................           3,267           25,072           22,066                           50,405
Prepaid expenses and other .....................           3,065            2,443            3,590                            9,098
                                                       -----------------------------------------------------------------------------
      Total current assets .....................          17,370           73,542           58,849               --         149,761
                                                       -----------------------------------------------------------------------------

Property, plant & equipment, net ...............             702           25,032           50,446                           76,180
Intangibles ....................................              87            2,292            3,918                            6,297
Investment in subsidiaries .....................          78,028            1,533           (6,129)         (73,432)             --
Intercompany ...................................          63,874          (32,463)           3,197          (34,608)             --
Other assets ...................................          15,236            8,542            2,435                           26,213
                                                       -----------------------------------------------------------------------------
      Total assets .............................       $ 175,297        $  78,478        $ 112,716        $(108,040)      $ 258,451
                                                       =============================================================================

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

Redeemable Securities:
Common stock ...................................           2,389               --            1,124                            3,513
Common stock of subsidiary .....................              --              451               --                              451
                                                       -----------------------------------------------------------------------------
                                                           2,389              451            1,124               --           3,964
                                                       -----------------------------------------------------------------------------
            Stockholders' Equity
Series A preferred stock .......................             521               --               --                              521
Common stock ...................................               2               32               --              (32)              2
Paid in capital ................................             878           34,040               --          (34,040)            878
Retained earnings ..............................          32,808            7,747           31,613          (39,360)         32,808
Accumulated other comprehensive
   income (loss) ...............................            (144)              30           (2,477)                          (2,591)
                                                       -----------------------------------------------------------------------------
      Total stockholders' equity ...............          34,065           41,849           29,136          (73,432)         31,618
                                                       -----------------------------------------------------------------------------
      Total liabilities and equity .............       $ 175,297        $  78,478        $ 112,716        $(108,040)      $ 258,451
                                                       =============================================================================
</TABLE>


                                       18
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>             <C>
Net sales ......................................       $   9,066        $  45,540        $  34,127        $  (9,290)      $  79,443

Cost of goods sold .............................           7,389           34,555           25,280           (9,290)         57,934
                                                       -----------------------------------------------------------------------------
Gross profit ...................................           1,677           10,985            8,847               --          21,509

Selling, general, and
   administrative expenses .....................           3,801            9,837            5,218                           18,856
                                                       -----------------------------------------------------------------------------
Operating (loss) income ........................          (2,124)           1,148            3,629               --           2,653

Interest expense ...............................           2,223               75            1,479                            3,777

Interest income ................................              (5)              --             (287)                            (292)

Other expense ..................................              --               --              743                              743

Gain from property damage claim ................              --             (550)              --                             (550)

Gain from sale of asset ........................              --               --          (14,195)                         (14,195)

Intercompany allocation ........................          (2,757)           2,757               --                               --

(Profit) loss relating to subsidiaries .........         (11,292)              --               --           11,292              --
                                                       -----------------------------------------------------------------------------
Income (loss) income before
   income taxes ................................           9,707           (1,134)          15,889          (11,292)         13,170

(Benefit) provision for income taxes ...........            (211)            (259)           4,157               --           3,687
                                                       -----------------------------------------------------------------------------
Net income (loss) ..............................       $   9,918        $    (875)       $  11,732        $ (11,292)      $   9,483
                                                       =============================================================================
</TABLE>


                                       19
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
                    FOR THE NINE MONTHS ENDED MARCH 31, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>             <C>
Net sales ......................................       $  26,511        $ 125,915        $ 101,684        $ (27,449)      $ 226,661

Cost of goods sold .............................          21,421           95,099           74,921          (27,449)        163,992
                                                       -----------------------------------------------------------------------------
Gross profit ...................................           5,090           30,816           26,763               --          62,669

Selling, general, and
   administrative expenses .....................          10,283           28,385           17,219                           55,887
                                                       -----------------------------------------------------------------------------

Operating (loss) income ........................          (5,193)           2,431            9,544               --           6,782

Interest expense ...............................           6,102              193            4,470                           10,765

Interest income ................................             (17)              (1)            (449)                            (467)

Other expense ..................................            (912)              --            3,690                            2,778

Gain from property damage claim ................              --             (550)              --                             (550)

Gain from sale of asset ........................              --               --          (14,195)                         (14,195)

Intercompany allocation ........................          (7,969)           7,969               --                               --

(Profit) loss relating to subsidiaries .........          (8,590)              --               --            8,590              --
                                                       -----------------------------------------------------------------------------
Income (loss) income before
   income taxes ................................           6,193           (5,180)          16,028           (8,590)          8,451

(Benefit) provision for income taxes ...........            (994)          (1,724)           4,417               --           1,699
                                                       -----------------------------------------------------------------------------
Net income (loss) ..............................       $   7,187        $  (3,456)       $  11,611        $  (8,590)      $   6,752
                                                       =============================================================================
</TABLE>


                                       20
<PAGE>

                        PHILIPP BROTHERS CHEMICALS, INC.
           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
                    FOR THE NINE MONTHS ENDED MARCH 31, 2000
                                 (In Thousands)

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Foreign
                                                                     U.S. Guarantor    Subsidiaries      Consolidation  Consolidated
                                                        Parent        Subsidiaries    Non-Guarantors      Adjustments      Balance
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>              <C>             <C>
Operating activities:
Net income (loss) ..............................       $   7,187        $  (3,456)       $  11,611        $  (8,590)      $   6,752
Adjustments to reconcile net (loss) income
      to net cash (used in) provided by
      operating activities:
   Depreciation and amortization ...............             405            3,329            5,489                            9,223
   Gain from property damage claim .............              --             (550)              --                             (550)
   Gain from sale of asset .....................              --               --          (14,195)                         (14,195)
   Other .......................................           2,133             (467)          (4,924)                          (3,258)
Changes in operating assets and liabilities:
Accounts receivable ............................             248              914            4,003                            5,165
Inventory ......................................            (290)          (8,744)          (1,745)                         (10,779)
Prepaid expenses and other .....................          (2,440)             609            2,015                              184
Other assets ...................................              19             (595)            (229)                            (805)
Intercompany ...................................         (24,081)          18,847           (3,356)           8,590              --
Accounts payable ...............................            (162)             432           (2,790)                          (2,520)
Accrued expenses and other .....................           2,796           (6,602)           3,798                               (8)
                                                       -----------------------------------------------------------------------------
Net cash (used in) provided by
   operating activities ........................         (14,185)           3,717             (323)              --         (10,791)
                                                       -----------------------------------------------------------------------------
Investing activities:
Capital expenditures ...........................             (90)          (6,185)          (7,646)                         (13,921)
Proceeds from property damage claim ............              --              872               --                              872
Proceeds from sale of asset ....................              --               --           18,700                           18,700
Other investing ................................          (3,000)              --               --                           (3,000)
                                                       -----------------------------------------------------------------------------
Net cash provided by (used in)
   investing activities ........................          (3,090)          (5,313)          11,054               --           2,651
                                                       -----------------------------------------------------------------------------
Financing activities:
Cash overdraft .................................             (75)             812            1,108                            1,845
Net increase in short term debt ................             229               74            1,773                            2,076
Proceeds from long term debt ...................          16,807            1,566              876                           19,249
Payments of long term debt .....................             (94)            (464)         (10,856)                         (11,414)
Other financing ................................              --               --               62                               62
                                                       -----------------------------------------------------------------------------
Net cash (used in) provided by
   financing activities ........................          16,867            1,988           (7,037)              --          11,818
                                                       -----------------------------------------------------------------------------
Net (decrease) increase in cash
   and cash equivalents ........................            (408)             392            3,694                            3,678
Cash and cash equivalents at
   beginning of year ...........................             393              166            1,749                            2,308
                                                       -----------------------------------------------------------------------------
Cash and cash equivalents at
   end of year .................................       $     (15)       $     558        $   5,443        $      --       $   5,986
                                                       =============================================================================
</TABLE>


                                       21
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

      This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain factors that might cause such a difference are discussed throughout this
Form 10-Q and are discussed  under the caption of this Item 2 entitled  "Certain
Factors Affecting Future Operating Results".

General

      Philipp Brothers  Chemicals,  Inc.  (together with its  subsidiaries,  the
"Company"), is a leading diversified global manufacturer and marketer of a broad
range  of  specialty  agricultural  and  industrial  chemicals,  which  are sold
world-wide for use in numerous  markets,  including animal nutrition and health,
agriculture,  pharmaceutical,  electronics,  wood treatment, glass, construction
and concrete.  The Company also provides  recycling and hazardous waste services
primarily to the electronics and metal treatment industries.  Unless the context
otherwise  requires,  references  herein to the Company are intended to refer to
Philipp  Brothers  Chemicals,  Inc. and/or one or more of its  subsidiaries,  as
applicable.

Acquisition

      On November 30, 2000,  the Company  purchased  (see Note 2 of the Notes to
the Condensed  Consolidated  Financial  Statements) the Medicated Feed Additives
(MFA) business of Pfizer,  Inc. (Pfizer).  The MFA business produces and sells a
broad  range  of  medicated  feed  additive  products  to the  global  livestock
industry,  either directly to large integrated  livestock producers or through a
network of independent distributors.

      The purchase price for this acquisition was $74.4 million,  of which $51.7
million was paid in cash with the remainder being financed  through the issuance
of a promissory  note to Pfizer for $22.7  million.  The note is payable in 2003
and bears interest at 13% payable  semi-annually in arrears.  The purchase price
continues  to be  subject  to  finalization  based on  certain  working  capital
adjustments  under the  agreement.  The Company  financed the $51.7 million cash
payment  through  net cash  proceeds  of $40.8  million  from  the  issuance  of
redeemable   preferred  securities  (see  Note  7  of  the  Notes  to  Condensed
Consolidated  Financial  Statements)  and the remainder  through an amendment to
existing  bank  credit  facilities  (see  Note  6  of  the  Notes  to  Condensed
Consolidated Financial Statements). In addition, under the terms of the purchase
agreement, the Company is required to pay Pfizer contingent purchase price based
on a percentage of future net revenues of a particular product.  The term of the
contingent payments is five years from November 30, 2000. The maximum contingent
purchase price due under this  arrangement  is limited to $55.0 million,  with a
maximum annual payment of $12.0 million. In addition, the Company is required to
pay Pfizer contingent  payments to a maximum of $10.0 million over five years on
other products based on certain gross profit levels of the MFA business.

      The acquisition was accounted for as a purchase and operating results have
been included since the date of acquisition. The MFA business is included in the
AgChem Segment for segment reporting purposes.

Subsequent Event

      On May 4, 2001, the Company sold its Agtrol U.S.  business,  a division of
the  Company's  Phibro-Tech,  Inc.  subsidiary to Nufarm Inc.  (Nufarm),  a U.S.
subsidiary of Nufarm Limited, a publicly listed Australian based company. Agtrol
develops,  manufactures,  and markets crop protection products, including copper
fungicides.  The effective date was May 1, 2001 and the sale included  inventory
and intangible assets to Nufarm. The sale did not include plant, equipment,  and
other manufacturing  assets. The Company also entered into a five-year agreement
to supply copper  fungicide  products to Nufarm from its Sumter,  South Carolina
plant.

      The sales price was $16.0 million, of which $14.8 million was paid in cash
with a note  for  $1.2  million  payable  on June 30,  2001.  Additionally,  the
purchase  price will be adjusted  upward or downward for any inventory in excess
or less than the amount of inventory at June 30, 2000. The proceeds will be used
to pay down debt.

      The parties are  involved in ongoing  discussions  relating to the sale of
Agtrol's European operations.

Results of Operations

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


                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                             Sales
                                                            ($000's)
                                          Three Months Ended        Nine Months Ended
                                               March 31,                March 31,
Operating Segments                         2001         2000         2001         2000
                                        ---------    ---------    ---------    ---------
<S>                                     <C>          <C>          <C>          <C>
  AgChem ............................   $  69,671    $  44,698    $ 160,168    $ 126,227
  Industrial Chemicals ..............      40,001       40,203      117,082      119,609
  Elimination of intersegment sales .      (7,469)      (5,458)     (21,921)     (19,175)
                                        ---------    ---------    ---------    ---------
                                        $ 102,203    $  79,443    $ 255,329    $ 226,661
                                        =========    =========    =========    =========
<CAPTION>

                                                       Operating Income
                                                           ($000's)
                                           Three Months Ended       Nine Months Ended
                                                March 31,               March 31,
Operating Segments                         2001        2000         2001          2000
                                        ---------    ---------    ---------    ---------
<S>                                     <C>          <C>          <C>          <C>
  AgChem ............................   $   3,113    $   2,989    $   5,634    $   6,126
  Industrial Chemicals ..............         479        1,842        2,257        7,687
  Corporate expenses and eliminations      (2,276)      (2,178)      (7,557)      (7,031)
                                        ---------    ---------    ---------    ---------
                                        $   1,316    $   2,653    $     334    $   6,782
                                        =========    =========    =========    =========
</TABLE>

Comparison of Three Months Ended March 31, 2001 and 2000

      Net  Sales.  Net  sales  increased  by $22.8  million,  or 28.6% to $102.2
million in the three  months ended March 31, 2001 as compared to the same period
of the prior year. AgChem sales increased by $25.0 million, due to $27.6 million
of sales from the newly  acquired MFA business.  This was partially  offset by a
$1.4 million reduction in sales of crop protection  chemicals primarily due to a
weather  related  delay  in  the  California  grape-growing  season.  Industrial
Chemicals sales were lower by $.2 million. Lower sales volume of etchants due to
the  slowdown in the  electronics  industry  was  partially  offset by increased
demand for coal fly ash and higher recycling fees.

      Gross Profit.  Gross profit  increased by $5.4 million,  or 25.0% to $26.9
million as  compared  to the same  period of the prior  year.  In AgChem,  gross
profits  generated by operations  of the MFA business  were $8.7 million.  Gross
profit (and  operating  income) of the MFA business would have been $4.6 million
higher  than  reported if not for  purchase  price  adjustments  to the value of
inventory acquired from Pfizer.  Offsetting this was a reduction in gross profit
from crop protection chemicals of $1.4 million, resulting from reduced sales and
changes in product mix. Lower profits in the Industrial  Chemicals  segment were
primarily due to the lower sales volume to the  electronics  industry as well as
increased utility costs.

      Selling,  General  and  Administrative  Expenses.   Selling,  general  and
administrative  expenses  increased $6.7 million,  or 35.6% to $25.6 million for
the three  months  ended  March 31,  2001 as  compared to the same period of the
prior year.  $6.5 million of this increase  relates to S,G&A expenses of the MFA
business.  A reduction in the repurchase  value of redeemable  common stock of a
minority shareholder was partially offset by management advisory fees payable to
Palladium in the 2001 period.

      Operating  Income.  Operating  income  decreased  by $1.3  million to $1.3
million for the three months ended March 31, 2001 as compared to the same period
of the prior  year.  Operating  income of the AgChem  segment  increased  by $.1
million  as  income   generated   by  the  MFA  business  of  $2.2  million  was
substantially  offset by reduced  profitability  from crop protection  chemicals
($1.5 million).  Operating income of the Industrial  Chemicals segment was lower
by $1.4 million  primarily due to lower sales to the electronics  industry,  and
higher utility and freight costs.  Operating income would have been $4.6 million
higher  than  reported if not for  purchase  price  adjustments  to the value of
inventory acquired from Pfizer.

      Interest Expense,  Net. Net interest expense increased by $1.7 million, to
$5.2  million for the three  months ended March 31, 2001 as compared to the same
period of the prior year. The additional  debt taken on as part of the financing
of the MFA acquisition as well as increased  borrowings under the amended credit
facility with PNC Bank were the primary factors for the increase.

      Other  Expense,   Net.  Other  expense,  net  is  primarily  comprised  of
unrealized foreign currency losses.


                                       23
<PAGE>

      Income Taxes.  The Company  provides a benefit on interim period losses as
it is anticipated that future earnings can be utilized to offset the tax benefit
recorded in the current  year.  The  effective tax rate for the quarter is lower
than the  U.S.  statutory  rate due to the  relationship  of each  domestic  and
international  subsidiaries' individual income or loss position to the statutory
tax rates in each country.

Comparison of Nine Months Ended March 31, 2001 and 2000

      Net  Sales.  Net  sales  increased  by $28.7  million,  or 12.6% to $255.3
million in the nine  months  ended March 31, 2001 as compared to the same period
of the prior year.  AgChem sales  increased by $33.9  million,  primarily due to
$38.0  million of sales from the MFA business.  This was  partially  offset by a
drop in sales of crop  protection  chemicals  ($4.2 million)  primarily due to a
weather  related  delay in the sales in the third quarter of fiscal 2001 as well
as heavier than normal sales volume during the second  quarter of fiscal 2000 as
one  customer  purchased   additional  product  to  meet  its  minimum  purchase
commitments  for the calendar  year.  Sales to this customer  during fiscal 2001
have followed a more normalized sales pattern.  Industrial  Chemicals sales were
lower by $2.5  million  primarily  due to lower sales of calcium  carbide  ($3.8
million) as the  continuing  weak market  negatively  impacted  both pricing and
volume.  In addition,  sales of  halogenated  organic  compounds  were down $2.4
million due to the impact of competitive  products from China.  Offsetting these
decreases  were higher  recycling  fees ($1.9 million) and sales of coal fly ash
($2.3 million) as sales volume increased resulting from new supply contracts.

      Gross Profit.  Gross profit  increased by $3.7  million,  or 6.0% to $66.4
million as  compared  to the same  period of the prior  year.  In AgChem,  gross
profits  generated by the MFA business were $12.3 million,  which were partially
offset by reduced profits from crop protection  chemicals ($3.1 million).  Gross
profit (and  operating  income) of the MFA business  would have been $5.7 higher
than reported if not for purchase  price  adjustments  to the value of inventory
acquired from Pfizer.  Lower profits in the  Industrial  Chemicals  segment were
primarily due to increased  raw material and utility costs in the  production of
calcium carbide and dicyandiamide  which, in conjunction with the reduced volume
and  pricing  on  calcium  carbide,  negatively  impacted  gross  profit by $5.2
million. In addition, the lower sales of halogenated compounds, the weakening in
the  electronics  industry,  and  higher  utility  costs  more than  offset  the
additional gross profit from coal fly ash and recycling fees.

      Selling,  General  and  Administrative  Expenses.   Selling,  general  and
administrative  expenses increased $10.2 million,  or 18.2% to $66.1 million for
the nine months ended March 31, 2001 as compared to the same period of the prior
year.  This  increase was primarily  due to S,G&A  expenses  relating to the MFA
business ($9.7 million),  compensation expense associated with the separation of
employment of a senior  executive of the Company ($1.3 million),  and additional
warehousing and  distribution  costs associated with the increased sales of coal
fly ash ($1.6  million).  Offsetting  these  items  were  lower  expenses  ($1.9
million) at the  Company's  Norwegian  subsidiary,  primarily the result of cost
containment  measures  taken over the past year. A reduction  in the  repurchase
value of redeemable common stock of a minority  shareholder was partially offset
by management advisory fees payable to Palladium in the 2001 period.

      Operating  Income.  Operating  income  decreased  by $6.4  million  to $.3
million for the nine months  ended March 31, 2001 as compared to the same period
of the prior  year.  Operating  income of the AgChem  segment  decreased  by $.5
million.  Income  generated  from the MFA business  ($2.6 million) was offset by
reduced  profitability from crop protection chemicals ($2.5 million).  Operating
income of the Industrial  Chemicals  segment was lower by $5.4 million primarily
due to lower  profitability of dicyandiamide  and calcium carbide ($3.2 million)
and halogenated  organic  compounds ($1.2 million).  In addition,  the weakening
electronics  industry and  increased  freight and utility  costs have  adversely
impacted  the  segment's  profitability.  Operating  income would have been $5.7
million higher than reported if not for purchase price  adjustments to the value
of inventory acquired from Pfizer.

      Interest Expense,  Net. Net interest expense increased by $2.5 million, or
24.4% to $12.8  million in the nine  months  ended March 31, 2001 as compared to
the same  period of the prior  year.  Increased  average  borrowings  as well as
higher interest rates were the primary factors for the increase.

      Other  Expense,   Net.  Other  expense,  net  is  primarily  comprised  of
unrealized foreign currency losses.

      Income Taxes.  The Company  provides a benefit on interim period losses as
it is anticipated that future earnings can be utilized to offset the tax benefit
recorded  in the current  year.  The  effective  tax rate is lower than the U.S.
statutory  rate  due to the  relationship  of each  domestic  and  international
subsidiaries'  individual  income or loss position to the statutory tax rates in
each country.


                                       24
<PAGE>

Liquidity and Capital Resources

      Net Cash Provided by Operating Activities. Cash provided by operations for
the nine months ended March 31, 2001 was $1.6 million.  Included in this is $4.1
million as a final settlement from the Company's  insurance carrier for business
interruption  and other  reimbursable  losses and expenses in connection  with a
fire, in April 1999, at its Bowmanstown, Pennsylvania facility.

      Net Cash Used in Investing  Activities.  Cash used in investing activities
for the nine months ended March 31, 2001 was $62.5 million, primarily related to
the MFA acquisition  ($51.7  million).  See Note 2 of the Notes to the Condensed
Consolidated  Financial Statements for details on the non-cash consideration for
this  acquisition.  Capital  expenditures  of $10.3  million were  primarily for
improvements  at the  Company's  ODDA  (Norway)  facility  and  expansion of the
Company's coal fly ash operations.

      Net Cash Provided by Financing Activities.  Net cash provided by financing
activities for the nine months ended March 31, 2001 was $73.6 million,  of which
$45.0  million  was  received  through  the  issuance  of  redeemable  preferred
securities and $24.0 million through utilization of the amended revolving credit
facility  with PNC Bank (see Note 6 of the Notes to the  Condensed  Consolidated
Financial Statements).

      Liquidity. In connection with the MFA acquisition, the Company amended its
loan  agreement with PNC Bank,  increasing  the revolving  credit portion of the
facility to $70 million (from $35 million) and adding an additional  $15 million
facility for spending on capital  expenditures.  The Company may choose  between
two interest options:  the base rate, as defined; and the Euro Rate, as defined,
plus 21/4% to 3% per annum, depending on the Company's operating performance and
whether the  drawdowns are under the  revolving  credit  facility or the capital
expenditure facility. The agreement was effective December 1, 2000 and continues
until November 30, 2003.

      On November 30, 2000 the Company issued $25 million of redeemable Series B
preferred  stock and $20 million of redeemable  Series C preferred  stock.  Each
Series is entitled to cumulative cash dividends,  payable  semi-annually  at 15%
per annum of the liquidation  value.  The  liquidation  value of the Preferred B
stock is an amount  equal to $1 per share plus all accrued and unpaid  dividends
(Liquidation  Value). The Preferred C stock is entitled to the Liquidation Value
plus a percentage of the equity value of the Company,  as defined in the amended
Certificate  of  Incorporation.  The equity value is calculated as a multiple of
the earnings before interest,  tax, depreciation and amortization of the Company
(Equity Value). The Company may, at the date of the annual closing  anniversary,
redeem the Preferred B in whole or in part at the Liquidation  Value,  for cash,
provided that if the Preferred B stock is redeemed separately from the Preferred
C stock then the Preferred B must be redeemed for the Liquidation  Value plus an
additional  amount which would generate an internal rate of return of 20% to the
holders of the  shares.  Redemption  in part of the  Preferred  B shares is only
available if at least 50% of the outstanding Preferred B shares are redeemed. On
the third closing  anniversary and on each closing anniversary  thereafter,  the
Company  may  redeem  for cash only in whole  the  Preferred  C  shares,  at the
Liquidation  Value  plus  the  Equity  Value  payment.  At any  time  after  the
redemption of the Company's Senior  Subordinated  Notes due 2008, the holders of
both  series  have the right to require  the Company to redeem for cash all such
preferred shares outstanding.

      As of March 31,  2001,  the Company had $69.5  million of working  capital
compared to $79.9  million as of June 30, 2000.  Inventories  increased by $51.9
million from the fiscal year end,  primarily due to inventory  purchased as part
of the MFA  acquisition  ($51.7  million).  Due to the  nature  and terms of the
amended   revolving   credit   agreement,   which  includes  both  a  subjective
acceleration  clause and a requirement  to maintain a lockbox  arrangement,  all
borrowings against this facility are now classified as a current  liability.  At
March 31, 2001, the amount of credit extended under this agreement totaled $53.7
million and the Company had $12.1 million  available  under the  borrowing  base
formula in this agreement.

      Cash on hand as of March 31, 2001  amounted to $15.1  million  compared to
$2.4  million at the fiscal year end.  Much of the increase in cash results from
the initial funding  requirements  for the  international  operations of the MFA
business.

      Commencing  with the fourth  quarter of fiscal  2000,  due to  competitive
market  conditions,  the Company extended payment terms on selected AgChem sales
representing  $6.7 million of revenues.  These terms  deferred cash inflows into
the third and fourth quarters of fiscal 2001. As of March 31, 2001, $6.1 million
of receivables is still outstanding relating to these revenues.

      The Company  anticipates  spending  approximately  $14 million for capital
expenditures in the 2001 fiscal year for its existing business,  principally for
improvements  at its  ODDA  facility  and  for  expansion  of its  coal  fly ash
operations.  Depending on actual future operating  results,  the Company may, if
necessary, postpone certain expenditures that are considered discretionary.


                                       25
<PAGE>

      The  Company  believes  that cash  flows  from  operations  and  available
borrowing  arrangements should provide sufficient working capital to operate the
Company's  business,  to make  budgeted  capital  expenditures,  and to  service
interest  and  current  principal  coming due on  outstanding  debt for the next
twelve months.

Seasonality of Business

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

Quantitative and Qualitative Disclosure About Market Risk

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

Interest Rate Risk

      The  Company  uses  sensitivity  analysis to assess the market risk of its
debt-related  financial instruments and derivatives.  Market risk is defined for
these  purposes  as the  potential  change in the fair value  resulting  from an
adverse  movement  in  interest  rates.  The  carrying  amounts of cash and cash
equivalents, trade receivables, trade payables and short term debt is considered
to be representative  of their fair value because of their short maturities.  As
of March 31, 2001, the fair value of the Company's senior  subordinated debt was
estimated  based on quoted  market  rates to be $65.0  million  and the  related
carrying  amount is $100 million.  A 100 basis point  increase in interest rates
could result in an  approximately  $5.4  million  reduction in the fair value of
total debt.

Foreign Currency Exchange Rate Risk

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

      The Company uses sensitivity analysis to assess the market risk associated
with its  foreign  currency  transactions.  Market  risk is  defined  for  these
purposes  as the  potential  change  in fair  value  resulting  from an  adverse
movement in foreign currency  exchange rates. The fair value associated with the
foreign currency contracts has been estimated by valuing the net position of the
contracts  using the applicable spot rates and forward rates as of the reporting
date.  At March 31,  2001,  the fair  market  value was equal to their  carrying
amount due to the Company's  adoption of SFAS 133 at July 1, 2000 which requires
that all derivatives be recorded on the balance sheet at fair value.

Other

      The  Company  obtains  third party  letters of credit and surety  bonds in
connection with certain inventory purchases and insurance obligations.  At March
31, 2001,  the contract  values of these letters of credit and surety bonds were
$1.4 million and their fair values did not differ materially from their carrying
amount.


                                       26
<PAGE>

Commodity Price Risk

      The  Company  purchases  certain  raw  materials,  such as  copper,  under
short-term  supply  contracts.  The purchase  prices  thereunder  are  generally
determined  based on prevailing  market  conditions.  The Company uses commodity
derivative instruments to modify some of the commodity price risks. At March 31,
2001,  the fair  market  value  was  equal to their  carrying  value  due to the
Company's  adoption  of  SFAS  133 at July  1,  2000  which  requires  that  all
derivatives be recorded on the balance sheet at fair value.

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

Certain Factors Affecting Future Operating Results

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

      See Part I -- Item 2 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quantitative  and Qualitative  Disclosure
About Market Risk."


                                       27
<PAGE>

                          PART II -- Other Information

Item 5. Other Information.

      On May 4, 2001,  the Company  agreed to sell  certain of the assets of its
Agtrol  International  division ("Agtrol") fungicide business to Nufarm Limited,
an Australian  public company  ("Nufarm").  Agtrol  develops,  manufactures  and
markets crop protection products,  including copper fungicides.  The sale of the
U.S.  operations of the Agtrol division and the contemplated  sale of the Agtrol
European operations (as discussed below) includes Agtrol's products,  trademarks
and other intellectual  property,  inventory and commercial  relationships.  The
Company is retaining  ownership of all Agtrol  receivables,  copper know-how and
its plants,  equipment and other manufacturing  assets,  including its plants in
Sumter,  South Carolina and Bordeaux,  France.  The Company has agreed to supply
100% of Nufarm's  requirements of copper  fungicide  products from the Company's
Sumter and Bordeaux  plants.  The sale of the United States assets of Agtrol was
effective as of May 1, 2001 for a purchase  price of  $15,999,990,  of which the
Company received $14,775,000 in cash at the closing and the remaining $1,224,990
in the form of a note of Nufarm,  Inc., a subsidiary of Nufarm,  payable on June
30, 2001. The purchase  price will be adjusted  upward or downward for inventory
of Agtrol in excess of or less than the amount of inventory at June 30, 2000. In
addition to the U. S. asset sale,  the Company has agreed to sell certain of the
assets of Agtrol  International  located in France to Nufarm, as well as all the
stock of an operating  subsidiary of Agtrol  International in Argentina and of a
newly formed  non-operating  subsidiary of Agtrol  International in Mexico.  The
entry into a definitive  agreement for the  disposition  of the French assets is
subject to compliance with certain French labor law requirements.  In connection
with the foregoing  transactions,  the Company and Nufarm,  Inc.  entered into a
license  agreement  pursuant to which the Company  licensed  certain  technology
relating to its dry prill manufacturing  process to Nufarm on an exclusive basis
in the fungicide field and with respect to certain  pesticide  products and on a
non-exclusive basis in all other fields.

Item 6. Exhibits and Reports on Form 8-K.

      (a) Exhibits

      Exhibit No.    Description
      ----------     -----------
      10.37          United States Asset Purchase Agreement between Phibro-Tech,
                     Inc. and Nufarm, Inc. dated as of May 1, 2001.*

      10.38          Supply Agreement between Phibro-Tech, Inc. and Nufarm, Inc.
                     dated as of May 1, 2001.*

      10.39          License  Agreement  between  Phibro-Tech,  Inc. and Nufarm,
                     Inc. dated as of May 1, 2001.*

- ----------
*  Filed herewith.

      (b) Reports on Form 8-K.

      The registrant filed a Current Report on Form 8-K dated November 30, 2000,
as amended by a Current Report on Form 8-K/A dated  February 2, 2001,  reporting
under Item 2 the  acquisition of assets relating to the Medicated Feed Additives
business  of  Pfizer  Inc.  and  certain  of  its  subsidiaries.  The  financial
statements  reported in Item 7 of said Form 8-K/A were: (a) statements of assets
acquired  as of  December  31,  1999 and 1998,  and the  related  statements  of
revenues and operating  expenses for the years ended December 31, 1999, 1998 and
1997,  and (b) the  following  pro forma balance sheet as of September 30, 2000,
and pro forma  income  statements  for the year ended June 30,  2000 and for the
three months ended September 30, 2000.


                                       28
<PAGE>

                                   SIGNATURES

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

                                          PHILIPP BROTHERS CHEMICALS, INC.

Date: May 14, 2001                        By: /s/ DAVID STORBECK
                                              ----------------------------------
                                              David Storbeck
                                              Chief Financial Officer

Date: May 14, 2001                        By: /S/ JOSEPH KATZENSTEIN
                                              ----------------------------------
                                              Joseph Katzenstein, Treasurer
                                              and Secretary


                                       29
<PAGE>

                                 EXHIBIT INDEX

Exhibit No.          Description
- ----------           -----------
10.37                United States Asset Purchase Agreement between Phibro-Tech,
                     Inc. and Nufarm, Inc. dated as of May 1, 2001.*

10.38                Supply Agreement between Phibro-Tech, Inc. and Nufarm, Inc.
                     dated as of May 1, 2001.*

10.39                License  Agreement  between  Phibro-Tech,  Inc. and Nufarm,
                     Inc. dated as of May 1, 2001.*

- ----------
*  Filed herewith.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.37
<SEQUENCE>2
<FILENAME>file002.txt
<DESCRIPTION>PURCHASE AGREEMENT BETWEEN PHIBRO-TECH AND NUFARM
<TEXT>


                     UNITED STATES ASSET PURCHASE AGREEMENT

                                     BETWEEN

                                PHIBRO-TECH, INC.

                                       AND

                                  NUFARM, INC.

                                   ----------

                                As of May 1, 2001

                                   ----------


<PAGE>

ARTICLE 1    Purchase and Sale of Assets of the U.S. Agtrol Division.........  1

    1.1      Sale of Purchased Assets........................................  1

    1.2      Purchased Assets................................................  1

    1.3      Excluded Assets.................................................  2

ARTICLE 2    Consideration...................................................  4

    2.1      Purchase Price..................................................  4

    2.2      Assumed Liabilities; Excluded Liabilities.......................  5

    2.3      Certain Closing Prorations and Adjustments......................  6

    2.4      Non-assignability...............................................  6

    2.5      Collection of Receivables.......................................  7

    2.6      Supply Agreement; License Agreement.............................  8

ARTICLE 3    Closing; Deliveries; Conditions Precedent.......................  8

    3.1      Closing.........................................................  8

    3.2      Seller's Deliveries.............................................  9

    3.3      Buyer's Deliveries..............................................  9

    3.4      Condition Precedent of Buyer and the Seller..................... 10

    3.5      Buyer's Conditions Precedent.................................... 10

    3.6      Seller's Conditions Precedent................................... 11

ARTICLE 4    Representations and Warranties of the Seller.................... 11

    4.1      Organization, Standing and Qualification; Authority............. 11

    4.2      No Violation; Qualification..................................... 12

    4.3      Financial Statements............................................ 12

    4.4      Absence of Undisclosed Liabilities.............................. 13

    4.5      Absence of Certain Changes or Events............................ 13

    4.6      Tax Liabilities................................................. 13

    4.7      Leasehold Interests............................................. 13

    4.8      Other Property.................................................. 14

    4.9      Registered Patents, Trade Names, Trademarks and Copyrights...... 14

    4.10     Title to Assets................................................. 15

    4.11     Contracts....................................................... 15

    4.12     Compliance with Laws............................................ 15

    4.13     Litigation and Claims........................................... 15


<PAGE>


    4.14     Permits......................................................... 16

    4.15     Employees....................................................... 17

    4.16     Employment Contracts and Benefits............................... 17

    4.17     Fees............................................................ 18

    4.18     Environmental Laws.............................................. 18

    4.19     Disclosure of Confidential Information to Others;
             Restrictive Agreements.......................................... 18

    4.20     Books and Records............................................... 19

    4.21     Validity of Representations and Warranties...................... 19

ARTICLE 5    Representations and Warranties of Buyer......................... 20

    5.1      Organization and Standing....................................... 20

    5.2      Authority....................................................... 20

    5.3      Litigation...................................................... 20

    5.4      Financing....................................................... 20

    5.5      No Violation; Qualification..................................... 20

    5.6      Brokerage or Finder's Fee....................................... 21

    5.7      Investigation................................................... 21

ARTICLE 6    Certain Covenants............................................... 21

    6.1      Consents........................................................ 21

    6.2      Certain Employee Matters........................................ 22

    6.3      Disclosure of Business Secrets.................................. 23

    6.4      Non-Competition, Non-Disclosure and Non-Solicitation............ 23

    6.5      Bulk Sales Laws................................................. 25

    6.6      Transactional Taxes............................................. 25

    6.7      Books and Records............................................... 25

    6.8      Product Registrations........................................... 26

    6.9      Product Rework.................................................. 26

    6.10     Stock Sales..................................................... 26

ARTICLE 7    Indemnification................................................. 26

    7.1      Seller's Obligation to Indemnify................................ 26

    7.2      Buyer's Obligation to Indemnify................................. 27

    7.3      Procedure for Satisfaction of Indemnity Claims.................. 27

    7.4      Survival and Other Matters...................................... 29


                                       ii
<PAGE>

    7.5      Satisfaction of Indemnity Claims................................ 30

    7.6      Interest........................................................ 31

ARTICLE 8    Miscellaneous................................................... 31

    8.1      Certain Defined Terms........................................... 31

    8.2      Certain Understandings.......................................... 35

    8.3      Binding Agreement............................................... 36

    8.4      Assignment...................................................... 36

    8.5      Public Announcements............................................ 36

    8.6      Law To Govern................................................... 36

    8.7      Notices......................................................... 36

    8.8      Entire Agreement................................................ 37

    8.9      Waivers......................................................... 38

    8.10     Severability.................................................... 38

    8.11     Income Tax Position............................................. 38

    8.12     Third-Party Beneficiaries....................................... 38

    8.13     Time of the Essence............................................. 38

    8.14     Waiver of Jury Trial............................................ 38

    8.15     Drafting........................................................ 39

    8.16     Counterparts.................................................... 39

    8.17     Headings........................................................ 39

    8.18     Further Assurances.............................................. 39

    8.19     Dispute Resolution.............................................. 39


                                       iii
<PAGE>


EXHIBITS

Exhibit A             Buyer Note
Exhibit B             Supply Agreement
Exhibit C             License Agreement
Exhibit D             Assignment and Assumption Agreement

SCHEDULES

Schedule 1.2(a)       Tangible Personal Property
Schedule 1.2(b)       Leasehold Interests
Schedule 1.2(c)       Inventory
Schedule 1.2(d)       Contracts
Schedule 1.2(e)       Intangibles
Schedule 2.5          Receivables

Schedule 3.5(d)       Contracts to be Assigned Prior to Closing
Schedule 4.1          Jurisdictions the Seller is Authorized to do Business
Schedule 4.3          Financial Statements
Schedule 4.7          Real Property
Schedule 4.9          Intellectual Property
Schedule 4.10         Title of Assets
Schedule 4.11         Contracts
Schedule 4.13         Litigation
Schedule 4.14         Permits
Schedule 4.15         Employees
Schedule 4.16         Benefit Plans
Schedule 4.19         Disclosure of Confidential Information to Others;
                      Restrictive Agreements
Schedule 6.2          Employees to be Offered Employment
Schedule 8.2(a)       Persons of Seller "with knowledge"


                                       iv
<PAGE>

                     UNITED STATES ASSET PURCHASE AGREEMENT

      This United States Asset Purchase Agreement (this  "Agreement"),  dated as
of May 1, 2001 (the "Effective  Date"), is by and between  Phibro-Tech,  Inc., a
Delaware  corporation (the "Seller"),  and Nufarm,  Inc., a Delaware corporation
("Buyer").

      WHEREAS,  the Seller and its  Affiliates  own and  operate,  directly  and
indirectly,  through the Seller, LC Holdings S.A., a French societe anonyme ("LC
Holdings"),   Agtrol  International  S.A.,  a  French  societe  anonyme,  Agtrol
Internacional  (Argentina) S.A. ("Agtrol  Argentina"),  and Agtrol International
(Mexico) S.A.  ("Agtrol  Mexico"),  the division known as Agtrol  International,
which  division  engages  in  the  business  of  developing,  manufacturing  and
marketing certain fungicides,  bactericides and plant-growth regulators ("Agtrol
International");

      WHEREAS,  the  parties  desire (a) that  pursuant to this  Agreement,  the
Seller  sells to Buyer the assets of Agtrol  International  that are utilized by
Agtrol  International  to conduct its business in and from the United  States of
America, including the China office and excluding the operations of the Facility
(the "U.S.  Agtrol  Division");  and (b) that Buyer  purchase such assets of the
U.S. Agtrol Division from the Seller, on the terms and subject to the conditions
set forth herein; and

      WHEREAS, defined terms have the meanings stated in Section 8.1.

      NOW,  THEREFORE,  in  consideration of the mutual  covenants,  agreements,
representations and warranties herein contained,  and upon the terms and subject
to the conditions set forth herein, the parties hereto hereby agree as follows:

                                   ARTICLE 1

             Purchase and Sale of Assets of the U.S. Agtrol Division

      1.1 Sale of  Purchased  Assets.  At the  Closing,  the Seller  shall sell,
assign,  convey and otherwise  transfer to Buyer,  and Buyer shall purchase from
the Seller,  all right, title and interest of the Seller in and to the Purchased
Assets, free and clear of all Liens, other than Permitted Liens.

      1.2  Purchased  Assets.  At the Closing,  the Seller  shall sell,  assign,
convey and  otherwise  transfer  to Buyer,  and Buyer  shall  purchase  from the
Seller, the following  properties and assets of the Seller that are used or held
for use primarily by the U.S. Agtrol Division, as such exist on the Closing Date
(the  "Purchased  Assets"),  free and clear of all Liens  other  than  Permitted
Liens:

            (a) Tangible Personal Property. All vehicles, machinery,  equipment,
      office  furniture,  office  equipment,  office  materials and supplies and
      other tangible personal  property,  all of which is identified on Schedule
      1.2(a) (collectively the "Tangible Personal Property").

            (b) Leasehold  Interests.  All leasehold  interests in real property
      wherever  located,   all  of  which  are  identified  on  Schedule  1.2(b)
      (collectively the "Leasehold Interests").


<PAGE>

            (c) Inventory.  (i) All inventories,  wherever located,  of finished
      Copper Products and finished  Non-Copper Products and (ii) all inventories
      of raw materials,  works in process,  supplies and packaging  materials to
      the extent such raw  materials,  works in process,  supplies and packaging
      materials  relate to Non-Copper  Products,  all of which are identified by
      location on Schedule 1.2(c) (collectively the "Inventory").

            (d)  Contracts.  All right,  title and interest in and to contracts,
      agreements, purchase orders, licenses and leases, all of which, other than
      purchase orders entered into in the ordinary  course of business,  are set
      forth on Schedule 1.2(d) (all of the foregoing,  including purchase orders
      entered into in the ordinary course of business,  being  collectively  the
      "Contracts").

            (e)  Intangibles.  All right,  title and  interest in and to (i) all
      copyrights,   trademarks,  trade  names,  logos,  service  marks,  product
      specifications,    all   governmental    registrations,    including   the
      Registrations,  and data in support of Registrations  (including any right
      to any  compensation  for the use thereof) with respect to Copper Products
      and Non-Copper  Products and applications  for any of the foregoing,  (ii)
      know-how,  trade  secrets,  technology,  software and production and other
      processes  and  formulae  related to the  formulation  or  manufacture  of
      Non-Copper Products,  other than the technology licensed under the License
      Agreement,  (iii) all rights under  warranties from suppliers of Inventory
      and Tangible Personal Property,  (iv) telephone numbers, postal addresses,
      domain names, web sites and other intangible proprietary property, (v) all
      approvals,  consents,  licenses, permits, waivers and other authorizations
      issued,  granted, given or otherwise made available under the authority of
      any  government  or  political   subdivision  thereof  or  any  executive,
      judicial,  legislative,  regulatory or administrative agency, authority or
      office,  to the extent  assignable to Buyer,  and (vi) an undivided  equal
      co-ownership  interest  with  the  Seller  in and to the  know-how,  trade
      secrets,  technology  and  production  and other  processes  and  formulae
      related to the formulation or manufacture of Copper Products, all of which
      (other  than  data  in  support  of any  governmental  registrations)  are
      identified on Schedule 1.2(e).

            (f) Prepaid  Items.  All right,  title and interest of the Seller in
      and to all prepaid items relating  primarily to any of the other Purchased
      Assets  or the  operation  of the U.S.  Agtrol  Division,  but only to the
      extent of an  adjustment  to the  Purchase  Price  therefor is paid to the
      Seller in accordance with Section 2.3 (collectively "Prepaids").

            (g) Business  Records.  All right,  title and interest in and to all
      engineering and production reports,  consulting reports, health and safety
      data  marketing data and reports,  forecasts,  financial data and reports,
      product catalogues, copies of personnel records, mailing lists, vendor and
      supplier  lists,  customer  lists and any  other  similar  information  in
      tangible and/or electronic form (collectively the "Business Records").

            (h) Goodwill.  All goodwill in and going concern value including the
      right to use the name "Agtrol" and any variations thereof and any goodwill
      related thereto.

      1.3 Excluded  Assets.  All  properties,  assets and business of the Seller
anywhere in the world,  including the  remaining  businesses of the Seller other
than  the U.S.  Agtrol  Division,  other  than the  Purchased  Assets,  shall be
excluded from the Purchased Assets (collectively,  the "Excluded Assets").  Such
Excluded Assets include:


                                       2
<PAGE>

            (a) all  assets,  properties,  business  and  rights  pertaining  or
      relating to any of the businesses owned, operated or managed by the Seller
      (other than those which relate primarily to the U.S. Agtrol Division);

            (b) all shares of capital stock,  and all other equity interests and
      securities, of or in the Seller or any of the subsidiaries thereof;

            (c) the names Philipp Brothers  Chemicals,  Inc.,  Philipp Brothers,
      Phibro,  Phibro-Tech  and any and all variations  thereof and all goodwill
      related thereto;

            (d) all Excess Inventory and all inventories of raw materials, works
      in  process,  supplies  and  packaging  materials  for the  purpose of the
      production of Copper Products;

            (e) all cash, cash  equivalents and similar type  investments of the
      Seller,  such  as  certificates  of  deposit,  Treasury  bills  and  other
      marketable  securities  on hand and/or in banks,  and  unearned  insurance
      premiums, excluding, however, Prepaids;

            (f) all accounts receivable,  notes receivable and other receivables
      of the Seller,  including all intracompany  receivables,  all of which are
      identified on Schedule 1.3(f) (collectively the "Receivables");

            (g) all  personal  effects  that are owned by  personnel of the U.S.
      Agtrol Division and not by the Seller;

            (h) all  financial  and tax reports,  ledgers and books and records,
      Tax returns and work sheets related to any of the foregoing, to the extent
      not related primarily to the U.S. Agtrol Division;

            (i) all organizational documents,  corporate seals, minute books and
      books and  records  that  pertain to the  organization,  existence  and/or
      capitalization of the Seller;

            (j) any and all policies of insurance,  including any and all rights
      thereunder, of the Seller;

            (k) all rights of the Seller to enforce (i) the obligations of Buyer
      to pay,  perform or discharge the Assumed  Liabilities  and (ii) all other
      obligations  of Buyer under or in  connection  with,  as well as all other
      rights of the Seller under or in connection  with,  this Agreement  and/or
      any of the other Transaction Documents;

            (l) all rights of the Seller to claims for refunds of Taxes;

            (m) any and all  rights  necessary  to  defend  against  any and all
      debts, liabilities and obligations retained by the Seller,  including, but
      not limited to, rights of setoff which the Seller may have with respect to
      any of such debts, liabilities and obligations;


                                       3
<PAGE>

            (n) any and all  claims or causes of action  against  third  parties
      that accrue or have accrued against or in favor of the Seller prior to the
      Closing  Date or that arise or have arisen out of any one or more  events,
      conditions or circumstances prior to the Closing Date;

            (o) any assets of any compensation or benefit plan or arrangement of
      the Seller;

            (p) an undivided  equal  co-ownership  interest with Buyer in and to
      know-how, trade secrets, technology, and production and other processes or
      formulae related to the formulation or manufacture of Copper Products;

            (q) any and all  rights of the  Seller  to  patents  related  to the
      formulation or manufacture of Copper  Products,  including the provisional
      patent and other  technology  that is  licensed  pursuant  to the  License
      Agreement, except to the extent licensed under the License Agreement; and

            (r) the property,  plant and equipment of the Seller,  including the
      plant located in Sumter, South Carolina (the "Sumter Plant").

Notwithstanding the foregoing, certain of the Excluded Assets may be acquired by
Buyer  and/or  its  Affiliates  as of the date  hereof  in  connection  with the
Argentina Stock Sale and/or the Mexico Stock Sale.

                                   ARTICLE 2

                                 Consideration

      2.1 Purchase Price.

            (a) In  consideration  of the sale,  assignment  and transfer of the
      Purchased Assets, at the Closing (i) Buyer shall pay to the Seller the sum
      of $14,775,000  (the "Cash Amount") and (ii) Buyer shall deliver to Seller
      an unsecured promissory note substantially in the form attached as Exhibit
      A hereto (the "Buyer  Note") in the Aggregate  Amount of  $1,224,990  (the
      "Note Amount," and together with the Cash Amount,  as adjusted pursuant to
      Sections  2.1(d) and 2.3, the "Purchase  Price").  All payments under this
      Section shall be by wire transfer of immediately  available  funds in U.S.
      dollars to an account or accounts specified in writing by the Seller prior
      to Closing.

            (b) Commencing on the Closing Date or such prior date as the parties
      hereto may  mutually  agree,  the Seller  shall take a physical  inventory
      count of the Inventory  and shall  conduct such count in  accordance  with
      GAAP  and  shall  employ  counting  procedures  consistent  with  previous
      physical  inventory  counts  conducted by the U.S.  Agtrol  Division  (the
      "Inventory Count").  The Seller shall make its employees available for the
      taking of the Inventory Count and Buyer and its representatives shall have
      the right, as Buyer  reasonably deems  appropriate,  to participate in the
      taking of the Inventory  Count.  Each party shall be  responsible  for its
      respective costs of the Inventory Count. The Inventory Count shall include
      only such  Inventory  that: (i) is of a quality that is usable or saleable
      condition  in the  ordinary  course of business and has a shelf life of at
      least (A) three (3) months in the case of antibiotics  and (B) twelve (12)
      months in all other count  products,  each calculated from the date of the
      Inventory  Count;  (ii) is in the  physical  possession  or control of


                                       4
<PAGE>

      the Seller at its facilities, at public warehouses, or in transit from its
      suppliers;  (iii) complies or will comply with all applicable  laws, rule,
      regulations and other  specifications  in order to permit the sale of such
      Inventory in the ordinary course of business without any addition or other
      modification  to  the  physical   makeup  thereof;   (iv)  meets  industry
      standards;  and (v) is not  materially  in excess of the  normal  stocking
      patterns  of the  Seller  based on the  seasonal  nature of its  business.
      Promptly after the Closing,  the Seller shall prepare a statement  setting
      forth the U.S.  dollar value of such Inventory as of the close of business
      on the Effective Date (the "Effective Date Inventory Calculation"),  using
      the results of the Inventory Count as the basis for such calculation.  Any
      Inventory not included in the Effective  Date  Inventory  Calculation as a
      result of the foregoing shall be referred to herein as "Excess Inventory."
      The Effective Date Inventory  Calculation  shall be prepared in accordance
      with GAAP, in a manner  consistent  with the  preparation of the Financial
      Statements.  The  Seller  shall use all  reasonable  efforts  to cause the
      Effective Date Inventory Calculation to be prepared and delivered to Buyer
      within  ten  (10)  days  after  the  Closing.  Buyer  and  its  authorized
      representatives,  at Buyer's  expense,  shall have the right to review the
      Effective Date Inventory  Calculation delivered by the Seller to Buyer and
      to review any working  papers  with  respect to its  preparation.  Without
      charge by Buyer, Buyer shall cause its employees to cooperate fully and on
      a timely  basis and to  assist  the  Seller  with its  preparation  of the
      Effective Date Inventory Calculation, and shall provide the Seller and its
      authorized  representatives  reasonable  access to the books,  records and
      facilities that constitute part of the Purchased Assets for such purpose.

            (c) Buyer  shall be  deemed  to have  accepted  the  Effective  Date
      Inventory Calculation,  unless within ten (10) days after delivery thereof
      to Buyer, Buyer gives written notice to the Seller of Buyer's objection to
      any item therein,  citing the item or principle  disputed.  If Buyer gives
      such  written  notice of objection  and the Seller and Buyer  resolve such
      dispute,  such  inventory  calculation,  as  so  resolved,  shall  be  the
      Effective Date Inventory  Calculation.  If Buyer gives such written notice
      of objection and Buyer and Seller shall attempt to resolve such dispute in
      accordance with Section 8.19.

            (d) If  (i)  the  Inventory  as  reflected  in  the  Effective  Date
      Inventory  Calculation  exceeds  $6,188,000,  the Purchase  Price shall be
      increased by the U.S. dollar amount of such excess (the "Excess  Inventory
      Amount")  and Buyer  shall pay to the  Seller  the  amount of such  Excess
      Inventory Amount and (ii) the Inventory as reflected in the Effective Date
      Inventory Calculation is less than $6,188,000, the Purchase Price shall be
      reduced by the U.S. dollar amount of such shortfall (the "Inventory  Value
      Shortfall") and the Seller shall pay to Buyer the amount of such Inventory
      Value  Shortfall.  Any payment required under this Section 2.1(d) shall be
      paid within five (5) Business  Days after the final  determination  of the
      Effective  Date  Inventory  Calculation  by wire  transfer of  immediately
      available  funds in U.S.  dollars to an account or accounts  designated by
      the party entitled to such payment.

      2.2 Assumed Liabilities; Excluded Liabilities. In addition to the Purchase
Price payable pursuant to Section 2.1, effective as of the Effective Date, Buyer
hereby agrees to assume, pay, perform,  discharge and otherwise satisfy promptly
when due, and to indemnify and hold  harmless the Seller from and against,  only
(a) under the  Contracts to the extent  arising with respect to the period on or
after  the  Effective  Date  and to the  extent  such  liabilities  would be the
liabilities  of the  Seller  but for the  assignment  of the  Contract,  and (b)
relating  to the  U.S.  Agtrol  Division  or the  use  of the  Purchased  Assets
(including the sale of Inventory by Buyer) on or after the Effective Date,


                                       5
<PAGE>

including any claims  relating to health and safety,  environmental,  employment
and termination of employment on or after the Effective Date (collectively,  the
"Assumed  Liabilities").  Except as provided in this Agreement,  Buyer shall not
assume or become  liable or obligated for or on any contract or agreement of the
Seller  or  for  any  of any  debt,  liability  or  obligation  of  the  Seller,
whatsoever,  whether known or unknown, direct, contingent or otherwise,  however
or whenever  arising or asserted,  including any liability or obligation  (i) of
the  Seller  to  its  employees,  customers,  creditors  or  brokers,  or to any
governmental  authority,  (ii) in  respect  of the  Excluded  Assets,  or  (iii)
relating to the U.S. Agtrol Division or the use of the Purchased Assets prior to
the  Effective  Date,  including  any  claims  relating  to health  and  safety,
environmental,  employment and termination of employment  prior to the Effective
Date (all such liabilities and obligations of the Seller,  herein referred to as
the "Excluded  Liabilities").  Buyer shall be solely  responsible for satisfying
all of the Assumed Liabilities and the Seller shall have no liability whatsoever
with respect thereto.  The Seller shall be solely responsible for satisfying all
of the Excluded  Liabilities  and Buyer shall have no liability  whatsoever with
respect thereto.

      2.3 Certain Closing Prorations and Adjustments.  All utility charges, real
estate taxes, personal property taxes, rental payments under Leasehold Interests
Leases, rental payments under leases of Tangible Personal Property of the Seller
to be assumed by Buyer  pursuant to this  Agreement  and  similar  items (to the
extent  included in the  Purchased  Assets),  to the extent  Buyer  realizes any
benefit  therefrom on or after the  Effective  Date,  shall be prorated.  To the
extent the net amount  resulting  from the  foregoing is in favor of the Seller,
Buyer shall pay to the  Seller,  on the Closing  Date,  such net amount;  to the
extent the net amount  resulting  from the  foregoing is in favor of Buyer,  the
Seller  shall pay to Buyer,  on the Closing  Date,  such net  amount.  In either
event, such payment shall be by wire transfer of immediately  available funds in
U.S. dollars to an account or accounts  designated by the party entitled to such
payment. If any of the apportionments set forth above are not accomplished as of
the Closing,  then, as soon as practicable  thereafter,  representatives  of the
Seller and Buyer  shall  examine all  appropriate  books and records in order to
make the determination of said  apportionments.  Buyer and/or the Seller, as the
case may be,  shall make payment in respect  thereof by May 18,  2001;  provided
that if payments  with respect to real or personal  property  taxes are based in
whole or in part on the previous year's taxes,  Buyer and/or the Seller,  as the
case may be,  shall make payment to reflect the current  year's  taxes  promptly
after the relevant tax amounts are determined. In addition, the Seller shall pay
to Buyer,  on the Closing Date, by wire transfer of immediately  available funds
in U.S.  dollars to an account or accounts  designated by Buyer, an amount equal
to all earned or accrued  but unpaid  sick pay,  vacation  pay,  bonuses and the
like, with respect to Employees  hired by Buyer,  owing in respect of the period
preceding the Closing Date.

      2.4  Non-assignability.  From the date  hereof and  through  and after the
Closing Date, the Seller shall use  commercially  reasonable  efforts to obtain,
and Buyer shall  cooperate  with the Seller to obtain,  approvals,  consents and
waivers  necessary to convey to Buyer each of the  Purchased  Assets,  including
each Contract (including governmental registrations, permits, licenses and other
authorizations)  and all  claims,  rights and  benefits  arising  thereunder  or
resulting therefrom (each a "Contract  Interest");  provided,  however, that the
Seller shall not be obligated to pay any consideration for any approval, consent
or waiver to any third  party  from  whom such  approval,  consent  or waiver is
requested.  Notwithstanding  anything to the contrary herein, to the extent that
any lease, contract, license, permit, registration,  agreement,  purchase order,
commitment,  property


                                       6
<PAGE>

interest or other asset or right  included in the  Purchased  Assets  (including
without  limitation  governmental  registrations,  permits,  licenses  and other
authorizations),  or any claim, right or benefit arising thereunder or resulting
therefrom  is not  capable of being  sold,  assigned,  transferred  or  conveyed
without the approval, consent or waiver of the issuer thereof or the other party
or  parties  thereto,   or  any  other  Person   (including  any  government  or
governmental  regulatory agency or authority),  this Agreement shall not, in the
event any such issuer or third party  shall  object to or not grant  approval of
such assignment,  constitute a sale, assignment, transfer or conveyance thereof,
or an attempted sale,  assignment,  transfer or conveyance thereof,  absent such
approval,  consent or waiver;  and the Seller  shall not be  obligated  to sell,
assign,  transfer or convey to Buyer any of its rights or  obligations  in or to
any such Contract Interest without first obtaining all such necessary approvals,
consents or waivers.  If any of such  approvals,  consents or waivers  shall not
have  been  obtained  as of the  Closing,  the  Seller  shall  use  commercially
reasonable  efforts to cooperate with Buyer in, and to engage in, any reasonable
and  lawful  arrangement  designed  to provide  the  benefits  of such  Contract
Interests to Buyer and, if required, to hold the benefit of same as bare trustee
for Buyer to the extent  permitted by applicable  Law and Buyer shall  indemnify
the Seller for all damages,  losses,  costs and liabilities relating to any such
performance  occurring on or after the Effective  Date. To the extent the Seller
provides the benefit of any Contract as a result of any such arrangement,  Buyer
shall perform the  obligations  under such Contract  arising in connection  with
such benefits.

      2.5 Collection of Receivables.

            (a)  Attached  hereto  as  Schedule  2.5  is a  list  of  all of the
      Receivables.  From the Closing Date until August 31, 2001 (the "Collection
      Period"),  Buyer shall use commercially  reasonable efforts to collect for
      the  benefit  of the  Seller  the  Receivables  (the  "Collections").  All
      payments  received by Buyer  during the  Collection  Period  from  account
      debtors   indebted  on  account  of  both  the  Receivables  and  accounts
      receivable  of Buyer arising after the Closing Date shall be applied first
      to  the  indebtedness  owed  by  the  account  debtor  on  account  of the
      Receivables,  and then to any  indebtedness  owed by the account debtor to
      Buyer  arising  subsequent to the Closing Date;  provided,  however,  that
      Buyer shall not be obligated to apply any of the Receivables to the extent
      the applicable customer otherwise directs.

            (b) Within  five (5)  Business  Days after the end of each  calendar
      month during the  Collection  Period (i.e. by June 7, 2001,  July 9, 2001,
      August 7, 2001 and September 10, 2001),  Buyer shall deliver to the Seller
      a statement or report showing all  Collections of Receivables  during such
      month.  On the first  Business  Day of each  week  during  the  Collection
      Period,  Buyer  shall  forward  to the Seller via  overnight  courier  all
      Collections in the form of checks received by Buyer during the prior week.
      As of and from September 10, 2001, Buyer shall have no further obligations
      with respect to Collections  and/or  Receivables,  except that Buyer shall
      promptly remit to the Seller all  Receivables  received by Buyer after the
      Collection Period.

            (c)  Buyer  shall  not  have  any  interest  in or  to  any  of  the
      Receivables  and  shall  not agree to any  return,  settlement,  discount,
      credit, rebilling or reduction of any of the Receivables without the prior
      written consent of the Seller.  Buyer shall not assign,  pledge or grant a
      security  interest in any of the Receivables to any third party or claim a
      security interest or right in or to any


                                       7
<PAGE>

      of  the  Receivables.  Buyer  shall  not be  obligated  to  undertake,  to
      institute or to join in any legal action to collect any Receivable.

            (d)  The  Seller  acknowledges  that  the  maintenance  of  customer
      relations is fundamental to the U.S. Agtrol Division.

            (e) Subject to Section 2.5(c),  Buyer and the Seller each agree that
      they will immediately upon receipt transfer to the other party any cash or
      other property received by such party, including in respect of Receivables
      and vendor rebates,  which rightfully  belongs to the other party. In this
      regard,  if during the twelve (12) month  period  after the  Closing  Date
      Buyer receives from any customer of the U.S.  Agtrol  Division as a return
      any product  purchased from the U.S.  Agtrol Division prior to the Closing
      Date which product is  marketable,  Buyer shall promptly pay to the Seller
      an amount equal to the value of such returned product, using the value for
      such  product  used  to  determine  the  final  Effective  Date  Inventory
      Calculation.

            (f) During the  Collection  Period,  the Seller may request Buyer to
      contact debtors indebted on account of the Receivables in order to collect
      such  Receivables.  Upon such request,  Buyer,  in its sole option,  shall
      promptly  either perform such request or inform the Seller that the Seller
      may perform such request itself.  In the event such request (either by the
      Seller or by Buyer on behalf of the Seller)  does not result in the prompt
      full payment of such  Receivable,  the Seller may contact such  defaulting
      account debtor.

      2.6 Supply Agreement;  License Agreement.  At the Closing,  the Seller and
Buyer shall enter into (a) a supply  agreement,  dated as of the Effective Date,
for the  provision  by the Seller to Buyer of  products  from the Sumter  Plant,
substantially  in the form of Exhibit B hereto (the "Supply  Agreement") and (b)
an exclusive license  agreement,  dated as of the Effective Date,  providing for
the  licensing by the Seller to Buyer of that  certain  patent of the Seller for
the  continuous  process for the  manufacture  of granular  fungicide  products,
substantially in the form of Exhibit C hereto (the "License Agreement").

                                   ARTICLE 3

                    Closing; Deliveries; Conditions Precedent

      3.1 Closing.

            (a) The closing of the  transactions  contemplated by this Agreement
      (the  "Closing")  shall take place at the  offices  of  McDermott,  Will &
      Emery,  50 Rockefeller  Plaza,  New York,  New York, at 10:00 a.m.,  local
      time, on May 4, 2001 (the  "Closing  Date").  The  effective  date of this
      Agreement  shall be the Effective Date and all  transactions  contemplated
      herein  or in any  other  Transaction  Document  shall be  deemed  to have
      occurred as of the Effective Date unless otherwise  specifically  provided
      to the contrary.


                                       8
<PAGE>

            (b) All proceedings to be taken and all documents to be executed and
      delivered by the parties at the Closing shall be deemed to have been taken
      and executed  simultaneously  and no proceedings shall be deemed taken and
      no documents executed or delivered until all have been taken, executed and
      delivered.

      3.2 Seller's Deliveries. At the Closing, the Seller shall deliver or cause
to be delivered to Buyer:

            (a) a certificate of good standing or other appropriate  evidence of
      existence with respect to the Seller,  as of a then recent date, issued by
      the Secretary of State of the State of Delaware;

            (b) the  certificate  described in Section  3.5(c) and copies of all
      resolutions of the board of directors and stockholders,  if applicable, of
      the Seller  authorizing  the execution and delivery of this  Agreement and
      the other  Transaction  Documents and the consummation of the transactions
      contemplated hereby and thereby by the Seller,  certified by the corporate
      secretary or assistant secretary thereof;

            (c) duly  authorized  assignments  by the Seller of the Contracts or
      novations of the  Contracts  between  Buyer and the other party thereto in
      replacement  of any such Contract  incapable of  assignment,  such novated
      Contract to be on the same terms and  conditions as between the Seller and
      such other party;

            (d)  bills of sale and such  other  instruments  of  assignment  and
      conveyance as may be requested by Buyer in order  effectively  to transfer
      to Buyer title to the  Purchased  Assets as herein  provided,  all in form
      reasonably requested by Buyer, executed by the Seller;

            (e) the Supply Agreement, executed by the Seller;

            (f) the License Agreement, executed by the Seller;

            (g) any amount to be paid at  Closing  by the Seller to Buyer  under
      Section 2.3;

            (h) an  opinion of  Golenbock,  Eiseman,  Assor & Bell,  in form and
      substance reasonably satisfactory to Buyer; and

            (i) all other  documents  required by the terms of this Agreement or
      the other Transaction  Documents to be delivered by the Seller to Buyer at
      the  Closing,  including  evidence of  termination  of Liens on  Purchased
      Assets.

      3.3 Buyer's Deliveries. At the Closing, Buyer will deliver to the Seller:

            (a) the Cash Amount by wire transfer of immediately  available funds
      to such account(s) as the Seller shall specify;

            (b) the Buyer Note, executed by Buyer;


                                       9
<PAGE>

            (c) an assumption agreement,  substantially in the form of Exhibit D
      hereto, executed by Buyer;

            (d) the Supply Agreement, executed by Buyer;

            (e) the License Agreement, executed by Buyer;

            (f)  the  certificate  described  in  Section  3.6(c)  and a copy of
      resolutions  of Buyer  authorizing  the  execution  and  delivery  of this
      Agreement and the other Transaction  Documents and the consummation of the
      transactions  contemplated  hereby and thereby by Buyer,  certified by the
      corporate secretary or assistant secretary of Buyer;

            (g) a certificate of good standing with respect to Buyer,  issued as
      of a then recent date, by the Secretary of State of the State of Delaware;

            (h) any amount to be paid at  Closing  by Buyer to the Seller  under
      Section 2.3;

            (i) an opinion of  McDermott,  Will & Emery,  in form and  substance
      reasonably satisfactory to the Seller; and

            (j) all other  documents  required by the terms of this Agreement or
      the other Transaction  Documents to be delivered by Buyer to the Seller at
      the Closing.

      3.4 Condition  Precedent of Buyer and the Seller.  The obligations of each
of Buyer and the Seller  under this  Agreement  to proceed  with the Closing are
subject to the  fulfillment  or waiver by the affected  party at or prior to the
Closing of the condition that no governmental  authority or regulatory agency or
commission  or court of  competent  jurisdiction  shall  have  enacted,  issued,
promulgated,  enforced or entered any statute, rule,  regulation,  injunction or
other  order  which is in effect and has the  effect of making the  transactions
contemplated by this Agreement  illegal or otherwise  restraining or prohibiting
consummation of such transactions;  provided,  however,  that the affected party
shall have used its best efforts to have any such order or injunction vacated.

      3.5 Buyer's  Conditions  Precedent.  The  obligations  of Buyer under this
Agreement to proceed with the Closing are subject to the  fulfillment or waiver,
at the option of Buyer, of the following conditions at or prior to the Closing:

            (a) The  representations  and warranties of the Seller  contained in
      this Agreement and each certificate delivered by the Seller at the Closing
      pursuant  to this  Agreement  shall be true and  correct  in all  material
      respects  when made,  and shall also be true and  correct in all  material
      respects  at the time of the  Closing  with the same  force and  effect as
      though such  representations  and warranties were made at that time except
      that representations and warranties made as of a specific,  indicated date
      shall be true and correct in all  material  respects as of such  specified
      date.

            (b) Each covenant, agreement and obligation required by the terms of
      this Agreement to be complied with and performed by the Seller at or prior
      to the  Closing  shall  have  been  complied  with and  performed,  in all
      material respects.


                                       10
<PAGE>

            (c) The Seller shall have  delivered to and for the benefit of Buyer
      a certificate of the Seller  executed on the Closing Date  certifying that
      the conditions  set forth in  subsections  (a) and (b) of this Section 3.5
      have been fulfilled.

            (d) All consents  from  Persons to any  Contract  listed on Schedule
      3.5(d) that may be required in connection with this Agreement or to assure
      that  such  contracts   continue  in  full  force  and  effect  after  the
      consummation of the  transactions  contemplated  hereby without giving any
      contracting  Person the right to  terminate  or modify  any such  Contract
      shall have been obtained either by duly authorized  assignment or novation
      thereof.

      3.6 Seller's  Conditions  Precedent.  The  obligations of the Seller under
this  Agreement to proceed with the Closing are subject,  to the  fulfillment or
waiver, at the option of the Seller,  of each of the following  conditions at or
prior to the Closing:

            (a) The  representations  and warranties of Buyer  contained in this
      Agreement and each certificate  delivered by it at the Closing pursuant to
      this  Agreement  shall be true and correct in all material  respects  when
      made,  and shall also be true and correct in all material  respects at the
      time of the  Closing  with  the same  force  and  effect  as  though  such
      representations  and  warranties  were  made  at  that  time  except  that
      representations and warranties made as of a specific, indicated date shall
      be true and correct in all material respects as of such specified date.

            (b) Each covenant, agreement and obligation required by the terms of
      this  Agreement to be complied  with and performed by Buyer at or prior to
      the Closing shall have been complied with and  performed,  in all material
      respects.

            (c) Buyer shall have  delivered to and for the benefit of the Seller
      a certificate  of Buyer executed on the Closing Date  certifying  that the
      conditions set forth in  subsections  (a) and (b) of this Section 3.6 have
      been fulfilled.

                                   ARTICLE 4

                  Representations and Warranties of the Seller

      Except as otherwise set forth in the disclosure  schedule delivered by the
Seller to Buyer on the date of the  execution  by Buyer of this  Agreement  (the
"Disclosure  Schedule"),  the Seller hereby  represents and warrants to Buyer as
follows:

      4.1 Organization, Standing and Qualification; Authority.

            (a) The Seller is a corporation duly organized, validly existing and
      in good  standing  under the laws of the State of Delaware.  The Seller is
      duly  qualified  to do  business  and is in  good  standing  as a  foreign
      corporation under the laws of each jurisdiction where the failure to be so
      qualified  would  result  in a  Material  Adverse  Effect  and  each  such
      jurisdictions  is listed on  Schedule  4.1.  The Seller has the  requisite
      corporate  power and  corporate  authority to own and lease its assets and
      properties,  including the Purchased Assets,  and to carry on its business
      in the places such assets and properties are now owned or leased and where
      such business is presently conducted.


                                       11
<PAGE>

            (b) The  Seller  has all  requisite  corporate  power and  corporate
      authority to execute and deliver this Agreement, the Supply Agreement, the
      License  Agreement and all other documents  executed  and/or  delivered in
      connection herewith (collectively the "Transaction Documents") to which it
      shall be a signatory and to carry out the transactions contemplated hereby
      and thereby. This Agreement has been duly executed by, and constitutes the
      legal,  valid and binding  obligation of, the Seller and each of the other
      Transaction  Documents,  when executed and delivered by the Seller,  shall
      constitute the legal,  valid and binding obligation of the Seller, in each
      case  enforceable  against it in accordance  with their  respective  terms
      subject to bankruptcy, insolvency, reorganization,  moratorium and similar
      laws of general  applicability  relating to or affecting creditors' rights
      and to general equity principles. All corporate proceedings required to be
      taken by the Seller relating to the execution, delivery and performance of
      this Agreement and the other Transaction  Documents,  and the consummation
      of the transactions contemplated hereby and thereby, have been duly taken.

      4.2 No Violation; Qualification. Except as may be caused or made necessary
by facts relating solely to Buyer:  (a) the execution,  delivery and performance
of this  Agreement  and the other  Transaction  Documents  by the Seller and the
consummation by it of the transactions contemplated by this Agreement and by the
other Transaction  Documents will not (i) conflict with or violate any provision
of the  certificate  of  incorporation  or  bylaws of the  Seller,  (ii) with or
without the giving of notice or the passage of time, or both, result in a breach
of, or violate,  or be in conflict with, or constitute a material default under,
or  permit  the  termination  of,  or cause or permit  acceleration  under,  any
material  agreement,  instrument,  debt or  obligation  to which the Seller is a
party or to or by which it is subject or bound,  or (iii)  violate any law, rule
or regulation or any order, judgment, decree or award of any court, governmental
authority or arbitrator to or by which the Seller is subject or bound, except as
would not  reasonably  be  expected  to have a  material  adverse  effect on the
ability  of the  Seller to  consummate  the  transactions  contemplated  by this
Agreement and by the other  Transaction  Documents;  and (b), except as provided
herein,  no material  consent,  approval or  authorization  of, or  declaration,
filing or  registration  with,  or notice to,  any  governmental  or  regulatory
authority  or any other  third  party is  required to be obtained or made by the
Seller in  connection  with the  execution,  delivery  and  performance  of this
Agreement  and  the  other  Transaction  Documents  or the  consummation  of the
transactions  contemplated  by  this  Agreement  and  by the  other  Transaction
Documents, other than those consents that are the obligation of Buyer to obtain.

      4.3 Financial  Statements.  Attached as Schedule 4.3 are true and complete
copies of the  following  financial  statements  (the  "Financial  Statements"):
unaudited  balance  sheets of the U.S.  Agtrol  Division as of June 30, 1999 and
June 30, 2000 and, in each case, the related  statements of income and cash flow
for the fiscal  years then  ended  prepared  by  management  of the U.S.  Agtrol
Division and the unaudited balance sheet of the U.S. Agtrol Division as of March
31, 2001  prepared by  management  of the U.S.  Agtrol  Division  (the  "Balance
Sheet").  The Financial  Statements  fairly present in all material respects the
financial  position of and the results of operations of the U.S. Agtrol Division
in  accordance  with GAAP,  consistently  applied,  as of the  respective  dates
thereof  and for the fiscal  years  covered  thereby,  subject to the absence of
footnotes  and,  in the case of all  interim  period  Financial  Statements,  to
reasonable year-end adjustments.

      4.4 Absence of Undisclosed Liabilities. The Seller has no material debt or
material  liability  relating to the U.S. Agtrol Division that would be required
in accordance with U.S. generally


                                       12
<PAGE>

accepted accounting principles ("GAAP") to be set forth or reserved against on a
balance  sheet of the U.S.  Agtrol  Division  that has not been set forth on the
Balance Sheet, except for (i) those incurred after the date of the Balance Sheet
in the ordinary course of business  consistent with past practice,  (ii) covered
by insurance,  indemnification  or comparable  arrangements or (iii) which would
not reasonably be expected to have a Material Adverse Effect.

      4.5  Absence of Certain  Changes or Events.  Since the date of the Balance
Sheet,  there has been no change that,  individually or in the aggregate,  would
have a  material  adverse  effect on the U.S.  Agtrol  Division,  whether or not
covered by  insurance,  and the Seller has no  knowledge of any such change that
could  reasonably  be  expected  to  occur,  nor  has  there  been  any  damage,
destruction or loss that could, individually or in the aggregate,  reasonably be
expected to have a material adverse effect on the U.S. Agtrol Division,  whether
or not  covered  by  insurance  other  than as a  result  of  downturn  suffered
generally  by  the  Seller's  industry.  Except  as  expressly  contemplated  or
permitted by this Agreement,  since the date of the Balance Sheet: (a) there has
not been any  increase  in the rate or terms of salary or bonus  payable  by the
Seller to any of the key employees of the U.S. Agtrol Division, except increases
occurring in the ordinary  course of business in accordance  with past practice;
(b) the Seller has not entered into any agreement or transaction relating to the
U.S. Agtrol Division,  outside the ordinary course of business,  consistent with
past practice, (c) the Seller has not materially changed its accounting methods,
principles or practices in respect of the U.S.  Agtrol  Division,  including its
payables and receivables  practices,  other than as required by changes in GAAP,
(d) the Seller has not sold, transferred, leased to others or otherwise disposed
of any of the  assets  or  properties  relating  primarily  to the  U.S.  Agtrol
Division,  except in the  ordinary  course  of  business,  consistent  with past
practice,  (e) the  Seller  has  not  experienced  any  labor  union  organizing
activity, had any actual or threatened employee strike, work stoppage, slow down
or lockout, or had any change in its relations with its employees as a group, in
each case relating to the U.S. Agtrol  Division,  (f) the Seller has complied in
all  material  respects  with each law,  rule or  regulation  applicable  to the
conduct of the U.S. Agtrol Division, and (g) the Seller has not entered into any
agreement to effect any of the foregoing or otherwise  conducted the business of
the  U.S.  Agtrol  Division  other  than in the  ordinary  course  of  business,
consistent with past practice.

      4.6 Tax Liabilities. The Seller has paid all material liabilities relating
to the U.S.  Agtrol  Division  for  federal,  state and local  taxes or  similar
charges imposed by any taxing authority,  including  federal,  state,  local and
foreign  income,  sales,  use,  excise,  franchise,  value  added,  withholding,
transfer, real property and personal property taxes (collectively,  "Taxes") due
and payable by the Seller with respect to the period prior to the Closing  Date.
The Seller has timely filed, or shall timely file all required returns,  reports
and other instruments relating to any and all such Taxes. There are no liens for
Taxes upon any of the Purchased Assets.

      4.7 Leasehold Interests.

            (a)  Schedule  4.7  identifies  all real  property  interests of the
      Seller,  including  fee  interests,   leasehold  interests  and  easements
      necessary to conduct or primarily used in the operation of the U.S. Agtrol
      Division.

            (b) The Seller is the holder of valid,  enforceable  and  subsisting
      interests as lessee under the leases of  Leasehold  Interests  attached to
      Schedule  4.7 (the  "Leases").  The  copies  of the


                                       13
<PAGE>

      Leases set forth on Schedule 4.7 are complete, accurate, true and correct.
      Except as set forth on  Schedule  4.7:  (i) each of the  Leases is in full
      force and  effect  and has not been  modified,  amended,  or  altered,  in
      writing or  otherwise;  (ii) to the Seller's  knowledge,  (A) all material
      obligations  of the landlord or lessor under the Leases which have accrued
      have been  performed,  other  than any lease for  Leasehold  Interests  in
      China, and (B) no party is in material default under any Lease, other than
      any lease for Leasehold  Interests in China;  (iii) all obligations of the
      Seller under the Leases which have accrued have been  performed;  and (iv)
      the Seller is not in default in any material  respect  under any Lease and
      no  circumstance  presently  exists  which,  with notice or the passage of
      time, or both, would give rise to a default by the Seller.

            (c) Subject to obtaining the consent of the applicable landlord, the
      Seller has full legal power and  authority  to assign its rights under the
      Leases to Buyer in accordance with this Agreement.

            (d) The Seller has the right to use the Leasehold  Interests for the
      operations  currently  conducted thereon.  The Seller has not received any
      notice  of any  pending  or  threatened  real  estate  Tax  deficiency  or
      reassessment or condemnation of all or any portion of any of the Leasehold
      Interests.

      4.8 Other  Property.  The books and  records of the Seller  reflect in all
material respects the Tangible Personal Property.  No Tangible Personal Property
is held under any lease, security agreement, conditional sales contract or other
title  retention  or  security  arrangement,  or is  located  other  than in the
possession  or under the control of any of the  Seller.  The  Tangible  Personal
Property is in good operating condition,  reasonable wear and tear excepted;  to
the  Seller's  knowledge,  conforms  with  all  applicable  laws;  and has  been
maintained  by the Seller in the ordinary  course.  All items  constituting  the
Tangible   Personal  Property  shall  be  delivered  at  the  Closing  with  all
documentation  in the  Seller's  possession  or under its  control  for Buyer to
obtain all permits, licenses and registrations required for their operation.

      4.9 Registered Patents, Trade Names,  Trademarks and Copyrights.  Schedule
4.9  sets  forth a list of all  registered  patents,  trade  names,  trademarks,
service marks and copyrights,  and all applications in respect of the foregoing,
owned,  registered  or  licensed  by the  Seller  that  are  used  primarily  in
connection with the U.S. Agtrol Division.  To the knowledge of the Seller, there
is no  infringement  or alleged  infringement  of any such  patent,  trade name,
trademark, service mark or copyright. To the knowledge of the Seller, the Seller
is not  infringing  on any  patent,  trade  name,  trademark,  service  mark  or
copyright of any other Person relating  primarily to the U.S.  Agtrol  Division.
Except as otherwise set forth  herein,  the Seller is not a party to any license
agreement or arrangement, whether as licensor, licensee, franchisor,  franchisee
or otherwise, with respect to any patent, trademark, service mark, trade name or
copyright relating primarily to the U.S. Agtrol Division.


                                       14
<PAGE>

      4.10 Title to Assets.  At the  Closing,  the Seller  will have,  and will,
subject to any requisite  consents,  approvals and  re-registrations,  convey to
Buyer, good and valid title to the Purchased Assets,  free and clear of any Lien
other than Permitted Liens.  Except as set forth on Schedule 4.10, the Purchased
Assets  constitute all of the assets used by the Seller  primarily in connection
with the U.S.  Agtrol  Division  and are  adequate  for the  conduct of the U.S.
Agtrol  Division as presently  conducted by the Seller  (excluding  the property
related to general,  administrative and other services supplied by the Seller or
an  Affiliate  thereof,  the  property to be  licensed to Buyer  pursuant to the
License  Agreement and certain of the benefits of the Facility  under the Supply
Agreement).

      4.11 Contracts.  To the knowledge of the Seller,  all of the Contracts are
in full force and effect.  As of the Closing Date, the Seller shall have paid in
full all amounts due as of the Closing  Date under each  Contract  and will have
satisfied in full or provided for all of its obligations thereunder due or to be
performed as of the Effective Date in the ordinary  course of business.  Neither
the Seller nor, to the knowledge of the Seller,  any other party to any Contract
is in material breach thereof or in default  thereunder in any material  respect
and no fact,  event or  circumstance  exists with respect to any Contract  that,
with the giving of notice or lapse of time,  would  constitute  such a breach or
default,  except for such  breaches,  defaults and events as to which  requisite
waivers or consents have been  obtained.  Except as  specifically  identified on
Schedule  4.11,  no  approval or consent  of, or notice to or filing  with,  any
Person is required  under the terms of any Contract in order that such  Contract
continues  in full  force and  effect for the  benefit  of Buyer  following  the
consummation of the transactions  contemplated by this Agreement.  Schedule 4.11
sets forth a list of all Contracts.

      4.12  Compliance with Laws. At all times since January 1, 1999: the Seller
has used, and is presently using, the Purchased Assets, and the Purchased Assets
have been used, in compliance in all material  respects with all federal,  state
and local  laws,  statutes,  rules,  regulations,  ordinances,  orders and other
requirements of law ("Laws")  applicable to the Seller and the Purchased  Assets
including  matters  relating  to  anti-competitive  practices,   discrimination,
employment,  zoning,  land-use  concerns,  and health and safety  practices  and
requirements.  The  Seller  is not  subject  to any  judicial,  governmental  or
administrative  order,  judgment or decree and is not presently  charged with or
under any  governmental  or  administrative  investigation,  or, to the Seller's
knowledge,  threatened with any such  investigation  or proceeding,  in any case
relating to the U.S. Agtrol Division.  The Seller has not received any notice of
any  uncorrected  violation  of any Law asserted by any  governmental  agency or
authority with respect to the U.S. Agtrol Division.

      4.13 Litigation and Claims.

            (a) Except as set forth on Schedule 4.13, there is not pending, nor,
      to the knowledge of the Seller, threatened, any suit, action, arbitration,
      or legal or administrative proceeding,  against the Seller, arising out of
      the  operations of the U.S.  Agtrol  Division,  or in connection  with the
      transactions  contemplated  by this  Agreement  or the  other  Transaction
      Documents,  in each case which is  reasonably  expected to have a Material
      Adverse Effect or a material adverse effect on the ability of Buyer or the
      Seller to consummate the  transactions  contemplated  by this Agreement or
      any other  Transaction  Document  including  any claims by (i) any past or
      present employee of the U.S. Agtrol Division for compensation or otherwise
      arising out of his or her employment with the Seller, (ii) any customer or
      other Person  relating to any products sold


                                       15
<PAGE>

      or provided by the U.S. Agtrol Division,  whether pursuant to any warranty
      (express  or  implied),  whether  due to injury  to  persons  or  property
      suffered by any Person as a result of the sale of any such  product by the
      Seller or otherwise,  or (iii) any supplier of the U.S.  Agtrol  Division.
      Seller has not received notice of any action, arbitration or proceeding or
      of any claim of default or  non-performance  by the Seller asserted by any
      Person  under any contract or other  agreement  with the Seller that could
      have a Material  Adverse Effect or could have a material adverse effect on
      the  ability  of  Buyer  or the  Seller  to  consummate  the  transactions
      contemplated  in this Agreement or the other  Transaction  Documents.  The
      Seller is not in  violation in any  material  respect of any order,  writ,
      injunction,  decree or settlement agreement of or with any federal, state,
      local or foreign court, department, agency or instrumentality with respect
      to the U.S. Agtrol Division.

            (b) Set forth on Schedule 4.13 are true, complete and correct copies
      of  all  written  product  and  service  warranties  and  guarantees,  and
      descriptions  of  all  unwritten   product  and  service   warranties  and
      guarantees, in each case given, made or agreed to by the Seller in respect
      of the U.S.  Agtrol  Division  in  connection  with the sale of  products,
      services or  otherwise,  other than those set forth on  Seller's  standard
      form of confirmation  attached to Schedule 4.13.  Schedule 4.13 sets forth
      each  pending  claim  against  the  Seller  for more than  $10,000  by any
      customer  of the U.S.  Agtrol  Division  or any  other  Person  to  return
      products to the U.S. Agtrol Division, by reason of alleged  overshipments,
      defective  products or otherwise,  and every such claim made,  resolved or
      settled since  January 1, 1999 for more than $10,000.  Except as set forth
      on Schedule  4.13,  there are no claims for more than $10,000  against the
      Seller in respect  of the U.S.  Agtrol  Division  to return  products,  by
      reason of alleged overshipments, defective products or otherwise.

            (c) Schedule 4.13 lists (i) all product recalls and all liabilities,
      obligations  and  damages  of any kind for  death,  disease  or  injury to
      Persons,  business  or property  relating  to products of the U.S.  Agtrol
      Division  arising  with  respect  to any  period  after  January  1,  1999
      involving  amounts  in excess of $10,000  (and all  product  recalls  with
      regard to the amount  involved)  (each a "Product  Liability  Matter") and
      (ii) all product  warranty  claims  relating  to any  products of the U.S.
      Agtrol  Division  arising with respect to any period after January 1, 1999
      involving amounts in excess of $10,000 (each a "Product Warranty Matter").

      4.14 Permits.  Schedule 4.14 lists all  governmental  (including  federal,
state and local governments and political subdivisions thereof and regulatory or
administrative  agencies,  authorities  and offices)  authorizations,  licenses,
franchises,  waivers and permits  necessary  for the  operation of the Purchased
Assets and the conduct of the business of the U.S.  Agtrol Division as currently
operated and  conducted,  including all  registrations  issued in respect of the
U.S. Agtrol Division by the U.S. Environmental  Protection Agency under FIFRA or
otherwise  (the  "Registrations")  and by state  agencies under state law, rule,
regulation  or  ordinance  with respect to such Copper  Products and  Non-Copper
Products or the active ingredients therein, excluding the conduct of business in
China  (collectively,  the  "Permits").  Schedule  4.14  lists all of the Copper
Products and the  Non-Copper  Products.  The Seller has obtained all Permits and
all such  Permits  are  presently  in full  force  and  effect.  The  Seller  is
conducting the U.S. Agtrol Division in compliance in all material  respects with
all Permits and no action,  proceeding or claim is pending,  or to the knowledge
of the Seller,  threatened to revoke, modify, terminate or invalidate any Permit
in any material respect.


                                       16
<PAGE>

      4.15 Employees.

            (a) Schedule 4.15 attached  hereto  contains the names and addresses
      of all employees of the U.S.  Agtrol Division or of the Seller who provide
      substantially  all of their  services  to or for the  benefit  of the U.S.
      Agtrol  Division  (the  "Employees"),  the job  designations  of each such
      employee,  and the  compensation  (including  bonus)  paid  to  each  such
      employee,  presently and for calendar  year 2000.  Such Schedule also sets
      forth information  concerning any disciplinary  proceeding or action taken
      with respect to any such employees,  including any information  concerning
      positive drug tests during the three (3) years prior to the Closing Date.

            (b)  Schedule  4.15  sets  forth  (i)  all  outstanding   employment
      agreements  or  commitments  and a  description  of  any  oral  employment
      agreements or  commitments  to which the Seller is a party or by which the
      Seller is bound relating to U.S.  Agtrol  Division,  (ii) all  outstanding
      consulting,  retainer  or  service  agreements  or  arrangements  for  the
      rendition  of  services to the Seller or to which the Seller is a party or
      by which the Seller is bound relating to the U.S. Agtrol  Division,  (iii)
      any  agreement,  policy  or  practice  that  requires  the  Seller  to pay
      termination  or severance pay in respect of the U.S.  Agtrol  Division and
      (iv) any conciliation agreement,  consent decree or settlement between the
      Seller and any of its employees in respect of the U.S. Agtrol Division.

            (c) Schedule  4.15  attached  hereto sets forth a list of any former
      management or sales  employees and other key employees of the U.S.  Agtrol
      Division  who left the employ of the U.S.  Agtrol  Division  since July 1,
      2000 for any reason,  including the job  designation of each such employee
      and the reason such employee left the Seller's employ.

      4.16 Employment Contracts and Benefits.

            (a) The Seller is not a party to any contract or agreement  with any
      labor  organization,  and the Seller has not agreed to recognize any union
      or other  collective  bargaining  unit,  and no union or other  collective
      bargaining unit has been certified as representing any of the employees of
      the  U.S.   Agtrol   Division.   The  Seller  has  no   knowledge  of  any
      organizational  effort  currently being made or threatened by or on behalf
      of any labor union with respect to employees of the U.S. Agtrol  Division.
      No  unfair  labor  practice  charges  are  pending,  or  to  the  Seller's
      knowledge,  threatened, against the Seller with respect to the U.S. Agtrol
      Division. No strikes or arbitration proceedings by employees of the Seller
      involving labor matters affecting the U.S. Agtrol Division are pending or,
      to the Seller's knowledge,  threatened. The Seller has not experienced any
      strikes,  work stoppage or other material labor difficulties of any nature
      with respect to the employees of the U.S. Agtrol Division in the past five
      (5) years.

            (b) With  respect  to the  U.S.  Agtrol  Division,  the  Seller  has
      complied in all material respects with all Laws relating to the employment
      of labor,  including those Laws relating to safety,  health, wages, hours,
      collective  bargaining,  unemployment  insurance,  workers'  compensation,
      equal employment opportunity and payment and withholding of taxes.

            (c)  Schedule  4.16 sets forth a complete  and  correct  list of all
      employee  benefit  plans,  as  defined  in  Section  3(3) of the  Employee
      Retirement  Income  Security Act of 1974,  as amended  ("ERISA"),  and all
      employment,  compensation, bonus, stock option, stock purchase,


                                       17
<PAGE>

      restricted stock,  incentive,  deferred  compensation,  retiree medical or
      life insurance,  supplemental retirement,  severance, change of control or
      other  benefit  plans,  programs or  arrangements,  in each case,  that is
      maintained, contributed to or sponsored by the Seller on behalf of current
      or  former  employees  of the  U.S.  Agtrol  Division  (collectively,  the
      "Benefit Plans").

            (d) With  respect to each  Benefit  Plan,  the Seller has  furnished
      Buyer with a complete and accurate  copy of (i) the plan document or other
      governing  contract,  as amended  and (ii) the most  recently  distributed
      summary plan description and summary of material modifications.

            (e) Neither the  execution  and delivery of this  Agreement  nor the
      consummation of the  transactions  contemplated  hereby will (i) result in
      any payment  becoming  due to any  current or former  employee of the U.S.
      Agtrol  Division,  (ii)  increase any benefits  under any Benefit Plan, or
      (iii) result in the acceleration of the time of payment,  vesting or other
      rights with respect to any such benefits.

      4.17 Fees. The Seller is not obligated to pay any fee or commission to any
broker,  finder  or  investment  banker  in  connection  with  the  transactions
contemplated by this Agreement,  other than the Seller's  responsibility for the
fees of Young & Partners  LLC  incurred  by the Seller in  connection  with this
Agreement. The Seller shall promptly pay such fees as and when due.

      4.18  Environmental  Laws. The Seller has conducted and currently conducts
the business and  operation of the U.S.  Agtrol  Division in  compliance  in all
material  respects  with all  Environmental  Laws.  The Seller has  obtained all
material environmental permits and authorizations necessary for the operation of
the Purchased Assets and the business of the U.S. Agtrol Division,  and all such
permits  are in full force and effect  and the  Seller is in  compliance  in all
material respects with the terms and conditions of all such permits.  The Seller
has not received any written notice, or is aware, of any current  administrative
or  judicial  investigation,  proceeding,  order,  or  action  with  respect  to
violations, alleged or proven, of Environmental Laws by the U.S. Agtrol Division
or  otherwise  involving  the  Leasehold  Interests  or  the  operations  of the
Purchased Assets and the business of the U.S. Agtrol Division conducted thereat.
No Hazardous Substance that presents any risk to human health or the environment
that requires  remediation or removal under Environmental Laws is present at the
Leasehold  Interests,  and no amount of  Hazardous  Substance  is present at the
Leasehold  Interests  as a result of any  action or  inaction  of the  Seller in
violation of Law.  "Environmental  Laws" means all applicable  local,  state and
federal statutes and regulations  relating to the protection of human health and
the environment,  including the Federal Insecticide,  Fungicide, and Rodenticide
Act ("FIFRA") and the regulations adopted thereunder.

      4.19  Disclosure  of  Confidential  Information  to  Others;   Restrictive
Agreements.

            (a) Schedule 4.19 sets forth a true and complete list of all Persons
      (other than Buyer, Buyer's agents and representatives and employees of the
      U.S. Agtrol Division) to whom the Seller has disclosed all or any material
      portion of the Business Secrets during the last two (2) years prior to the
      Effective  Date,  including the name and address of each such Person and a
      copy of any non-disclosure or other agreement executed by such Person with
      respect  to the  disclosed  information.  Except as set forth on  Schedule
      4.19, no other Person has had  possession of or access to, whether with or
      without  the  Seller's  consent,  the  customer  list of the  U.S.  Agtrol
      Division or any other


                                       18
<PAGE>

      Business  Secret during the two (2) years prior to the Effective Date. The
      disclosure of Business  Secrets by the Seller to the employees of the U.S.
      Agtrol  Division was solely for the purpose of allowing such  employees to
      conduct the business of the U.S.  Agtrol Division on behalf of the Seller;
      the  Seller  has  given no such  employee  the  right to use the  Business
      Secrets for any other purpose;  and the Seller is hereby  transferring  to
      Buyer all of its rights  against  any Person who has in the past or may in
      the future  violate such limited use rights.  For the purposes of the this
      Agreement,  "Business Secrets" means any of the following  information and
      materials  pertaining or relating to the U.S.  Agtrol  Division and/or the
      Purchased  Assets,  to  the  extent  the  Seller  reasonably  deemed  such
      information  to be  confidential:  customer  lists,  sales  and  marketing
      strategies,  sales and gross profit data, cost data, contract information,
      know-how  (other  than  Copper  Product  know-how)  and the  terms of this
      Agreement,  excluding information readily available to the public, whether
      or not in  written  form and  whether  or not the  Seller  has  possession
      thereof.

            (b) Schedule  4.19  contains all  currently  existing and  effective
      contracts,  agreements  or  arrangements  of  any  kind,  or  if  oral,  a
      description thereof, to which the Seller is a party or by which the Seller
      is otherwise  bound and which restrict the Seller or any of its Affiliates
      from  engaging in any line of business  or from  competing  with any other
      Person  anywhere  in the world with  respect to the  business  of the U.S.
      Agtrol Division as currently conducted or contemplated.

            (c)  Schedule  4.19  contains  all  non-disclosure  or similar  such
      agreements  to which the  Seller  is a party  that  bind the  Seller  with
      respect  to  information  provided  or made  available  to the  Seller  in
      connection with the U.S. Agtrol Division.

      4.20 Books and  Records.  The Seller  maintains  only one set of books and
records with respect to the U.S.  Agtrol  Division,  which books and records are
maintained  in the  ordinary  course;  all such  books  and  records  are in all
material respects an accurate reflection of all transactions entered into by the
Seller with respect to the U.S. Agtrol  Division.  Neither the Seller nor anyone
acting on its behalf has made any payments or otherwise  provided any  benefits,
direct or indirect, to any customer, supplier, governmental agency or otherwise,
or to any employee or agent thereof, in connection with the U.S. Agtrol Division
for the purpose of acquiring purchase or sales  relationships of the business of
the U.S. Agtrol Division or otherwise, that (a) are be unknown or undisclosed to
the employers of the persons who received any such  payments;  (b) are unlawful,
in any respect;  or (c) are not fully disclosed as such on the books and records
of the Seller.

      4.21 Validity of  Representations  and Warranties.  No  representation  or
warranty of the Seller and no statement,  report, or certificate furnished or to
be furnished by or on behalf of the Seller or any of its  respective  employees,
representatives or agents in connection  herewith,  contains or will contain any
untrue  statement of a material fact or omits, or will omit, to state a material
fact necessary in order to make the statements  contained  herein or therein not
misleading.


                                       19
<PAGE>

                                   ARTICLE 5

                     Representations and Warranties of Buyer

      Buyer represents and warrants to the Seller that:

      5.1  Organization  and Standing.  Buyer is a corporation  duly  organized,
validly  existing and in good standing  under the laws of the State of Delaware.
Buyer has all requisite corporate power and corporate authority to own and lease
its assets and properties and to carry on its business as and in the places such
assets  and  properties  are now owned or  leased  and where  such  business  is
presently conducted.

      5.2  Authority.  Buyer has all  requisite  corporate  power and  corporate
authority to enter into this Agreement, the other Transactions Documents and the
Buyer Note and to carry out the  transactions  contemplated  hereby and thereby.
This  Agreement  has been duly  executed  by Buyer  constitutes,  and each other
Transaction  Document and the Buyer Note,  when executed and delivered by Buyer,
will constitute, the legal, valid and binding obligations of Buyer, in each case
enforceable  against it in  accordance  with their  respective  terms subject to
bankruptcy, insolvency,  reorganization,  moratorium and similar laws of general
applicability  relating to or affecting  creditors' rights and to general equity
principles.  All corporate proceedings and actions required to be taken by Buyer
relating to the execution, delivery and performance of this Agreement, the other
Transaction   Documents  and  the  Buyer  Note,  and  the  consummation  of  the
transactions contemplated hereby and thereby, have been duly taken.

      5.3  Litigation.  There is no action,  suit,  proceeding,  arbitration  or
investigation pending, or, to the knowledge of Buyer, threatened,  against Buyer
or any  of its  Affiliates,  and  there  is not  outstanding  any  order,  writ,
injunction,  award or decree of any court or arbitrator  or any federal,  state,
municipal  or  other  governmental  department,  commission,  board,  agency  or
instrumentality  to which Buyer or any of its  Affiliates is subject,  in either
case that could  reasonably  be  expected  to affect  materially  adversely  the
ability of Buyer to consummate the  transactions  contemplated by this Agreement
and by the other Transaction Documents.

      5.4  Financing.  At the  Closing,  Buyer will have all funds  necessary to
consummate  the  transactions  contemplated  by this  Agreement and by the other
Transaction Documents.

      5.5 No Violation; Qualification. Except as may be caused or made necessary
by  facts  relating  solely  to the  Seller:  (a) the  execution,  delivery  and
performance of this Agreement and the other  Transaction  Documents by Buyer and
the consummation by it of the transactions contemplated by this Agreement and by
the other  Transaction  Documents  will not (i)  conflict  with or  violate  any
provision of the certificate of incorporation  or bylaws of Buyer,  (ii) with or
without the giving of notice or the passage of time, or both, result in a breach
of, or violate,  or be in conflict with, or constitute a material default under,
or  permit  the  termination  of,  or cause or permit  acceleration  under,  any
material agreement,  instrument, debt or obligation to which Buyer is a party or
to or by  which it is  subject  or  bound,  or (iii)  violate  any law,  rule or
regulation or any order,  judgment,  decree or award of any court,  governmental
authority  or  arbitrator  to or by which  Buyer is subject or bound,  except as
would not  reasonably  be  expected  to have a  material  adverse  effect on the
ability of Buyer


                                       20
<PAGE>

to consummate the  transactions  contemplated by this Agreement and by the other
Transaction  Documents;  and (b) no material consent,  approval or authorization
of, or declaration,  filing or registration with, or notice to, any governmental
or  regulatory  authority or any other third party is required to be obtained or
made by Buyer in connection with the execution, delivery and performance of this
Agreement  and  the  other  Transaction  Documents  or the  consummation  of the
transactions  contemplated  by  this  Agreement  and  by the  other  Transaction
Documents,  other than those  consents that are the  obligation of the Seller to
obtain.

      5.6  Brokerage  or Finder's  Fee.  No Person is entitled to any  brokerage
commissions or finder's fees in connection with the transactions contemplated by
this  Agreement as a result of any action taken by Buyer,  any of its Affiliates
or any of its or their officers, directors or employees.

      5.7 Investigation.

            (a) Buyer has made its own  inquiry  and  investigation  into,  and,
      based thereon,  has formed an independent  judgment  concerning,  the U.S.
      Agtrol  Division and the Purchased  Assets to the extent  permitted by the
      information provided by the Seller.

            (b) In  connection  with Buyer's  investigation  of the U.S.  Agtrol
      Division and the  Purchased  Assets,  Buyer has  received  from the Seller
      certain  projections and other  forecasts,  plans and budgets and has made
      its  own  investigation   thereof.   Buyer  acknowledges  that  there  are
      uncertainties inherent in attempting to make such projections,  forecasts,
      plans and budgets,  that Buyer is familiar with such uncertainties.  Buyer
      is  taking  full  responsibility  for  making  its own  evaluation  of the
      adequacy and accuracy of all estimates, projections,  forecasts, plans and
      budgets so furnished  to it.  Buyer agrees that it shall be estopped  from
      making  any claim  against  the Seller  for  breach of  representation  or
      warranty to the extent that Buyer knew such  representation or warranty to
      be inaccurate or untrue at Closing.

                                    ARTICLE 6

                                Certain Covenants

      6.1  Consents.  The Seller shall use  commercially  reasonable  efforts to
obtain  all  consents   required  of  third  persons  in  connection   with  the
transactions  contemplated by this Agreement,  including  consents in respect of
Contracts,  either by assignment or novation thereof, and Buyer shall provide to
the Seller reasonable cooperation in connection therewith.  Without limiting the
generality of the foregoing,  Buyer (a) shall provide such financial  statements
and other  financial  information  with  respect to Buyer as may  reasonably  be
requested,  and (b) shall use  commercially  reasonable  efforts,  at no cost to
Buyer,  and shall  assist the Seller in its  efforts,  at no cost to Buyers,  to
obtain for the benefit of the Seller,  from the other party or parties  thereto,
the  release  of the  Seller  from all  liabilities  and  obligations  under the
Contracts  accruing  or  arising  with  respect  to the  period  on or after the
Effective Date. The provisions of this Section 6.1 shall survive the Closing.


                                       21
<PAGE>

      6.2 Certain Employee Matters.

            (a) Buyer shall offer employment to all of the employees employed by
      the Seller  exclusively  for the U.S. Agtrol Division in the United States
      listed  on  Schedule  6.2  (the  "U.S.  Employees")  as of  June  1,  2001
      ("Employment  Date");  provided,  however,  that Buyer may condition  such
      offer of  employment  on (i) any such U.S.  Employee's  continuing to be a
      U.S.  Employee on the  Employment  Date and (ii) the  Seller's  not having
      given notice to such U.S.  Employee prior to the Employment Date that such
      U.S. Employee's employment shall be terminated; provided, further, that no
      U.S. Employee who is on layoff or leave of absence (including  disability)
      on the Employment  Date shall be deemed a U.S.  Employee  unless and until
      such employee returns to active  employment with the U.S. Agtrol Division.
      Each  such  offer  of  employment  shall be at the  same  salary  and with
      substantially the same medical and health insurance  benefits as in effect
      immediately  prior to the  Employment  Date. To the extent that service is
      relevant for  eligibility  and vesting  under any  retirement  or employee
      benefit plan, program or arrangement established or maintained by Buyer or
      any of its  Affiliates  for the  benefit  of U.S.  Employees,  such  plan,
      program or arrangement shall credit all U.S. Employees for eligibility and
      vesting  service on or prior to the Employment Date with the Seller or any
      Affiliate  or  predecessor  thereof.  Buyer  shall  cause to be waived all
      limitations  on  benefits  relating  to any  pre-existing  conditions  and
      recognize,  for purposes of annual  deductible  and  out-of-pocket  limits
      under its medical and dental plans,  deductible and out-of-pocket expenses
      paid by U.S.  Employees and their  dependents under the medical and dental
      plans in which they  participate  in the calendar  year of the  Employment
      Date. Each U.S. Employee who accepts his or her continuation of employment
      offer  shall be, as  effective  as of the  Employment  Date,  an "at will"
      employee of Buyer,  unless Buyer and such U.S. Employee shall enter into a
      written  employment  agreement  to  the  contrary.  Nothing  herein  shall
      restrict  Buyer's  ability to change or terminate  the benefits or benefit
      plans provided to any U.S.  Employees or to change the "at will" status of
      such employees.  The Seller shall remain  responsible  for, as an Excluded
      Liability,  and shall  pay,  any  severance  claims,  costs and  causes of
      action,  of all U.S.  Employees  with respect to the period on or prior to
      the Effective Date and with respect to the Seller's severance policies.

            (b) Neither the Seller nor Buyer is  planning or  contemplating,  or
      has made or taken,  and  neither  the Seller nor Buyer shall make or take,
      any decisions or actions  concerning the U.S. Agtrol Division's  employees
      that would require the service of notice under the U.S. Worker  Adjustment
      and Retraining Act of 1988, as amended (the "WARN Act"), or the service of
      notice,  making of a filing or  receipt  of any other  approval  under any
      employee or similar  notice,  filing or approval  provision of  applicable
      foreign,  federal, state or local Law, including any decision not to offer
      employment to any employees of the U.S. Agtrol Division that would cause a
      violation of the WARN Act or any such similar foreign,  federal,  state or
      local Law.

            (c) This Section 6.2 shall  operate  exclusively  for the benefit of
      the parties to this  Agreement (and their  permitted  assigns) and not for
      the benefit of any other Person.

            (d)  Buyer  shall  not  assume  any  Benefit  Plan or  liability  or
      obligation under any plan, contract, payroll practice or other arrangement
      that the Seller  sponsors,  contributes to, or  participates  in, or under
      which the Seller has or may have any liability or  obligation,  whether or
      not disclosed under this Agreement or in any Schedule.


                                       22
<PAGE>

            (e)  Buyer  shall  not  assume,  and the  Seller  shall  retain  and
      indemnify and hold Buyer harmless from and against,  all  liabilities  and
      claims  brought  (i)  by  current  or  former   employees  of  the  Seller
      exclusively for the U.S. Agtrol Division (or their  respective  dependants
      and  beneficiaries)  in connection with their employment or termination of
      employment  with the Seller on or prior to the Effective  Date,  (ii) with
      respect to any Benefit  Plan,  including  any liability for payment of any
      claim  thereunder  or that  otherwise  arose  as a  result  of  events  or
      conditions  occurring on or prior to the  Effective  Date, or (iii) by any
      current or former independent contractor of the Seller exclusively for the
      U.S. Agtrol Division (or its respective  dependents and  beneficiaries) in
      connection with (A) any challenge to its  classification as an independent
      contractor or (B) any Benefit Plan, and (iv) any employee  benefit plan or
      arrangement maintained by the Seller or any ERISA Affiliate of the Seller.

            (f) To the extent  required by  applicable  Law, the Seller shall be
      responsible  for and retain all liability  for, as an Excluded  Liability,
      giving notification of and providing health care continuation  coverage to
      current  or  former  employees  of the  U.S.  Agtrol  Division  and  their
      "qualified  beneficiaries"  within the  meaning of and as  required by the
      Consolidated  Omnibus  Budget  Reconciliation  Act  of  1985,  as  amended
      ("COBRA"),  and  shall  indemnify  and hold  Buyer  harmless  against  any
      liability arising out of any such failure to comply with COBRA;  provided,
      however,  that Buyer shall be responsible and liable for giving notice and
      providing COBRA  continuation  coverage to any U.S. Employee in connection
      with  Buyer's  group  medical  plan as a result of events  occurring on or
      after the Employment Date to the extent required by applicable Law.

      6.3 Disclosure of Business Secrets. In the event (a) any present or former
employee,  agent,  representative  or  independent  contractor of the Seller has
disclosed  directly or indirectly or used for his own benefit or for the benefit
of another Person any Business Secret learned by such individual  while employed
or otherwise  working for or acting on behalf of the Seller or (b) any Person to
whom the Seller or any of its  Affiliates  has disclosed  any Business  Secrets,
whether pursuant to an non-disclosure  agreement or otherwise,  discloses or has
disclosed  directly or indirectly or uses or has used for its own benefit or for
the benefit of any other Person any  Business  Secret so  disclosed,  the Seller
shall, at Buyer's request, and at the Seller's cost and expense, assign to Buyer
any cause of action or other claim that the Seller may have  against any present
or former  employee,  agent,  representative  or independent  contractor for any
actions or omissions prior to or following the Closing. The Seller shall, at its
cost and expense, cooperate with Buyer, as reasonably requested by Buyer, in the
prosecution of such claim.  The provisions of this Section 6.3 shall survive the
Closing.

      6.4 Non-Competition, Non-Disclosure and Non-Solicitation.

            (a) For a period  commencing on the Effective Date and ending on (i)
      the date that is four (4) years after the Effective Date if on or prior to
      such date either party to the Supply  Agreement has delivered to the other
      party notice of non-renewal of the Supply Agreement in accordance with its
      terms or (ii) the date that is five (5) years after the Effective  Date if
      neither  party to the Supply  Agreement  has  delivered to the other party
      notice  of  non-renewal  in  accordance  with its terms  (the  "Restricted
      Period"),  the Seller  shall not, and the Seller shall ensure that none of
      its Affiliates shall, engage, directly or indirectly,  in the manufacture,
      distribution,  marketing,  developing,  and/or sale of products  currently
      sold  or  distributed  by the  U.S.  Agtrol  Division,


                                       23
<PAGE>

      products sold or  distributed at any time during the three (3) years prior
      to the Effective Date by the U.S. Agtrol Division,  products  currently in
      development by the U.S. Agtrol Division and Substitute  Products of any of
      the foregoing,  but excluding copper sulfate,  copper carbonate and copper
      oxides and related products (the  "Business"),  anywhere in the world (the
      "Restricted  Area")  except as may be  necessary to comply with the Supply
      Agreement and as permitted under the License Agreement.  By way of further
      definition  and  explanation of the  foregoing,  and without  limiting the
      generality of the foregoing  restriction,  during such Restricted  Period,
      neither  the  Seller  nor any of its  Affiliates  shall  acquire,  manage,
      operate,  join, control,  participate or become financially interested in,
      or be connected with (in any capacity, whether as a partner,  stockholder,
      investor,  consultant,  independent contractor,  agent,  representative or
      otherwise), or provide any direct or indirect financial assistance to, any
      Person that is engaged, directly or indirectly, in the Business within the
      Restricted Area.  Nothing  contained herein,  however,  shall prohibit the
      Seller  or any of its  Affiliates  (i)  from  acquiring  and  owning,  for
      investment  purposes  only,  up to five  percent  (5%) of the  outstanding
      equity  securities  of a Person  engaged in the  Business  if such  equity
      securities  of any such Person are  available  to the general  public on a
      national  securities  exchange,  (ii) from  taking  action to collect  any
      Receivable in accordance  with Section 2.5 or (iii) from reworking  and/or
      selling Excess Inventory;  provided,  however, that the Seller shall first
      offer  such  Excess  Inventory  for  sale to Buyer  on  conditions  in the
      aggregate no less  favorable  than those on which it may  ultimately  sell
      such Excess Inventory.

            (b) The Seller hereby acknowledges,  covenants and agrees that, from
      and after the Closing  Date,  it will hold any and all items  constituting
      Business Secrets communicated or transmitted to, or otherwise obtained by,
      it in strictest confidence. The Seller shall not, regardless of the reason
      therefor, directly or indirectly make use of, exploit, disclose or divulge
      any  Business  Secrets to any other  Person  (except  to the  extent  such
      information  is required to be submitted  to any  federal,  state or local
      governmental  authority  or to any other  Person  pursuant  to subpoena or
      other  court  process or as may be  permitted  herein),  or make any false
      statement or otherwise commit any act (including  contacting any customers
      of the U.S. Agtrol  Division  except to collect  Receivables in accordance
      with  Section  2.5 and/or to sell  Excess  Inventory  in  accordance  with
      Section  6.4(c)(a))  that is  intended  to be in any way be  injurious  or
      detrimental  to the  Business or to Buyer's use of the  Purchased  Assets,
      including Buyer's image, business or customer relations.

            (c) During the Restricted  Period, the Seller shall not, for its own
      benefit, or for the benefit of any other Person, or for any reason, accept
      any business with respect to the Business from, or intentionally interfere
      in any manner with Buyer's business relationship with, any customer of the
      U.S.  Agtrol  Division  except to collect  Receivables in accordance  with
      Section 2.5 and/or to sell Excess  Inventory  in  accordance  with Section
      6.4(c)(a).  Without  limiting the generality of the foregoing,  the Seller
      shall not solicit or induce, or attempt to solicit or induce, any business
      with respect to the Business  (directly or indirectly  through any Person)
      from any customer of the U.S. Agtrol Division,  regardless of the purpose.
      Furthermore,  nothing  contained in this Section 6.4(c) shall be construed
      to infer that the  Seller is, in any  respect  whatsoever,  retaining  any
      rights  to,  or in  respect  of,  the  customer  list of the  U.S.  Agtrol
      Division,  any customer  information  of the U.S.  Agtrol  Division or any
      other Business  Secrets for direct or indirect use after the expiration of
      the  Restricted  Period,  it being  understood and agreed that pursuant to
      this  Agreement  Buyer is  acquiring  all of the Seller's  rights  thereto
      without limitation as to time or otherwise.


                                       24
<PAGE>

            (d) During the Restricted Period, neither Buyer nor the Seller shall
      hire,  solicit  (except for general  solicitations  made to the public) or
      induce,  or attempt to hire,  solicit or induce  (directly  or  indirectly
      through any Person),  for employment,  or interfere in any manner with the
      other party's  relationship  with, any employee of such other party hereto
      or any of its Affiliates.

            (e) The Seller  acknowledges  and  agrees  that the  agreements  and
      covenants  contained  in this  Section  6.4 are of a unique  and  valuable
      nature and may, if breached,  result in  irreparable  damage to Buyer that
      may not be readily susceptible to monetary valuation; and, accordingly, in
      the event of the breach of any  covenant or  agreement  contained  in this
      Section 6.4, Buyer shall be entitled to seek injunctive or other equitable
      relief,  in addition to any other remedies  provided by Law or equity,  in
      furtherance of the  enforcement  thereof.  In no event shall the amount or
      value of any  consideration  paid or given by Buyer for the  covenants and
      agreements  contained in this Section 6.4, or otherwise in connection with
      this  Agreement,  be used to  determine  the scope or  extent  of  damages
      suffered by Buyer in the event of a breach by the Seller of such covenants
      and agreements.

            (f) In addition to the consideration  allocated to the covenants and
      agreements  set forth in this Section 6.4,  the Seller  acknowledges  that
      Buyer  would not have  completed  the  transactions  contemplated  by this
      Agreement  and  the  Transaction   Documents   absent  the  covenants  and
      agreements set forth in this Section 6.4.

            (g) The provisions of this Section 6.4 shall survive the Closing.

      6.5 Bulk Sales Laws. Buyer hereby waives compliance by the Seller with any
bulk sales law,  including Article 6 of the Uniform Commercial Code, that may be
applicable to any of the transactions contemplated by this Agreement.

      6.6 Transactional  Taxes. The Seller and Buyer shall each bear and satisfy
fifty percent  (50%) of any and all sales,  transfer,  value added,  conveyance,
stamp,  recording or other similar Taxes or governmental charges or fees imposed
by any taxing or other  jurisdiction  (other than any  federal,  provincial  and
local  Australian  Taxes)  with  respect to the  transfer or  assignment  of the
Purchased  Assets  or  otherwise  on  account  of this  Agreement  or any of the
transactions contemplated by this Agreement.

      6.7 Books and Records.

            (a) On  reasonable  notice from time to time after the Closing Date,
      Buyer   shall   permit   the  Seller   and  their   successors,   and  the
      representatives thereof,  reasonable access, during normal business hours,
      for  purposes  of  inspection   and/or  copying  of  all   correspondence,
      contracts,  agreements and other books and records  pertaining to the U.S.
      Agtrol  Division  that  constitute a part of the Purchased  Assets.  Buyer
      shall cause all such  materials to be preserved  for seven (7) years after
      the Effective Date.


                                       25
<PAGE>

            (b) Without limiting the provisions of Section 6.7(a),  for a period
      of seven (7) years  after the  Effective  Date,  Buyer  shall  assist  and
      cooperate with the Seller and its successors,  at the Seller's expense, in
      collecting  and  assembling  information  that  constitute  a part  of the
      Purchased Assets.

      6.8  Product  Registrations.  Buyer  shall be  responsible  for  preparing
appropriate   documentation   to   transfer   from  the   Seller  to  Buyer  the
Registrations,  and all rights to all data supporting such registrations, of the
U.S.  Agtrol  Division  as  necessary,  in Buyer's  sole  judgment,  to sell and
distribute the Copper  Products and the Non-Copper  Products.  After the Closing
Date, to the extent  requested by Buyer in order to comply with  applicable Law,
the Seller shall cooperate with and provide commercially  reasonable  assistance
to  Buyer  for  Buyer  to  obtain,  by  transfer  or  otherwise,   any  existing
registrations for the Copper Products and the Non-Copper  Products or the active
ingredients  therein and rights of the Seller and/or its  Affiliates to all data
supporting  such  registrations,  held by the  Seller in any  jurisdiction.  The
Seller  hereby  licenses  Buyer  to sell  and  distribute  Copper  Products  and
Non-Copper  Products under the Seller's  Registrations until Buyer has effective
Registrations for such products.

      6.9 Product  Rework.  If, after the Effective  Date,  Buyer  receives as a
return any product sold or distributed by the U.S.  Agtrol  Division on or prior
to the  Closing  Date,  which  product  is no longer  marketable,  Buyer may use
commercially  reasonable  efforts  to rework  such  product  in order to make it
marketable.  Buyer shall be responsible  for and shall bear the first $50,000 of
costs it incurs in connection with such rework (the "Rework Costs").  The Seller
shall  promptly  pay to  Buyer,  notwithstanding  any  limitations  set forth in
Article  7, all  Rework  Costs  incurred  by Buyer in  excess of  $50,000,  upon
delivery to the Seller of reasonable  evidence of the  incurrence of such Rework
Costs.

      6.10 Stock Sales.  The parties shall act in good faith to  consummate  the
sale of all of the issued and outstanding  equity  interests of Agtrol Argentina
(the  "Argentina  Stock Sale") and Agtrol  Mexico (the "Mexico Stock Sale") from
the Seller to Buyer for  aggregate  consideration  of $10  pursuant  to separate
Stock  Purchase  Agreements  that shall  substantially  replicate  the terms and
conditions  hereof to the extent  applicable  and subject to such changes (i) as
may be  necessary  or  desirable  under  applicable  local law or (ii) as may be
reasonable in light of the size and type of the  operations of Agtrol  Argentina
and Agtrol Mexico.

                                    ARTICLE 7

                                 Indemnification

      7.1 Seller's  Obligation  to  Indemnify.  From and after the Closing,  and
subject to the terms and conditions of this Article 7, the Seller hereby assumes
and  agrees  to  save,  indemnify  and hold  harmless  Buyer  and its  officers,
directors and stockholders (collectively "Buyer Indemnitees") from and against:

            (a) any loss,  liability or damage suffered or incurred by any Buyer
      Indemnitee by reason of any breach by the Seller of any  representation or
      warranty of the Seller set forth in this Agreement;


                                       26
<PAGE>

            (b) any loss,  liability or damage suffered or incurred by any Buyer
      Indemnitee by reason of the  non-fulfillment by the Seller of any covenant
      or  agreement  to be  performed  or complied  with by the Seller  under or
      pursuant to this Agreement;

            (c) any loss,  liability or damage suffered or incurred by any Buyer
      Indemnitee  with respect to or in  connection  with any one or more of the
      Excluded Liabilities;

            (d) any  liability  or  damage  suffered  or  incurred  by any Buyer
      Indemnitee arising out of or related to the ownership or use of any of the
      Purchased Assets and/or the operations, business or activities of the U.S.
      Agtrol  Division  prior to the Effective  Date (other than with respect to
      Inventory sold by Buyer or any Affiliate  thereof after the Closing Date);
      and

            (e) any actions, suits, proceedings,  judgments, costs and expenses,
      including reasonable attorneys' fees, incident to any of the foregoing, or
      incurred in enforcing any of the obligations under this Section 7.1.

      7.2 Buyer's  Obligation  to  Indemnify.  From and after the  Closing,  and
subject to the terms and  conditions of this Article 7, Buyer hereby assumes and
agrees  to save,  indemnify  and hold  harmless  the  Seller  and its  officers,
directors and stockholders (collectively "Seller Indemnitees") from and against:

            (a) any loss, liability or damage suffered or incurred by any Seller
      Indemnitee  by reason  of any  breach  by Buyer of any  representation  or
      warranty of Buyer set forth in this Agreement;

            (b) any loss, liability or damage suffered or incurred by any Seller
      Indemnitee  by reason of the  non-fulfillment  by Buyer of any covenant or
      agreement to be  performed or complied  with by Buyer under or pursuant to
      this Agreement;

            (c) any loss, liability or damage suffered or incurred by any Seller
      Indemnitee  arising  in  connection  with any  Seller  Indemnitee  for any
      Assumed Liabilities;

            (d) any loss, liability or damage suffered or incurred by any Seller
      Indemnitee arising out of or related to the ownership or use of any of the
      Purchased Assets and/or the operations, business or activities of the U.S.
      Agtrol  Division on or after the  Effective  Date  (including  the license
      under Section 6.8); and

            (e) any actions, suits, proceedings,  judgments, costs and expenses,
      including reasonable attorneys' fees, incident to any of the foregoing, or
      incurred in enforcing any of the obligations under this Section 7.2

      7.3 Procedure for  Satisfaction of Indemnity  Claims.  The obligations and
liabilities  of the parties  hereto shall be subject to the following  terms and
conditions:

            (a) Any party  required  to  indemnify  another  Person  under  this
      Agreement may be referred to herein as the  "Indemnifying  Party," and any
      Person entitled to indemnification

                                       27
<PAGE>

      hereunder may be referred to herein as the "Indemnified  Party." Any claim
      for indemnification  made pursuant to this Article 7 is sometimes referred
      to as an "Indemnity Claim."

            (b) The  Indemnified  Party shall give prompt  written notice to the
      Indemnifying  Party of any Indemnity Claim after learning of the existence
      thereof; provided, however, that the failure to provide such prompt notice
      shall in no event impair the rights of the Indemnified  Party or limit the
      obligations of the Indemnifying  Party hereunder except to the extent that
      such  failure  has an adverse  effect on the  ability of the  Indemnifying
      Party  adequately to defend such claim. In the event of a claim brought by
      a third  party  (a  "Third  Party  Claim")  which  might  give  rise to an
      Indemnity  Claim by the  Indemnified  Party,  such notice of the Indemnity
      Claim  shall  state the nature and basis of said  Indemnity  Claim and the
      amount  thereof,  to the extent known. In the event of any other Indemnity
      Claim, including one for an alleged breach or misrepresentation hereunder,
      such notice  shall state the nature and basis  thereof,  the amount of the
      asserted  damages,  and the  method by which  such  alleged  damages  were
      calculated;  provided,  however,  that the Indemnified  Party shall in all
      events have the right  subsequently to revise the basis for such Indemnity
      Claim and the  amount of damages  asserted  as well as the method by which
      such damages are calculated.

            (c) In the event of a Third Party Claim:

                  (i)  Provided  that  the  Indemnifying  Party  has  adequately
            evidenced  to the  Indemnified  Party its  ability to  satisfy  such
            claim,  the  Indemnifying  Party shall be entitled to contest and to
            assume the defense of the claim at the Indemnifying Party's expense,
            and further provided that it utilizes  reputable counsel  reasonably
            satisfactory to the Indemnified Party. In the event the Indemnifying
            Party  gives  notice to the  Indemnified  Party of the  Indemnifying
            Party's election to assume the contest or defense as aforesaid, then
            the  Indemnifying  Party shall be obligated  promptly to defend such
            claim.  The  Indemnified  Party shall, at the  Indemnifying  Party's
            expense, make available to the Indemnifying Party and its attorneys,
            accountants or other duly designated agents all books and records of
            the  Indemnified  Party  relating  to  any  such  action,   suit  or
            proceeding,  and the  parties  hereto  agree to render to each other
            such assistance (at the expense of the  Indemnifying  Party) as they
            may  reasonably  require of each other in order to ensure the proper
            and  adequate  contest  or  defense  of any  such  action,  suit  or
            proceeding.  The Indemnified  Party shall be entitled,  with counsel
            selected by the  Indemnified  Party,  to  participate in (but not to
            control), at its own expense, the defense of any claim or litigation
            which the Indemnifying  Party has, in accordance with the provisions
            of this  subparagraph  (i), elected to defend,  and to be kept fully
            informed of the status thereof at all stages, including the right to
            receive,  at  the  Indemnifying  Party's  expense,   copies  of  all
            pleadings and other material papers in connection with such claim or
            litigation.  The Indemnifying Party shall not settle any Third Party
            Claim  without the consent of the  Indemnified  Party unless (1) the
            Indemnifying  Party fully  indemnifies the Indemnified Party for all
            liabilities,  damages, losses, costs and expenses in connection with
            such settlement of such claim,  (2) there is no finding or admission
            of any violation of Law by the Indemnified Party not agreeing to the
            settlement,  and (3) the  relief  granted  in  connection  therewith
            requires  no action  on the part of,  and has no  economic  or other
            adverse effect on, the Indemnified Party.

                  (ii) If the  defense of a Third  Party Claim is not assumed by
            the Indemnifying  Party as provided in subparagraph (i) above,  then
            the Indemnified  Party may (to the extent that the Indemnified Party
            determines  to  do so in  its  sole  discretion)  conduct  any  such


                                       28
<PAGE>

            proceeding as it deems appropriate  utilizing reputable counsel, and
            may take  whatever  action it deems  necessary  or  appropriate,  to
            resolve or settle such claim or dispute,  but shall in no event have
            any  obligation  to defend any such claim or proceeding or to appeal
            any adverse finding or  determination or to defend the appeal by any
            other party to a favorable  determination,  it being agreed that any
            actions  taken or omitted  with respect to the  foregoing  shall not
            avoid,  reduce  or  mitigate  the  Indemnifying   Party's  liability
            hereunder.  The Indemnifying  Party shall  nevertheless,  at its own
            expense,  make available to the Indemnified  Party and its attorneys
            and  accountants  all books and  records of the  Indemnifying  Party
            relating to such  proceedings  or litigation and shall render to the
            Indemnified Party such assistance as may be reasonably  requested by
            the Indemnified  Party.  The  Indemnifying  Party shall be entitled,
            with counsel selected by it, to participate in (but not to control),
            at its own expense, the defense of any claim or litigation which the
            Indemnifying  Party has not elected to defend in accordance with the
            provisions of subparagraph  (i) above.  The Indemnified  Party shall
            not settle any Third Party Claim  without first giving notice of the
            proposed  settlement  to the  Indemnifying  Party  (the  "Settlement
            Notice").  The Indemnifying Party shall have the right,  exercisable
            within ten (10) Business Days  following  receipt of the  Settlement
            Notice,  to  instruct  the  Indemnified  Party not so to settle such
            Third Party Claim;  provided that, in such event,  the  Indemnifying
            Party  shall be  required  to assume  the  defense of any such Third
            Party Claim subject to and in  accordance  with the  provisions  and
            prerequisites  of subparagraph  (i) above (including those set forth
            in  the  first  sentence  thereof);   provided,  further,  that  the
            Indemnified Party shall be entitled to settle such Third Party Claim
            regardless  of the  instructions  of the  Indemnifying  Party to the
            contrary if the Indemnifying Party is unable or fails to satisfy the
            requirements set forth in clauses (A) and (B) contained in the first
            sentence of subparagraph (i) above.

      7.4 Survival and Other Matters.  Notwithstanding  anything to the contrary
contained in this Agreement or any other Transaction Document:

            (a) Each representation, warranty, indemnity, covenant and agreement
      of the Seller and Buyer shall survive the Closing; provided, however, that
      no  Indemnified  Party shall be  entitled to assert any claim  against any
      Indemnifying  Party under Section 7.1(a),  7.1(b) or 7.1(e) (to the extent
      related to Section  7.1(a) or  7.1(b)),  7.2(a),  7.2(b) or 7.2(e) (to the
      extent related to Section  7.2(a) or 7.2(b)) of this Agreement  unless the
      Indemnified Party asserting such claim shall notify the Indemnifying Party
      in  writing  of such  claim,  in  reasonable  detail,  prior to the second
      anniversary  of the Closing  Date, in which case the  Indemnified  Party's
      right to indemnification in respect of such claim will survive.

            (b) The Seller shall have no liability under Section 7.1(a),  7.1(b)
      and 7.1(e) (to the extent  related to Section 7.1(a) and 7.1(b)) and under
      any  similar  indemnification  provisions  for  breach of  representation,
      warranty, covenant or agreement by the Seller and/or its Affiliates in the
      purchase  agreements for the French Asset Sale,  the Argentina  Stock Sale
      and  the  Mexico   Stock  Sale   (collectively   the   "Foreign   Purchase
      Agreements"),  and Buyer shall have no  liability  under  Section  7.2(a),
      7.2(b) and 7.2(e) (to the extent related to Section 7.2(a) and 7.2(b)) and
      under any similar indemnification provisions for breach of representation,
      warranty,  covenant or  agreement by Buyer  and/or its  Affiliates  in the
      Foreign  Purchase  Agreements,  as the case may be,  unless the  aggregate
      amount of all of such party's liabilities thereunder, but for this Section
      7.4(b) exceeds  $125,000;  provided,  however,  such limit applies to such
      liabilities in the aggregate,  and not to each individual liability,  such
      that once the  aggregate of such  liabilities  exceeds  such amount,  such
      party shall be


                                       29
<PAGE>

      responsible  to  indemnify  the  Indemnified  Party  fully  for  all  such
      liabilities,  to the extent such liabilities exceed such amount; provided,
      further,  that any Rework Costs  incurred by Buyer (and not  reimbursed by
      the  Seller)  in excess of  $25,000  shall be  included  for  purposes  of
      determining  whether  Seller's  liabilities  have  exceeded  such  amount.
      Notwithstanding the foregoing,  no such monetary limitation shall apply as
      to any  Third  Party  Claim  or to any  claim  based  on  fraud  or  gross
      negligence.

            (c) The Seller shall have no liability under Section 7.1(a),  7.1(b)
      and 7.1(e) (to the extent  related to Section 7.1(a) and 7.1(b)) and under
      any  similar  indemnification  provisions  for  breach of  representation,
      warranty, covenant or agreement by the Seller and/or its Affiliates in the
      Foreign  Purchase  Agreements,  and Buyer  shall have no  liability  under
      Section 7.2(a), 7.2(b) and 7.2(e) (to the extent related to Section 7.2(a)
      and 7.2(b)) and under any similar indemnification provisions for breach of
      representation,  warranty,  covenant  or  agreement  by Buyer  and/or  its
      Affiliate in the Foreign Purchase  Agreements,  as the case may be, to the
      extent the aggregate amount of such party's  liabilities  thereunder,  but
      for  this  Section  7.4(c),   exceeds  $18,225,000.   Notwithstanding  the
      foregoing,  no such monetary limitations shall apply or to any Third Party
      Claim.

            (d)   The   Seller   shall   not   have   any   liability   for  any
      misrepresentation or breach of warranty,  agreement or covenant under this
      Agreement  if and to the extent that the same is  disclosed  in any of the
      Schedules of the Disclosure Schedule.

            (e)  The  effect  of  any  misrepresentation,  breach  of  warranty,
      covenant or agreement of, or any  indemnifiable  claim against,  any party
      under this  Agreement  shall be determined  based solely on damages net of
      any  amounts  actually  recovered  by such party in respect  thereof or in
      connection   therewith  under  any  one  or  more  policies  of  insurance
      maintained by such party or any third party;  provided,  however,  that no
      party shall have any obligation to seek any such recovery.

            (f)  The  effect  of  any  misrepresentation,  breach  of  warranty,
      covenant or agreement of, or any  indemnifiable  claim against,  any party
      under or in respect to this Agreement and any damages resulting  therefrom
      shall be determined  based solely on damages on a net after-tax  basis. NO
      PARTY SHALL BE HELD LIABLE  HEREUNDER FOR INCIDENTAL,  INDIRECT,  SPECIAL,
      PUNITIVE OR CONSEQUENTIAL DAMAGES, OR FOR LOST PROFITS OR LOST OPPORTUNITY
      COSTS,  WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE  POSSIBILITY  OF
      SUCH DAMAGES.

      7.5 Satisfaction of Indemnity Claims. Buyer may not obtain satisfaction of
any  Indemnity  Claim under  Section 7.1, by way of set-off  against any amounts
owing  by  Buyer to the  Seller,  including  amounts  owing  on  account  of the
Receivables  or  owing  in  respect  of  the  Buyer  Note.  In all  events,  and
notwithstanding anything to the contrary contained in this Agreement, the Seller
agrees  and  acknowledges  that the  provisions  of this  Section  shall  not be
construed  as a  limitation  on the  amount or scope of the  obligations  of the
Seller to  indemnify  Buyer under this Article 7; it being  understood  that the
Seller shall remain fully liable  hereunder in  accordance  with the  provisions
hereof notwithstanding the unavailability or exhaustion of such payment sources.


                                       30
<PAGE>

      7.6 Interest.  An  Indemnifying  Party shall pay the an Indemnified  Party
interest  at the rate of twelve  percent  (12%) per annum for any  indemnifiable
liability from the date such indemnifiable liability was actually paid, incurred
or suffered  by the  Indemnified  Party  until paid in full by the  Indemnifying
Party.

                                    ARTICLE 8

                                  Miscellaneous

      8.1 Certain Defined Terms. As used in this Agreement,  the following terms
shall have the following meanings:

            "Affiliate"  when used with respect to any Person,  means any Person
      that by means of the majority of shares or  otherwise,  is  controlled  by
      such Person,  is  controlling  such Person or is under common control with
      such Person. A Person shall be regarded as in control of another Person if
      it owns or directly or  indirectly  controls more than fifty percent (50%)
      of the voting stock or other ownership interest of the other Person, or if
      it  possesses,  directly or  indirectly,  the power to direct or cause the
      direction of the management and policies of the Person.

            "Agreement"  has  the  meaning  specified  in the  preamble  of this
      Agreement.

            "Agtrol Argentina" has the meaning specified in the recitals of this
      Agreement.

            "Agtrol  International" has the meaning specified in the recitals of
      this Agreement.

            "Agtrol  Mexico" has the meaning  specified  in the recitals of this
      Agreement.

            "Agtrol  S.A." has the  meaning  specified  in the  recitals of this
      Agreement.

            "Argentina Stock Sale" has the meaning specified in Section 6.10.

            "Assumed Liabilities" has the meaning specified in Section 2.2.

            "Balance Sheet" has the meaning specified in Section 4.3.

            "Benefit Plans" has the meaning specified in Section 4.16(c).

            "Business" has the meaning specified in Section 6.4(a).

            "Business  Day"  means any day that is not a  Saturday,  a Sunday or
      other day on which banks are required or authorized by Law to be closed in
      the State of New York.

            "Business Records" has the meaning specified in Section 1.2(g).

            "Business Secrets" has the meaning specified in Section 4.19(a)

            "Buyer" has the meaning specified in the preamble of this Agreement.


                                       31
<PAGE>

            "Buyer Indemnitees" has the meaning specified in Section 7.1.

            "Buyer Note" has the meaning specified in Section 2.1(a).

            "Cash Amount" has the meaning specified in Section 2.1(a).

            "Closing" has the meaning specified in Section 3.1(a).

            "Closing Date" has the meaning specified in Section 3.1(a).

            "COBRA" has the meaning specified in Section 6.2(f).

            "Code" means the Internal Revenue Code of 1986, as amended.

            "Collection Period" has the meaning specified in Section 2.5(a).

            "Collections" has the meaning specified in Section 2.5(a).

            "Contract Interest" has the meaning specified in Section 2.4.

            "Contract" has the meaning specified in Section 1.2(d).

            "Copper  Product" means any product of the U.S.  Agtrol  Division in
      which copper or any copper compound is an active ingredient: (i) currently
      sold or distributed by the U.S. Agtrol Division,  (ii) sold or distributed
      at any time during the three (3) years prior to the Effective  Date by the
      U.S.  Agtrol  Division,  (iii) currently in development by the U.S. Agtrol
      Division or (iv) Substitute Products of any of the foregoing.

            "Disclosure Schedule" has the meaning specified in Article 4.

            "Effective  Date" has the meaning  specified in the preamble of this
      Agreement.

            "Effective Date Inventory  Calculation" has the meaning specified in
      Section 2.1(b).

            "Employees" has the meaning specified in Section 4.15.

            "Employment Date" has the meaning specified in Section 6.2(a).

            "Environmental Laws" has the meaning specified in Section 4.18.

            "ERISA" has the meaning specified in Section 4.16(c).

            "ERISA  Affiliate"  means  any  trade or  business  (whether  or not
      incorporated)  that is or has ever been treated as a single  employer with
      the Seller under Section 414(b), (c), (m) or (o) of the Code.

            "Excess Inventory" has the meaning specified in Section 2.1(d).


                                       32
<PAGE>

            "Excess  Inventory  Amount"  has the  meaning  specified  in Section
      2.1(d).

            "Excluded Assets" has the meaning specified in Section 1.3.

            "Excluded Liabilities" has the meaning specified in Section 2.2.

            "Facility" means the Sumter, South Carolina facility of the Seller.

            "FIFRA" has the meaning specified in Section 4.18.

            "Financial Statements" has the meaning specified in Section 4.3.

            "Foreign  Purchase  Agreements" has the meaning specified in Section
      7.4(b).

            "French Asset Sale" means the sale  contemplated  to occur after the
      Closing Date between certain  Affiliates of the Seller and an Affiliate of
      Buyer,  pursuant to which such Seller's  Affiliates  would sell,  and such
      Buyer's Affiliate would buy, certain of the assets of Agtrol International
      used in the conduct of its  business  in and from  France,  excluding  the
      Bordeaux facility.

            "GAAP" has the meaning specified in Section 4.4.

            "Hazardous   Substance"   means  any  and  all  hazardous  or  toxic
      substances,  materials  or wastes as may be  defined  or listed  under the
      Resource  Conservation and Recovery Act, the Toxic Substances Control Act,
      the Comprehensive  Environmental Response,  Compensation and Liability Act
      or any comparable state statute or any regulation promulgated under any of
      such federal or state statutes.

            "Indemnified Party" has the meaning specified in Section 7.3(a).

            "Indemnity Claim" has the meaning specified in Section 7.3(a).

            "Indemnifying Party" has the meaning specified in Section 7.3(a).

            "Inventory" has the meaning specified in Section 1.2(c).

            "Inventory Count" has the meaning specified in Section 2.1(b).

            "Inventory  Value  Shortfall"  has the meaning  specified in Section
      2.1(d).

            "Laws" has the meaning specified in Section 4.12.

            "LC  Holdings"  has the meaning  specified  in the  recitals of this
      Agreement.

            "Leasehold Interests" has the meaning specified in Section 1.2(b).

            "Leases" has the meaning specified in Section 4.7(b).

            "License Agreement" has the meaning specified in Section 2.6.


                                       33
<PAGE>

            "Lien" means any security interest, mortgage, deed of trust, charge,
      pledge, claim, right of Person other than the Seller, lien, restriction or
      similar encumbrance.

            "Material Adverse Effect" means any materially  adverse effect on or
      change  to the  results  of  operations  or  the  financial  condition  or
      prospects  of the U.S.  Agtrol  Division,  except for any such  changes or
      effects  affecting  the  U.S.  economy  or the  chemical  crop  protection
      industry in general.

            "Mexico Stock Sale" has the meaning specified in Section 6.10.

            "Non-Copper Products" means a product of the U.S. Agtrol Division in
      which neither copper nor any copper compound is an active ingredient.

            "Note Amount" has the meaning specified in Section 2.1(a).

            "Permits" has the meaning specified in Section 4.14.

            "Permitted Liens" means landlords', mechanics' and workmens' liens.

            "Person" means an  individual,  a  corporation,  a  partnership,  an
      association,  a  limited  liability  company,  a trust or other  entity or
      organization of whatever nature.

            "Prepaids" has the meaning specified in Section 1.2(f).

            "Product  Liability  Matter"  has the meaning  specified  in Section
      4.13(c).  "Product  Warranty Matter" has the meaning  specified in Section
      4.13(c).

            "Purchase Price" has the meaning specified in Section 2.1(a).

            "Purchased Assets" has the meaning specified in Section 1.2.

            "Receivables" has the meaning specified in Section 1.2(f).

            "Registrations" has the meaning specified in Section 4.14.

            "Restricted Area" has the meaning specified in Section 6.4(a).

            "Restricted Period" has the meaning specified in Section 6.4(a).

            "Rework Cost" has the meaning specified in Section 6.9.

            "Seller"  has  the  meaning   specified  in  the  preamble  of  this
      Agreement.

            "Seller Indemnitees" has the meaning specified in Section 7.2.

            "Settlement Notice" has the meaning specified in Section 7.3(c)(ii).


                                       34
<PAGE>

            "Substitute  Products"  means  products with  substantially  similar
      performance characteristics, efficacy or functionality.

            "Sumter Plant" has the meaning specified in Section 1.3(p).

            "Supply Agreement" has the meaning specified in Section 2.6.

            "Tangible  Personal  Property" has the meaning  specified in Section
      1.2(a).

            "Taxes" has the meaning specified in Section 4.6.

            "Third Party Claim" has the meaning specified in Section 7.3(b).

            "Transaction Documents" has the meaning specified in Section 4.1(b).

            "U.S.  Agtrol Division" has the meaning specified in the recitals of
      this Agreement.

            "U.S. Employees" has the meaning specified in Section 6.2(a).

            "WARN Act" has the meaning specified in Section 6.2(b).

      8.2  Certain  Understandings.  Notwithstanding  anything  to the  contrary
contained in this Agreement:

            (a) For  purpose  of this  Agreement,  the  term  "knowledge  of the
      Seller",  and any  variation  thereof shall be deemed to refer only to the
      knowledge the individuals listed on Schedule 8.2(a).

            (b) To the extent a  representation  or warranty  in this  Agreement
      requires the  disclosure  of any  contract or  agreement,  the  applicable
      representation  or warranty shall be deemed to exclude any agreement under
      which the obligations of the parties thereto have been performed.

            (c) Certain matters and items  disclosed in the Disclosure  Schedule
      may not be required to be disclosed therein,  but may be disclosed therein
      for  informational  purposes only, and no such disclosure shall constitute
      an indication or admission of the materiality thereof or create a standard
      of disclosure.

            (d) The term "including" and all derivatives and variations  thereof
      shall mean "including, without limitation".

            (e) Notwithstanding any cross-referencing which may be undertaken in
      the Disclosure Schedule or any Schedule thereof,  any matter identified in
      any one or more of the  Schedules  of the  Disclosure  Schedule  shall  be
      deemed  disclosed  for  purposes of any other  Schedule of the  Disclosure
      Schedule.

      8.3 Binding  Agreement.  All the terms and  provisions  of this  Agreement
shall be binding  upon,  inure to the  benefit  of, and be  enforceable  by, the
parties hereto and their respective heirs, legal representatives, successors and
assigns.


                                       35
<PAGE>

      8.4  Assignment.  No party may  assign  this  Agreement  or any  rights or
obligations hereunder,  directly or directly, other than to an Affiliate of such
party,  except  with the prior  written  consent of the other party  hereto.  No
assignment  shall  relieve  the  assigning  party  of  any  of  its  obligations
hereunder.

      8.5 Public  Announcements.  Except as may be  required  to comply with the
requirements  of  any  applicable  law  or  as  required  under  the  rules  and
regulations  of any  stock  exchange  upon  which the  securities  of one of the
parties or its Affiliates are listed,  no party to this Agreement shall make any
public   announcement   in  respect  of  this  Agreement  or  the   transactions
contemplated  by this Agreement or otherwise  communicate  with respect  thereto
with any news media without prior notification to the other parties. The parties
shall, to the extent  practicable,  consult with each other as to the timing and
contents of any such press release or public statement.

      8.6 Law To Govern.  This  Agreement  shall be  construed  and  enforced in
accordance  with the internal laws of the State of New York,  without  regard to
principles  of conflict of laws.  Any  litigation  arising  hereunder or related
hereto  or under  any of the  other  Transaction  Documents  may be tried by the
United States  District  Court for the Southern  District of New York,  provided
that if such  litigation  shall not be  permitted to be tried by such court then
such  litigation may be held in the state courts of New York sitting in New York
City. Each party  irrevocably  consents to and confers personal  jurisdiction on
the United States  District Court for the Southern  District of New York, or, if
(but only if) the  litigation in question  shall not be permitted to be tried by
such  court,  on the state  courts of New York  sitting  in New York  City,  and
expressly  waives any objection to the venue of such court,  as the case may be,
and agrees  that  service of process may be made on such party by mailing a copy
of the  pleading or other  document by  registered  or  certified  mail,  return
receipt requested, to its or his addresses for the giving of notice provided for
in Section 8.7 hereof,  with  service  being deemed to be made five (5) Business
Days after the giving of such notice.  Each of the parties  hereto agrees 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.

      8.7 Notices.  All notices  shall be in writing and shall be deemed to have
been duly given if telefaxed,  transmission  confirmed,  within one (1) Business
Day after  transmission,  if delivered  personally or sent by overnight courier,
postage  prepaid,  return  receipt  requested,  upon  receipt,  or if mailed via
registered or certified mail, return receipt requested,  postage prepaid, within
five (5) Business  Days after  deposit in the mail, to the other party hereto at
the following addresses:

                           if to the Seller, to:

                           Phibro-Tech, Inc.
                           c/o Philipp Brothers Chemicals, Inc.
                           One Parker Plaza
                           Fort Lee, New Jersey 07024
                           United States of America
                           Attn: President
                           Facsimile: 201 944-6245


                                       36
<PAGE>

                           with a copy to:

                           Phibro-Tech, Inc.
                           c/o Philipp Brothers Chemicals, Inc.
                           One Parker Plaza
                           Fort Lee, New Jersey 07024
                           United States of America
                           Attn: General Counsel
                           Facsimile: 201 944-6245

                           if to Buyer, to:

                           Nufarm Limited
                           103-105 Pipe Road
                           Laverton North 3026
                           Victoria
                           Australia
                           Attn: Group General Manager Operations
                           Facsimile: 011 613-9282-1007

                           with a copy to:

                           Nufarm, Inc.
                           1333 Burr Ridge Parkway
                           Burr Ridge, Illinois 60521
                           United States of America
                           Attn:  General Manager
                           Facsimile:  713-266-7623

or to such  other  addresses  as any such  party may  designate  in  writing  in
accordance with this Section 8.7.

      8.8 Entire Agreement. This Agreement (including all Schedules and Exhibits
hereto) sets forth the entire  understanding of the parties hereto in respect of
the subject matter hereof and may not be modified or amended except by a written
agreement  specifically referring to this Agreement signed by all of the parties
hereto. This Agreement  supersedes all prior agreements and understandings among
the parties with respect to such subject matter.  No amendment,  modification or
waiver of this Agreement,  or any provision hereof, shall be binding unless made
in writing  and  executed by the parties  hereto.  In the event of any  conflict
between  the terms of this  Agreement  and the  terms of any  other  Transaction
Document, the terms of this Agreement shall prevail.

      8.9  Waivers.  No failure by any of the parties  hereto to insist upon the
strict  performance  of any  covenant,  agreement,  term  or  condition  of this
Agreement,  or to exercise any right or remedy consequent upon a breach thereof,
shall  constitute  a waiver of any such breach or of such  covenant,  agreement,
term or condition. No covenant,  agreement,  term or condition of this Agreement
to be performed or complied  with by any party  hereto,  and no breach  thereof,
shall be waived,  altered or


                                       37
<PAGE>

modified except by a written instrument  executed by the other party or parties.
No  waiver  by any of the  parties  hereto  of any  breach  of any  covenant  or
condition hereof on the part of the other party or parties hereto to be kept and
performed  shall be  considered  to be a continuing  waiver of such  covenant or
provision,  or of any subsequent  breach  thereof,  unless  otherwise  expressly
provided for in such waiver.

      8.10 Severability. In case any one or more of the provisions or parts of a
provision  contained  in  this  Agreement  shall  for any  reason  be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability  shall not affect any other provision or part of a provision of
this  Agreement,  but this  Agreement  shall be  construed as if such invalid or
illegal or  unenforceable  provision or part of a provision  had been limited or
modified (consistent with its general intent) to the extent necessary so that it
shall be valid,  legal and  enforceable,  or if it shall not be  possible  so to
limit or modify such invalid or illegal or unenforceable  provision or part of a
provision,  this  Agreement  shall be construed as if such invalid or illegal or
unenforceable provision or part of a provision had never been contained herein.

      8.11 Income Tax Position. No party hereto shall take a position for income
Tax purposes which is inconsistent with an express provision of this Agreement.

      8.12 Third-Party  Beneficiaries.  Nothing herein,  express or implied,  is
intended or shall be  construed  to or shall  confer upon or give to any Person,
other than the parties hereto (and the respective  Seller  Indemnitees and Buyer
Indemnitees to the extent provided in Article 7), any rights,  remedies or other
benefits  under or by reason of this  Agreement  or any  documents  executed  in
connection with this Agreement.

      8.13 Time of the  Essence.  Time is of the  essence  with  respect to each
party's respective obligations under or pursuant to this Agreement.

      8.14 Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY  IRREVOCABLY
WAIVES,  TO THE FULLEST  EXTENT  PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
AGREEMENT OR INSTRUMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY SUCH AGREEMENT OR INSTRUMENT.


                                       38
<PAGE>

      8.15 Drafting. This Agreement has been drafted and negotiated in the State
of New York. No party shall be deemed to have drafted this  Agreement but rather
this Agreement is a collaborative  effort of the  undersigned  parties and their
attorneys.

      8.16  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts,  each of which shall be deemed an original  but all of which shall
constitute one and the same agreement.

      8.17 Headings.  The Section and Schedule headings contained herein are for
the  purposes of  convenience  only and are not  intended to define or limit the
contents of such Sections and Schedules.

      8.18 Further  Assurances.  At any time and from time to time following the
Closing,  at the request of any party and  without  further  consideration,  any
other party hereto  shall  provide,  execute  and/or  deliver such  documents or
instruments,  and take  such  actions,  as the  requesting  party  hereto or its
counsel may  reasonably  deem  necessary or desirable in order to  consummate or
otherwise  to implement  the  provisions  and  purposes of this  Agreement or to
comply with  applicable  Laws,  including  the  provision  of audited  financial
statements,  as  necessary.  The  parties  hereto  agree to  cooperate  fully in
implementing  a smooth and orderly  transfer of the business of the U.S.  Agtrol
Division and the Purchased Assets from the Seller to Buyer.

      8.19 Dispute Resolution.

            (a) The  parties  hereto  shall  attempt to resolve  any  dispute or
      controversy  arising  out  of or in  connection  with  this  Agreement  in
      accordance  with this  Section  8.19.  The  parties  shall first refer the
      dispute to  management-level  employees who have  oversight of operational
      matters to  negotiate  in good faith  during a period of fifteen (15) days
      for resolution of the dispute. If such employees are unable to resolve the
      dispute, the parties shall refer the dispute to chief executive officer of
      the Seller and the chief executive  officer of Nufarm Limited to negotiate
      in good faith during a period of fifteen (15) days for  resolution  of the
      dispute.  No party  may  bring a claim  under or in  connection  with this
      Agreement  unless  and until it such  procedure  has been  concluded  with
      respect to such claim. Notwithstanding the foregoing, any party may at any
      time seek  equitable  relief,  including an  injunction,  as a remedy in a
      court of law.

            (b)   Each   of  the   parties   hereto   hereby   irrevocably   and
      unconditionally   waives,  to  the  fullest  extent  it  may  legally  and
      effectively  do so, any objection that it may not or hereafter have to the
      laying of venue of any  suit,  action,  or  proceeding  arising  out of or
      relating to this Agreement or the transactions  contemplated hereby in any
      New York state or federal court  located in the Borough of Manhattan,  New
      York. Each of the parties hereto hereby irrevocably waives, to the fullest
      extent  permitted  by law,  the  defense of an  inconvenient  forum to the
      maintenance of such action or proceeding in any such court.

            (c)   Each   of  the   parties   hereto   hereby   irrevocably   and
      unconditionally  consents to service of process in the manner provided for
      notices in Section 8.6. Nothing in this Agreement will affect the right of
      any party to this Agreement to serve process in any other manner permitted
      by law.

                  [Remainder of Page Intentionally Left Blank]


                                       39
<PAGE>


      IN WITNESS  WHEREOF,  the parties have duly  executed  this United  States
Asset Purchase Agreement as of the date first above written.

                                       PHIBRO-TECH, INC.

                                       By: /s/ W. Dwight Glover
                                          ------------------------------
                                          Name: W. Dwight Glover
                                          Title: President


                                       NUFARM, INC.

                                       By: /s/ Kevin Martin
                                          ------------------------------
                                       Name: Kevin Martin
                                       Title: Authorized Signatory

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>3
<FILENAME>file003.txt
<DESCRIPTION>SUPPLY AGREEMENT
<TEXT>


                                SUPPLY AGREEMENT

      This Supply Agreement, entered into as of this 1st day of May, 2001, is by
and between Phibro-Tech, Inc., a Delaware corporation with offices at One Parker
Plaza, Fort Lee, New Jersey ("Seller"), and Nufarm, Inc., a Delaware corporation
with  offices at 1333 Burr Ridge  Parkway,  Suite  125A,  Burr  Ridge,  Illinois
("Buyer").

                                   WITNESSETH:

      WHEREAS,  Seller  and Buyer wish to enter  into a Supply  Agreement  under
which Seller will sell and deliver Product (as hereafter  defined) to Buyer upon
the terms and conditions set forth herein.

      NOW,  THEREFORE,  in consideration of the mutual covenants herein,  Seller
and Buyer hereby agree as follows:

1.    Definitions.

      (a)   "Affiliate" means in respect of a party to this Agreement any entity
            that, by means ownership of the majority of shares or otherwise,  is
            controlled  by such  party,  is  controlling  such party or is under
            common  control with such party. A corporation or other entity shall
            be  regarded  as in control of another  corporation  or entity if it
            owns,  or directly or indirectly  controls,  more than fifty percent
            (50%) of the voting stock or other  ownership  interest of the other
            corporation or entity,  or if it possesses,  directly or indirectly,
            the power to direct or cause the  direction  of the  management  and
            policies of the corporation or other entity.

      (b)   "Calendar  Quarter" means each calendar  quarter  starting  January,
            April, July and October 1.

      (c)   "Calendar  Year" means each calendar year while this Agreement is in
            effect.

      (d)   "Contract Year" means in the first instance,  the period  commencing
            as of May 1,  2001 and  ending  June 30,  2002 and  thereafter  each
            twelve-month  period commencing July 1 and ending June 30 while this
            Agreement is in effect.

      (e)   "Control" means the possession,  direct or indirect, of the power to
            direct or cause the  direction  of the  management  or policies of a
            person  or  entity,   whether   through  the   ownership  of  voting
            securities, by contract or otherwise.

      (f)   "Delivery Point" means FOB the Facility,  unless otherwise specified
            and agreed by both parties.

      (g)   "Facility" means the Sumter, SC facility of Seller at which Products
            are manufactured.


<PAGE>

      (h)   "Lead Time" means the period of time  between  receipt of a Purchase
            Order and the time the  Product  is  delivered  to Buyer  and/or its
            Affiliates at the Delivery Point, which shall be sixty (60) calendar
            days for all Products.

      (i)   "Product"  means the products  manufactured  by Seller for Buyer and
            set forth in  Attachment  1, as may be amended  from time to time by
            the mutual agreement of the parties.

      (j)   "Product Specifications" means the published specifications for each
            of the Products set forth in Attachment 2.

      (k)   "Purchase Order" has the meaning set forth in Section 2(d).

      (l)   "Substitute  Products"  means  products that are used as substitutes
            for Products, including without limitation, products manufactured by
            others  with  substantially  similar  performance   characteristics,
            efficacy or  functionality,  but does not include existing  Products
            sold by Buyer's Affiliates.

      (m)   "Technical  Data Sheets" means those product  technical  data sheets
            customarily  used  in the  chemical  industry  and  containing  such
            information as is customarily found therein.

2.    Purchase of Product.

      (a)   Appointment;  Exclusivity.  Buyer and its Affiliates  hereby appoint
            Seller to manufacture  and be their  exclusive  supplier of Products
            and  Substitute  Products,  subject to the  conditions and terms set
            forth herein, and Seller accepts such appointment to manufacture and
            supply  the  Products  and to do  such  other  acts  as  are  herein
            authorized.  During the term of this  Agreement,  Seller shall,  and
            shall ensure that its Affiliates shall not,  directly or indirectly,
            supply,  distribute or sell  Products or Substitute  Products to any
            person or entity other than Buyer and/or its Affiliates on terms and
            conditions,  including price, that are, in the aggregate, materially
            more  favorable  to such other person or entity than to Buyer and/or
            its Affiliates hereunder.


                                       2
<PAGE>

      (b)   100% Requirements. Buyer agrees, and agrees to cause its Affiliates,
            to  buy  100%  of  its  and  their  requirements  for  Products  and
            Substitute Products, up to the capacity of the Facility,  during the
            term of this  Agreement  from  Seller  hereunder,  and Seller  shall
            supply  to  Buyer  and  its   Affiliates   100%  of  its  and  their
            requirements  for Products and  Substitute  Products,  in accordance
            with the terms  and  conditions  of this  Agreement,  provided  such
            requirements do not exceed the capacity of the Facility.  During the
            term of this  Agreement,  Buyer shall not divert the  manufacture or
            sale of Products or  Substitute  Products  from the  Facility to any
            other plant.

      (c)   Forecasts.  Buyer  agrees to provide to Seller,  within  thirty (30)
            days after the date  hereof,  written  non-binding  forecasts of its
            anticipated  requirements  of Products  by Calendar  Quarter for the
            balance  of  Calendar  Year  2001  and for the  first  two  Calendar
            Quarters  of Calendar  Year 2002.  At least sixty (60) days prior to
            the beginning of each Calendar  Quarter,  Buyer shall provide Seller
            with a  written  non-binding  rolling  estimate  of its  anticipated
            requirements  of Product  during the next four  succeeding  Calendar
            Quarters.

      (d)   Purchase Orders. To effect the purchase of Product, Buyer shall give
            Seller a binding written  purchase order;  such order shall:  (i) be
            given to Seller at least the number of days  prior to the  scheduled
            date for  delivery  of the Product  ordered  equal to the Lead Time;
            (ii) specify the quantities,  ship-to  location and delivery date of
            Product  to  be  purchased;  (iii)  be  subject  to  the  terms  and
            conditions of this Agreement;  and (iv) be Buyer's standard purchase
            order form  (hereinafter  referred  to  individually  as a "Purchase
            Order" and  collectively  as the  "Purchase  Orders"),  and shall be
            appropriately  completed and executed by Buyer.  Within fifteen (15)
            business  days after  receipt of such  written  notice and  Purchase
            Order,  Seller  shall  either (A) notify  Buyer in writing that such
            Purchase Order does not comply with the terms and conditions of this
            Agreement,  specifying the respect in which the Purchase Order fails
            to comply with this Agreement, in which event Seller and Buyer shall
            promptly negotiate in good faith to resolve such disagreement and to
            execute a suitable Purchase Order reflecting such resolution, or (B)
            notify  Buyer in writing of  Seller's  acceptance  of such  Purchase
            Order, in which event such acceptance notice shall be accompanied by
            a copy of such Purchase  Order signed by Seller.  If Seller fails to
            notify  Buyer  within such  period,  Seller  shall be deemed to have
            accepted  and  signed  the  Purchase  Order.  Seller  shall  not  be
            obligated to fulfill any Purchase  Orders in respect of any Calendar
            Quarter  to the  extent  the  aggregate  Purchase  Orders  for  such
            Calendar  Quarter exceed the forecasts for such Calendar  Quarter by
            more than  twenty-five  percent  (25%),  although  Seller  shall use
            commercially reasonable efforts to fulfill all such Purchase Orders.
            Seller shall not be  obligated to fulfill any Product  Order of less
            than $500.

      (e)   Printed  Purchase  Order Terms Not  Binding.  Every  Purchase  Order
            issued by Buyer hereunder shall reference this Agreement. No printed
            term or condition contained in such Purchase Order shall bind, apply
            to, or in any respect  give rise to any  obligation  on the part of,
            Seller or Buyer.  No term or condition  typed on such Purchase Order
            shall bind,  apply to, or in any respect give rise to any obligation
            on  the  part  of   Seller   unless   specifically   agreed  to  and
            countersigned  by Seller.  Subject to  Section  2(f),  the terms and
            conditions  contained in this Agreement (including any Attachment or
            Schedule hereto) supersede such printed terms and conditions and all
            prior oral or written  agreements,  commitments  and  understandings
            between Seller and Buyer and shall,  together with the terms of such
            accepted  Purchase Order,  constitute the entire  agreement  between
            Seller and Buyer with  respect to the matters  provided  for in such
            Purchase Order.


                                       3
<PAGE>

      (f)   Terms of Sale. Buyer shall,  with respect to any sale of Products by
            Buyer to any of its  direct or  indirect  customers,  replicate  the
            terms under which  Seller  sells  Products  hereunder  to Buyer that
            limit Seller's liability to Buyer (i.e., the Performance  Warranties
            and  Sections  7(b) and 9 but not  Section  5(g))  to limit  Buyer's
            liability  to such  customer  for such sale (the  "Terms of  Sale").
            Where Buyer sells  Product to its customer  pursuant to the Terms of
            Sale and Buyer is liable to such customer, Buyer will be entitled to
            pursue such rights as it may have against Seller; provided, however,
            that to the extent  Buyer  modifies  the Terms of Sale  without  the
            prior written consent of Seller, Buyer shall not pursue any recovery
            from Seller.

      (g)   Facility.  Seller shall manufacture  Product at the Facility.  Buyer
            agrees that Seller may utilize the Facility for the blending  and/or
            manufacture of product other than the Products,  subject to Seller's
            obligations  under the Asset  Purchase  Agreement  between Buyer and
            Seller  dated as of the date hereof and the  requirements  set forth
            herein.   Seller  may  change  the  location  at  which  Product  is
            manufactured  to  another  location  in the United  States  upon one
            hundred  eighty  (180) days'  prior  written  notification  to Buyer
            unless such change would result in any material increase in price of
            Product or other material adverse change to Buyer.

      (h)   Capital  Expenditures.  During the term of this Agreement,  if Buyer
            requires  additional  capacity or investment for the  manufacture of
            Products at the Facility, for the manufacture of new products at the
            Facility,  or  for  the  manufacture  of  reformulated  Products  or
            products at the  Facility,  (i) Buyer shall notify Seller in writing
            of its need for such additional  capacity or investment;  (ii) Buyer
            and Seller shall promptly after delivery of such notice negotiate in
            good faith  such  request;  and (iii) if Buyer and  Seller  agree to
            proceed with  increasing  the capacity of, or making changes to, the
            Facility, Buyer shall be liable for all reasonable costs incurred in
            order  so  to   increase   the   capacity   or  change  the  product
            manufacturing  capacities  of the  Facility to the extent  Buyer has
            approved such costs in writing prior to the incurrence thereof.

3.    Payment; Delivery.

      (a)   Price.  The purchase  prices for Product for the first Contract Year
            shall be  Seller's  full  standard  cost and  margin as shown on the
            Purchase  Price  appendix  agreed  by Buyer  and  Seller on the date
            hereof. Thereafter,  during the term of this Agreement, the purchase
            price for Product shall be Seller's full standard  cost,  determined
            by Seller with  respect for  Contract  Year on a  consistent  basis,
            subject to Section 3(d). On or prior to May 10 of each Contract Year
            after the first  Contract  Year,  Seller  and  margin  shown on such
            appendix shall have delivered to Buyer  adjustments to the price for
            Products  determined  in  accordance  with  this  Section  and  such
            appendix for the following Contract Year (the "Adjustments"),  along
            with  information in support of each such  Adjustment.  Seller shall
            promptly provide and/or make available to Buyer any information that
            Buyer  reasonably  requests  in  connection  with  the  Adjustments,
            including a report or certificate of Seller's auditors in respect of
            any Adjustment  that relates to copper prices.  After


                                       4
<PAGE>

            such delivery,  and or prior to May 31 of each Contract Year, Seller
            and Buyer shall meet in such location as they may mutually  agree to
            discuss in good faith the  Adjustments.  Seller and Buyer shall give
            due regard during such negotiations to actual and forecasted changes
            in volume and the affect thereof on standard cost.

      (b)   Invoices. Seller's invoices shall be sent to:

                     Nufarm, Inc.
                     1333 Burr Ridge Parkway
                     Burr Ridge, Illinois 60521
                     United States of America
                     Attn:  Financial Controller

            or such other  address as Buyer may  notify  Seller in writing  from
            time to time.

      (c)   Minimum Aggregate  Payment.  In respect of each Contract Year, Buyer
            shall  pay to Seller a  minimum  aggregate  payment  in  respect  of
            Product  equal to 70% of Base Volume  multiplied  by Product  price,
            regardless  of the volume of Product  ordered by Buyer  during  such
            Contract  Year.  Payment of the price for Product in respect of such
            Year shall be included for  purposes of  determining  whether  Buyer
            made such minimum aggregate payment.

      (d)   Hardship.  At any time during the term of this Agreement,  if either
            party believes that this Agreement is causing demonstrable  economic
            hardship  to it,  such party will  notify the other party in writing
            and within thirty (30) days  thereafter,  the parties shall meet and
            negotiate that issue in good faith. The party claiming such hardship
            shall  provide   and/or  make  available  to  the  other  party  any
            information such other party reasonably  requests in connection with
            such hardship.

      (e)   Payment.  Buyer agrees to pay to Seller the  purchase  price and all
            other amounts  assumed by Buyer in accordance with the terms of this
            Agreement  for Products  delivered in  accordance  with the terms of
            this  Agreement  within  fifty (50) days after the date of  Seller's
            invoice for those  Products.  Such invoices shall be stated and paid
            in U.S.  Dollars  and  shall be dated  no  earlier  than the date of
            delivery of the Product to the Delivery Point.

      (f)   Tax. In addition to the prices referred to in this Agreement for any
            Product,  Buyer shall promptly pay to Seller or, with Seller's prior
            written consent,  directly to the applicable taxing  authority,  all
            sales,  transfer,  excise, VAT, personal property and similar taxes,
            tariffs  or duties  applicable  to any sale of  Product  under  this
            Agreement.  Buyer  shall be  responsible  for all  customs and other
            export duties in connection with the examination of Products.

      (g)   Delivery.

            (i)   Seller  shall  deliver  or  cause  to  be  delivered   Product
                  specified  in an accepted  Purchase  Order to Buyer and/or its
                  Affiliates  at the  Delivery  Point within the Lead Time after
                  delivery of such Purchase Order.


                                       5
<PAGE>

            (ii)  Buyer assumes all title to, and all risk of loss of,  Products
                  upon delivery of the Products by Seller at the Delivery  Point
                  to the  carrier  packed  and  ready for  shipment  to Buyer or
                  Buyer's designee. Buyer will be responsible for all subsequent
                  charges.  Unless  otherwise  directed by Buyer,  Seller  will,
                  however,  prepay the  freight  and bill Buyer for its cost for
                  transportation  charges.  In the absence of instructions  from
                  Buyer to the contrary, Seller, on behalf of Buyer, will select
                  the mode of conveyance and carrier or carriers,  but shall not
                  be deemed  thereby to assume any liability in connection  with
                  the shipment nor shall any such carrier be construed to be the
                  agent of Seller.  If Buyer specifies the carrier in writing to
                  Seller,  or if Buyer requests  actual carrier  invoices,  then
                  shipment will be made collect.  Buyer will be responsible  for
                  all  storage,  rigging,  drayage and other  charges at Buyer's
                  site and for any special handling  requested by Buyer.  Seller
                  shall cooperate in good faith with Buyer in the  documentation
                  and proof of loss claims  promptly  presented  by Buyer to the
                  appropriate carrier and/or insurer.

            (iii) Seller shall make  reasonable  efforts to make deliveries in a
                  timely  fashion and to notify Buyer  promptly of any delays in
                  delivery.

      (h)   Weights.  Seller's  weights at Delivery  Point shall govern,  unless
            proven to be incorrect.

      (i)   Acceptance. Buyer will make an examination and test of each shipment
            for compliance with the Product  Specifications  within a reasonable
            time after its arrival at Buyer's destination.  Buyer shall have the
            right to reject on a  reasonable  basis any portion of any  shipment
            which does not meet the Product Specifications, without invalidating
            the remainder of the order or shipment.  Any claims  against  Seller
            for failure to comply with the Product Specifications will be waived
            unless made in writing  promptly  after the facts on which the claim
            is based become  known to Buyer and in any event within  thirty (30)
            days after the shipment's arrival at Buyer's destination. If Product
            is so  rejected,  Seller at its  option may  either  refund  Buyer's
            purchase price or promptly replace such non-conforming Product. Upon
            Seller's  request,  Buyer  shall  return to  Seller,  transportation
            charges  collect,  the  Product  upon  which the refund or credit is
            based, in substantially as good condition as when received by Buyer,
            except such part, if any, as cannot be returned due to its necessary
            use in processing to determine the existence of an inferior  quality
            or defective  condition;  and Buyer shall also likewise  return,  if
            possible,  the Products  used in  processing.  In the event that any
            shipment  is  rejected  by  Buyer  due to  failure  to meet  Product
            Specifications,  Buyer may  withhold  payment of such portion of any
            invoice  relating  thereto,  until such time as Seller replaces such
            Product  failing  to meet  the  Product  Specifications.  Except  as
            provided in Section 9(c),  Seller's sole  liability for Product that
            does  not   conform  in  all   material   respects  to  the  Product
            Specifications  shall be  limited  to  Seller's  obligation,  at its
            option,  to  replace  such  Product  or to refund  the price of such
            Product, and maximum liability, if any, of Seller in respect thereto
            shall be the purchase  price of that part of the  material


                                       6
<PAGE>

            which is  subject  to the  condition  or cause on which the claim is
            based.  No claim shall be allowed for any cause as to material which
            has been treated or processed in any way,  except for such  quantity
            necessarily  processed  to  determine  the  existence of an inferior
            quality or defective condition.

      (j)   Quality Certificate. Seller shall accompany each shipment of Product
            hereunder with Seller's standard form of (i) weight certificates and
            (ii) assay  certificate(s)  applicable  to each batch of  production
            contained therein.

4.    Seller's Obligations.

      (a)   Documentation. Seller shall provide Buyer with Technical Data Sheets
            in  connection  with the sale of the Product  from time to time upon
            request by Buyer.

      (b)   Support.  Seller agrees upon Buyer's reasonable request from time to
            time during the term of this Agreement to provide  certain  research
            and  development  services  and  to  provide  Buyer  reasonable  and
            customary  technical  and/or  laboratory  support at  Seller's  then
            standard  rates for such  services  and subject to such terms as the
            parties may  otherwise  mutually  agree,  all in  accordance  with a
            separate  agreement to be entered into on terms mutually  acceptable
            to Buyer and Seller.

      (c)   Supply  Interruption.  If Seller is  unable  to supply  Products  in
            accordance with accepted  Purchase Orders at any time for any reason
            other than a force majeure (as  hereinafter  defined) and other than
            pursuant to a capital  expenditure  project  jointly  undertaken  by
            Buyer and  Seller (a "Supply  Interruption  Period"),  Seller  shall
            attempt in good faith to provide  written  notice to Buyer as far in
            advance of the  commencement  of the Supply  Interruption  Period as
            possible  or  as  soon   thereafter   as  possible   and  shall  use
            commercially reasonable efforts to resume supply in a timely manner.
            Seller  will also  provide  advance  written  notice to Buyer of any
            planned operational  interruption relating to the Products if Seller
            reasonably  believes  that  the  event  will  result  in a  material
            interruption  of  supply of  Products.  So that all  Product  can be
            shipped as required under this Agreement, promptly after delivery of
            any such  notice,  Buyer and Seller will in good faith  negotiate an
            agreement  pursuant to which Buyer's  anticipated needs for Products
            would be filled  during  the  Supply  Interruption  Period.  Such an
            agreement may include, for example,  that Seller would (i) produce a
            sufficient  amount of  Products  prior to the  Service  Interruption
            Period to  fulfill  Buyer's  anticipated  needs  during  the  Supply
            Interruption  Period;  (ii)  have  an  Affiliate  of  Seller  supply
            Products or  Substitute  Products  under this  Agreement  during the
            Supply  Interruption Period to the extent Seller is unable to supply
            the Products in accordance herewith; and/or (iii) obtain Products or
            Substitute Products from a third-party  manufacturer for shipment to
            Buyer  in  accordance   with  Purchase   Orders  during  the  Supply
            Interruption  Period.  If Seller cannot or does not provide Products
            during a Supply  Interruption  Period  for a  consecutive  period of
            forty-five  (45) days,  Buyer  shall have the right to  procure,  if
            possible,  Substitute Products on the open market ("cover products")
            on a  short-term  basis  and on  commercially  reasonable  terms and
            Seller shall  reimburse Buyer for the cost of


                                       7
<PAGE>

            such cover  products  in  quantities  consistent  with the  Purchase
            Orders to the  extent  such cost  exceeds  the cost of the  Products
            under  this  Agreement;  provided,  however,  that once  Seller  has
            provided  written  notice  to Buyer  that  Seller  is able to resume
            supply  of  the  Products  under  this  Agreement,  Buyer  will  use
            commercially  reasonable  efforts to stop its  procurement  of cover
            products and will resume  acquiring  Products from Seller under this
            Agreement.   If  Buyer  does  procure  cover   products  and  Seller
            reimburses Buyer for any excess costs thereof in accordance with the
            foregoing,  Seller's  liability  arising  as a result of the  Supply
            Interruption   Period   shall  be  limited  to  such   reimbursement
            obligation.

      (d)   Facility.  Seller shall use commercially reasonable efforts to cause
            the Facility  and the  Products to comply in all  material  respects
            with all  applicable  governmental  laws,  regulations,  ordinances,
            standards, orders and decrees including those relating to pollution,
            ecology and environmental matters.

      (e)   Product  Changes.  If either party requires a change to any Product,
            such party shall notify the other party in writing and within thirty
            (30) days  thereafter,  the parties shall meet and negotiate in good
            faith that Product change.  Notwithstanding anything to the contrary
            herein,  Seller may make any Product  change  required for safety as
            and when  required.  If the parties do not agree to a Product change
            as a result of such  negotiations,  the following  procedures  shall
            apply:

            (i)   Upon ninety (90) days' prior written  notice to Buyer,  Seller
                  may make  changes to any Products  whenever  such changes are:
                  (A)   required  for  safety,   (B)   required  to   facilitate
                  performance in accordance with the Product Specifications,  or
                  (C) such that they represent non-substantial substitutions and
                  modifications   not   materially   and   adversely   affecting
                  performance  in  accordance  with the Product  Specifications;
                  provided,   however,  that  the  Products  so  modified  shall
                  continue to be covered by the applicable product registration.
                  In the event of such changes by Seller that materially  affect
                  the cost of the Product and/or that Seller reasonably believes
                  materially  and adversely to affect  performance in accordance
                  with the Product Specifications  ("Material Changes"),  Seller
                  shall so state in its notice to Buyer.  Buyer shall  thereupon
                  have  forty-five  (45) days after  receipt  of such  notice to
                  review  such  changes  and to document  and  substantiate  any
                  objection thereto.  In the event of a Material Change to which
                  Buyer  objects  as  aforesaid,  Buyer  shall have the right to
                  terminate  this  Agreement  with  respect to such Product upon
                  written  notice to Seller  within  sixty  (60) days  after its
                  receipt of such notice of changes  from Seller  unless  Seller
                  agrees,  within thirty (30) days after the  expiration of such
                  sixty-day  period,  not to make  such  change  or to make such
                  change in a manner that does not materially affect the cost of
                  the Product and/or does not  materially  and adversely  affect
                  performance in accordance with the Product Specifications.


                                       8
<PAGE>

            (ii)  The cost of any change requested by Seller  reasonably  deemed
                  by Seller  necessary  to assure the  compliance  of  delivered
                  Products with Product Specifications shall be borne by Seller.
                  Any change  requested  by Seller  reasonably  deemed by Seller
                  necessary  or  desirable  to  assure  the  compliance  of  the
                  Products  with  changed  safety   standards  or   governmental
                  regulations  shall be  implemented by Seller by an appropriate
                  field change notice.  If in the reasonable  judgment of Seller
                  such change is likely to result in a material  increase in the
                  cost of, or the time  required for  performance  by Seller of,
                  the  supply  of  Products  hereunder,  or the  composition  of
                  Products,  such notice  shall  propose new prices of Products,
                  Lead Times, Product  Specifications  and/or Product warranties
                  ("Change Notice Terms"). Such new Change Notice Terms shall be
                  determined in  accordance  with the same methods as such terms
                  shall have been determined  prior to such Change Notice Terms.
                  Buyer shall have the right to object to such new Change Notice
                  Terms by  written  notice to Seller  within  thirty  (30) days
                  after receipt of such change notice. In such event, Seller and
                  Buyer  shall  negotiate  in good  faith  with  respect to such
                  Change Notice Terms that may be  appropriate  in light of such
                  change notice.

            (iii) Upon ninety (90) days' prior written  notice to Seller,  Buyer
                  may require that Seller may make changes to any  Products.  In
                  the event of such changes by Buyer that Buyer reasonably deems
                  would materially affect the cost of the Product to Seller Lead
                  Times  or  Product  warranties,  Buyer  shall  so state in its
                  notice to Seller.  Seller shall thereupon have forty-five (45)
                  days after  receipt of such notice to review such  changes and
                  to document and  substantiate  any objection  thereto.  In the
                  event  of  a  Material  Change  to  which  Seller  objects  as
                  aforesaid,  Seller  shall  have the  right to  terminate  this
                  Agreement  with respect to such Product upon written notice to
                  Buyer  within sixty (60) days after its receipt of such notice
                  of changes from Buyer unless Buyer agrees,  within thirty (30)
                  days after the  expiration of such  sixty-day  period,  not to
                  make such  change or to make such change in a manner that does
                  not materially affect the cost of the Product to Seller.

            (iv)  The cost of any change requested by Buyer reasonably deemed by
                  Buyer necessary to assure the compliance of delivered Products
                  with  Product  Specifications  shall be borne by  Seller.  Any
                  change requested by Buyer reasonably deemed by Buyer necessary
                  or desirable  to assure the  compliance  of the Products  with
                  changed safety standards or governmental  regulations shall be
                  implemented by Seller by an  appropriate  field change notice.
                  If in the reasonable  judgment of Seller such change is likely
                  to result in a material  increase  in the cost of, or the time
                  required for  performance by Seller of, the supply of Products
                  hereunder,  or the composition of Products,  such notice shall
                  propose  Change  Notice  Terms.  Such new Change  Notice Terms
                  shall be


                                       9
<PAGE>

                  determined in  accordance  with the same methods as such terms
                  shall have been determined  prior to such Change Notice Terms.
                  Buyer shall have the right to object to such new Change Notice
                  Terms by  written  notice to Seller  within  thirty  (30) days
                  after receipt of such change notice. In such event, Seller and
                  Buyer  shall  negotiate  in good  faith  with  respect to such
                  Change Notice Terms that may be  appropriate  in light of such
                  change notice.

5.    Quality Assurance and Control

      (a)   Seller  shall use  commercially  reasonable  efforts to maintain the
            productivity,  yields and quality of its  production of Products and
            practice the  "continuous  improvement"  approach in accordance with
            good manufacturing practice.

      (b)   Upon  request  of  Buyer,  Seller  shall  provide  to Buyer  and its
            customers  certificates  of  analysis  for  all  raw  materials  and
            Products.

      (c)   Seller shall maintain all documentation  relating to the manufacture
            and/or  quality  control  of the  Products  for a period of at least
            seven (7) years and shall make such documentation available to Buyer
            upon its reasonable request in writing.

      (d)   Seller  shall  take one (1) sample of each  production  batch of the
            Products,  shall  keep it in a sealed  container  for a period of at
            least  thirty-six  (36)  months  after  delivery  and shall make the
            sample  available  to Buyer  upon its  reasonable  written  request.
            Seller's numbering system for identifying the production batches and
            samples shall be in correlation to the Purchase Order.

      (e)   Buyer shall have the right,  upon reasonable prior notice to Seller,
            to enter the Facility during regular business hours, for the purpose
            of: (i)  observing  and testing  the raw  materials,  packaging  and
            labeling  materials  and  Products,  (ii)observing  the  process  of
            manufacturing,  packaging  and  labeling  the  Products;  and  (iii)
            inspecting   the  quality  of  the  finished   Products,   including
            inspecting  the  process and  results of any  quality  control  test
            conducted  by  Seller;  provided,  however,  that  Buyer  shall  not
            materially  disrupt the  operations  of the  Facility as a result of
            such entry.

      (f)   Seller  shall use  commercially  reasonable  efforts to maintain its
            current  certifications  under  quality,  environmental,  health and
            safety  standards  (e.g.,  ISO 9000 ff) and shall,  upon  reasonable
            request  of  Buyer  and  at  Buyer's   cost  and   expense,   obtain
            certification  under  quality,  environmental,   health  and  safety
            standards that Seller currently does not have.

      (g)   Without  limiting the  foregoing,  Seller makes no warranty that any
            Product  will have any effect on any or all  fungus or other  plant,
            crop, fruit or tree diseases or conditions.


                                       10
<PAGE>

6.    Resale.

      Buyer  shall  have the right to  re-label  all  Products  and to sell such
      Products under Buyer's name alone;  provided,  however,  that in the event
      Buyer re-labels any Product, Buyer shall be responsible for all regulatory
      and/or other requirements for labels and other matters.

7.    Warranties; Disclaimer.

      (a)   Warranties.  The Product will, at the time of delivery,  (i) be free
            from material defects and from  contamination  resulting from faulty
            manufacture;  (ii) conform in all  material  respects to the Product
            Specifications, and (iii) be labeled and packaged in accordance with
            the   Product   Specifications   (collectively,   the   "Performance
            Warranties").

            Seller represents and warrants that it has and will use commercially
            reasonable efforts to maintain  sufficient  production  capacity and
            know-how to manufacture  and supply Products in accordance with this
            Agreement.  Seller  will not  materially  change  the  manufacturing
            process  for and  components  of the  Product  from the  process and
            components  in  place  prior to the date  hereof,  except  as may be
            changed in accordance herewith. To Seller's knowledge,  the Products
            do not infringe any third party intellectual property rights. Seller
            will convey to Buyer good title to the purchased  Products free from
            any security interest, lien, claim or encumbrance that arises out of
            activities of Seller.

      (b)   Disclaimer.

            The  stated   warranties  are  conditioned  upon  proper  treatment,
            storage,   handling  and  use  of  the  Products.  SELLER  MAKES  NO
            REPRESENTATION  OR WARRANTY  EXCEPT AS MAY BE EXPRESSLY SET FORTH IN
            THIS AGREEMENT,  AND SELLER EXPRESSLY  DISCLAIMS ANY AND ALL IMPLIED
            WARRANTIES,  INCLUDING ALL IMPLIED  WARRANTIES  OF  MERCHANTABILITY,
            FITNESS  FOR USE OR FITNESS  FOR A  PARTICULAR  PURPOSE.  Claims for
            breach of  warranty  resulting  from  latent  defects  shall be made
            promptly after discovery thereof by Buyer.

8.    Term.

      This  Agreement  shall have an initial term  extending five (5) years from
      the date hereof with consecutive  two-year renewals at two-year  intervals
      thereafter,  unless  and until  either  party  gives  the other  notice of
      non-renewal  no less than one (1) year prior to the end of the  initial or
      any renewal term.

9.    Indemnification; Insurance.

      (a)   Indemnification  by Buyer.  Buyer shall  defend,  indemnify and hold
            harmless Seller, its shareholders, officers, directors and employees
            from and against any all damages, losses, liability,  claims, causes
            of action,  expenses and costs (including


                                       11
<PAGE>

            reasonable  attorneys' fees and other litigation costs) for personal
            injury   (including   death),   property  damage  and  other  relief
            (including  environmental claims) arising out of (i) claims relating
            to  Buyer's   furnishing   of   manufacturing   specifications   and
            procedures,   packaging  materials,   labeling  or  any  information
            pertaining thereto, (ii) the handling, storage, transportation, sale
            or use of the Product by Buyer or any direct or indirect customer or
            bailee thereof,  (iii) claims and liability  arising out of the use,
            disposition,  subsequent  processing,  admixture  or reaction of any
            Product with other products,  chemicals or materials,  including any
            change made in the composition or form of Products or use of same in
            combination with other  substances,  including,  but not limited to,
            damages for  infringement  of any patents or processes  practiced by
            Buyer or patents  on  products  made by Buyer  (other  than  patents
            licensed by Buyer from Seller  under the License  Agreement  between
            Buyer  and  Seller  dated  as of the date  hereof)  and  claims  and
            liability  arising out of the fungicidal  nature or other properties
            of the Products,  or the use or  application of Products or items on
            which  Products  are applied or with which such  Products  are used,
            (iv) claims of product liability for Products sold by Buyer,  except
            to the extent the liability is caused by a breach of the Performance
            Warranties  by Seller,  and (vi) Buyer's  failure to comply with all
            applicable  laws,  rules  and  regulations   relating  to  the  use,
            distribution,  sale and processing of the Product;  but in any event
            excluding any claim or damage to the extent Seller is responsible to
            indemnify Buyer therefor in accordance with Section 9(c).

      (b)   Insurance  of  Buyer.  Buyer  shall  procure   reasonably   adequate
            insurance for product  liability  damages arising out of the sale or
            use of the  Products.  Buyer shall  maintain  comprehensive  general
            liability  insurance  (including  pollution  liability coverage) and
            other insurance,  on an occurrence  basis, for injury to or death of
            any person(s) or damage to property of not less than $50,000,000 per
            occurrence.

      (c)   Indemnification by Seller.  Seller shall defend,  indemnify and hold
            harmless Buyer, its shareholders,  officers, directors and employees
            from and against any all damages, losses, liability,  claims, causes
            of action,  expenses and costs (including reasonable attorneys' fees
            and other litigation costs) for personal injury  (including  death),
            property damage and other relief  (including  environmental  claims)
            arising out of (i) liability to persons or entities other than Buyer
            and its direct and indirect  customers in such capacity for Products
            to the extent the  liability is  attributable  to the failure of the
            Products to conform with Seller's Performance  Warranties hereunder;
            (ii) the  handling,  storage  or  transportation  of the  Product by
            Seller  or any  bailee  thereof,  (iii)  any  costs of  cleanup  and
            recovery of damages  arising out of or  incidental to the removal or
            disposal  of waste  material  generated  or created by Seller or any
            customer of Seller  (other than  Buyer),  (iv) claims in  connection
            with,  or arising  from,  infringement  of any patents on  processes
            practiced  by Seller,  whether  such  claims and  liability  are for
            negligence  or  otherwise,   except  to  the  extent  of  procedures
            furnished  by Buyer,  and (v)  Seller's  failure to comply  with all
            applicable laws,  rules and regulations  relating to the manufacture
            and supply of the Product;  but (A) in any event excluding any claim
            or damage to the extent


                                       12
<PAGE>

            Buyer is responsible to indemnify Seller therefor in accordance with
            Section 9(a) and (B) in the case of any claims arising under Section
            9(c),  other than through Buyer or its direct or indirect  customers
            in such capacity,  Seller's liability shall be limited to 50% of the
            amount paid by Buyer during the previous  Contract Year for Products
            and if  such  claim  occurs  during  the  first  Contract  Year,  to
            $5,000,000.

      (d)   Insurance  of  Seller.  Seller  shall  procure  reasonably  adequate
            insurance for product  liability  damages arising out of the sale or
            use of the Products.  Seller shall  maintain  comprehensive  general
            liability  insurance  (including  pollution  liability coverage) and
            other insurance,  on an occurrence  basis, for injury to or death of
            any person(s) or damage to property of not less than $50,000,000 per
            occurrence.

      (e)   Limitations. Except as set forth in Section 9(a) or Section 9(c):

            (i)   Seller shall in no event by liable, directly or indirectly, to
                  Buyer or anyone claiming through or on behalf of Buyer for (A)
                  any special,  incidental,  consequential or punitive  damages,
                  including  any damages for lost  profits,  loss of business or
                  loss of  use,  arising  out of,  or in  connection  with  this
                  Agreement or the use or performance of Product,  whether in an
                  action of  contract  or tort,  including  negligence,  even if
                  Seller has been advised of the  possibility of such damages or
                  (B) any claim or demand  against  Buyer by any other  party on
                  account  of,  or  arising  from,  the  use or  performance  of
                  Product.  Seller's liability and Buyer's exclusive remedy, for
                  any  cause  of  action  arising  out of this  Agreement  or in
                  connection  with the sale of any Product is expressly  limited
                  to replacement of  non-conforming  Product(s) or payment in an
                  amount  not to  exceed  the  purchase  price  of the  specific
                  Product(s) for which damages are claimed, at Seller's option.

            (ii)  Buyer shall in no event be liable, directly or indirectly,  to
                  Seller or to  anyone  claiming  on  behalf  of Seller  for any
                  special,   incidental,   consequential  or  punitive  damages,
                  including  any damages for lost  profits,  loss of business or
                  loss of use,  arising  out of,  or in  connection  with,  this
                  Agreement or the use or performance of Product,  whether in an
                  action of  contract  or tort,  including  negligence,  even if
                  Buyer has been advised of the possibility of such damages.

            (iii) No action,  whether in contract or tort, including negligence,
                  arising out of, or in connection  with,  this Agreement may be
                  brought by any party  more than two (2) years  after the cause
                  of action has accrued.


                                       13
<PAGE>

10.   Confidentiality.

      (a)   Confidential Information. Buyer and Seller acknowledge that each may
            have  access  to  certain  confidential  data,  including  formulas,
            know-how,  specifications,  market  information,  customer lists and
            other  confidential  information  of the other  party in  connection
            herewith,  including  quantities  and  prices  of  Product  supplied
            hereunder (the "Confidential Information").

      (b)   Covenant.  Each party agrees that  Confidential  Information  of the
            other party is valuable property.  Except as may be required by law,
            each party will not use or disclose the Confidential  Information of
            the other party for any purpose  other than the  performance  of its
            obligations  hereunder or in  connection  herewith and will take all
            reasonably necessary action to protect the Confidential  Information
            of the other  party.  In the event that either  party is required by
            law to disclose  any  Confidential  Information,  it will notify the
            other party promptly so that it may seek a protective order or other
            remedy.  In such event,  such party will finish only that portion of
            the  confidential  Information  that it is  advised  by  counsel  is
            legally  required and will use  commercially  reasonable  efforts to
            obtain assurance that confidential treatment will be accorded to the
            Confidential  Information.  Each party  will use the same  degree of
            diligence  and  effort to  protect  the other  party's  Confidential
            Information  from  disclosure to third parties as such party uses to
            protect its own  Confidential  Information,  but in no event shall a
            party use less than  reasonable  diligence  and effort in protecting
            the Confidential Information of the other party.

      (c)   Exceptions.  Confidential  Information does not include  information
            that:

            (i)   is publicly known or available at the time of  disclosure,  or
                  subsequently  comes into the public domain through no fault or
                  action of the party in receipt of such information;

            (ii)  is  or  becomes   available  to  the  receiving   party  on  a
                  non-confidential   basis   from  a  source,   other  than  the
                  disclosing party or its representatives,  provided that to the
                  knowledge  of  such  receiving  party,   such  source  is  not
                  prohibited  from  disclosing  such  portions to the  receiving
                  party by a contractual,  legal or fiduciary  obligation to the
                  disclosing party; or

            (iii) was in the  possession  of the  receiving  party  prior to its
                  disclosure   by  the   disclosing   party,   as  evidenced  by
                  appropriate documentation; provided, however, that information
                  disclosed by either party to the other in connection with this
                  Agreement  prior to the execution of this Agreement that would
                  have been deemed  Confidential  Information if disclosed after
                  the execution of this  Agreement  shall be deemed to have been
                  disclosed  under this  Agreement even if it was not identified
                  as confidential  in the manner  contemplated by this Agreement
                  at the time of its disclosure.


                                       14
<PAGE>

      (d)   Return or  Destruction.  Upon the  termination or expiration of this
            Agreement,  each party shall upon request, return to the other party
            or destroy such other party's Confidential Information.

      (e)   Specific  Performance.  The parties hereto mutually agree that their
            obligations  under  this  Section  10 are of a  special  and  unique
            character which gives them a peculiar value and each party cannot be
            reasonably or adequately  compensated in damages in an action at law
            in the event the other party breaches such  obligations.  Therefore,
            each party  expressly  agrees that the other party shall be entitled
            to injunctive and other equitable relief in the event of such breach
            or  threatened  breach in addition  to any other  rights or remedies
            which such other party may possess.

11.   Termination.

      (a)   Breach.  Notwithstanding  anything herein to the contrary, if either
            party  breaches  in  any  material  respect  any of  the  terms  and
            conditions of this Agreement,  the non-breaching party will have the
            right,  upon sixty (60) days' prior written  notice to the breaching
            party, to terminate this  Agreement,  in addition to other remedies,
            unless  prior to the end of said  sixty  (60) day grace  period  the
            defaulting party has cured or is proceeding diligently (to the other
            party's  reasonable  satisfaction)  to cure the breach in  question;
            provided,  however,  that no party  shall seek to invoke such remedy
            without  having first  exhausted the procedures set forth in Section
            12(o).

      (b)   Change  of  Control  of  Buyer.  In  the  event  of  the  sale  of a
            controlling  interest of Buyer or the business of Buyer,  other than
            through a public offering of stock for which a registration is filed
            with the  applicable  regulatory  authority,  or the  assignment  or
            delegation by Buyer of its rights or  obligations  hereunder,  other
            than to a  subsidiary  or Affiliate  of Buyer,  Buyer shall  provide
            immediate  notice  to  Seller  and  Seller  shall  have the right to
            terminate this Agreement  within  forty-five (45) days after receipt
            of such notice if Seller reasonably  determines that its performance
            under this Agreement would be materially and adversely affected as a
            result of such event.  Any notice of termination  must be in writing
            and  shall  give rise to  immediate  termination  of this  Agreement
            unless otherwise stated therein.

      (c)   Change of Control of Seller.  In the event of the sale,  directly or
            indirectly,  of a controlling interest of Seller, other than through
            a public  offering of stock for which a  registration  is filed with
            the   applicable   regulatory   authority,   the   sale  of  all  or
            substantially  all of the assets of Seller or the  Facility,  or the
            assignment  or  delegation  by Seller of its  rights or  obligations
            hereunder, other than to a subsidiary or Affiliate of Seller, Seller
            shall  provide  immediate  notice  in  writing  to  Buyer.  If Buyer
            reasonably  determines  that the acquiror is a  competitor  of Buyer
            and/or its  Affiliates  or that the  acquiror  would not fulfill the
            terms and conditions hereof in accordance with the price of Products
            hereunder,  Buyer shall have the right within  forty-five  (45) days
            after  receipt  of such  notice  to  deliver  to


                                       15
<PAGE>

            Seller a notice of termination,  which notice shall state a date, no
            later than twelve months after the date of the notice, on which date
            this Agreement shall terminate.

      (d)   Effect  of  Termination.  Notwithstanding  anything  herein  to  the
            contrary,  no expiration  or other  termination  of this  Agreement,
            regardless  of the  reason or  reasons  therefor,  shall  affect the
            obligation of Buyer to pay fully and timely for Product delivered to
            Buyer  prior  to  such  expiration  or   termination.   All  payment
            obligations,  and all obligations and liabilities  accruing prior to
            termination or arising out of the event or occurrence giving rise to
            termination, shall survive any such expiration or termination.

      (e)   Rights on Default.  Without limiting any other right or remedy which
            Seller may have,  if Buyer  shall  default in any  material  payment
            obligation  to Buyer,  which default  remains  uncured for more than
            thirty (30) days, Seller shall have the right to cancel,  suspend or
            reject any or all outstanding  and/or future orders and shipments in
            its discretion.

12.   Miscellaneous.

      (a)   Assignment.  Subject  to  Section  11(c),  Seller  may  assign  this
            Agreement;  provided, however, that if Seller assigns this agreement
            to an  Affiliate  of Seller,  Seller shall remain bound by the terms
            and conditions of this  Agreement.  Subject to Section 11(b),  Buyer
            may assign this Agreement;  provided, however, that if Buyer assigns
            this Agreement to an Affiliate of Buyer, Buyer shall remain bound by
            the terms and conditions of this  Agreement.  No party shall arrange
            for the performance of its obligations  hereunder to be performed by
            any other  entity  without  the prior  written  consent of the other
            party.

      (b)   Survival.  The  provisions of Sections  3(f), 9, 10 and 11(d) hereof
            shall survive the  termination  or expiration of this  Agreement and
            any and all  rights and  obligations  of any of the  parties  hereto
            which  accrue prior to such  termination  or  expiration  shall also
            survive such termination or expiration.

      (c)   Notices.  Any notice  required or  permitted  to be given  hereunder
            shall  be  deemed  sufficient  if  sent by  telefacsimile,  delivery
            confirmed, or if mailed by registered or certified mail or delivered
            by  messenger  or air  courier,  to the party to whom such notice is
            required or permitted  to be given.  If  telefaxed,  any such notice
            shall be considered given two (2) days after the date telefaxed.  If
            mailed,  any such notice shall considered given seven (7) days after
            the date when mailed. If delivered by messenger or air courier,  any
            such notice shall be considered given when received.


                                       16
<PAGE>

            All notices to Buyer shall be addressed as follows:

                      Nufarm, Inc.
                      1333 Burr Ridge Parkway
                      Burr Ridge, Illinois 60521
                      United States of America
                      Attn:  General Manager
                      Facsimile:  713-266-7623

            Copy to:  Nufarm Limited
                      103-105 Pipe Road
                      Laverton North
                      Victoria 3026
                      Australia
                      Attention: Group General Manager Operations
                      Facsimile: 011 613-9282-1007

            All notices to Seller shall be addressed as follows:

                      Phibro-Tech, Inc.
                      One Parker Plaza
                      Fort Lee, New Jersey 07024
                      United States of America
                      Attn:  President
                      Facsimile:  201 944-6245

            Copy to:  Phibro-Tech, Inc.
                      One Parker Plaza
                      Fort Lee, New Jersey 07024
                      United States of America
                      Attn:  General Counsel
                      Facsimile:  201 944-6245

            A party may  change the  address  to which  notice is to be given by
            notice as provided herein.

      (d)   Governing  Law. This  Agreement  shall be  interpreted in accordance
            with the laws of the State of New York,  United  States of  America,
            without reference to conflict of laws principles.

      (e)   Force   Majeure.   Any  party  may  reduce,   suspend  or  terminate
            performance   hereunder   without   liability   including,   without
            limitation,  any  damages or penalty for delay in  delivery,  in the
            event performance is prevented by a cause beyond the control of such
            party including without  limitation,  an act of God, act, regulation
            or law of any government, war, civil war, commotion,  destruction of
            production faculties or materials by fire, explosion,  earthquake or
            storm, sabotage, labor disturbance,  strike, lock-out,  epidemic, or
            unforeseen  shortage or  unavailability


                                       17
<PAGE>

            (on terms  economically and commercially  practicable to such party)
            of   fuel,   power,   transportation,   raw   materials,   supplies,
            governmental   approvals,   permits  or  licenses   (each  a  "force
            majeure"); provided, the affected party sends written notice thereof
            to the other party within a reasonable  time after the onset of such
            event.  Notwithstanding  the  foregoing,  if as a result of any such
            prevention,  a party is unable to perform under this Agreement for a
            period of one hundred eighty (180) consecutive days, the other party
            shall have the right to terminate  this Agreement  effective  thirty
            (30)  days   after  its   provision   of   written   notice  to  the
            non-performing  party of its  intention so to terminate  unless such
            performance  shall be resumed during such thirty-day  period. In the
            event a party elects so to terminate this Agreement, the other party
            shall  have no  further  liability  as a  result  of the  reduction,
            suspension or termination of performance due to a force majeure.

      (f)   Entire  Agreement.  This  Agreement,  together with any  Attachments
            hereto  and any  appendices  delivered  contemporaneously  herewith,
            constitutes  the  entire  understanding  between  the  parties  with
            respect to the subject  matter  hereof,  and supersedes and replaces
            any  other  prior   agreements,   representations,   warranties  and
            discussions  relating thereto.  The parties agree that all supply of
            Product  hereunder shall be subject to and governed by the terms and
            conditions  contained  herein,  and none of the terms and conditions
            contained in any purchase or order form, invoice,  etc., shall amend
            the provisions of this  Agreement  unless signed by both parties and
            clearly indicating that the parties intend to vary the terms hereof.

      (g)   Severability.  In the event that any of the provisions  contained in
            this  Agreement   would  be  held  to  be  invalid,   prohibited  or
            unenforceable for any reason,  such provision,  shall be ineffective
            to the extent of such invalidity,  prohibition or  unenforceability,
            without  invalidating  the remaining  provisions of this  Agreement.
            Subject to the foregoing,  in case any one or more of the provisions
            contained herein should be invalid,  illegal or unenforceable in any
            respect, the validity,  legality and enforceability of the remaining
            provisions  contained  herein  shall  not be  affected  in  any  way
            thereby.

      (h)   Third  Party  Beneficiaries.  The  parties  hereto do not  intend to
            create hereby,  and this Agreement shall not be read or construed to
            create or grant,  any  rights or  benefits  in or for any  person or
            entity  other than the parties  hereto or as  expressly  provided in
            Section  9  hereof,  and any and all  other  third  party  rights or
            benefits are hereby expressly disclaimed and denied.

      (i)   Modification; waiver. This Agreement can only be modified or changed
            by an  agreement  in writing and signed by the parties  hereto.  The
            failure of any party at any time or times to require  performance of
            any  provision  hereof shall not affect the right of such party at a
            later time to enforce the same. No waiver by any party hereto of any
            condition,  or of the  breach of any  provision,  term or  covenant,
            contained in this  Agreement in any one or more  instances  shall be
            deemed to be or construed as a further or  continuing  waiver of any
            such  condition,  or of the breach of any other  provision,  term or
            covenant, of this Agreement.


                                       18
<PAGE>

      (j)   Relationship of the Parties. The relationship of the parties created
            hereby is that of independent  contractors,  and neither party shall
            be any right or authority to create or assume any  obligation of any
            kind on behalf of the other.

      (k)   Validity. Each signatory hereto represents and warrants to the other
            party that he is duly  authorized  and  empowered  to  execute  this
            Agreement in the capacity herein set forth.

      (l)   Binding   Effect.   This   Agreement  and  the  various  rights  and
            obligations  arising  hereunder shall inure to the benefit of and be
            binding  upon  the  parties  hereto  and  their   respective   legal
            representatives, successors and permitted assigns.

      (m)   Captions;  construction.  The  captions  herein  have been  inserted
            solely for  convenience of reference and in no way define,  limit or
            describe the scope or substance of any provision of this  Agreement.
            No party shall be deemed to have drafted this Agreement,  but rather
            this Agreement is a collaborative  effort of the undersigned parties
            and their attorneys.

      (n)   Counterparts.   This   Agreement   may  be  executed  in   identical
            counterparts,  all of which when taken together shall constitute but
            one complete, executed agreement.

      (o)   Dispute Resolution.

            (i)   The   parties   shall   attempt  to  resolve  any  dispute  or
                  controversy   arising  out  of  or  in  connection  with  this
                  Agreement in accordance with the following.  The parties shall
                  first refer the dispute to management-level employees who have
                  oversight  of  operational  matters to negotiate in good faith
                  over  a  period  of  fifteen  (15)  days a  resolution  of the
                  dispute.  If such employees are unable to resolve the dispute,
                  the  parties  shall  refer  the  dispute  to  chief  executive
                  officers  of the  parties  to  negotiate  in good faith over a
                  period of fifteen  (15) days a resolution  of the dispute.  No
                  party  may  bring a claim  under or in  connection  with  this
                  Agreement   unless  and  until  it  such  procedure  has  been
                  concluded  with  respect to such  claim.  Notwithstanding  the
                  foregoing,  any party may at any time seek equitable relief or
                  remedy, including an injunction, in a court of law.

            (ii)  Each   of  the   parties   hereto   hereby   irrevocably   and
                  unconditionally  submits, for itself and its property,  to the
                  jurisdiction  of any New York state court or federal  court of
                  the  United  States  of  America  sitting  in the  Borough  of
                  Manhattan,  New York, in any action or proceeding  arising out
                  of  or  relating  to  this   Agreement  or  the   transactions
                  contemplated  hereby or for  recognition or enforcement of any
                  judgment  relating  thereto,  and each of the  parties  hereto
                  hereby irrevocably and unconditionally  agrees that all claims
                  in respect of any such action or  proceeding  may be heard and
                  determined  in any  such  court.  Each of the  parties  hereto
                  agrees that a final  judgment in any such action or proceeding
                  shall be conclusive and may be


                                       19
<PAGE>

                  enforced in other  jurisdictions by suit on the judgment or in
                  any other manner provided by law.

            (iii) Each   of  the   parties   hereto   hereby   irrevocably   and
                  unconditionally  waives,  to the fullest extent it may legally
                  and  effectively  do so,  any  objection  that  it may  not or
                  hereafter have to the laying of venue of any suit,  action, or
                  proceeding arising out of or relating to this Agreement or the
                  transactions  contemplated  hereby  in any New  York  state or
                  federal court  located in the Borough of Manhattan,  New York.
                  Each of the parties hereto hereby  irrevocably  waives, to the
                  fullest   extent   permitted   by  law,   the  defense  of  an
                  inconvenient  forum  to the  maintenance  of  such  action  or
                  proceeding in any such court.

            (iv)  Each   of  the   parties   hereto   hereby   irrevocably   and
                  unconditionally  consents  to service of process in the manner
                  provided  for  notices  in  Section  12(c).  Nothing  in  this
                  Agreement will affect the right of any party to this Agreement
                  to serve process in any other manner permitted by law.


                                       20
<PAGE>

      IN WITNESS  WHEREOF,  the parties have caused this Supply  Agreement to be
executed  in by their  duly  authorized  representatives  as of the  date  first
written above.

PHIBRO-TECH, INC.                    NUFARM, INC.

By:  /s/ W. Dwight Glover            By:  /s/ Kevin Martin
   ----------------------               ----------------------
Name: W. Dwight Glover               Name: Kevin Martin
Title: President                     Title: Authorized Signatory


<PAGE>

                                  Attachment 1

                                    Products

Products

Champion Technical (standard)               EPA No.: 55146-003

Champion Technical (Orient grade)           EPA No.: 55146-003

Champion Technical (Korea grade)            EPA No.: 55146-003

Champion Wettable Powder                    EPA No.: 55146-001

Champion Wettable Powder Turkey

Champion Wettable Powder Sri Lanka

Champion Wettable Powder Jordan

Champ Flowable                              EPA No.: 55146-041

Champ Formula 2 Flowable                    EPA No.: 55146-64

Champ DP                                    EPA No.: 55146-57


<PAGE>


                                  Attachment 2

                             Product Specifications

See attached.


<PAGE>


                                    Appendix

                                Price of Products


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>4
<FILENAME>file004.txt
<DESCRIPTION>LICENSE AGREEMENT
<TEXT>


                                LICENSE AGREEMENT

      This Agreement is made as of this 1st day of May, 2001 between
PHIBRO-TECH, INC., a Delaware corporation, with offices at One Parker Plaza,
Fort Lee, New Jersey 07024 (hereinafter referred to as "Licensor") and Nufarm,
Inc., a Delaware corporation, with offices at 1333 Burr Ridge Parkway, Suite
125A, Burr Ridge, Illinois 60521 (hereinafter referred to as "Licensee").

                              W I T N E S S E T H :

      WHEREAS, in the course of research conducted by or under the auspices of
Licensor, those employees of Licensor named as inventors in Section 1.2 below
(each an "Inventor" and collectively the "Inventors") have produced the
invention described in the patent application referred to in Section 1.2 (the
"Invention"); and

      WHEREAS, pursuant to the employment arrangements between the Inventors and
the Licensor, Licensor is the owner of the interests of the Inventors in the
Invention, any patents resulting therefrom and the Licensed Technology (as
defined below); and

      WHEREAS, substantially contemporaneously herewith Licensee is purchasing
from Licensor substantially all of the Agtrol Division of Licensor and certain
of its Affiliated Companies, other than the Invention, Licensed Technology and
certain other assets, pursuant to certain purchase agreements dated as of May 1,
2001, among Licensor and Licensee and certain Affiliated Companies of such
entities; and, in connection with such acquisition, substantially
contemporaneously herewith, Licensee is agreeing to purchase all of its
requirements of certain products from Licensor, pursuant to two certain Supply
Agreements of even date herewith between Licensor and Licensee and one of its
Affiliated Companies (the "Supply Agreements"); and

      WHEREAS, Licensee wishes to obtain an exclusive license to the Licensed
Technology and Invention in order to make, use and sell Licensed Products and
practice Licensed Processes (as defined below) in the Field, and Licensor is
willing to grant such an exclusive license to Licensee subject to the terms and
conditions hereof; and

      WHEREAS, Licensee wishes to obtain a non-exclusive license to the Licensed
Technology and Invention in order to make, use and sell Licensed Products and
practice Licensed Processes (as defined below) outside the Field anywhere in the
Territory; and Licensor is willing to grant such a non-exclusive license to
Licensee subject to the terms and conditions hereof;

      NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties agree as follows:

1.    Definitions

      1.1   "Affiliated Company" means in respect of a party to this Agreement
            any entity which, by means of the majority of shares or otherwise,
            is controlled by such party, is controlling such party or is under
            common control with such party. A corporation or other entity shall
            be regarded as in control of another corporation or entity if it
            owns or directly or indirectly controls more than fifty percent
            (50%) of


<PAGE>

            the voting stock or other ownership interest of the other
            corporation or entity, or if it possesses, directly or indirectly,
            the power to direct or cause the direction of the management and
            policies of the corporation or other entity.

      1.2   "Application" means the provisional patent application specified in
            Schedule 1.2 delivered contemporaneously herewith.

      1.3   "Confidential Information" means all information, know-how, data,
            technical or non-technical and commercial information provided by
            one party to the other.

      1.4   "Field" means the manufacture of (i) all fungicide products and (ii)
            the pesticide products sold by Licensee or an Affiliated Company of
            Licensee other than Chlorothalanil and other products produced or
            sold by Licensor or an Affiliated Company of Licensor.

      1.5   "Improvements" means research of and developments, enhancements,
            modifications and other improvements to the Invention, Licensed
            Technology, Licensed Processes or Licensed Products developed, made
            or obtained by or on behalf of a party, or used by a party,
            including without limitation, to use, practice, commercialize or
            exploit the Invention, Licensed Technology, Licensed Process or
            Licensed Product, or to make, have made, use, lease or sell Licensed
            Products or practice Licensed Processes.

      1.6   "Intellectual Property" collectively means the Application,
            Invention, Licensed Patent and Licensed Technology.

      1.7   "Licensed Patents" means the Application, all corresponding
            applications made in or outside the United States and claiming
            priority therefrom (including but without limiting the generality of
            the foregoing, any application or other filing made under the Patent
            Cooperation Treaty), and any patents that issue on the Application
            or applications related to or based upon the Application by priority
            claim, together with all related United States, European and other
            patents and patent applications, and any divisions, continuations,
            continuations-in-part, reissues, re-examinations, registrations,
            divisional and substituted patents and applications, additions,
            counterparts or extensions to any of the said patent applications or
            patents.

      1.8   "Licensed Products" means tangible materials which, in the course of
            use or sale would, in the absence of this Agreement, prior to the
            issuance of the Licensed Patents, infringe one or more claims of the
            applications included within the Licensed Patents if issued in such
            form or, after the issuance of the Licensed Patents, infringe one or
            more claims of the Licensed Patents that have not been held invalid
            or unenforceable by an unappealed or unappealable judgment of a
            court of competent jurisdiction.

      1.9   "Licensed Process(es)" means processes which, in the course of being
            practiced would, in the absence of this Agreement, prior to the
            issuance of the Licensed Patents, infringe one or more claims of the
            applications included within the Licensed Patents if issued in such
            form or, after the issuance of the Licensed


                                       2
<PAGE>

            Patents, infringe one or more claims of the Licensed Patents that
            have not been held invalid or unenforceable by an unappealed or
            unappealable judgment of a court of competent jurisdiction.

      1.10  "Licensed Technology" includes the information from time to time
            contained in the Application, together with all scientific and
            commercial information, including, without limiting the generality
            thereof, all designs, drawings, technical and non-technical
            information and materials, know-how and other intellectual property,
            data, specifications, test results, and other information relating
            to the Invention or the manufacture, use or sale of Licensed
            Products or practice of Licensed Processes, and developed or
            acquired by Licensor prior to the date hereof.

      1.11  "Term" is described in Section 5.1.

      1.12  "Territory" means the entire world.

2.    Grant of License

      2.1   Exclusive License. (a) On the terms and subject to the conditions
            set forth in this Agreement, Licensor grants to Licensee an
            exclusive, fully-paid, royalty-free, right and license to use,
            operate, maintain and enhance, practice, commercialize and exploit,
            in the Field, the following in the Territory: (i) the Invention;
            (ii) the Licensed Processes; and (iii) the Licensed Patents and the
            Licensed Technology, including the exclusive right and license, in
            the Territory, to make, have made by an Affiliated Company or third
            party (subject to the proviso in Section 2.2(b) below), manufacture,
            use, import, lease, sell, offer to sell, and otherwise transfer and
            dispose of Licensed Products and practice Licensed Processes in the
            Field and to further develop, enhance, modify and improve the
            Invention and the Licensed Technology and Licensed Patents in the
            Field, and to practice unpatented processes in the Field and use
            unpatented information and know-how included within the Invention or
            the Licensed Technology in the Field. Licensor hereby represents and
            warrants to Licensee that it has not granted any of the foregoing
            rights to any third party by license or otherwise.

            (b) Non-exclusive License. On the terms and subject to the
            conditions set forth in this Agreement, Licensor grants to Licensee
            a non-exclusive, fully-paid, royalty-free, right and license to use,
            operate, maintain and enhance, practice, commercialize and exploit,
            outside the Field, the following in the Territory: (i) the
            Invention; (ii) the Licensed Processes; and (iii) the Licensed
            Patents and the Licensed Technology, including the non-exclusive
            right and license, in the Territory, to make, have made by an
            Affiliated Company or third party (subject to the proviso in Section
            2.2(b) below), manufacture, use, import, lease, sell, offer to sell,
            and otherwise transfer and dispose of Licensed Products and practice
            Licensed Processes and to further develop, enhance, modify and
            improve the Invention and the Licensed Technology and Licensed
            Patents outside the Field, and to practice unpatented processes
            outside the Field and use unpatented information and know-how
            included within the Invention or the Licensed Technology outside the
            Field.


                                       3
<PAGE>

      2.2   Sublicense. The rights and license granted herein to Licensee are
            for the sole use and benefit of Licensee. Licensee shall not be
            entitled to sublicense or otherwise transfer any or all of its
            rights under this Agreement for any purpose whatsoever; provided,
            however, that (a) Licensee may transfer all of its rights hereunder
            to an Affiliated Company and (b) Licensee may transfer its right to
            manufacture the Licensed Products using the Licensed Processes to a
            third party one year prior to the date on which the Supply Agreement
            related to Licensor's facility in Sumter, South Carolina terminates
            as a result of a notice of non-renewal in respect of such Supply
            Agreement; provided, however, that no such sublicense in (b) shall
            diminish any obligations of Licensee and any of its Affiliated
            Companies under either of the Supply Agreements.

      2.3   No Implied License. No right or license is granted or implied to
            Licensee or any person claiming through or on behalf of Licensee
            under any patent or patent application or other technology other
            than as specifically set forth in Section 2.1.

      2.4   Improvements Developed Solely by Licensee. Licensee has the right to
            make Improvements. Licensee shall have all right, title and interest
            to all Improvements made by or on behalf of Licensee (excluding
            Improvements and other technologies made by Licensor in accordance
            with Section 2.6 or made jointly by Licensee and Licensor in
            accordance with Section 2.5 and shall license to Licensor on a
            non-exclusive basis all Improvements at no additional cost.

      2.5   Improvements Developed Jointly by Licensee and Licensor. Each of
            Licensee and Licensor shall have an equal undivided ownership
            interest in and to any Improvements developed jointly by Licensee
            and Licensor.

      2.6   Improvements Developed Solely by Licensor. Licensor shall have all
            right, title and interest to all Improvements made by or on behalf
            of Licensor after the date hereof (excluding Improvements and other
            technologies made by Licensee in accordance with Section 2.4 or made
            jointly by Licensee and Licensor in accordance with Section 2.5) and
            shall license to Licensee on a non-exclusive basis all Improvements
            at no additional cost.

      2.7   Reservation of Rights. Licensor reserves unto itself rights with
            respect to the Intellectual Property and other rights licensed to
            Licensee hereunder, to the extent necessary or appropriate to
            perform its duties and responsibilities under the Supply Agreements,
            and for research and development purposes and to make Improvements.

3.    No Payment By Licensee

            Fully-paid License. The licenses granted herein shall be fully paid,
            and no initiation, milestone, royalty or other payments shall be due
            in respect of the manufacture, use or sale of Licensed Products or
            practice of Licensed Processes.


                                       4
<PAGE>

4.    Confidentiality

      4.1   Confidentiality Obligations. (a) A party receiving Confidential
            Information hereunder will protect such Confidential Information of
            the disclosing party from unauthorized disclosure to third parties
            with the same degree of care as the receiving party uses for its own
            similar information but no less than due care. The foregoing
            obligation shall not apply to any information which is:

                  (i) shown to be in the public domain as evidenced by documents
            which were generally published prior to such disclosure or known or
            in possession of the receiving party prior to the disclosure of the
            information by the other party;

                  (ii) subsequently received from outside parties having the
            right to divulge the same;

                  (iii) or becomes part of the public domain through no fault or
            disclosure by the receiving party; or

                  (iv) necessarily disclosed in the course of and for the
            purpose of complying with governmental regulations.

            Any existing or prospective affiliates, consultants or scientific
            advisers who are recipients of information hereunder shall be under
            the same obligation of confidentiality with respect to such
            information as the disclosing party.

            (b) Subject to Section 4.2, neither party shall disclose or make
            available to any person, firm or entity a copy, summary or extract
            of this Agreement or any of the terms hereof except to the extent
            reasonably required for compliance with securities and other laws
            and accounting requirements.

            (c) The parties shall only disclose Confidential Information of the
            other to their respective employees who have a need to have access
            to such Confidential Information.

            (d) During the Term, Licensee covenants and agrees with Licensor
            that it will not disclose Licensed Technology, including without
            limitation, the contents of any pending unissued claims in the
            patent applications included in the Licensed Patents, to any third
            party, provided that this obligation shall not apply to such part of
            the Licensed Technology (other than the contents of any patent
            applications included in the Licensed Patents) as shall become part
            of the public domain through the efforts of Licensor or Licensee in
            accordance with Article 8 hereof, and without the fault or
            disclosure by Licensee other than in accordance with Article 8
            hereof, after the issuance of the Licensed Patents in the United
            States or the European Patent Office; it being understood that no
            exceptions to such obligation of confidentiality in this Section 4.1
            shall permit disclosure of any content of the Application by
            Licensee.

      4.2   Publicity. Neither party shall originate any publicity, news release
            or other announcement, written or oral, relating to the existence or
            the terms or conditions


                                       5
<PAGE>

            of this Agreement without the prior written consent of the other
            party, except, in the case of a party with securities registered for
            public trading, as may be necessary in the reasonable opinion of
            counsel to such party to comply with applicable law or pursuant to
            the requirements of any governmental authority, and in any such
            event each party shall give the other party as much advance notice
            as is reasonably possible under the circumstances.

      4.3   Export Control Regulations. To the extent that United States Export
            Control Regulations are applicable, Licensee shall not, without
            having first fully complied with such regulations, (a) transfer any
            unpublished technical data obtained or to be obtained from Licensor
            to a destination outside of the United States, or (b) knowingly
            ship, directly or indirectly, any product produced using such
            unpublished technical data to any destination outside the United
            States.

5.    Term; Termination

      5.1   Term. The term of the licenses granted hereunder shall commence upon
            the signing hereof and, unless sooner terminated, shall continue for
            the life of any applicable Licensed Patent, and shall expire on a
            country by country basis when the last to expire Licensed Patent in
            such country expires; provided, however, that with respect to an
            Application filed in a particular country, if a patent is not
            ultimately issued on the Application by a competent governmental
            authority in such country, the term of the licenses granted
            hereunder shall be twenty (20) years from the date of the execution
            of this Agreement (the "Term").

      5.2   Termination. (a) If during the Term

                  (i) Licensee or Licensor commits a breach of any term or
            condition of this Agreement and does not remedy such breach within
            thirty (30) days after the date of receipt of a written notice from
            the other party requiring such remedy; or

                  (ii) Licensee or Licensor becomes insolvent or has a receiver
            or a trustee appointed over the whole or any part of its assets or
            if any order be made or resolution passed for its winding up or if
            in the case of Licensee any analogous step or proceedings are taken
            pursuant to the laws of its place of incorporation (other than for
            the purpose of reconstruction or amalgamation if any new legal
            entity so formed agrees to enter into an agreement with the other
            party under the same terms and conditions as this Agreement),

            THEN

            in any such case the other party may by written notice forthwith
            terminate this Agreement.

            (b) If during the Term, (i) either Licensee or Licensor undergoes an
            effective change in control, such that more than fifty percent (50%)
            of the voting stock of Licensee or Licensor, respectively, is owned
            or controlled by another entity or corporation, and (ii) the new
            controlling entity or corporation does not agree to the terms,
            responsibilities and obligations agreed to by the party subject to
            the change


                                       6
<PAGE>

            of control hereunder, then the party not subject to the change in
            control may by written notice forthwith terminate this Agreement.

      5.3   Effect of Termination. Expiration or termination of any or all of
            this Agreement shall not relieve the Licensee and Licensor of any
            obligation accruing or accrued prior to expiration or termination
            and in particular the provisions of Sections 4 and 6 shall continue
            to apply and survive.

6.    Indemnity and Insurance

      6.1   Indemnification by Licensee. Licensee shall indemnify and hold
            harmless Licensor, its respective directors, officers, employees and
            agents, from and against any and all demands, losses, damages,
            liabilities, claims (including claims of infringement of any patent
            or property right of a third party except such infringements of
            which Licensor had prior knowledge and failed to notify Licensee and
            except for any claims for which Licensor indemnifies Licensee
            pursuant to either of the Supply Agreements), and costs and expenses
            incidental thereto (including costs of investigation, defense,
            settlement and reasonable attorneys' fees) which any or all of them
            may hereafter incur, be responsible for or pay out, which arise out
            of or are in any way connected with (i) Licensee's breach of any
            term or provision of this Agreement, or (ii) any loss, injury
            (including death), illness, damage (whether personal or property) or
            product liability arising out of the exercise by the Licensee of its
            rights under this Agreement other than any product liability arising
            out of Licensor's activities under either of the Supply Agreements,
            including without limitation, the use by Licensee or any person
            claiming through or on behalf of Licensee of any Licensed Product or
            use or practice of any method or process related to the Licensed
            Patents or Licensed Process or Licensed Technology, or any use, sale
            or other disposition or commercialization of any of the Licensed
            Products, Licensed Processes, Licensed Patents or Licensed
            Technology or (iii) any statement, representation or warranty of
            Licensee or other transferee with respect thereto; but in any event
            excluding any claim to the extent Licensor is responsible to
            indemnify Licensee under Section 6.1(b).

            (b) Indemnification by Licensor. Licensor shall indemnify and hold
            harmless Licensee, its respective directors, officers, employees and
            agents, from and against any and all demands, losses, damages,
            liabilities, claims (including claims of infringement of any patent
            or property right of a third party except such infringements of
            which Licensee had prior knowledge and failed to notify Licensor),
            and costs and expenses incidental thereto (including costs of
            investigation, defense, settlement and reasonable attorneys' fees)
            which any or all of them may hereafter incur, be responsible for or
            pay out, which arise out of or are in any way connected with (i)
            Licensor's breach of any term or provision of this Agreement, or
            (ii) any statement, representation or warranty of Licensor or other
            transferee with respect thereto; but in any event excluding any
            claim to the extent Licensee is responsible to indemnify Licensor
            under Section 6.1(a).

      6.2   Insurance. Licensee shall maintain public and product liability
            insurance for the Term and thereafter with respect to the
            manufacture and sale of Licensed Products


                                       7
<PAGE>

            and use of Licensed Processes by Licensee, and shall ensure that at
            all times the insurance coverage is for a minimum amount
            commensurate with standard industry practices and will be in place
            on or before the date of the first commercial sale of Licensed
            Products or any use of a Licensed Process. Licensee shall provide
            that any parties involved in the manufacture and/or sale of Licensed
            Products or practice of Licensed Processes through it or on its
            behalf (other than the Licensor) shall maintain product liability
            insurance with respect to the manufacture and/or sale of Licensed
            Products and use of a Licensed Process to a similar minimum limit.
            Licensee shall maintain such insurance for so long as it continues
            to manufacture and/or sell Licensed Products or use Licensed
            Processes, and thereafter for so long as commercially reasonably
            necessary.

7.    Representations and Warranties

            Licensor hereby represents and warrants to Licensee that:

      7.1   Licensor has provided to Licensee in writing the Application, all
            inventions and know-how existing, on or before the date hereof that
            are associated with the Application, the Licensed Patents, the
            Licensed Products, the Licensed Process(es) and the Licensed
            Technology. The Licensor owns all of the Inventors' right, title and
            interest in the Invention claimed in the Application.

      7.2   Licensor has not received any notice of a claim of infringement or
            misappropriation of any alleged rights asserted by any third party
            in relation to the Licensed Patent, the Licensed Products, the
            Licensed Technology, the Licensed Process(es), or the Invention.

      7.3   Licensor owns the Intellectual Property and has the full right and
            power to grant the licenses set forth in Section 2.1. There are no
            assignments, grants, licenses, encumbrances, obligations or
            agreements that are or would be inconsistent with the rights granted
            to Licensee under this Agreement and there are no pending claims
            against the Intellectual Property that would negatively affect
            Licensee's rights to use the Intellectual Property hereunder, and to
            the knowledge of Licensor, the use of the Intellectual Property as
            granted hereunder does not infringe, misappropriate or misuse the
            intellectual property or other rights of any third party.

      7.4   Licensor has taken, and will continue to take, the commercially
            reasonable measures and precautions necessary to protect and
            maintain the confidentiality of such intellectual property.

            Except as set forth herein, LICENSOR MAKES NO OTHER WARRANTIES,
            EITHER EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS OF
            THE LICENSED PRODUCTS OR LICENSED PROCESS FOR A PARTICULAR PURPOSE
            and Licensee shall make no statements, representations or warranties
            whatsoever to any third parties that are inconsistent with such
            disclaimer by Licensor.


                                       8
<PAGE>

            Licensee acknowledges that until a Licensed Patent issues in the
            name of Licensor, Licensee may not be able to enforce its patent or
            other rights granted hereunder to prevent other entities (who did
            not receive such technology from Licensor or any successor or
            predecessor in interest) from using technology which may be included
            in the unissued claims of Licensed Patents or other Licensed
            Technology and independently developed. Licensee further
            acknowledges that Licensor does not guarantee that the Application
            shall issue or the scope of the claims therein, nor any degree of
            exclusivity (a) even after Licensed Patents are granted to the
            extent a Licensed Product or Licensed Process involves an aspect
            which is not covered by the Licensed Patents but is covered by
            rights of a third party (who did not receive such technology from
            Licensor or any predecessor in interest) and independently
            developed, or (b) with respect to unpatentable information which
            becomes part of the public domain through the efforts of Licensee
            and without the fault of or disclosure by Licensor.

            Except as set forth herein, Licensor hereby disclaims all warranties
            relating to the Licensed Patents and Licensed Technology, express or
            implied. Without limiting the generality of the foregoing, Licensor
            expressly does not warrant (i) the patentability of the Invention or
            Licensed Technology, (ii) the accuracy of any information contained
            in the Application or Licensed Technology, or (iii) the accuracy,
            safety, or usefulness for any purpose of the Invention described in
            the Application, the Licensed Patents and/or the Licensed
            Technology.

8.    Patent Prosecution

      8.1   Prosecution. During the Term, Licensor shall use commercially
            reasonable efforts to diligently prosecute and maintain the
            Application, the Licensed Patents and Licensed Processes. If
            Licensor decides not to seek patent protection on an invention
            included as Licensed Technology which may reasonably be patentable,
            or decides to allow any of the patents or patent applications
            included as Licensed Patents to be abandoned or to lapse, Licensor
            shall give Licensee written notice of that decision at least ninety
            (90) days prior to the first date that action may be taken to
            preserve the right to seek patent protection, or to avoid such
            abandonment or lapse, and Licensee, shall have the right to assume,
            by written notice to Licensor, the prosecution or maintenance of
            said patent applications, at its own expense. Licensor covenants
            that during the Term Licensor shall provide Licensee with copies of
            all substantive communications to and from patent offices regarding
            the Application and the Licensed Patent reasonably promptly after
            the receipt or submission thereof.

      8.2   Licensee Cooperation. Licensee agrees to cooperate with Licensor in
            Licensor's preparation, filing, prosecution and maintenance of the
            Application, Licensed Patents and Licensed Processes. Licensee shall
            bear its own costs in connection with such cooperation with
            Licensor; provided, however, that Licensee shall have no obligation
            to incur any third party expenses in connection therewith.

      8.3   Foreign Patent Applications. Licensor has filed a patent application
            with respect to the Licensed Patents in the foreign jurisdictions
            listed on Schedule 8.3 delivered contemporaneously herewith.
            Licensee may request Licensor, and


                                       9
<PAGE>

            Licensor shall, file a patent application with respect to the
            Licensed Patents or Licensed Processes in any jurisdiction other
            than the United States and the jurisdictions listed on Schedule 8.3.
            If Licensor files a patent application with respect to the Licensed
            Patents or Licensed Processes in any jurisdiction other than the
            United States and those listed on Schedule 8.3, Licensee agrees to
            reimburse Licensor for its pro rata share of patent costs incurred
            by Licensor for such filings requested by Licensee, provided that
            Licensor has given Licensee thirty (30) days written notice of the
            filing of the foreign application (which notice shall offer a
            reasonable estimate of anticipated prosecution and maintenance
            expenses in that jurisdiction) and during a period of fifteen (15)
            days following the giving of such written notice, Licensee does not
            notify Licensor that it agrees to exclude from this Agreement and
            the license granted hereunder the territory of that foreign
            jurisdiction. Licensee's pro rata share of such patent costs shall
            be divided equitably between Licensor and Licensee.

      8.4   Patent Costs. Licensee shall pay its share of patent costs set forth
            in Section 8.3 within thirty (30) days of receipt of an invoice from
            Licensor for same. Patent costs may include all documented
            out-of-pocket costs incurred in connection with filing a Licensed
            Patent and obtaining and maintaining a Licensed Patent, including
            governmental filing, issue and maintenance fees, draftsmen's
            charges, foreign agent fees and attorneys' fees.

      8.5   Markings. Licensee shall apply the patent marking notices required
            by the law of any country where Licensed Products are made, sold or
            used in accordance with the applicable patent laws of that country.

9.    Infringement of Patent Rights

      9.1   Infringement of Third Party Patents

            If Licensee shall become aware of the institution of proceedings or
            the threatened institution of proceedings or be sued by a third
            party for infringement of a Patent because of the use, manufacture
            or sale of Licensed Products, or practice of a Licensed Process,
            Licensee shall promptly notify Licensor in writing of the
            institution of such proceeding or suit, and the parties shall
            consult together with respect to the course of action to be taken.
            Unless otherwise agreed, in the case of legal proceedings, Licensor
            shall have the first and prior right, if it so elects, to control
            the defense of such suit at its own expense; in which event Licensee
            shall have the right to be represented by counsel of its own
            selection, and shall co-operate fully in the defense and settlement
            of such suit and furnish to Licensor all evidence and assistance in
            its control. In the event Licensor elects not to control the defense
            of such suit, Licensee can control the defense of such suit at an
            expense to be shared equally between Licensee and Licensor. Neither
            party shall settle the same in any manner without the prior written
            consent of the other; provided, however, that the party controlling
            the defense shall be free to settle the same without the consent of
            the non-controlling party if by the settlement the scope of the
            rights of the non-controlling party hereunder would not be reduced
            or diminished in any material respect.


                                       10
<PAGE>

10.      Enforcement of Patent Rights

      10.1  Disclosure. Each party shall promptly notify the other in writing of
            any facts that may affect the validity, scope or enforceability of a
            Licensed Patent. Each party shall notify the other promptly in
            writing of any infringement of a Licensed Patent that becomes known
            to such party. The parties shall cooperate with each other in
            attempting to eliminate the infringement identified.

      10.2  Rights to Enforce. Licensor shall have the right, but not the
            obligation, to enforce the Licensed Patents against any
            infringement. In the event of infringement by a third party of any
            Licensed Patents within the Field which Licensee wishes to
            prosecute, Licensee shall first make a written request to Licensor
            to prosecute such action. If within one hundred twenty (120) days
            after receipt of such request Licensor shall have been unsuccessful
            in persuading such alleged infringer to desist such infringement,
            and Licensor or a designee shall not have brought an infringement
            action against such alleged infringer, Licensee, together with all
            other licensees of the Licensed Patents (if any), may enforce the
            Licensed Patents by appropriate legal proceedings.

      10.3  Licensee Enforcement. In the event that Licensee shall be
            prosecuting any alleged infringer pursuant to Section 10.2, it shall
            keep Licensor fully informed of all material developments of such
            proceedings. Licensee shall be responsible for all costs and
            expenses of any enforcement activities, including legal proceedings,
            against infringers that Licensee initiates. Licensor shall join in
            and cooperate with any enforcement proceedings at Licensee's
            request, provided that Licensor may be represented by Licensor's
            counsel in any such legal proceedings, at Licensor's own expense
            (subject to reimbursement under Section 10.5), acting in an advisory
            but not controlling capacity. In addition, Licensee may name
            Licensor as party plaintiff as required by law. No settlement,
            consent judgment, or other final, voluntary disposition of any suit
            brought by Licensee which waives any rights within the Licensed
            Patents may be entered into without the prior written consent of
            Licensor. In the event that a declaratory judgment action alleging
            the invalidity or non-infringement of the Licensed Patents shall be
            brought or raised against Licensee, Licensor shall have the right,
            but not the obligation, to intervene and take over the sole defense
            of such action. Any recoveries in any action brought by Licensee
            under this Section 10.3 shall be allocated as provided in Section
            10.5 hereof.

      10.4  Licensor Enforcement. Any actions brought by Licensor at the request
            of Licensee pursuant to Section 10.2 shall be at the sole cost and
            expense of Licensor. Licensor agrees to consult with Licensee and to
            keep Licensee fully informed regarding all material developments of
            such proceeding. In addition, Licensor may name Licensee as a party
            plaintiff as required by law. No settlement, consent, judgment or
            other final, voluntary disposition of any suit brought by Licensor
            which waives any rights within the Field of the Licensed Patents may
            be entered into without the prior written consent of Licensee, which
            consent shall not be unreasonably withheld. Licensee agrees to join
            in and cooperate with any enforcement proceedings at Licensor's
            request and at



                                       11
<PAGE>

            Licensor's expense, provided, however, that Licensee may be
            represented by Licensee's counsel in any such proceeding, at
            Licensee's own expense, subject to reimbursement under Section 10.5,
            acting in an advisory, but not controlling, capacity. Any recoveries
            in any action brought by Licensor under this Section 10.4 shall be
            allocated as provided in Section 10.5 hereof. Licensor shall have no
            legal or contractual obligation to Licensee for its failure to
            defend or participate in any legal action, and may, upon reasonable
            notice to Licensee, withdraw from any suit at any time, without any
            continuing liability to Licensee for expenses incurred after such
            withdrawal.

      10.5  Recoveries. All recoveries by way of royalties, damages and claims
            with respect to infringement actions instituted and claims made
            (including penalties and interest) (a) prosecuted by Licensee
            pursuant to Section 10.3, or (b) prosecuted by Licensor or a
            designee pursuant to Section 10.4, shall be applied first in
            satisfaction of any unreimbursed expenses (including attorneys'
            fees) of the party controlling the litigation (which shall be
            Licensee under Section 10.3 and Licensor or a designee under Section
            10.4) and next to the other party or parties to the extent of its or
            their unreimbursed expenses incurred in its or their participation
            and/or cooperation. Any remaining balance of damages shall be
            distributed eighty percent (80%) to the party controlling the
            litigation and twenty percent (20%) to the other party or parties.

11.   Compliance with Laws, Regulations and Standards

            Licensee agrees to comply with all governmental laws and regulations
            applicable to the use, production and/or sale of Licensed Products
            and Licensed Processes.

12.   Dispute Resolution; Equitable Remedies.

      12.1  Dispute Resolution. Prior to the initiation of formal legal
            proceedings, the parties hereto shall attempt in good faith to
            resolve all disputes in respect of this Agreement. Formal
            proceedings for the resolution of a dispute may not be commenced
            until the earlier of (a) the date that the parties conclude in good
            faith that amicable resolution through negotiation of the matter
            does not appear likely or (b) thirty (30) days after the parties
            first attempted to resolve the issue. This provision will not be
            construed to prevent a party from instituting, and a party is
            authorized to institute, formal legal proceedings to avoid the
            expiration of any applicable statute of limitation period.

      12.2  Equitable Remedies. Nothing in this Section 12 shall prevent either
            party from pursuing a temporary restraining order, injunctive relief
            or other equitable relief against the other party in a court of law
            at any time if the allegedly aggrieved party believes that a breach
            or a threatened breach of this Agreement would cause irreparable
            harm.

13.   Notices

            Any notice which either party may wish to send to the other shall be
            deemed to have been duly sent if delivered or posted by airmail to
            such party at the address


                                       12
<PAGE>

            as set out at the beginning of this Agreement or to such other
            address as may have been notified pursuant to the provisions of this
            clause and if delivered shall be deemed to have been received on the
            day of delivery and if posted then on the seventh working day next
            following the day of posting; provided, however, that any such
            notice may be sent by facsimile and shall be deemed to have been
            received at the beginning of the working day next following the day
            of transmission if the receiving machine causes the sending machine
            to print the answer back code of the receiving machine at the
            beginning and end of an uninterrupted transmission.

14.   General Provisions

      14.1  Assignment. This Agreement shall not be assigned by either party
            without the prior written consent of the other party, except (a) to
            an Affiliated Company, or (b) to a third party purchasing
            substantially all of the assets of such party or its Affiliated
            Company which shall have been an assignee of substantially all of
            the assets of the business to which this Agreement relates.

      14.2  Entire Agreement, Amendment and Waiver. This Agreement (including
            any schedules attached) contains the entire understanding of the
            parties with respect to the subject matter hereof. This Agreement
            may be amended, modified or altered only by an instrument in writing
            duly executed by the parties hereto. The waiver of a breach
            hereunder may be effected only by a writing signed by the waiving
            party and shall not constitute a waiver of any other breach.

      14.3  Severability. If any provision of this Agreement is or becomes or is
            deemed invalid, illegal, or unenforceable in any jurisdiction, (a)
            such provision will be deemed amended to conform to applicable laws
            of such jurisdiction so as to be valid and enforceable or, if it
            cannot be so amended without materially altering the intention of
            the parties, it will be stricken; (b) the validity, legality and
            enforceability of such provision will not in any way be affected or
            impaired thereby in any other jurisdiction; and (c) the remainder of
            this Agreement will remain in full force and effect.

      14.4  Governing Law. This Agreement shall be governed by, construed and
            interpreted in accordance with the laws of the State of New York,
            excluding any choice of law rules which may direct the application
            of the laws of any other jurisdiction.

      14.5  Retained Rights. Nothing in this Agreement shall limit in any
            respect the right of either party to conduct research and
            development and to market products using the Intellectual Property
            other than as expressly provided herein.

      14.6  Counterparts. This Agreement may be executed in two or more
            counterparts, each of which shall be an original, but all of which
            together shall constitute one and the same instrument.

      14.7  Relationship of Parties. Nothing contained in this Agreement shall
            be construed as creating a corporation, partnership, association,
            joint stock company, business


                                       13
<PAGE>

            trust, joint venture between the parties hereto nor as creating any
            fiduciary relationship of any nature between the parties.

      14.8  Right of First Collaboration. Subject to any existing rights that
            Licensor may have to the contrary, if Licensor decides to use the
            Intellectual Property for any application of Chlorothalanil or other
            products produced or sold by Licensor or an Affiliated Company of
            Licensor and by Licensee or an Affiliated Company of Licensee, it
            shall first ask Licensee if Licensee wishes to collaborate with
            Licensor for such application. If the Licensee chooses to
            collaborate with Licensor for such application, Licensee will notify
            Licensor of such within a reasonable amount of time not in any event
            exceeding thirty (30) days after notice thereof from Licensor and
            the parties will negotiate in good faith the terms of such
            collaboration. If Licensee elects not to collaborate on developments
            with respect to Chlorothalanil, Licensor shall be free to use the
            Intellectual Property for the application of Chlorothalanil as first
            described by Licensor to Licensee.

                  [Remainder of Page Intentionally Left Blank]


                                       14
<PAGE>


      IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first hereinbefore mentioned.

                                    PHIBRO-TECH, INC.

                                    By: /s/ W. Dwight Glover
                                       -----------------------


                                    NUFARM, INC.

                                    By: /s/ Kevin Martin
                                       -----------------------


                                       15

<PAGE>

                                  Schedule 1.2


<PAGE>

                                  Schedule 8.3

                       Foreign Patent Application Filings

None.

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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