Philipp Brothers Netherlands III BV, et al. – ‘POS AM’ on 2/24/05

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Post-Effective Amendment
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: POS AM      Post-Effective Amendment No. 1 to Form S-4           302   1.69M 
 2: EX-5.1      Opinion of Golenbock Eiseman Assor Bell & Peskoe       6     29K 
                          LLP.                                                   
 3: EX-12       Computation of Earnings to Fixed Charges               1      9K 
 4: EX-23.1     Consent of Pricewaterhousecoopers LLP                  1      8K 

POS AM   —   Post-Effective Amendment No. 1 to Form S-4
Document Table of Contents

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 2005 

                                                     REGISTRATION NO. 333-122063
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 1

TO

FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 

PHIBRO ANIMAL HEALTH CORPORATION
PHILIPP BROTHERS NETHERLANDS III B.V. 
(Exact name of Registrants as specified in their charters)
PHIBRO ANIMAL HEALTH CORPORATION

                                                        [Enlarge/Download Table]
                                                                                          
           NEW YORK                            2819                       13-1840497      
(State or Other Jurisdiction of    (Primary Standard Industrial        (I.R.S. employer   
Incorporation or Organization)      Classification Code Number)     identification number)
                                        65 CHALLENGER ROAD                                
                                 RIDGEFIELD PARK, NEW JERSEY 07660                        
                                          (201) 329-7300                                  

(Address, including zip code, and telephone number, including area code of
registrant's principal executive office)
PHILIPP BROTHERS NETHERLANDS III B.V. 

                                                        [Enlarge/Download Table]
                                                                                     
        THE NETHERLANDS                      2819                  NOT APPLICABLE    
(State or Other Jurisdiction of  (Primary Standard Industrial     (I.R.S. employer   
Incorporation or Organization)    Classification Code Number)  identification number)
                                           ROKIN 55                                  
                                       1012 KK AMSTERDAM                             
                                        THE NETHERLANDS                              
                                        (201) 329-7300                               

(Address, including zip code, and telephone number, including area code of
registrant's principal executive office)

SEE TABLE OF ADDITIONAL REGISTRANTS 

JACK C. BENDHEIM, 
PRESIDENT AND CHAIRMAN OF THE BOARD 
PHIBRO ANIMAL HEALTH CORPORATION
65 CHALLENGER ROAD
RIDGEFIELD PARK, NEW JERSEY 07660 
(201) 329-7300
(Name, address, including zip code, and telephone number, including area code,
of agent for service) 

With a copy to: 

LAWRENCE M. BELL, ESQ.
GOLENBOCK EISEMAN ASSOR BELL & PESKOE LLP 
437 MADISON AVENUE
NEW YORK, NEW YORK 10022-7302 
(212) 907-7300

    APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon as
practicable after the effective date of this registration statement.            

If the securities being registered on this Form are being offered in    
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box.  [ ]                            

If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, check the following box and   
list the Securities Act registration statement number of the earlier effective  
registration statement for the same offering.  [ ]                              

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act   
registration statement number of the earlier effective registration statement   
for the same offering.  [ ]                                                     

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS     
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION 
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF  
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME    
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), 
MAY DETERMINE.                                                                  
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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TABLE OF ADDITIONAL REGISTRANTS 

                                                        [Enlarge/Download Table]

                                     STATE OR OTHER JURISDICTION      PRIMARY STANDARD                            
EXACT NAME OF REGISTRANT                 OF INCORPORATION OR      INDUSTRIAL CLASSIFICATION     I.R.S. EMPLOYER   
AS SPECIFIED IN ITS CHARTER                 ORGANIZATION                 CODE NUMBER         IDENTIFICATION NUMBER
---------------------------          ---------------------------  -------------------------  ---------------------
                                                                                                                  
Prince Agriproducts, Inc. ..........      Delaware                          2819                23-1653576        
  One Prince Plaza                                                                                                
  Quincy, Illinois 62305                                                                                          
  (217) 222-8854                                                                                                  
Phibro-Tech, Inc. ..................      Delaware                          2819                22-3060339        
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 07660                                                                               
  (201) 329-7300                                                                                                  
Phibro Animal Health U.S., Inc. ....      Delaware                          2819                22-3743224        
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 07660                                                                               
  (201) 329-7300                                                                                                  
Phibro Animal Health Holdings,            Delaware                          2819                22-3743221        
  Inc. .............................                                                                              
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 07660                                                                               
  (201) 329-7300                                                                                                  
Phibrochem, Inc. ...................     New Jersey                         2819                22-2758614        
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 07660                                                                               
  (201) 329-7300                                                                                                  
C P Chemicals, Inc. ................     New Jersey                         2819                22-1548721        
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 0766                                                                                
  (201) 329-7300                                                                                                  
Phibro Chemicals, Inc. .............      New York                          2819                22-2871784        
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 07660                                                                               
  (201) 329-7300                                                                                                  
Western Magnesium Corp. ............     California                         2819                13-2849569        
  65 Challenger Road                                                                                              
  Ridgefield Park, New Jersey 07660                                                                               
  (201) 329-7300                                                                                                  
Phibro Animal Health SA.............      Belgium                           2819              Not Applicable      
  Rue de L'Institut, 87A                                                                                          
  B-1330 Rixensart, Belgium                                                                                       
  (201) 329-7300                                                                                                  

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PROSPECTUS                                                                      

Phibro Animal Health Corporation
Philipp Brothers Netherlands III B.V. 
OFFER TO EXCHANGE 
127,491 Units 
consisting of 
$103,207,000 13% Senior Secured Notes Due 2007 of Phibro Animal Health
Corporation and 
$24,284,000 13% Senior Secured Notes Due 2007 of Philipp Brothers Netherlands 
III B.V., 
which have been registered under the Securities Act of 1933,
for all outstanding Units 
consisting of 
$103,207,000 13% Senior Secured Notes Due 2007 of Phibro Animal Health
Corporation and 
$24,284,000 13% Senior Secured Notes Due 2007 of Philipp Brothers Netherlands 
III B.V.

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON MARCH 7, 2005, UNLESS EXTENDED. 

--------------------- 

Terms of the exchange offer:                                                    

    We will exchange all old units that are validly tendered and not withdrawn
prior to the expiration of the exchange offer.                                  

   You may withdraw tenders of old units at any time prior to the expiration
of the exchange offer.                                                          

   We believe that the exchange of old units will not be a taxable event for
U.S. federal income tax purposes, but you should see "Certain United States     
Federal Income Tax Considerations" on page 160 for more information. See also   
"Certain Dutch Tax Consequences."                                               

We will not receive any proceeds from the exchange offer.             

  The terms of the new units are substantially identical to the old units,
except that the new units are registered under the Securities Act of 1933 and   
the transfer restrictions and registration rights applicable to the old units do
not apply to the new units.                                                     

--------------------- 

SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF RISKS THAT
SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD UNITS.             

 Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the   
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.                                                               

The date of this prospectus is February 28, 2005, amending our prospectus dated 
February 4, 2005. 

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TABLE OF CONTENTS 

                                                                [Download Table]
                                                                 
Prospectus Summary..........................................    1
Risk Factors................................................   16
Use of Proceeds.............................................   30
Capitalization..............................................   31
Selected Consolidated Financial Data........................   32
Management's Discussion and Analysis of Financial Condition      
  and Results of Operations.................................   34
Business....................................................   61
Conditions in Israel........................................   79
Management..................................................   81
Principal Stockholders......................................   88
Description of Capital Stock................................   89
Certain Relationships and Related Party Transactions........   91
Description of Certain Indebtedness.........................   94
The Exchange Offer..........................................   96
Description of the New Units................................  105
Description of the New Notes................................  105
Certain United States Federal Income Tax Consequences.......  160
Certain Dutch Tax Consequences..............................  164
Plan of Distribution........................................  167
Legal Matters...............................................  168
Experts.....................................................  168
Where You Can Find More Information.........................  168
Service of Process and Enforcement of Liabilities...........  169
Philipp Brothers Netherlands III B.V........................  169
Index to Consolidated Financial Statements..................  F-1

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. 
PHIBRO ANIMAL HEALTH CORPORATION AND PHILIPP BROTHERS NETHERLANDS III B.V. HAVE 
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. IF     
ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT  
RELY ON IT. PHIBRO ANIMAL HEALTH CORPORATION AND PHILIPP BROTHERS NETHERLANDS   
III B.V. ARE NOT MAKING AN OFFER TO SELL THESE SECURITIES IN ANY JURISDICTION   
WHERE THE OFFER OR SALE IS NOT PERMITTED, WHERE THE PERSON MAKING THE OFFER IS  
NOT QUALIFIED TO DO SO, OR TO ANY PERSON WHO CANNOT LEGALLY BE OFFERED THE      
SECURITIES. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS 
IS ACCURATE ONLY AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS OR ANY    
SUPPLEMENT.                                                                     

    Each broker-dealer that receives new units for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in        
connection with any resale of new units. The letter of transmittal states that  
by so acknowledging and by delivering a prospectus, a broker-dealer will not be 
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended, which we refer to as the Securities Act. This          
prospectus, as it may be amended or supplemented from time to time, may be used 
by a broker-dealer in connection with resales of new units received in exchange 
for old units where the old units were acquired by the broker-dealer as a result
of market-making activities or other trading activities. Phibro Animal Health   
Corporation and Philipp Brothers Netherlands III B.V. each has agreed that, for 
a period of 90 days after the effective date of the registration statement of   
which this prospectus is a part, it will make this prospectus available to any  
broker-dealer for use in connection with any such resale. See "Plan of          
Distribution."                                                                  

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FOR NEW HAMPSHIRE RESIDENTS 

Neither the fact that a registration statement or an application for a
license has been filed under Chapter 421-B of the New Hampshire Uniform         
Securities Act of 1933 with the state of New Hampshire nor the fact that a      
security is effectively registered or a person is licensed in the state of New  
Hampshire constitutes a finding by the secretary of state that any document     
filed under RSA 421-B is true, complete and not misleading. Neither any such    
fact nor the fact that an exemption or exception is available for a security or 
a transaction means that the secretary of state has passed in any way upon the  
merits or qualifications of, or recommended or given approval to, any person,   
security or transaction. It is unlawful to make, or cause to be made, to any    
prospective purchaser, customer or client any representation inconsistent with  
the provisions of this paragraph.                                               

NETHERLANDS SELLING RESTRICTIONS

    Neither the new units nor any of the new notes (or any rights representing
an interest in the global new unit or any of the global new notes) may be       
offered, sold, transferred, or delivered as part of their initial distribution  
or at any time thereafter, directly or indirectly, to any individual or legal   
entity established, resident or domiciled in The Netherlands. Offers and sales  
of new units and new notes to any persons or legal entities established,        
resident or domiciled outside The Netherlands must be made in compliance with   
any applicable rule in the relevant jurisdictions.                              

BELGIUM SELLING RESTRICTIONS

This prospectus and related documents are not intended to constitute a
public offering in Belgium. The Belgian Banking and Finance Commission has      
neither reviewed nor approved these documents or commented on their accuracy or 
adequacy, or recommended or endorsed the new units and new notes.               

   The new units and new notes may not be offered for sale, sold or marketed
in Belgium by means of a public offering under Belgian law. In addition, the new
units and new notes may not be offered or sold to any person qualifying as a    
consumer within the meaning of Article 1.7(o) of the Belgian Law of 14th July   
1991 on consumer protection and trade practices, unless such offer or sale is   
made in compliance with the Belgian Law of 14th July 1991 on consumer protection
and trade practices and its implementing legislation.                           

MARKET SHARE, RANKING AND OTHER INDUSTRY DATA 

The market share, ranking and other industry data contained in this   
prospectus, including our position and the position of our competitors within   
these markets, are based either on our management's knowledge of, and experience
in, the markets in which we operate, or derived from industry data or           
third-party sources and, in each case, we believe these estimates are reasonable
as of the date of this prospectus or, if an earlier date is specified, as of    
such earlier date. However, this information may prove to be inaccurate because 
of the method by which we obtained some of the data for our estimates or because
this information is subject to change and cannot always be verified due to      
limits on the availability and reliability of independent sources, the voluntary
nature of the data gathering process and other limitations and uncertainties    
inherent in any statistical survey of market shares. In addition, purchasing    
patterns and consumer preferences can and do change. As a result, you should be 
aware that market share, ranking and other similar data set forth herein, and   
estimates and beliefs based on such data, may not be reliable.                  

TRADEMARKS

    The following trademarks and service marks used throughout this prospectus
belong to, are licensed to, or are otherwise used by us in our medicated feed   
additives business: Stafac(R); Eskalin(R); V-Max(R); Terramycin(R);             
Neo-Terramycin(R); CLTC(R); Mecadox(R); Nicarb(R); Amprol(R); Bloatguard(R);    
Aviax(R); Coxistac(R); Posistac(R); Banminth(R); Cerditac(R); Cerdimix (R);     
Rumatel(R).                                                                     

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FORWARD-LOOKING STATEMENTS

   This prospectus contains forward-looking statements within the meaning of
the federal securities laws. Statements that are not historical facts, including
statements about our beliefs and expectations, are forward-looking statements.  
Forward-looking statements include statements preceded by, followed by or that  
include the words "may," "could," "would," "should," "believe," "expect,"       
"anticipate," "plan," "estimate," "target," "project," "intend," or similar     
expressions. These statements include, among others, statements regarding our   
expected business outlook, anticipated financial and operating results, our     
business strategy and means to implement the strategy, our objectives, the      
amount and timing of capital expenditures, the likelihood of our success in     
expanding our business, financing plans, budgets, working capital needs and     
sources of liquidity.                                                           

   Forward-looking statements are only predictions and are not guarantees of
performance. These statements are based on our management's beliefs and         
assumptions, which in turn are based on currently available information.        
Important assumptions relating to the forward-looking statements include, among 
others, assumptions regarding demand for our products, the expansion of product 
offerings geographically or through new applications, the timing and cost of    
planned capital expenditures, competitive conditions and general economic       
conditions. These assumptions could prove inaccurate. Forward-looking statements
also involve risks and uncertainties, which could cause actual results that     
differ materially from those contained in any forward-looking statement. Many of
these factors are beyond our ability to control or predict. Such factors        
include, but are not limited to, the following:                                 

- our substantial leverage and potential inability to service our debt

- our dependence on distributions from our subsidiaries               

- risks associated with our international operations and significant  
foreign assets                                                    

- our dependence on our Israeli operations                            

- competition in each of our markets                                  

- potential environmental liability                                   

- potential legislation affecting the use of medicated feed additives 

 - extensive regulation by numerous government authorities in the United
States and other countries                                        

- our reliance on the continued operation and sufficiency of our      
manufacturing facilities                                          

- our reliance upon unpatented trade secrets                          

- the risks of legal proceedings and general litigation expenses      

- potential operating hazards and uninsured risks                     

- the risk of work stoppages                                          

- our dependence on key personnel                                     

We believe the forward-looking statements in this prospectus are      
reasonable; however, you should not place undue reliance on any forward-looking 
statements, which are based on current expectations. You should read this       
prospectus completely and with the understanding that future results may be     
materially different from what we expect. Further, forward-looking statements   
speak only as of the date they are made, and we undertake no obligation to      
update publicly any of them in light of new information or future events.       

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PROSPECTUS SUMMARY

    The following summary highlights information that we believe is especially
important concerning our business and this exchange offer. The following summary
is qualified in its entirety by the more detailed information and the financial 
statements and notes thereto appearing elsewhere in this prospectus. You should 
carefully read this entire prospectus and should consider, among other things,  
the matters set forth under "Risk Factors" before deciding to participate in the
exchange offer. Unless otherwise indicated or the context requires otherwise,   
references in this prospectus to (1) "PAH," "our company," "we," "our," "us" and
similar expressions refer to Phibro Animal Health Corporation, a New York       
corporation, and its consolidated subsidiaries, (2) "PB Netherlands" refers to  
Philipp Brothers Netherlands III B.V., a company organized under the laws of the
Netherlands, and its consolidated subsidiaries, (3) the "US issuer" refers to   
Phibro Animal Health Corporation and not its subsidiaries, and (4) the "Dutch   
issuer" refers to Philipp Brothers Netherlands III B.V. and not its             
subsidiaries. We formerly conducted business under the name, "Philipp Brothers  
Chemicals, Inc." As used herein, references to any "fiscal" year of our company 
refer to our fiscal year ended or ending on the June 30 of such year.           

THE EXCHANGE OFFER

     On October 21, 2003, the US issuer and Dutch issuer issued and sold 105,000
units, consisting of $85.0 million principal amount of 13% Senior Secured Notes 
due 2007 of the US issuer and $20.0 million principal amount of 13% Senior      
Secured Notes due 2007 of the Dutch issuer, and on December 21, 2004 the US     
issuer and Dutch issuer issued and sold, under the same indenture as such       
105,000 units, 22,491 additional units, consisting of $18.207 million principal 
amount of 13% Senior Secured Notes due 2007 of the US issuer and $4.284 million 
principal amount of 13% Senior Secured Notes due 2007 of the Dutch issuer. The  
units and notes issued and sold on October 21, 2003 and on December 21, 2004 are
collectively referred to as the old units and the old notes. The units and notes
issued and sold on December 21, 2004 are referred to separately as the          
additional old units and additional old notes. In connection with each of those 
sales, we entered into a registration rights agreement, the terms of each of    
which are substantially similar, with the initial purchaser of the old units in 
which we agreed to deliver this prospectus to you and to complete an exchange   
offer for the old units. As contemplated by the registration rights agreements, 
we are offering to exchange an aggregate of 127,491 new units, consisting of    
$103.207 million principal amount of new 13% Senior Secured Notes due 2007 of   
the US issuer and $24.284 million principal amount of new 13% Senior Secured    
Notes due 2007 of the Dutch issuer, referred to collectively as the new units   
and the new notes, the issuance of which new units have been registered under   
the Securities Act, for a like aggregate principal amount of our old units. We  
urge you to read the discussions in this Prospectus Summary under the headings  
"Summary of Exchange Offer" and "The New Units" and in this Prospectus under the
headings "The Exchange Offer" and "The New Units" for further information       
regarding the exchange offer and the new units.                                 

THE COMPANY 

OVERVIEW                                                                        

  We are a leading diversified global manufacturer and marketer of a broad
range of animal health and nutrition products, specifically medicated feed      
additives (MFAs) and nutritional feed additives (NFAs), which we sell throughout
the world predominantly to the poultry, swine and cattle markets. MFAs are used 
preventively and therapeutically in animal feed to produce healthy livestock. We
believe we are the third largest manufacturer and marketer of MFAs in the world,
and we believe that certain of our MFA products have leading positions in the   
marketplace. We are also a specialty chemicals manufacturer and marketer,       
serving primarily the United States pressure-treated wood and chemical          
industries. We have several proprietary products, and many of our products      
provide critical performance attributes to our customers' products, while       
representing a relatively small percentage of total end-product cost. We operate
in over 16 countries around the world and sell our animal health and nutrition  
products and specialty chemicals products into over 40 countries. Approximately 
76% of our fiscal 2004 net sales were from our Animal Health and Nutrition      
business, and approximately 24% of our fiscal 2004 net sales were from our      
Specialty Chemicals business.                                                   
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    Our Animal Health and Nutrition segment manufactures and markets more than
500 formulations and concentrations of medicated and nutritional feed additives,
including antibiotics, antibacterials, anticoccidials, anthelmintics, trace     
minerals, vitamins, vitamin premixes and other animal health and nutrition      
products, to the livestock and pet food industries. Our MFA products are        
internationally recognized for quality and efficacy in the prevention and       
treatment of diseases in livestock, such as coccidiosis in poultry, dysentery in
swine and acidosis in cattle. We market our Animal Health and Nutrition products
under approximately 450 governmental product registrations, approving our MFA   
products with respect to animal drug safety and effectiveness.                  

Our Specialty Chemicals business manufactures and markets a number of 
specialty chemicals for use in the pressure-treated wood, chemical catalyst,    
semiconductor, automotive, aerospace and agricultural industries. We anticipate 
that our proprietary manufacturing process to produce a copper-based solution   
for one of the leading new products for manufacturing pressure-treated wood will
represent our largest growth opportunity in our Specialty Chemicals business.   
Over 39% of our fiscal 2004 net sales in our Specialty Chemicals business was   
derived from copper-based compounds, solutions or mixes.                        

     We have in recent years focused our business on animal health and nutrition
products. As a result of the rapid decline of the printed circuit board industry
in the United States, we have substantially exited that business, including our 
etchant recycling operations, and re-directed our productive capacity in niche  
markets. We have also sold other non-strategic businesses, such as our Agtrol   
copper fungicide business and our subsidiaries, Mineral Resource Technologies,  
Inc. ("MRT") and The Prince Manufacturing Company ("PMC"). In addition, we      
closed our operations in Odda, Norway ("Odda") and Bordeaux, France ("La        
Cornubia").                                                                     

BUSINESS STRENGTHS                                                              

   Top Three MFA Provider in the World.  We believe we are the world's third
largest manufacturer and marketer of medicated feed additives in the poultry and
swine markets. We manufacture and market over 200 MFA formulations and          
concentrations. We believe our MFAs rank first in sales in Brazil, and third in 
the United States. Our Animal Health and Nutrition business serves our customers
in over 40 countries from 21 facilities. Many of our MFA products have been     
marketed for over 20 years.                                                     

Significant Barriers to Entry.  Medicated feed additives cannot be    
manufactured or marketed without governmental product registrations that are    
specific to each country -- the Food and Drug Administration ("FDA") for        
example, in the United States, Health Canada in Canada, and EFSA/EMEA           
authorities in Europe. Before a product registration is granted, the applicant  
must show the regulatory authority that the product and its proposed use are    
both effective and safe for the specified species and application. Obtaining an 
MFA product registration is comparable in cost and difficulty with obtaining    
approval for drugs used to treat humans. In addition to approval of formulation 
and labeling, regulatory authorities typically require approval and periodic    
inspection of the manufacturing facilities. Because of the costs and            
difficulties associated with obtaining MFA product registrations, there have    
been few new medicated feed additives developed and marketed over the last      
decade. The only two new MFA compounds approved for use in the last 10 years    
were semduramicin, one of our products, and ractopamine. Because of the inherent
difficulties and high costs of obtaining major product registrations and their  
absolute necessity to operate in this business, our existing broad portfolio of 
product registrations provides us strength in the marketplace.                  

  Strong Brand Name Recognition of Our Medicated Feed Additives.  We enjoy
strong brand name recognition with our medicated feed additives for the         
prevention and control of diseases in poultry, swine and cattle. In particular, 
virginiamycin, an antibiotic marketed under the Stafac(R), Eskalin(R) and       
V-Max(R) brand names, is a popular and efficacious choice of medicated feed     
additive in the poultry, swine and cattle industry. Semduramicin, sold under the
brand name Aviax(R), and salinomycin, sold under the brand name Coxistac(R), are
also leading poultry anticoccidials. In fiscal 2004, branded MFAs accounted for 
approximately 50% of our total Animal Health and Nutrition sales.               

     Established Global Network and Customer Base.  From our 23 facilities in 16
countries, we manufacture and market our products, which are sold through       
multiple distribution channels to over 2,800 customers in a wide variety of end 
use markets. We sell our products through an established global sales, marketing
and                                                                             
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distribution network to customers in over 40 countries. In fiscal 2004, no      
single customer accounted for more than 5% of total revenues and our top 10     
customers accounted for less than 22% of total revenues.                        

 Extensive Technical Support for Customers.  We employ over 60 chemists,
technicians, PhDs and veterinarians (DVMs) at our various facilities involved in
providing technical services to customers. Our technical service group and sales
personnel are able to work directly with commercial feed manufacturers and      
integrated poultry, swine and cattle producers to promote animal health. We are 
able to offer our customers products targeted to local markets, allowing us to  
serve those local markets more effectively. Our MFA field personnel are skilled 
in the area of product differentiation and have extensive applications knowledge
so as to be able to work closely with customers in determining optimum benefits 
from usage of our products. As agricultural food production will continue to    
intensify and will adopt evolving technologies, our MFA personnel are constantly
working with customers to better understand their needs in order to best utilize
the products existing within our MFA portfolio. This commercial knowledge also  
plays a pivotal role within the R&D function to ensure that research results are
applicable to customer needs and concerns.                                      

Manufacturing Expertise.  Our manufacturing expertise and know-how in 
antibiotic manufacturing process and organic synthesis has given us unique      
positions in the marketplace. We believe that we are the only manufacturer of   
virginiamycin and semduramicin in the world. Our blending, compounding and      
formulation expertise is recognized by our customers in the animal health and   
nutrition market. In addition, in our Specialty Chemicals business, based on our
more than 50 years of expertise in the metal chemical area, we have become a    
leading supplier of the new copper-containing compound to the pressure-treated  
wood industry. We also believe we hold leading positions in agricultural and    
other industrial applications for copper-containing compounds.                  

Proven Management Team.  We have assembled a strong and experienced   
management team at both the corporate and operating levels. Our top operating   
managers have an average of over 30 years of experience in the animal health and
nutrition and specialty chemicals industries. With our expanded management team,
we have added significant operational and international experience to our       
businesses. Our founding family owns 100% of our common stock.                  

BUSINESS STRATEGY                                                               

  Expand Applications for Animal Health and Nutrition Product Offerings to
Our Primary Markets.  We seek to increase our product lines through expanding   
the scope of our animal health and nutrition product registrations, through both
extending the use claims and formulations and the geographic areas of such      
registrations. We are actively working with the FDA and other regulators to     
obtain additional registrations and cross-clearances so that our MFA products   
can continue to be used in situations where another MFA is also in use. In the  
United States, we obtained from the FDA a zero-day withdrawal registration for  
the use of our oxytetracycline product in cattle and recently obtained a cross  
clearance for Mecadox(R) and Terramycin(R) in swine. We have obtained approval  
for Aviax(R) in the EU, and are pursuing a modification of our Aviax(R)         
registration in the United States allowing for site change of the active        
ingredient. We believe that our receipt of FDA approval of Aviax(R), together   
with our EU approval of Aviax(R) and our other registration efforts, has the    
potential to increase our sales over the next two to three years. By leveraging 
our global reach and our position as the only leading animal health company     
dedicated to MFAs and NFAs, we are natural partners for small players in the    
industry, who approach us to help them license or distribute new products they  
have developed, because we do not compete with their other products.            

    Expand Our Customer Base.  We intend to expand and strengthen our customer
base by (i) focusing on relationships with key accounts, (ii) continuing to     
incent our sales force to concentrate on fast-growing, high-margin areas within 
existing product groups, and (iii) pursuing growth opportunities for our        
existing products in new markets. As certain of our MFA products are used in    
rotation by our customers, we seek to supply all or substantially all of the    
various MFA products which our customers may want to use. Our MFA business has  
historically been strongest in the poultry market, and we are seeking to develop
it further in the swine and cattle markets. We expect to continue to enhance our
sales force in the swine market, and believe that there are further growth      
opportunities from doing so. In addition, we believe the under-penetrated       
Chinese and                                                                     

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Latin American markets offer growth opportunities. In China, we are seeking to  
partner with local distributors, to leverage our existing local sales force.    

RECENT DEVELOPMENTS                                                             

    The Formation of a Holding Company and its Note Offering.  On February 10,
2005, PAHC Holdings Corporation ("HoldCo") sold $29,000,000 of its 15% Senior   
Secured Notes due 2010 (the "HoldCo Notes") in a private placement. Interest is 
payable at the option of HoldCo in cash or pay-in-kind Notes. We are not        
obligated for the HoldCo Notes.                                                 

  HoldCo was formed by the holders of all of our capital stock, other than
the holders of our Series C Preferred Stock. In particular, Jack Bendheim,      
Marvin Sussman and trusts for the benefit of Mr. Bendheim and his family        
exchanged all of their shares of Series A Preferred Stock and Class B Common    
Stock and Mr. Bendheim exchanged fifty percent (50%) of his shares of Class A   
Common Stock, for the same number and class of shares of HoldCo, having the same
designations, relative rights, privileges and limitations as our shares of such 
class (except to the extent that HoldCo is a Delaware corporation and we are a  
New York corporation).                                                          

   The proceeds from the sale of the HoldCo Notes, upon release from escrow,
will be used, directly or indirectly, to redeem our Series C Preferred Stock    
either by (i) making a capital contribution to us to contemporaneously finance  
the redemption of our Series C Preferred Stock, or (ii) purchasing a new series 
of our preferred stock, referred to as Series D Preferred Stock, that may be    
issued by us to finance the redemption of our Series C Preferred Stock. It is   
contemplated that such redemption will occur on or before February 28, 2005. On 
March 1, 2005, the applicable percentage for determining the equity value       
component of the redemption price increases, as currently provided in our       
certificate of incorporation, from 18% to 22%. If on March 1, 2005, we have not 
redeemed our Series C Preferred Stock from escrow, HoldCo will be required to   
redeem the HoldCo Notes, primarily with the proceeds of the HoldCo Notes placed 
in escrow.                                                                      

The HoldCo Notes are to be secured by all of HoldCo's assets (now     
consisting solely of our capital stock and, until disbursed, proceeds of the    
HoldCo Notes in escrow). Currently, such pledge covers all of our Series A      
Preferred Stock and Class B Common Stock, our non-voting classes of stock. In   
connection with the release of the proceeds of the HoldCo Notes from escrow and 
following the redemption of our Series C Preferred Stock, Mr. Bendheim will     
contribute to HoldCo the balance of our outstanding Class A Common Stock, and   
all of our outstanding Class A Common Stock, our voting stock, will be pledged  
as security for the HoldCo Notes. See "Principal Stockholders" and "Description 
of Capital Stock."                                                              

     The HoldCo Notes and such security interest are effectively subordinated to
all liabilities, including trade payables, of ours and our subsidiaries, as well
as the Units offered hereby.                                                    

    The 2004 Offering.  On December 21, 2004, we completed a private placement
(the "2004 Offering") under Rule 144A and Regulation S of the Securities Act,   
pursuant to which the US issuer and the Dutch issuer issued and sold $22.491    
million of additional old units, from which we received gross proceeds of       
approximately $23.4 million. We used the proceeds from the 2004 Offering to     
refinance indebtedness outstanding under our domestic senior credit facility.   
Such additional old units were issued under the same indenture as the 105,000   
old units issued on October 21, 2003. See "Description of Certain               
Indebtedness -- Domestic Senior Credit Facility" for more information.          

Consent Solicitation.  In connection with the completion of the 2004  
Offering, we solicited consents with regard to our outstanding old notes to     
amendments to the indenture governing such old notes to permit the sale of      
substantially all of the facilities owned by Phibro Animal Health SA (formerly  
Phibro Animal Health (Belgium) SPRL) ("PAH Belgium"), a wholly owned subsidiary 
of the Dutch issuer, in Rixensart, Belgium (the "Belgium Plant"), to reduce     
excess manufacturing capacity and to reduce operating expenses and, in          
furtherance thereof, to permit the maximum amount of indebtedness under our     
domestic senior credit facility permitted under the indenture governing the     
notes to be increased from $15.0 million to $37.5 and to permit the related     
transactions described herein. The requisite consents were obtained and the     
indenture was                                                                   

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amended pursuant to the Second Supplemental Indenture, dated as of December 8,  
2004. The amendments became effective on December 21, 2004 in connection with   
the 2004 Offering.                                                              

     Sale of Belgium Plant.  On December 16, 2004, Phibro Animal Health SA ("PAH
Belgium") entered into an agreement with GlaxoSmithKline Biologicals ("GSK") to 
sell to GSK substantially all of PAH Belgium's facilities in Rixensart, Belgium 
(the "Belgium Plant"). Such sale, when completed, (the "Belgium Plant           
Transactions") will include the following elements (U.S. dollar amounts as of   
December 31, 2004 exchange rate): (i) the transfer of substantially all of the  
land and buildings and certain equipment of PAH Belgium at the Belgium Plant, as
well as the industrial activities and intellectual property relating to certain 
solvent technology of PAH Belgium, for a purchase price of EUR 6.2 million ($8.4
million), payable at closing; (ii) the transfer to GSK of a majority of the     
employees of PAH Belgium and the corresponding responsibility for statutory     
severance obligations; (iii) GSK agreeing to be responsible for cleaning-up, by 
demolition or otherwise, certain buildings not to be used by it, but for PAH    
Belgium to reimburse GSK up to a maximum of EUR 0.7 million ($0.9 million) for  
such clean-up costs; (iv) in recognition of the benefits to the Company from the
proposed transaction, PAH Belgium agreeing to pay to GSK EUR 1.5 million ($2.0  
million) within six months from the closing date, EUR 1.5 million ($2.0 million)
within eighteen months from the closing date, EUR 1.5 million ($2.0 million)    
within thirty months from the closing date, and EUR 0.5 million ($0.7 million)  
within forty-two months from the closing date; (v) PAH Belgium retaining certain
excess land (valued at approximately EUR 0.4 million ($0.5 million)) and being  
able to sell such land for its own account; (vi) PAH Belgium being responsible  
for certain plant closure costs and legally required severance indemnities in   
connection with workforce reductions, estimated in total to be EUR 9.1 million  
($12.3 million), of which an amount estimated to be approximately EUR 4.6       
million ($6.2 million) would be payable at or around the closing and an         
aggregate amount so estimated to be approximately EUR 4.5 million ($6.1 million)
would be payable over periods up to thirteen years; and (vii) PAH Belgium       
retaining certain equipment at the Belgium Plant, and being able to sell such   
equipment for the account of PAH Belgium or transfer such equipment, together   
with other assets and rights related to the production of virginiamycin, to     
Philipp Brothers Brasil Holdings Ltda. ("PAH Brazil") which owns a facility in  
Guarulhos, Brazil or in connection with alternative production arrangements.    

    The foregoing transactions and agreements are subject to a closing that is
expected to occur on November 30, 2005, but in no event earlier than July 1,    
2005 or later than June 30, 2006.                                               

    The Dutch Notes and related guarantees are collateralized by a mortgage on
the Belgium Plant which will be released in connection with the closing of the  
sale of the Belgium Plant to GSK.                                               

Refinancing of Domestic Senior Credit Facility with Proceeds of the   
Additional Units.  To provide the necessary funds to build inventory of         
virginiamycin until the Brazil plant or alternative supplier is able to produce 
production quantities of virginiamycin and to finance the purchase of capital   
equipment to fit out the Brazilian plant with equipment to produce              
virginiamycin, other than equipment transferred from the Belgium                

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Plant, the maximum amount of indebtedness under our domestic senior credit      
facility permitted under the indenture governing the old notes was increased    
from $15.0 million to $37.5 million, pursuant to the Second Supplemental        
Indenture, and we increased our borrowing to $22.5 million. The proceeds of the 
2004 Offering were used to refinance $22.5 million of borrowing under the       
domestic senior credit facility. The issuance of the additional old units had   
the effect of reducing the maximum amount of indebtedness under our domestic    
senior credit facility permitted under the indenture governing the notes by the 
principal amount of the additional old units issued. Borrowings under the       
domestic senior credit facility continue to be subject to a borrowing base      
formula based on percentages of eligible domestic receivables and domestic      
inventory.                                                                      

PHILIPP BROTHERS NETHERLANDS III B.V.                                           

 Philipp Brothers Netherlands III B.V., the Dutch issuer, is an indirect
wholly-owned subsidiary of the US issuer and is incorporated under the laws of  
the Netherlands as a private company with limited liability. The Dutch issuer is
a holding company formed to finance the operations of PAH Belgium, which owns   
and operates our Rixensart, Belgium plant. Such plant uses fermentation         
processes to produce the active ingredients semduramicin and virginiamycin and  
conducts all of our fermentation development activities. For the fiscal year    
ended June 30, 2004, the Dutch issuer and its consolidated subsidiaries,        
including PAH Belgium, had revenue of $34.7 million and operating income of $6.7
million. As of December 31, 2004, the Dutch issuer and its consolidated         
subsidiaries, including PAH Belgium, had cash and cash equivalents of $5.4      
million, net trade accounts receivable of $2.2 million, inventory of $34.9      
million, net property, plant and equipment of $17.7 million, total assets of    
$64.1 million, total accounts payable and other current liabilities of $29.7    
million, total debt of $37.7 million and total liabilities of $67.8 million.    

--------------------- 

We are a New York corporation and our principal executive offices are 
located at 65 Challenger Road, Ridgefield Park, New Jersey 07660 and our phone  
number is (201) 329-7300.                                                       

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SUMMARY OF THE EXCHANGE OFFER 

   On October 21, 2003, we completed a private offering of 105,000 old units
consisting of:                                                                  

  - $85.0 million principal amount of 13% Senior Secured Notes due 2007 of
the US issuer, referred to as old US notes; and                   

  - $20.0 million principal amount of 13% Senior Secured Notes due 2007 of
the Dutch issuer, referred to as old Dutch notes.                 

    On December 21, 2004, we completed a private offering of 22,491 additional
old units consisting of:                                                        

    - $18.207 million principal amount of 13% Senior Secured Notes due 2007 of
the US issuer, also referred to as old US notes; and              

   - $4.284 million principal amount of 13% Senior Secured Notes due 2007 of
the Dutch issuer, also referred to as old Dutch notes.            

In connection with each of those sales, we entered into a registration
rights agreement, the terms of each of which are substantially similar, with the
initial purchaser of the old units in which we agreed to deliver this prospectus
to you and to complete an exchange offer for the old units.                     

NEW UNITS OFFERED.............   127,491 new units consisting of:               

                                 $103.207 million principal amount of 13% Senior
                          Secured Notes due 2007 of the US issuer,
                      referred to as the new US notes; and

                                $24.284 million principal amount of 13% Senior
                             Secured Notes due 2007 of the Dutch issuer,
                     referred to as the new Dutch notes.

                        The issuance of the new units has been
                                registered under the Securities Act. The terms
                                 of the new units and old units are identical in
                            all material respects, except for transfer
                               restrictions, registration rights relating to
                               the old units and certain provisions relating
                                to increased interest rates in connection with
                               the old units under circumstances relating to
                                 the timing of the exchange offer. You are urged
                                to read the discussions under the heading "The
                        New Units" in this summary for further
                      information regarding the new units.

THE EXCHANGE OFFER............   We are offering the new units to you in        
                              exchange for a like number of old units. The
                             old units may be exchanged only in integral
                                multiples of $1,000. We intend by the issuance
                             of the new units to satisfy our obligations
                                 contained in the registration rights agreement.
                                After the exchange offer is complete, you will
                          no longer be entitled to any exchange or
                                 registration with respect to your old units. In
                            this prospectus, the term "exchange offer"
                                means this offer to exchange new units for old
                                 units in accordance with the terms set forth in
                                this prospectus and the accompanying letter of
transmittal.  

CONSEQUENCES OF FAILURE TO                                                      
EXCHANGE UNITS................   If you do not exchange your old units for new  
                                units, subject to some limited exceptions, you
                         will no longer be able to require us to
                             register the old units under the Securities
                                 Act. In addition, you will not be able to offer
               or sell the old units unless:

                                - they are registered under the Securities Act
                                  and applicable state securities laws (and we
                               will have no obligation to register them,
                             except for some limited exceptions), or
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                             - you offer or sell them under an exemption
                                   from the requirements of, or in a transaction
                            not subject to, the Securities Act and
                       applicable state securities laws.

                                We do not currently intend to register the old
                            units under the Securities Act. Under some
                            circumstances, however, holders of the old
                                units, including holders who are not permitted
                                 to participate in the exchange offer or who may
                             not freely resell new units received in the
                                exchange offer, may require us to file, and to
                                 cause to become effective, a shelf registration
                            statement covering resales of new units by
                               these holders. For more information regarding
                            the consequences of not tendering your old
                                units, see "The Exchange Offer -- Consequences
                of Failure to Exchange Units."

EXPIRATION DATE; WITHDRAWAL                                                     
OF TENDER.....................   The exchange offer will expire at 5:00 p.m.,   
                               New York City time, on March 7, 2005, or such
                                 later date and time to which it may be extended
                                by us. The tender of old units pursuant to the
                             exchange offer may be withdrawn at any time
                              prior to the expiration date of the exchange
                                offer. Any old units not accepted for exchange
                                 for any reason will be returned without expense
                                to the tendering holder thereof promptly after
                               the expiration or termination of the exchange
offer.        

CONDITIONS TO THE EXCHANGE                                                      
OFFER.........................   Our obligation to accept for exchange, or to   
                                issue new units in exchange for, any old units
                                is subject to customary conditions relating to
                           compliance with any applicable law or any
                               applicable interpretation by the staff of the
                                 Securities and Exchange Commission, the receipt
                              of any applicable governmental approvals and
                              the absence of any actions or proceedings of
                              any governmental agency or court which could
                            materially impair PAH's or PB Netherlands'
                               ability to consummate the exchange offer. See
                          "The Exchange Offer -- Conditions to the
  Exchange Offer."

PROCEDURE FOR TENDERING OLD                                                     
UNITS.........................   If you wish to accept the exchange offer and   
                         tender your old units, you must either:

                       complete, sign and date the letter of
                              transmittal, or a facsimile of the letter of
                     transmittal, in accordance with its
                           instructions and the instructions in this
                                prospectus, and mail or otherwise deliver such
                          letter of transmittal, or the facsimile,
                           together with the old units and any other
                               required documentation, to the exchange agent
                     at the address set forth herein; or

                       if old units are tendered pursuant to
                             book-entry procedures, the tendering holder
                            must deliver a completed and duly executed
                           letter of transmittal or arrange with The
                               Depository Trust Company, or DTC, to cause an
                                 agent's message to be transmitted through DTC's
                                Automated Tender Offer Program System with the
                              required information (including a book-entry
                      confirmation) to the exchange agent.

                           See "The Exchange Offer -- Procedures for
       Tendering Old Units."

BROKER-DEALERS................   Each broker-dealer that receives new units for 
                            its own account in exchange for old units,
                            where such old units were acquired by such
                            broker-dealer as a result of market-making
     activities or other
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                              trading activities, must acknowledge that it
                              will deliver a prospectus in connection with
                            any resale of such new units. See "Plan of
Distribution."

USE OF PROCEEDS...............   We will not receive any proceeds from the      
                        exchange offer. See "Use of Proceeds."

EXCHANGE AGENT................   HSBC Bank USA, National Association is serving 
                              as the exchange agent in connection with the
                               exchange offer. The address, telephone number
                                and facsimile number of the exchange agent are
                               provided in the section "The Exchange Offer,"
                          as well as in the letter of transmittal.

FEDERAL INCOME TAX                                                              
CONSEQUENCES..................   We believe that the exchange of old units for  
                               new units pursuant to the exchange offer will
                          not be a taxable event for United States
                               federal income tax purposes. You are referred
                              to the discussion of the tax consequences of
                                 the exchange offer under "Certain United States
                               Federal Income Tax Consequences" and "Certain
                             Dutch Tax Consequences." You should consult
                                your tax advisor about the tax consequences as
                              they apply to your individual circumstances.

CONSEQUENCES OF EXCHANGING OLD UNITS PURSUANT TO THE EXCHANGE OFFER 

     Based on certain interpretive letters issued by the Staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of   
the view that holders of old units (other than any holder who is an "affiliate" 
of PAH or PB Netherlands within the meaning of Rule 405 under the Securities    
Act) who exchange their old units for new units pursuant to the exchange offer  
generally may offer the new units for resale, resell such new units and         
otherwise transfer the new units without compliance with the registration and   
prospectus delivery provisions of the Securities Act, provided that:            

- the new units are acquired in the ordinary course of the holders'   
business;                                                         

- the holders have no arrangement or understanding with any person to 
participate in a distribution of the new units; and               

- neither the holder nor any other person is engaging in or intends to
engage in a distribution of the new units.                        

    Each broker-dealer that receives new units for its own account in exchange
for old units must acknowledge that it will deliver a prospectus in connection  
with any resale of the new units. See "Plan of Distribution." In addition, to   
comply with the securities laws of applicable jurisdictions, the new units may  
not be offered or sold unless they have been registered or qualified for sale in
the applicable jurisdiction or in compliance with an available exemption from   
registration or qualification. PAH and PB Netherlands have agreed, under the    
registration rights agreement and subject to limitations specified in the       
registration rights agreement, to register or qualify the new units for offer or
sale under the securities or blue sky laws of the applicable jurisdictions as   
any holder of the units reasonably requests in writing. If a holder of old units
does not exchange the old units for new units according to the terms of the     
exchange offer, the old units will continue to be subject to the restrictions on
transfer contained in the indenture governing the units and in the legend       
printed on the old units. In general, the old units may not be offered or sold, 
unless registered under the Securities Act, except under an exemption from, or  
in a transaction not subject to, the Securities Act and applicable state        
securities laws. Holders of old units do not have any appraisal or dissenters'  
rights in connection with the exchange offer. See "The Exchange Offer -- Resales
of New Units."                                                                  

    The old units are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages (PORTAL) market. Following       
commencement of the exchange offer but prior to its completion, the old units   
may continue to be traded in the PORTAL market. Following completion of the     
exchange offer, however, the new units will not be eligible for trading in the  
PORTAL market.                                                                  
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THE NEW UNITS 

    The terms of the new units and the old units are identical in all material
respects, except for transfer restrictions, registration rights relating to the 
old units and certain provisions relating to increased interest rates in        
connection with the old units under circumstances relating to the timing of the 
exchange offer, which rights will terminate upon completion of the exchange     
offer. The new units will evidence the same debt as the old units and will be   
governed by the same indenture. This summary is not intended to be complete. For
a more complete description of the terms of the new units and new notes, see    
"Description of the New Units" and "Description of the New Notes," respectively,
in this prospectus.                                                             

ISSUERS.......................   Phibro Animal Health Corporation, the US       
                              issuer, and Philipp Brothers Netherlands III
         B.V., the Dutch issuer.

SECURITIES OFFERED............   127,491 new units consisting of $103.207       
                                million principal amount of 13% senior secured
                        notes due 2007 of Phibro Animal Health
                            Corporation, the new US notes, and $24.284
                                million principal amount of 13% senior secured
                                notes due 2007 of Philipp Brothers Netherlands
                                 III B.V., the new Dutch notes. The new US notes
                               and new Dutch notes are collectively referred
      to as the new notes.

MATURITY......................   December 1, 2007.                              

INTEREST RATE AND PAYMENT                                                       
DATES.........................   Each issuer will pay interest on its new notes 
                              at a rate equal to 13% per year. Interest on
                                the new notes will be payable semi-annually in
                             cash in arrears on June 1 and December 1 of
                       each year, beginning on June 1, 2005.

USE OF PROCEEDS...............   The new units issued in connection with the    
                         exchange offer are only being issued in
                          exchange for your old units. We will not
                                receive any cash proceeds from the issuance of
                               the new units pursuant to the exchange offer.
                               All old units accepted by us in this exchange
          offer will be cancelled.

SEPARATION EVENTS.............   The new notes of each issuer will not trade    
                              separately unless an event of default on the
                                 new notes has occurred, a tax redemption of the
                            new Dutch notes related to certain changes
                               affecting withholding taxes has occurred or a
                           change in control of the Dutch issuer has
occurred.     

GUARANTEES....................   All of the US issuer's existing and future     
                                 domestic restricted subsidiaries will guarantee
                          the new notes of each issuer on a senior
                                 secured basis. The new Dutch notes will also be
                              guaranteed by the US issuer and by the Dutch
                        issuer's current and future restricted
                      subsidiaries, including PAH Belgium.

                           The guarantees of the new US notes by its
                          domestic restricted subsidiaries and the
                             guarantees of the new Dutch notes by the US
                              issuer, its domestic restricted subsidiaries
                                and each of the restricted subsidiaries of the
                                 Dutch issuer will be senior secured obligations
                          of the US guarantors and such restricted
                              subsidiaries and will rank equal in right of
                               payment with all of their respective existing
                 and future senior indebtedness.

SECURITY INTEREST.............   The new US notes and related guarantees will be
                                 secured by substantially all of the US issuer's
                          assets and the assets of the US issuer's
                              domestic restricted subsidiaries, other than
                         real property and interests therein. In
                        addition, the new US notes and related
                                 guarantees will be secured by 65% of the voting
   stock and 100% of
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                              the non-voting stock of foreign subsidiaries
                              owned by the US issuer's domestic restricted
                                subsidiaries or the US issuer. Pursuant to the
                                 terms of an intercreditor agreement, as amended
                           in connection with the 2004 Offering, the
                                 security interest securing the new US notes and
                                the related guarantees made by the US issuer's
                          domestic restricted subsidiaries will be
                                 subordinated to a lien securing the US issuer's
                                domestic senior credit facility. Such security
                               interest will also be subordinated to certain
                            other secured indebtedness permitted to be
                               incurred by the US issuer under the indenture
                              and will be structurally subordinated to all
                        liabilities of the US issuer's foreign
                             subsidiaries and unrestricted subsidiaries.

                                 The new Dutch notes and related guarantees will
                               be secured by a pledge of all of the accounts
                             receivable, a security interest or floating
                                 charge on the inventory to the extent permitted
                                by applicable law, a mortgage on substantially
                              all of the real property of the Dutch issuer
                            and each of its restricted subsidiaries, a
                            pledge of 100% of the stock of each direct
                        subsidiary of the Dutch issuer and its
                          restricted subsidiaries, a pledge of the
                                intercompany loans made by the Dutch issuer to
                               its restricted subsidiaries and substantially
                               all of the assets of the US guarantors, other
                           than real property and interests therein.

RANKING.......................   The new notes of each issuer will be senior    
                             secured obligations of that issuer and will
                                rank equal in right of payment with any of the
                           other senior indebtedness of that issuer,
                         including in the case of the US issuer,
                             indebtedness under the US issuer's domestic
         senior credit facility.

OPTIONAL MAKE-WHOLE                                                             
REDEMPTION....................   The issuers may, at their option, redeem some  
                                or all of their new notes at any time prior to
                                June 1, 2005 by paying the greater of (i) 100%
                            of the aggregate principal amount of their
                                 notes and (ii) the sum of the present values of
                                 114% of the aggregate principal amount of their
                               notes plus scheduled interest payments on the
                               new notes through and including June 1, 2005,
                        discounted to the redemption date on a
                                 semi-annual basis at the adjusted treasury rate
                              plus 50 basis points, together with, in each
                          case, accrued and unpaid interest to the
                         redemption date. The foregoing optional
                                redemption of the notes shall include both new
                            US notes and new Dutch notes on a pro rata
                                 basis based upon the aggregate principal amount
                                 of notes outstanding at the time of redemption,
                                unless a change of control of the Dutch issuer
has occurred. 

OPTIONAL REDEMPTION...........   On or after June 1, 2005, the issuers may      
                             redeem all or a portion of the new notes at
                       their option at the redemption prices
                             (expressed as a percentage of the principal
                               amount), plus accrued and unpaid interest, if
                                 redeemed during the six-month period commencing
               on the dates indicated below:

                                                                [Download Table]

PERIOD                                           PERCENTAGE
------                                           ----------
                                                           
June 1, 2005...................................    114.0%  
December 1, 2005...............................    109.0%  
June 1, 2006...................................    105.0%  
December 1, 2006, and thereafter...............    101.0%  

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                               Prior to June 1, 2005, the issuers may redeem
                           on one or more occasions up to 35% of the
                                aggregate principal amount of the new notes at
                               a redemption price equal to 113% plus accrued
                              and unpaid interest with the net proceeds of
             any public equity offering.

                              The foregoing optional redemption of the new
                               notes shall include both new US notes and new
                                Dutch notes on a pro rata basis based upon the
                         aggregate principal amount of the notes
                                 outstanding at the time of redemption, unless a
                           change of control of the Dutch issuer has
occurred.     

                                 The Dutch issuer may redeem the new Dutch notes
                             in whole, and not in part, at 100% of their
                          principal amount plus accrued and unpaid
                          interest in the event of certain changes
                                affecting withholding taxes described below in
                 "Description of the New Notes."

CHANGE OF CONTROL OFFER.......   If the US issuer experiences a change of       
                                 control, each holder of new units will have the
                               right to sell the issuers all or a portion of
                         the new notes held by it at 101% of the
                               aggregate principal amount of such new notes,
                               plus accrued and unpaid interest, if any, and
                             additional interest, if any, to the date of
                             purchase. If the Dutch issuer experiences a
                                 change of control, it may, at its option at any
                                 time, redeem its new notes in whole, and not in
                         part, at the optional redemption prices
                                 otherwise applicable on the redemption date. If
                                the Dutch issuer has not delivered a notice of
                          redemption to the holders within 30 days
                            following a change of control, it shall be
                               required to commence an offer to purchase its
                                 new notes on the same terms and conditions that
                                 apply to it in the event of a change in control
                              of the US issuer; provided, that at any time
                           prior to the consummation of the offer to
                              purchase its new notes, the Dutch issuer may
                                 deliver an optional redemption notice to redeem
                            all of its notes in lieu of completing the
    offer to purchase.

ASSET SALE OFFERS.............   If either issuer or any of its restricted      
                                 subsidiaries sells assets and does not reinvest
                                 the proceeds from the sale of its assets in its
                              respective business, the issuers may have to
                             offer to use the proceeds to repurchase new
                            notes at 100% of their aggregate principal
                                amount plus accrued and unpaid interest to the
                              date of purchase. Any such repurchase of the
                               new notes shall include both new US notes and
                                new Dutch notes on a pro rata basis based upon
                             the aggregate principal amount of the notes
                             outstanding at the time of such repurchase,
                                unless a change of control of the Dutch issuer
has occurred. 

EXCESS CASH FLOW OFFERS.......   If we have excess cash flow, the issuers may   
                             have to offer to use 50% of the excess cash
                               flow to repurchase a portion of the new notes
                                at 102.5% of their aggregate principal amount,
                            plus accrued and unpaid interest. Any such
                                repurchase of the new notes shall include both
                                new US notes and new Dutch notes on a pro rata
                                 basis based upon the aggregate principal amount
                              of the notes outstanding at the time of such
                               repurchase, unless a change of control of the
            Dutch issuer has occurred.

RESTRICTIVE COVENANTS.........   The indenture governing the new notes will     
                             contain covenants that, among other things,
       limit our ability to:

                          - incur additional indebtedness or issue
                 disqualified capital stock;

     - make investments;

                          - pay dividends or make other restricted
payments; 

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                                - issue capital stock of certain subsidiaries;

                            - enter into transactions with affiliates;

          - create or incur liens;

            - transfer or sell assets;

                                - incur dividend or other payment restrictions
                         affecting certain subsidiaries; and

                                 - consummate a merger, consolidation or sale of
                             all or substantially all of our assets.

                            These covenants are subject to a number of
                         important exceptions described below in
                           "Description of the New Notes -- Certain\
Covenants."   

BOARD REPRESENTATION..........   A Noteholder Representative has been designated
                           to serve on the board of directors of the
                      Company. See "Description of the New
                          Notes -- Certain Covenants -- Noteholder
  Representative."

REGISTRATION..................   We filed a registration statement with the SEC 
                               on Form S-4 with respect to an exchange offer
                             for the 105,000 old units issued in October
                       2003, but due to pending confidential
                             acquisition negotiations, such registration
                             statement did not become effective, and the
                             Company caused a notice of withdrawal to be
                                 submitted to the SEC on November 15, 2004. As a
                             result, a Registration Default existed with
                            respect to the old notes issued in October
                            2003, and such notes have borne additional
                             interest. However, the effectiveness of the
                                 Registration Statement of which this prospectus
                            is a part cured such Registration Default,
                             subject to the consummation of the exchange
                                offer of new units for old units within thirty
                               (30) days thereafter. In such event, from and
                                after such effective date, such old notes bear
                             interest at the rate set forth on the cover
                             page of this prospectus and cease to accrue
                             such additional interest. See "The Exchange
                             Offer -- Registration Rights and Additional
                 Interest on Certain Old Units."

RISK FACTORS

     An investment in the new units and the new notes involves risks. You should
carefully consider the information in this prospectus. In particular, you should
evaluate the specific risk factors set forth under the caption "Risk Factors",  
as well as all other information set forth in this prospectus.                  

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SUMMARY HISTORICAL AND UNAUDITED CONSOLIDATED FINANCIAL DATA

    The summary historical and unaudited consolidated financial data set forth
below reflect continuing operations. Our Odda, Carbide, MRT and La Cornubia     
businesses have been classified as discontinued operations and are not included 
below. Odda operations were terminated in February 2003. Carbide was sold in    
April 2003. MRT was sold in August 2003. La Cornubia operations were terminated 
in June 2004.                                                                   

  The summary consolidated financial data included in this prospectus have
been prepared by, and are the responsibility of, our management.                
PricewaterhouseCoopers LLP, an independent registered public accounting firm,   
has neither examined nor reviewed the accompanying summary consolidated         
financial data and, accordingly, PricewaterhouseCoopers LLP does not express an 
opinion or any other form of assurance with respect thereto. The                
PricewaterhouseCoopers LLP report included in this prospectus relates only to   
our historical financial statements for the fiscal years ended June 30, 2004,   
2003 and 2002. It does not extend to any other financial data and should not be 
read to do so.                                                                  

     The following summary consolidated financial data set forth below should be
read in conjunction with, and are qualified in their entirety by reference to,  
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and our financial statements and the notes thereto appearing        
elsewhere in this prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                                    6 MONTHS ENDED   
                                  FISCAL YEARS ENDED JUNE 30,        DECEMBER 31,    
                                 ------------------------------   -------------------
                                   2002       2003       2004       2003       2004  
                                 --------   --------   --------   --------   --------
                                                                      (UNAUDITED)    
                                                    (IN THOUSANDS)                   
                                                                                     
RESULTS OF OPERATIONS:                                                               
Net sales....................... $328,676   $341,746   $358,274   $177,490   $181,335
Gross profit....................   81,265     90,546     90,403     43,709     36,491
Selling, general and                                                                 
  administrative expenses.......   70,636     65,050     71,389     32,609     34,353
Operating income................   10,629     25,496     19,014     11,100      2,138

                                                        [Enlarge/Download Table]

                                                                    AS OF DECEMBER 31,  
                                                    AS OF JUNE 30,  ------------------- 
                                                         2004         2003       2004   
                                                    --------------  --------   -------- 
                                                                        (UNAUDITED)     
                                                                                        
BALANCE SHEET DATA:                                                                     
Cash and cash equivalents..........................    $  5,568     $  8,682   $ 10,170 
Fixed assets.......................................      58,786       60,689     61,111 
Total assets.......................................     241,369      254,936    265,050 
Total debt.........................................     170,365      165,119    183,009 
Series C redeemable preferred stock................      24,678       17,065     22,817 
Total stockholders' deficit........................     (63,833)     (43,091)   (60,080)

RATIO OF EARNINGS TO FIXED CHARGES                                              

The following table sets forth our historical consolidated ratio of   
earnings to fixed charges for the periods indicated.                            

                                                        [Enlarge/Download Table]

                                                                              6 MONTHS   
                                                                                ENDED    
                                             FISCAL YEAR ENDED JUNE 30,     DECEMBER 31, 
                                          --------------------------------  -------------
                                          2000   2001   2002   2003   2004  2003    2004 
                                          ----   ----   ----   ----   ----  -----   -----
                                                                                         
Ratio of earnings to fixed charges(a).... 1.1     (b)    (b)   1.4    2.2    3.7      (b)

---------------                                                                 

(a)  For purposes of computing the consolidated ratio of earnings to fixed      
charges, earnings represent earnings (loss) from continuing operations
before income taxes, loss on equity investments and fixed charges.    

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  Fixed charges include interest expense (whether expensed or capitalized)
  and a portion of rentals determined to be representative of the interest
 component of such rental expense. Management believes that one-third is
representative of the interest component of such rental expense.      

(b)  The amounts by which earnings were inadequate to cover fixed charges were  
 $9,563, $10,384 and $7,672 for the fiscal years ended June 30, 2001 and
2002, and the six months ended December 31, 2004, respectively.       

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RISK FACTORS

An investment in the new units involves a significant degree of risk, 
including the risks described below. You should carefully consider the following
risk factors and the other information in this prospectus before deciding to    
exchange old units for new units. The risks described below are not the only    
ones facing us. This prospectus contains forward-looking statements that involve
risks and uncertainties, including, in particular, the statements about our     
plans, strategies and prospects under the headings "Prospectus Summary,"        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations," and "Business." Although we believe that our plans, intentions and 
expenditures reflected in or suggested by such forward-looking statements are   
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved. Important factors that could cause actual results to differ   
materially from the forward-looking statements we make in this prospectus are   
set forth below and elsewhere in this prospectus. All forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in   
their entirety by the following cautionary statements.                          

RISK FACTORS RELATED TO THE EXCHANGE OFFER                                      

IF YOU FAIL TO EXCHANGE YOUR OLD UNITS FOR NEW UNITS, YOUR OLD UNITS WILL   
CONTINUE TO BE SUBJECT TO RESTRICTIONS ON TRANSFER.                         

 The old units were not registered under the Securities Act or under the
securities laws of any state and may not be resold, offered for resale or       
otherwise transferred unless they are subsequently registered or resold under an
exemption from the registration requirements of the Securities Act and          
applicable state securities laws. If you do not exchange your old units for new 
units under the exchange offer, you will not be able to resell, offer to resell 
or otherwise transfer the old units unless they are registered under the        
Securities Act or unless you resell them, offer to resell or otherwise transfer 
them under an exemption from the registration requirements of, or in a          
transaction not subject to, the Securities Act. In addition, we will no longer  
be under an obligation to register the old units under the Securities Act except
in the limited circumstances provided under the registration rights agreement.  
In addition, if you want to exchange your old units in the exchange offer for   
the purpose of participating in a distribution of the new units, you may be     
deemed to have received restricted securities, and, if so, will be required to  
comply with the registration and prospectus delivery requirements of the        
Securities Act in connection with any resale transaction.                       

 IF AN ACTIVE TRADING MARKET FOR THE NEW UNITS DOES NOT DEVELOP, THE LIQUIDITY
AND VALUE OF THE NEW UNITS COULD BE HARMED.                                 

While the old units are currently eligible for trading on the PORTAL  
market, even if the registration statement becomes effective, which will        
generally allow resale of the new units, there is no established trading market 
for the new units. Neither issuer intends to list the new units on any U.S.     
national securities exchange or automated quotation system. We cannot assure you
that an active trading market will develop for the new units. If no active      
trading market develops, you may not be able to resell your new units at their  
fair market value or at all. Future trading prices of the new units will depend 
on many factors, including, among other things, prevailing interest rates, our  
operating results, our ability to complete the exchange offer and the market for
similar securities. The initial purchaser has advised us that it currently      
intends to make a market in the new units, but it is not obligated to do so and 
may discontinue any market making in the new units at any time.                 

THE ISSUANCE OF THE NEW UNITS MAY ADVERSELY AFFECT THE MARKET FOR THE OLD   
UNITS.                                                                      

    To the extent that the old units are tendered for exchange and accepted in
the exchange offer, the trading market for the untendered and tendered but      
unaccepted old units could be adversely affected.                               

  YOU MUST COMPLY WITH THE EXCHANGE OFFER PROCEDURES IN ORDER TO RECEIVE THE NEW
UNITS.                                                                      

The new units will be issued in exchange for the old units only after 
timely receipt by the exchange agent of the old units or a book-entry           
confirmation or a confirmation of blocking instructions related thereto, a      
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properly completed and executed letter of transmittal, or an agent's message and
all other required documentation. If you want to tender your old units in       
exchange for new units, you should allow sufficient time to ensure timely       
delivery. None of PAH, PB Netherlands nor the exchange agent are under any duty 
to give you notification of defects or irregularities with respect to tenders of
old units for exchange. Old units that are not tendered or are tendered but not 
accepted will, following the exchange offer, continue to be subject to the      
existing transfer restrictions. In addition, if you tender the old units in the 
exchange offer to participate in a distribution of the new units, you will be   
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. For additional    
information, please refer to the sections entitled "The Exchange Offer" and     
"Plan of Distribution" later in this prospectus.                                

RISK FACTORS RELATING TO THE NEW UNITS AND THE NEW NOTES                        

OUR SUBSTANTIAL LEVEL OF INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL  
CONDITION AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NEW UNITS
AND THE NEW NOTES.                                                          

We have a substantial amount of debt. As of December 31, 2004, we had 
approximately $183.0 million of total indebtedness outstanding and the amount by
which earnings were inadequate to cover fixed charges was $7.7 million. We had  
the ability to borrow, as of December 31, 2004, an additional $17.2 million     
under the revolving portion of our domestic senior credit facility, subject to  
the restrictions in the indenture and in our domestic senior credit facility.   
Additionally, subject to restrictions in the indenture and our domestic senior  
credit facility, we may incur additional indebtedness.                          

  Our high level of indebtedness could have important consequences to you,
including the following:                                                        

- it may make it difficult for us to satisfy our obligations under the
notes and our other indebtedness and contractual and commercial   
commitments;                                                      

     - we must use a substantial portion of our cash flow from operations to pay
     interest on the notes and our other indebtedness, which will reduce the
funds available to us for other purposes;                         

- all of the indebtedness outstanding under our domestic senior credit
    facility will have a prior ranking claim on our assets and will mature
prior to the notes;                                               

- our domestic senior credit facility has a variable rate of interest,
which exposes us to the risk of increased interest rates;         

     - our ability to obtain additional debt financing in the future for working
       capital, capital expenditures, acquisitions or general corporate purposes
may be limited;                                                   

     - our high level of indebtedness could limit our flexibility in reacting to
       changes in the industry and make us more vulnerable to adverse changes in
our business or economic conditions in general;                   

- our high level of indebtedness could place us at a competitive      
      disadvantage to those of our competitors who operate on a less leveraged
basis; and                                                        

    - if we fail to comply with the covenants in the indenture relating to the
notes, our domestic senior credit facility or in the instruments  
governing our other indebtedness (including the indenture for our 
      outstanding senior subordinated notes due 2008), such failure could have
    a material adverse effect on our business and our ability to repay the
notes.                                                            

   Our ability to make payments with respect to the notes and to satisfy our
other debt obligations will depend on our future operating performance and our  
ability to refinance our indebtedness, which will be affected by prevailing     
economic conditions and financial, business and other factors, certain of which 
are beyond our control.                                                         

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WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE
AND OTHER OBLIGATIONS DUE TO EVENTS BEYOND OUR CONTROL.                     

     Upon the issuance of the old notes, our interest expense increased compared
to prior years. Our ability to generate cash flows from operations and to make  
scheduled payments on our indebtedness, including equipment and other leases,   
will depend on our future financial performance. Our future performance will be 
affected by a range of economic, competitive and business factors that we cannot
control, such as general economic and financial conditions in our industry or   
the economy at large. A significant reduction in operating cash flows resulting 
from changes in economic conditions, increased competition, or other events     
beyond our control could increase the need for additional or alternative sources
of liquidity and could have a material adverse effect on our business, financial
condition, results of operations, prospects and our ability to service our debt 
and other obligations. If we are unable to service our indebtedness, we will be 
forced to adopt an alternative strategy that may include actions such as        
reducing or delaying acquisitions and capital expenditures, selling assets,     
restructuring or refinancing our indebtedness, or seeking additional equity     
capital. We cannot assure you that any of these alternative strategies could be 
effected on satisfactory terms, if at all, or that they would yield sufficient  
funds to make required payments on the notes and our other indebtedness. See    
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations -- Liquidity and Capital Resources."                                 

     We urge you to consider the information under "Capitalization," "Prospectus
Summary -- Summary Historical and Unaudited Consolidated Financial Data,"       
"Description of the Notes," and "Description of Certain Indebtedness" for more  
information on these matters.                                                   

 WE WILL DEPEND ON DISTRIBUTIONS FROM OUR SUBSIDIARIES TO MEET OUR OBLIGATIONS
UNDER THE NEW NOTES.                                                        

Substantially all of our operating income comes from our subsidiaries.
Therefore, we will depend on dividends and other distributions from our         
restricted subsidiaries to generate the funds necessary to meet our obligations,
including the payment of principal and interest on the notes. The ability of our
subsidiaries to pay such dividends will be subject to, among other things, the  
terms of any debt instruments of our subsidiaries then in effect and applicable 
law. In addition, in the case of our foreign subsidiaries, dividends and        
interest may be subject to foreign withholding taxes, which would reduce the    
amount of funds we receive from such foreign subsidiaries. Distributions from   
our foreign subsidiaries may also be subject to fluctuations in currency        
exchange rates, which could reduce the amount of funds we receive from such     
foreign subsidiaries.                                                           

THE DUTCH ISSUER IS A FINANCE SUBSIDIARY WITH LIMITED ASSETS.               

     The capital stock of PAH Belgium, the intercompany loan to PAH Belgium that
was previously funded with proceeds of the Dutch notes issued in October 2003   
and the new intercompany loan to PAH Belgium, are and will be the only          
significant assets of the Dutch issuer. Therefore the Dutch issuer will be      
entirely dependent on payments on the intercompany loans to PAH Belgium to make 
payments on the Dutch notes. In return, PAH Belgium will depend on the income it
receives from its business operations to service its indebtedness in respect of 
the intercompany loans granted to it by the Dutch issuer. Your right to receive 
payments on the Dutch notes could be adversely affected if PAH Belgium is       
declared bankrupt, liquidates or reorganizes. The dependence of the Dutch issuer
on payments from the US issuer and its domestic guarantors is likely to increase
after the sale of the Belgium Plant and the sale of the virginiamycin inventory 
to be built up prior to a supply from a new source.                             

THE COLLATERAL SECURING THE NEW NOTES MAY BE INSUFFICIENT OR UNAVAILABLE IN 
THE EVENT OF A DEFAULT.                                                     

 No appraisal of the value of the collateral has been made in connection
with this offering and the value of the collateral in the event of liquidation  
will depend on market and economic conditions, the availability of buyers and   
other factors. Consequently, we cannot assure you that liquidating the          
collateral securing the notes would produce proceeds in an amount sufficient to 
pay any amounts due under the notes after also satisfying the obligations to pay
any other senior secured creditors. Nor can we assure you that the fair market  
value of the collateral securing the notes would be sufficient to pay any       
amounts due under the notes following their acceleration.                       

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    The notes and guarantees related thereto will be effectively subordinated,
to the extent of the value of assets securing the notes and such guarantees, to 
indebtedness that may be incurred under our domestic senior credit facility and 
our performance bonds. In the event of a default under the notes, the proceeds  
from the sale of the collateral may not be sufficient to satisfy in full our    
obligations under our domestic senior credit facility, our performance bonds and
the notes. The amount to be received upon such a sale would depend upon numerous
factors, including the timing and manner of the sale. The book value of the     
collateral will be less than the principal amount of the notes offered hereby.  
By its nature, the collateral will be illiquid and may have no readily          
ascertainable market value. Accordingly, there can be no assurance that the     
collateral can be sold in a short period of time or that the proceeds obtained  
therefrom will be sufficient to pay all amounts owing to the lenders under our  
domestic senior credit facility and the holders of the notes. In addition, our  
failure or inability to pay rent under real property leases could cause the loss
of certain collateral. To the extent that third parties (including the lenders  
under our domestic senior credit facility) enjoy permitted liens, such third    
parties may have rights and remedies with respect to the property subject to    
such liens that, if exercised, could adversely affect the value of the          
collateral. Additionally, the terms of the indenture allow us to issue          
additional notes provided that we meet a specified coverage ratio. The indenture
does not require that we maintain the current level of collateral or maintain a 
specific ratio of indebtedness to asset values. Any additional notes issued     
pursuant to the indenture will rank pari passu to the notes issued in the       
exchange offer and be entitled to the same rights and priority with respect to  
the collateral. Thus, the issuance of additional notes pursuant to the indenture
may have the effect of significantly diluting your ability to recover payment in
full from the then existing pool of collateral. See "Description of the New     
Notes -- Security."                                                             

THE LIEN-RANKING PROVISIONS SET FORTH IN THE INDENTURE GOVERNING THE NOTES  
LIMIT THE RIGHTS OF THE HOLDERS OF THE NEW NOTES WITH RESPECT TO THE        
COLLATERAL SECURING THE NEW NOTES AND THE GUARANTEES RELATED THERETO.       

  The rights of the holders of the notes with respect to the collateral of
the US issuer and its domestic restricted subsidiaries that secure the notes are
substantially limited pursuant to the terms of the lien-ranking provisions set  
forth in the intercreditor agreement relating to the indenture governing the    
notes. Under those lien-ranking provisions, at any time that obligations that   
have the benefit of liens that are senior to the liens securing the notes and   
such guarantees pursuant to the terms thereof are outstanding, any actions that 
may be taken in respect of that collateral, including the ability to cause the  
commencement of enforcement proceedings against that collateral and to control  
the conduct of such proceedings, and releases of that collateral from the lien  
of the collateral documents of the US issuer and its domestic restricted        
subsidiaries, will be at the direction of the holders of the obligations secured
by such senior liens, and the collateral agent, on behalf of itself, the trustee
and the holders of the notes, will not have the ability to control or direct    
such actions, even if the rights of the holders of the notes are adversely      
affected. Additional releases of that collateral from the liens securing the    
notes are permitted under some circumstances.                                   

THE ABILITY OF THE COLLATERAL AGENT TO FORECLOSE ON THE COLLATERAL MAY BE   
LIMITED PURSUANT TO BANKRUPTCY LAWS.                                        

    The right of the collateral agent, as a secured party under the collateral
documents for the benefit of itself, the trustee and the holders of the US      
notes, to foreclose upon and sell the collateral upon the occurrence of a       
payment default is likely to be significantly impaired by applicable bankruptcy 
laws, including the automatic stay provision contained in Section 362 of the    
Bankruptcy Code. Under applicable federal bankruptcy laws, a secured creditor is
prohibited from repossessing its security from a debtor in a bankruptcy case, or
from disposing of security repossessed from such a debtor, without bankruptcy   
court approval. Moreover, applicable federal bankruptcy laws generally permit   
the debtor to continue to retain and use collateral even though the debtor is in
default under the applicable debt instruments. In view of the broad             
discretionary powers of a bankruptcy court, we cannot predict whether payments  
under the US notes would be made following commencement of, and during the      
pendency of, a bankruptcy case, whether or when the collateral agent could      
foreclose upon or sell the collateral or whether or to what extent holders of   
notes would be compensated for any delay in payment or loss of value of the     
collateral. Furthermore, if a bankruptcy court determines that the value of the 
collateral is not sufficient to repay all amounts due on the notes, holders of  
US notes would hold                                                             

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"under-secured claims." Applicable federal bankruptcy laws do not permit the    
payment or accrual of interest, costs and attorney's fees for "under-secured    
claims" during a debtor's bankruptcy case.                                      

There are two primary insolvency regimes under Dutch law: the first,  
moratorium of payment (surseance van betaling) is intended to facilitate the    
reorganization of a debtor's debts and enable the debtor to continue as a going 
concern. The second, bankruptcy (faillissement), is designed to liquidate and   
distribute the assets of a debtor to its creditors. Under Netherlands law the   
holders of the Dutch notes can in the event of bankruptcy or moratorium of      
payment exercise the rights afforded to pledgees as if there were no bankruptcy 
or moratorium of payment. However, bankruptcy or moratorium of payment involving
the Dutch issuer would affect the position of the holders of the Dutch notes as 
pledgees in some respects, the most important of which are: (i) the right of    
pledge will not extend to accounts receivable that arise under an agreement     
creating continuing obligations of the Dutch issuer and become due and payable  
on or after the date on which the Dutch issuer is declared bankrupt or granted a
moratorium of payments, (ii) the right of pledge will not extend to inventory   
that is acquired by the Dutch issuer on or after the date on which the Dutch    
issuer is declared bankrupt or granted a moratorium of payments, (iii) payments 
received by the Dutch issuer from the debtors of pledged accounts receivable    
after bankruptcy or moratorium of payments involving the Dutch issuer having    
been declared, will be part of the bankrupt estate, although the holders of the 
Dutch notes have the right to receive such amounts by preference after deduction
of certain costs, (iv) a mandatory "cooling-off" period of up to two months may 
apply in case of bankruptcy or moratorium of payments involving the Dutch       
issuer, which, if applicable, would delay the exercise of the rights of pledge  
on the shares of PAH Belgium and the accounts receivable and (v) the holders of 
the Dutch notes may be obliged to enforce their rights of pledge within a       
reasonable period as determined by the judge-commissioner (rechter-commissaris) 
appointed by the court in case of bankruptcy of the Dutch issuer.               

 THE INDENTURE GOVERNING THE NEW NOTES AND THE INSTRUMENTS GOVERNING OUR OTHER
INDEBTEDNESS IMPOSE SIGNIFICANT OPERATING AND FINANCIAL RESTRICTIONS ON US  
 THAT MAY PREVENT US FROM PURSUING CERTAIN BUSINESS OPPORTUNITIES AND RESTRICT
OUR ABILITY TO OPERATE OUR BUSINESS.                                        

   The indenture governing the notes and our domestic senior credit facility
contain covenants that restrict our ability to take various actions, such as:   

- incur additional indebtedness or issue disqualified capital stock;  

- make investments                                                    

- pay dividends or make other restricted payments;                    

- issue capital stock of certain subsidiaries;                        

- enter into transactions with affiliates;                            

- create or incur liens;                                              

- transfer or sell assets;                                            

- incur dividend or other payment restrictions affecting certain      
subsidiaries; and                                                 

     - consummate a merger, consolidation or sale of all or substantially all of
our assets.                                                       

     Our ability to comply with these covenants can be affected by events beyond
our control and we cannot assure you that we will satisfy those requirements. A 
breach of any of these provisions could result in a default under these         
instruments, which could allow all amounts outstanding thereunder to be declared
immediately due and payable. We cannot assure you that our assets would be      
sufficient to repay such amounts (including amounts due under the notes) in     
full. We may also be prevented from taking advantage of business opportunities  
that arise if we fail to meet certain financial ratios or because of the        
limitations imposed on us by the restrictive covenants under these instruments. 
We urge you to read the information under "Management's Discussion and Analysis 
of Financial Condition and Results of Operations -- Liquidity and Capital       
Resources," "Description of Certain Indebtedness" and "Description of the New   
Notes -- Certain Covenants" for a more detailed discussion of the substantive   
requirements of these covenants.                                                
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WE MAY BE UNABLE TO PURCHASE THE NEW NOTES UPON A CHANGE OF CONTROL.        

     Upon the occurrence of a change of control, we will be required to offer to
purchase all outstanding notes at a price equal to 101% of the principal amount 
of the notes, together with accrued and unpaid interest, if any, and additional 
interest or liquidated damages, if any, to the date of repurchase.              

    However, it is possible that we will not have sufficient funds at the time
of the change of control to make the required repurchase of the notes or that   
restrictions in our domestic senior credit facility will not allow such         
repurchases. If we are required to repurchase the notes, we would probably      
require third party financing. We cannot be sure that we would be able to obtain
third party financing on acceptable terms, or at all. Our failure to purchase   
the notes would be a default under the indenture, which would result in a       
default under our domestic senior credit facility. See "Description of the New  
Notes -- Change of Control" and "Description of Certain Indebtedness -- Domestic
Senior Credit Facility."                                                        

    One of the circumstances under which a change of control may occur is upon
the sale or disposition of all or substantially all of our capital stock or     
assets. However, the phrase "all or substantially all" will likely be           
interpreted under applicable state law and will be dependent upon particular    
facts and circumstances. As a result, there may be a degree of uncertainty in   
ascertaining whether a sale or disposition of "all or substantially all" of our 
capital stock or assets has occurred, in which case, the ability of a holder of 
the notes to obtain the benefit of an offer to repurchase all of a portion of   
the notes held by such holder may be impaired.                                  

A COURT COULD CANCEL THE GUARANTEES AND SECURITY INTERESTS UNDER FRAUDULENT 
CONVEYANCE LAWS OR CERTAIN OTHER CIRCUMSTANCES.                             

All of our present and future domestic restricted subsidiaries will   
guarantee the notes and provide assets as security for such guarantees. If,     
however, such a subsidiary becomes a debtor in a case under the Bankruptcy Code 
or encounters other financial difficulty, under federal or state fraudulent     
conveyance laws, renewable transactions or preferential payments, a court in the
relevant jurisdiction might avoid or cancel its guarantee and/or the liens      
created by the security interest. The court might do so if it found that, when  
the subsidiary entered into its guarantee and security arrangement or, in some  
states, when payments become due thereunder, it received less than reasonably   
equivalent value or fair consideration for such guarantee and/or security       
arrangement and either was or was rendered insolvent, was left with inadequate  
capital to conduct its business, or believed or should have believed that it    
would incur debts beyond its ability to pay. The court might also avoid such    
guarantee and/or security arrangement, without regard to the above factors, if  
it found that the subsidiary entered into its guarantee and/or security         
arrangement with actual or deemed intent to hinder, delay, or defraud its       
creditors.                                                                      

    A court could find that a subsidiary did not receive reasonably equivalent
value or fair consideration for its guarantee and/or security arrangement unless
it benefited directly or indirectly from the issuance of the notes. If a court  
avoided such guarantee and/or security arrangement, you would no longer have a  
claim against such subsidiary. In addition, the court might direct you to repay 
any amounts already received from such subsidiary. If the court were to avoid   
any guarantee and/or security arrangement, we cannot assure you that funds would
be available to pay the notes from another subsidiary or from any other source. 
In addition to the grounds set out above and other grounds for invalidating     
guarantees and security in insolvency, PAH Belgium's guarantee of the Dutch     
notes and/or the security interests securing such guarantee could be invalidated
by a Belgian court if it is held to be ultra vires or contrary to PAH Belgium's 
corporate interest. This could be the case if the court were to find that PAH   
Belgium did not receive a benefit proportionate to the risk it incurred under   
the guarantee, or if such risk is disproportionate to PAH Belgium's financial   
means.                                                                          

The indenture will state that the liability of each subsidiary on its 
guarantee and security arrangement is limited to the maximum amount that the    
subsidiary can incur without risk that the guarantee or security arrangement    
will be subject to avoidance as a fraudulent conveyance. This limitation may not
protect the guarantees and/or security arrangements from a fraudulent conveyance
attack or, if it does, that the guarantees and/or security arrangements will be 
in amounts sufficient, if necessary, to pay obligations under the notes when    
due.                                                                            

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THE NEW NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL EXISTING AND FUTURE   
LIABILITIES, INCLUDING ALL INDEBTEDNESS, OF OUR FOREIGN AND UNRESTRICTED    
SUBSIDIARIES.                                                               

   Our operations are predominantly conducted through subsidiaries. Although
our domestic restricted subsidiaries have guaranteed the notes and entered into 
security arrangements with respect to certain of their assets to secure         
repayment of the notes, our foreign and unrestricted subsidiaries (other than   
the Dutch issuer and its restricted subsidiaries with respect to the Dutch notes
and the related guarantees) have not guaranteed, granted liens or otherwise     
become obligated with respect to the notes. Claims of creditors of such         
subsidiaries, including trade creditors, will generally have priority as to the 
assets of such subsidiaries over the claims of us and the holders of our        
indebtedness, including the notes. The notes will therefore be effectively      
subordinated to all existing and future liabilities, including indebtedness, of 
our foreign subsidiaries (other than the Dutch issuer and its restricted        
subsidiaries with respect to the Dutch notes and the related guarantees). As of 
December 31, 2004, our foreign subsidiaries had indebtedness for borrowed money 
and had other liabilities of approximately $30.3 million reflected on our       
consolidated balance sheet. For fiscal 2004, our foreign subsidiaries           
contributed approximately 29% of our consolidated net sales.                    

In addition, distributions and intercompany transfers to us from our  
subsidiaries will depend on:                                                    

- their earnings;                                                     

- covenants contained in our and their debt agreements, including our 
domestic senior credit facility and the notes;                    

   - covenants contained in other agreements to which we or our subsidiaries
are or may become subject;                                        

- business and tax considerations; and                                

 - applicable law, including laws regarding the payment of dividends and
distributions.                                                    

    We cannot assure you that the operating results of our subsidiaries at any
given time will be sufficient to make distributions or other payments to us or  
that any distributions and/or payments will be adequate to pay any amounts due  
under the notes or our other indebtedness.                                      

THERE IS NO ESTABLISHED TRADING MARKET FOR THE NEW UNITS, AND YOU MAY NOT BE
ABLE TO SELL THEM QUICKLY OR AT THE PRICE YOU PAID.                         

     The units are a new issue of securities and there is no established trading
market for the units. Although, upon being declared effective, the registration 
statement will generally allow resales of the exchange units, the exchange units
will constitute a new issue of securities with no established trading market. We
do not intend to apply for the units or any exchange units to be listed on any  
security exchange or to arrange for quotation on any automated dealer quotation 
systems. The initial purchaser has advised us that it intends to make a market  
in the units and the exchange units, but it is not obligated to do so and may   
discontinue any market making in the units or exchange units at any time, in its
sole discretion. You may not be able to sell your units or exchange units at a  
particular time or at favorable prices. As a result, we cannot assure you as to 
the liquidity of any trading market for the units or the exchange units or, in  
the case of any holders or the units that do not exchange them, the trading     
market for the units following the offer to exchange the units for exchange     
units. As a result, you may be required to bear the financial risk of your      
investment in the units indefinitely. Future trading prices of the units and    
exchange units may be volatile and will depend on many factors, including:      

- our operating performance and financial condition;                  

    - our ability to complete the offer to exchange the units for the exchange
units;                                                            

- the interest of securities dealers in making a market for them; and 

- the market for similar securities.                                  

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  AS A RESULT OF THE DUTCH NOTES BEING ISSUED IN U.S. DOLLARS, WE MAY BE SUBJECT
TO ADDITIONAL CURRENCY RISKS.                                               

     The Dutch notes will be issued and paid for, and the interest paid on these
notes will be paid in, U.S. dollars. The Dutch issuer will lend the proceeds of 
the Dutch notes to PAH Belgium, and will pay interest and principal on the Dutch
notes primarily from interest and principal repayments on such loan to PAH      
Belgium or through dividends from PAH Belgium. PAH Belgium, however, receives   
its revenues primarily in Euros. As a result, in the event that the U.S. dollar 
appreciates against the Euro, PAH Belgium may have difficulty in generating the 
U.S. dollars necessary to repay the U.S. dollar loan from its parent, the Dutch 
issuer. From time to time, if we determine it is appropriate and advisable to do
so, we may seek to lessen the effect of exchange rate fluctuations through the  
use of derivative financial instruments. We cannot assure you, however, that we 
will be successful in these efforts.                                            

BELGIAN LAW MAY LIMIT THE GUARANTEE AND THE RELATED SECURITY OF PAH BELGIUM 
WITH RESPECT TO THE DUTCH NOTES.                                            

     Under Belgian law, the following factors may limit the proceeds which could
ultimately be obtained in respect of the security provided by PAH Belgium:      

- The floating charge over the assets of PAH Belgium is restricted by 
   statute to 50% of all of the inventory (work-in-progress and finished
       goods) of PAH Belgium. The remaining one-half of the inventory would thus
      fall outside the scope of the charge, and would be available for payment
to unsecured creditors.                                           

- Enforcement of the floating charge may trigger the bankruptcy of PAH
      Belgium, as it could significantly impair the use of the business assets
for the ongoing conduct of PAH Belgium's business.                

- Enforcement of the share pledge over the shares of PAH Belgium, the 
      floating charge and the real property mortgage of PAH Belgium is subject
to mandatory court intervention and approval. In insolvency, the  
  insolvency official (under supervision of the court) will handle the
 sale. At certain stages of the process, PAH Belgium itself or other
 creditors could intervene. This could lead to significant delays in
enforcement, which in turn could adversely affect the value of the
    assets, the timing of realization and therefore the amount of proceeds
ultimately obtained for the benefit of the noteholders.           

 - In any Belgian insolvency proceedings involving PAH Belgium, stays on
    enforcement of security are likely to be imposed. These stays could be
 significant, which could adversely affect the ultimate value of the
   collateral. In addition, under Belgian bankruptcy law, the trustee in
   bankruptcy may seek to set aside certain pre-bankruptcy transactions,
    including transactions at an undervalue, new security for pre-existing
       debts, and transactions entered into with the knowledge that the bankrupt
debtor was in a state of insolvency.                              

RISK FACTORS RELATING TO OUR BUSINESS                                           

  WE HAVE SIGNIFICANT ASSETS LOCATED OUTSIDE THE UNITED STATES AND A SIGNIFICANT
PORTION OF OUR SALES AND EARNINGS ARE ATTRIBUTABLE TO OPERATIONS CONDUCTED  
ABROAD.                                                                     

    During fiscal 2004, we operated manufacturing and other facilities in over
16 countries and sold our products in over 40 countries. At December 31, 2004,  
approximately 59% of our assets were located outside the United States,         
representing manufacturing facilities in Belgium, Brazil, Israel and the United 
Kingdom, and, for fiscal 2004, approximately 29% of our net sales consisted of  
sales made by us outside the United States. Changes in the relative values of   
currencies take place from time to time and could in the future adversely affect
our results of operations as well as our ability to meet interest and principal 
obligations on the notes. To the extent that the U.S. dollar weakens or         
strengthens versus the applicable foreign currency, our results are favorably or
unfavorably affected. We may from time to time manage this exposure by entering 
into foreign currency forward exchange contracts. Such contracts generally are  
entered into with respect to anticipated revenues denominated in foreign        
currencies for which timing of the receipt of payment can be                    

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reasonably estimated. No assurances can be given that such hedging activities   
will not result in losses which will have an adverse effect on our financial    
condition or results of operations. In addition, there are times when we do not 
hedge against foreign currency fluctuations and are therefore subject to the    
risks associated with fluctuations in currency exchange rates. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and   
Note 17 to our Consolidated Financial Statements included elsewhere herein.     

    In addition, international manufacturing, sales and raw materials sourcing
are subject to other inherent risks, including possible nationalization or      
expropriation, labor unrest, political instability, price and exchange controls,
limitation on foreign participation in local enterprises, health-care           
regulation, export duties and quotas, domestic and international customs and    
tariffs, unexpected changes in regulatory environments, difficulty in obtaining 
distribution and support, and potentially adverse tax consequences. Although    
such risks have not had a material adverse effect on us in the past, there can  
be no assurance that these factors will not have a material adverse impact on   
our ability to increase or maintain our international sales or on our results of
operations in the future.                                                       

 WE HAVE ASSETS LOCATED IN ISRAEL AND A PORTION OF OURS SALES AND EARNINGS ARE
ATTRIBUTABLE TO OPERATIONS CONDUCTED IN ISRAEL.                             

Israeli operations are conducted through Koffolk (1949) Ltd., a wholly
owned subsidiary, and accounted for approximately 13% of our consolidated assets
as of December 31, 2004 and approximately 12% of our fiscal 2004 consolidated   
net sales. We maintain two manufacturing facilities in Israel, one located near 
Tel Aviv in Petach Tikva, which manufacturers and markets nutritional feed      
additives for the livestock feed industry, and the second located south of      
Beersheba in Ramat Hovav, which synthesizes anticoccidials (nicarbazin and      
amprolium) and vitamins, the bulk of which are exported from Israel to the major
world markets. Accordingly, Koffolk is dependent on foreign markets and its     
ability to reach those markets. Consequently, we are affected by social,        
political and economic conditions affecting Israel, and any major hostilities   
involving Israel as well as the Middle East or curtailment of trade between     
Israel and its current trading partners, either as a result of hostilities or   
otherwise, could have a material adverse effect on us. See "Conditions in       
Israel."                                                                        

WE FACE COMPETITION IN EACH OF OUR MARKETS FROM A NUMBER OF LARGE AND SMALL 
COMPANIES, SOME OF WHICH HAVE GREATER FINANCIAL, RESEARCH AND DEVELOPMENT,  
PRODUCTION AND OTHER RESOURCES THAN WE HAVE.                                

Many of our products, including our Animal Health and Nutrition and   
Specialty Chemicals products, face competition from products which may be used  
as an alternative or substitute therefore. In addition, we compete with several 
large companies in the animal health and nutrition and specialty chemicals      
businesses. To the extent these companies, or new entrants into the market,     
offer comparable animal health and nutrition or specialty chemical products at  
lower prices, our business could be adversely affected.                         

     Our competitive position is based principally on our product registrations,
customer service and support, breadth of product line, product quality,         
manufacturing technology, facility location, and the selling prices of our      
products. Our competitors can be expected to continue to improve the design and 
performance of their products and to introduce new products with competitive    
price and performance characteristics. There can be no assurance that we will   
have sufficient resources to maintain our current competitive position or market
share. We typically do not enter into long-term agreements with our customers.  
See "Business -- Competition" and "Business -- Sales, Marketing and             
Distribution."                                                                  

OUR OPERATIONS, PROPERTIES AND SUBSIDIARIES ARE SUBJECT TO A WIDE VARIETY OF
  COMPLEX AND STRINGENT FEDERAL, STATE, LOCAL AND FOREIGN ENVIRONMENTAL LAWS AND
  REGULATIONS, INCLUDING THOSE GOVERNING THE USE, STORAGE, HANDLING, GENERATION,
 TREATMENT, EMISSION, RELEASE, DISCHARGE AND DISPOSAL OF CERTAIN MATERIALS AND
  WASTES, THE REMEDIATION OF CONTAMINATED SOIL AND GROUNDWATER, THE MANUFACTURE,
SALE AND USE OF PESTICIDES AND THE HEALTH AND SAFETY OF EMPLOYEES           
(COLLECTIVELY, "ENVIRONMENTAL LAWS").                                       

Pursuant to these Environmental Laws, certain of our subsidiaries are 
required to obtain and retain numerous governmental permits and approvals,      
including RCRA Part B permits, to conduct various aspects of their operations,  
any of which may be subject to revocation, modification or denial under certain 
circum-                                                                         

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stances. U.S. manufacturers of specialty chemicals, including certain of our    
subsidiaries, have expended, and may be required to expend in the future,       
substantial funds for compliance with such Environmental Laws.                  

   As recyclers of hazardous metal-containing chemical waste, certain of our
subsidiaries have been, and are likely to be, the focus of extensive compliance 
reviews by federal, state and local environmental regulatory authorities. In the
past, certain of our subsidiaries have paid certain fines and agreed to certain 
consent orders. While procedures have been implemented at each facility which   
are intended to achieve compliance in all material respects with Environmental  
Laws, there can be no assurance that our operations or activities or those of   
certain of our subsidiaries will not result in civil or criminal enforcement    
actions or private actions, resulting in mandatory clean-up requirements,       
revocation of required permits or licenses or significant fines, penalties or   
damages which could have a material adverse effect on us. In addition, we cannot
predict the extent to which any further legislation or regulation may affect the
market for our services or our cost of doing business. For instance, if         
governmental enforcement efforts should lessen, the market for the recycling    
services by certain of our subsidiaries could decline. Alternatively, changes in
Environmental Laws (some of which are set forth below) might increase the cost  
of such services by imposing additional requirements. States that have received 
authorization to administer their own hazardous waste management programs may   
also amend their applicable Environmental Laws, and may impose requirements     
which are stricter than those imposed by the U.S. Environmental Protection      
Agency ("EPA"). No assurance can be provided that such changes will not         
adversely affect the ability of our subsidiaries to provide services at a       
competitive price and thereby reduce the market for their services.             

   As such, the nature of our current and former operations and those of our
subsidiaries exposes us and our subsidiaries to the risk of claims with respect 
to such matters and there can be no assurance that material costs and           
liabilities will not be incurred in connection with such claims. Based upon our 
experience to date, we believe that the future cost of compliance with existing 
Environmental Laws, and liability for known environmental claims pursuant to    
such Environmental Laws, will not have a material adverse effect on us. However,
future events, such as new information, changes in existing Environmental Laws  
or their interpretation, and more vigorous enforcement policies of regulatory   
agencies, may give rise to additional expenditures or liabilities that could be 
material. See "Management's Discussion and Analysis of Financial Condition and  
Results of Operations," "Business -- Environmental Matters," "Business -- Legal 
Proceedings," and our Consolidated Financial Statements included herein.        

  THE USE OF ANTIBIOTICS IN MEDICATED FEED ADDITIVES IS A SUBJECT OF LEGISLATIVE
AND REGULATORY INTEREST.                                                    

The issue of potential for increased bacterial resistance to certain  
antibiotics used in certain food-producing animals is the subject of discussions
on a worldwide basis and, in certain instances, has led to government           
restrictions on the use of antibiotic MFAs in these food-producing animals. The 
sale of medicated feed additives containing antibiotics is a material portion of
our business. Legislative bills are introduced in the U.S. Congress from time to
time, some of which, if adopted, could have an adverse effect on our business.  
However, in the past, such bills that could have had a material adverse effect, 
have not had sufficient support to become law. The animal pharmaceutical        
industry is actively engaged in the legislative process. One of these           
initiatives is a proposed bill (S.1460) referred to the Committee on Health,    
Education, Labor, and Pensions of the Senate, called the Preservation of        
Antibiotics for Medical Treatment Act of 2003, sponsored by Senator Edward      
Kennedy. Should legislative, regulatory or other developments, including        
increased influence of consumer groups and other special interest lobbyists on  
the legislative and/or regulatory process, result in further restrictions on the
sale of such products, it could have a material adverse impact on our financial 
position, results of operations and cash flows.                                 

   On November 23, 2004, the FDA's Center for Veterinary Medicine released a
draft for comment of its long awaited risk assessment of streptogramin          
resistance for treatment of certain infections in humans attributable to the use
of streptogramins in animals (the "virginiamycin risk assessment"). The risk    
assessment was initiated over three years ago after the 1999 approval of        
Synercid for treating E. faecium infection in humans, which approval led to     
increased attention to the use of streptogramins in animals. Synercid and       
virginiamycin are both members of the streptogramin class of antimicrobial      
drugs. The draft risk assessment specifically addresses the risk of humans      
failing Synercid therapy for E. faecium infections due to                       
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the acquisition of resistance as a result of the ingestion of resistant strains 
of E. faecium present in food. The draft risk assessment found that it is       
difficult to assess the extent of transfer of streptogramin resistance from     
virginiamycin-exposed E. faecium infection to E. faecium infection found in     
human infections based on the available data, and that there are certain        
differences in the characteristics of E. faecium isolated from animal and human 
sources. The risk assessment concluded that these two findings, along with the  
current incomplete knowledge of the genetic basis of streptogramin resistance,  
prevents the risk assessment from making firm conclusions as to whether, and, if
so, how much, the use of virginiamycin in food animals contributes to the       
occurrence of virginiamycin-resistant infections in humans via a foodborne      
pathway.                                                                        

In August 2002, Japan's Ministry of Agriculture, Forests and Fisheries
(MAFF) launched a review of 29 U.S., European, and Japanese animal feed         
additives to determine whether the preventive use of certain medicated animal   
feed additives should be restricted because of the potential transfer of        
antimicrobial resistance to similar drugs used in treating humans. In January   
2003, MAFF announced that it would conduct a transparent science-based risk     
assessment of certain feed additives, consistent with the World Trade           
Organization's ("WTO") Agreement on the Application of Sanitary and             
Phyto-Sanitary Measures (SPS Agreement), and thus was no longer considering an  
immediate ban on such products. The SPS Agreement requires the 165 countries    
that are WTO Members to base food safety and animal health measures on          
scientific principles and evidence. Accordingly, such a risk assessment involves
a detailed study of potential risks and appropriate methods of managing such    
risks, and must be based on valid scientific principles and evidence.           

  The Australian Pesticides and Veterinary Medicines Authority (APPVMA) is
conducting a review of virginiamycin, which is likely to result in additional   
restrictions on the labeling of virginiamycin.                                  

In February 2003, the Sixtieth Joint FAO/WHO Expert Committee on Food 
Additives (JECFA) was held in Geneva, Switzerland to evaluate certain residues  
of veterinary drugs in food. Based on an earlier opinion from the thirty-sixth  
JECFA meeting in 1990, the Committee determined that an "acceptable daily       
intake" (ADI) of carbadox and another animal drug, flumequine, could not be     
established, because of the lack of an internationally agreed methodology for   
evaluating the scientific risks posed by such products. Accordingly, the JECFA  
recommended that the international Maximum Residue Levels (MRLs) for such       
products be withdrawn.                                                          

The JECFA consists of experts from various countries acting in their  
individual capacities. Its recommendations are not binding on the full Codex    
Alimentarius Commission ("Codex"), which is the recognized international        
standard-setting body for animal drugs. The Codex and its member countries are  
responsible for any final decision regarding the MRL, and must review JECFA's   
recommendations before any decision could be made. At present, the MRL for      
carbadox, which was established by JECFA in 1990, remains the international     
standard. Nevertheless, foreign governments could decide to restrict the uses of
carbadox in the interim, as has occurred in the European Union. Japan has banned
the use of carbadox in Japan, while allowing the import of pork from swine fed a
carbadox containing MFA so long as no residues are detectable in the imported   
pork.                                                                           

Codex Committee on Residues of Veterinary Drugs in Food (CCRVDF) has  
recently endorsed the JECFA recommendation to withdraw the Codex MRL for        
carbadox.                                                                       

    In 1998, the FDA conducted an evaluation of carbadox and found that it was
safe based on the U.S. "sensitivity of the method" policy. Accordingly, the FDA 
continues to permit the approved use of carbadox in the United States.          

     In the European Union, the Commission withdrew marketing authorization of a
number of anticoccidials, including nicarbazin, as the Commission did not       
consider the submissions to be in full compliance with its new regulations. We  
have since completed the necessary data and resubmitted our nicarbazin dossier. 
Feasibility and timetable for new registration will depend on the nature of     
demands and remarks from the Commission.                                        

    There can be no assurance that the United States, Japan or other countries
may not decide to ban or curtail the uses of certain medicated feed additives.  
Such a ban, depending upon the product involved and its                         

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importance to our MFA business, in one or more countries could have a material  
adverse effect on our business.                                                 

THE TESTING, MANUFACTURING, AND MARKETING OF CERTAIN OF OUR PRODUCTS ARE    
SUBJECT TO EXTENSIVE REGULATION BY NUMEROUS GOVERNMENT AUTHORITIES IN THE   
UNITED STATES AND OTHER COUNTRIES, INCLUDING, BUT NOT LIMITED TO, THE UNITED
STATES FOOD AND DRUG ADMINISTRATION (FDA).                                  

Among other requirements, FDA approval of our MFA and NFA products,   
including a review of the manufacturing processes and facilities used to produce
such products, is required before such products may be marketed in the United   
States. Similarly, marketing approval by a foreign governmental authority is    
typically required before such MFA and NFA products may be marketed in a        
particular foreign country. In order to obtain FDA approval of a new animal     
health and nutrition product, we must, among other things, demonstrate to the   
satisfaction of the FDA that the product is safe and effective for its intended 
uses and that we are capable of manufacturing the product with procedures that  
conform to the FDA's current good manufacturing practice ("cGMP") regulations,  
which must be followed at all times. The process of seeking FDA approvals can be
costly, time consuming, and subject to unanticipated and significant delays.    
There can be no assurance that such approvals will be granted to us on a timely 
basis, or at all. Any delay in obtaining or any failure to obtain such approvals
would adversely affect our ability to introduce and market MFA and NFA products 
and to generate product revenue. See "Business -- Government Regulation."       

  FIFRA, a health and safety statute, requires that all pesticides sold or
distributed in the U.S. must first be registered with the EPA. In order to      
obtain a registration, an applicant typically must demonstrate through test data
that its product will not cause unreasonable adverse effects on the environment.
Depending on the specific requirements at issue, these tests can be very        
expensive, running to millions of dollars. However, if the product in question  
is generic in nature (i.e., chemically identical or substantially similar to a  
previously-registered product), the applicant has the option of citing and      
relying on the test data supporting the original registrant's product, in lieu  
of submitting data. Should the generic applicant choose the citation option, it 
must offer to pay compensation to the original submitter and must agree to enter
into binding arbitration with the original submitter if the parties are unable  
to agree on the terms and amount of compensation.                               

  We have elected the citation option in the past and may use the citation
option in the future should we conclude that it is economically desirable to do 
so. While there are cost savings associated with the opportunity to avoid one's 
own testing and demonstration to the EPA of test data, there is, in each        
instance, a risk that the level of compensation ultimately required to be paid  
by us to the original registrant will be substantial. There is also the risk    
that a third party will elect the citation option with respect to one of our    
products, and that the level of compensation ultimately required to be paid to  
us as the original registrant will not be substantial.                          

MR. JACK BENDHEIM OWNS A SUBSTANTIAL AMOUNT OF OUTSTANDING SHARES OF OUR    
VOTING CAPITAL STOCK.                                                       

    Pursuant to corporate law and certain shareholder agreements, Mr. Bendheim
controls the election of all but four of seven of the directors of the Company  
and Marvin Sussman, Mr. Bendheim's brother-in-law, controls the election of one 
of the directors of the Company. Mr. Bendheim's capital stock in the Company and
board seats give him substantial influence on the outcome of corporate          
transactions or other matters submitted to the board of directors or            
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, and also the power to prevent or cause a    
change in control. Mr. Bendheim is also the Chairman of the Board and President.

The interests of Mr. Bendheim could conflict with your interests. For 
example, if we encounter financial difficulties or are unable to pay our debts  
as they mature, the interests of Mr. Bendheim as a significant holder of our    
equity might conflict with your interests as a holder of the notes. Mr. Bendheim
also may have an interest in pursuing acquisitions, divestitures, financings or 
other transactions that, in his judgment, could enhance his equity investment,  
even though such transactions might involve risks to you, as holders of the     
notes. See "Management -- Directors and Executive Officers" and "Principal      
Stockholders."                                                                  

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 THE PRINCIPAL RAW MATERIALS USED BY US IN THE MANUFACTURE OF OUR PRODUCTS CAN
BE SUBJECT TO CYCLICAL PRICE FLUCTUATIONS.                                  

   No single raw material accounted for more than 5% of our fiscal 2004 cost
of goods sold. While the selling prices of our products tend to increase or     
decrease over time with the cost of raw materials, such changes may not occur   
simultaneously or to the same degree. There can be no assurance that we will be 
able to pass any increases in raw material costs through to our customers in the
form of price increases. Significant increases in the price of raw materials, if
not offset by product price increases, would have an adverse impact upon our    
profitability.                                                                  

OUR REVENUES ARE DEPENDENT ON THE CONTINUED OPERATION OF OUR VARIOUS        
MANUFACTURING FACILITIES AND INTELLECTUAL PROPERTY.                         

  Although presently all our operating plants are considered to be in good
condition, the operation of animal health and nutrition and specialty chemical  
manufacturing plants involves many risks, including the breakdown, failure or   
substandard performance of equipment, power outages, the improper installation  
or operation of equipment, natural disasters and the need to comply with        
environmental and other directives of governmental agencies. Certain of our     
product lines are manufactured at a single facility and production would not be 
transferable to another site. The occurrence of material operational problems,  
including but not limited to the above events, may adversely affect our         
profitability during the period of such operational difficulties.               

   Our competitive position is also dependent upon unpatented trade secrets,
which generally are difficult to protect. There can be no assurance that others 
will not independently develop substantially equivalent proprietary information 
and techniques or otherwise gain access to our trade secrets, that such trade   
secrets will not be disclosed or that we can effectively protect our rights to  
unpatented trade secrets.                                                       

WE HAVE BEEN AND MAY CONTINUE TO BE SUBJECT TO CLAIMS OF INJURY FROM DIRECT 
  EXPOSURE TO CERTAIN OF OUR SUBSIDIARIES' PRODUCTS, WHICH CONSTITUTE OR CONTAIN
HAZARDOUS MATERIALS AND FROM INDIRECT EXPOSURE WHEN SUCH MATERIALS ARE      
INCORPORATED INTO OTHER COMPANIES' PRODUCTS.                                

Because certain of our subsidiaries' products constitute or contain   
hazardous materials, and because the production of certain chemicals involves   
the use, handling, processing, storage and transportation of hazardous          
materials, we and our subsidiaries have been subject to claims of injury from   
direct exposure to such materials and from indirect exposure when such materials
are incorporated into other companies' products. There can be no assurance that 
as a result of past or future operations, there will not be additional claims of
injury by employees or members of the public due to exposure, or alleged        
exposure, to such materials. In most cases, such claims are covered by insurance
and, where applicable, worker's compensation insurance, subject to policy limits
and exclusions.                                                                 

    Furthermore, we and our subsidiaries are parties to a number of claims and
lawsuits arising out of the normal course of business including product         
liabilities and governmental regulation. Certain of these actions seek damages  
in various amounts. In most cases, such claims are covered by insurance. We also
have exposure to present and future claims with respect to workplace exposure,  
workers' compensation and other matters. There can be no assurance as to the    
actual amount of these liabilities or the timing thereof.                       

WE ARE SUBJECT TO RISKS THAT MAY NOT BE COVERED BY OUR INSURANCE POLICIES.  

   In addition to pollution and other environmental risks, we are subject to
risks inherent in the animal health and nutrition and specialty chemicals       
industries, such as explosions, fires and spills or releases. Any significant   
interruption of operations at our principal facilities could have a material    
adverse effect on us. We maintain general liability insurance and property and  
business interruption insurance with coverage limits that we believe are        
adequate. Because of the nature of industry hazards, it is possible that        
liabilities for pollution and other damages arising from a major occurrence may 
not be covered by our insurance policies or could exceed insurance coverages or 
policy limits or that such insurance may not be available at reasonable rates in
the future. Any such liabilities, which could arise due to injury or loss of    
life, severe damage to and destruction of property and equipment, pollution or  
other environmental damage or suspension of operations, could have a            
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material adverse effect on us. See "-- Our operations, properties and           
subsidiaries are subject to a wide variety of complex and stringent federal,    
state, local and foreign environmental laws and regulations, including those    
governing the use, storage, handling, generation, treatment, emission, release, 
discharge and disposal of certain materials and wastes, the remediation of      
contaminated soil and groundwater, the manufacture, sale and use of pesticides  
and the health and safety of employees (collectively, 'Environmental Laws')."   

CERTAIN OF OUR EMPLOYEES ARE COVERED BY COLLECTIVE BARGAINING AGREEMENTS.   

  As of December 31, 2004, approximately 14 of our domestic employees were
covered by a collective bargaining agreement which expires in 2006. Most of our 
employees in Israel are covered by collective bargaining agreements. We believe 
that we have satisfactory relations with our unions and, therefore, anticipate  
reaching new agreements on satisfactory terms as the existing agreements expire 
or shortly thereafter. There can be no assurance, however, that new agreements  
will be reached without a work stoppage or strike or will be reached on terms   
satisfactory to us. A prolonged work stoppage or strike at any of our           
manufacturing facilities could have a material adverse effect on our results of 
operations.                                                                     

WE ARE DEPENDENT ON KEY PERSONNEL.                                          

Our operations are dependent on the continued efforts of our senior   
executive officers, Jack Bendheim, Gerald Carlson and Richard Johnson. The loss 
of the services of any of Messrs. Bendheim, Carlson or Johnson could have a     
material adverse effect on us. We do not carry key-man life insurance other than
to fund stock repurchase or compensation obligations and other than pursuant to 
our arrangements with the Palladium Investors. See "Management -- Directors and 
Executive Officers."                                                            

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USE OF PROCEEDS 

     We will not receive any proceeds from this exchange offer. In consideration
for issuing the new units, we will receive in exchange a like amount of the old 
units. The old units surrendered in exchange for the new units will be retired  
and cancelled and cannot be reissued. Accordingly, issuance of the new notes    
will not result in any increase in our indebtedness. We have agreed to bear the 
expenses of this exchange offer. No underwriter is being used in connection with
the exchange offer.                                                             

     The net proceeds from the sale of the old units issued in October 2003 were
approximately $97.3 million, after deducting fees and expenses from the         
offering. See "Description of Certain Indebtedness" for more information. These 
net proceeds were used to repay approximately $34.9 million of indebtedness     
outstanding under our previous credit facility, purchase $52.0 million of our   
senior subordinated notes at a price of 60% plus accrued and unpaid interest    
through the purchase date and pay certain of our obligations to Pfizer Inc. The 
proceeds of the 2004 Offering were used to refinance $22.5 million of           
indebtedness outstanding under our domestic senior credit facility.             

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CAPITALIZATION

 The following table sets forth our capitalization at December 31, 2004.
This presentation should be read in conjunction with our historical financial   
statements and the related notes thereto included elsewhere in this prospectus. 

                                                                [Download Table]

                                                                 AS OF    
                                                              DECEMBER 31,
                                                                  2004    
                                                              ------------
                                                                  (IN     
                                                               THOUSANDS) 
                                                                          
Cash and cash equivalents...................................    $ 10,170  
                                                                ========  
Total debt:                                                               
  Domestic senior credit facility...........................    $    297  
  Foreign bank loans........................................       7,192  
  Senior secured notes due 2007.............................     127,491  
  Senior subordinated notes due 2008........................      48,029  
  Other.....................................................          --  
                                                                --------  
     Total debt.............................................     183,009  
Series C redeemable preferred stock.........................      22,817  
Shareholders' deficit.......................................     (60,080) 
                                                                --------  
     Total capitalization...................................    $145,746  
                                                                ========  

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SELECTED CONSOLIDATED FINANCIAL DATA

 The following selected consolidated financial data as of and for fiscal
years ended June 30, 2000, 2001, 2002, 2003 and 2004 have been derived from our 
audited annual consolidated financial statements. The following selected        
consolidated financial data as of and for the six months ended December 31, 2004
and 2003 have been derived from our unaudited interim consolidated financial    
statements. The selected consolidated financial data reflect our Odda, Carbide, 
MRT and La Cornubia businesses as discontinued operations for all periods       
presented. You should read the information set forth below in conjunction with  
our "Management's Discussion and Analysis of Financial Condition and Results of 
Operations" and our consolidated financial statements and related notes included
elsewhere in this prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                                                                 6 MONTHS ENDED    
                                                    FISCAL YEARS ENDED JUNE 30,                   DECEMBER 31,     
                                        ----------------------------------------------------   ------------------- 
                                          2000       2001       2002       2003       2004       2003       2004   
                                        --------   --------   --------   --------   --------   --------   -------- 
                                                    (2)(3)                            (7)                          
                                                          (DOLLARS IN THOUSANDS, EXCEPT RATIOS)                    
                                                                                                                   
RESULTS OF OPERATIONS:                                                                                             
Net sales.............................. $261,769   $302,328   $328,676   $341,746   $358,274   $177,490   $181,335 
Cost of goods sold(10).................  201,320    234,784    247,411    251,200    267,871    133,781    144,844 
                                        --------   --------   --------   --------   --------   --------   -------- 
Gross profit...........................   60,449     67,544     81,265     90,546     90,403     43,709     36,491 
Selling, general and administrative                                                                                
  expenses(5)..........................   47,528     61,624     70,636     65,050     66,128     32,609     34,353 
Curtailment of operations at                                                                                       
  manufacturing facility...............   (1,481)                                                                  
Costs of non-completed transaction.....                                                5,261                       
                                        --------   --------   --------   --------   --------   --------   -------- 
Operating income.......................   14,402      5,920     10,629     25,496     19,014     11,100      2,138 
Interest expense.......................   14,520     17,919     18,070     16,281     18,618      8,482     10,635 
Interest (income)......................     (600)      (566)      (346)       (85)      (130)       (74)       (58)
Other expense (income), net............     (506)       327      3,354      1,666        (89)      (458)      (767)
(Gain) from property damage claim......     (946)                                                                  
(Gain) from sale of assets.............              (1,790)        (5)      (127)      (692)                      
Net (gain) on extinguishment of                                                                                    
  debt(6)..............................                                              (23,226)   (23,226)           
                                        --------   --------   --------   --------   --------   --------   -------- 
Income (loss) from continuing                                                                                      
  operations before income taxes.......    1,934     (9,970)   (10,444)     7,761     24,533     26,376     (7,672)
Provision (benefit) for income                                                                                     
  taxes(4).............................    1,143        (24)    14,767     10,060      7,969      3,663         40 
                                        --------   --------   --------   --------   --------   --------   -------- 
Income (loss) from continuing                                                                                      
  operations...........................      791     (9,946)   (25,211)    (2,299)    16,564     22,713     (7,712)
Income (loss) from discontinued                                                                                    
  operations(1)........................    9,262     (4,949)   (26,559)   (14,577)    (1,625)      (403)           
Income (loss) on disposal of                                                                                       
  discontinued operations(1)...........                                      (683)    (2,089)       231            
                                        --------   --------   --------   --------   --------   --------   -------- 
Net income (loss)......................   10,053    (14,895)   (51,770)   (17,559)    12,850     22,541     (7,712)
Change in derivative instruments.......                          1,062       (981)       (72)       419        322 
Change in foreign currency translation                                                                             
  adjustment...........................       55     (5,146)    (6,125)     7,377       (776)     2,172      8,311 
                                        --------   --------   --------   --------   --------   --------   -------- 
Comprehensive income (loss)............ $ 10,108   $(20,041)  $(56,833)  $(11,163)  $ 12,002     25,132        921 
                                        ========   ========   ========   ========   ========   ========   ======== 
Net income (loss)...................... $ 10,053   $(14,895)  $(51,770)  $(17,559)  $ 12,850   $ 22,541   $ (7,712)
Excess of the reduction of redeemable                                                                              
  preferred stock over total assets                                                                                
  divested and costs and liabilities                                                                               
  incurred on the Prince Transaction...       --         --         --         --     20,138     20,138        973 
Dividends and equity value accreted on                                                                             
  series B and C redeemable preferred                                                                              
  stock................................       --     (8,172)    (7,623)   (12,278)   (11,463)    (3,851)     1,859 
                                        --------   --------   --------   --------   --------   --------   -------- 
Net income (loss) available to common                                                                              
  shareholders......................... $ 10,053   $(23,067)  $(59,393)  $(29,837)  $ 21,525   $ 38,828   $ (4,880)
                                        ========   ========   ========   ========   ========   ========   ======== 

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                                                        [Enlarge/Download Table]

                                                                                                 6 MONTHS ENDED    
                                                    FISCAL YEARS ENDED JUNE 30,                   DECEMBER 31,     
                                        ----------------------------------------------------   ------------------- 
                                          2000       2001       2002       2003       2004       2003       2004   
                                        --------   --------   --------   --------   --------   --------   -------- 
                                                    (2)(3)                            (7)                          
                                                          (DOLLARS IN THOUSANDS, EXCEPT RATIOS)                    
                                                                                                                   
OTHER FINANCIAL DATA:                                                                                              
Depreciation and amortization.......... $  7,931   $ 10,063   $ 12,355   $ 12,524   $ 13,183   $  6,544   $  7,308 
Capital expenditures...................   11,033      6,437      8,518      8,636      6,244      2,280      3,676 
Ratio of earnings to fixed                                                                                         
  charges(8)...........................      1.1         --         --        1.4        2.2        3.7         -- 
(Deficiency) in earnings necessary to                                                                              
  cover fixed charges(9)...............       --     (9,563)   (10,384)        --         --         --     (7,672)
BALANCE SHEET DATA:                                                                                                
Cash and cash equivalents.............. $  2,403   $ 14,845   $  6,419   $ 11,179   $  5,568   $  8,682   $ 10,170 
Total assets...........................  258,450    330,019    296,444    274,347    241,369    254,936    265,050 
Long-term debt.........................  139,685    139,455    136,641    102,263    158,018    156,283    178,630 
Series B and C redeemable preferred                                                                                
  stock................................       --     48,980     56,602     68,881     24,678     17,065     22,817 
Total stockholders' equity (deficit)...   31,618      3,405    (61,189)   (84,510)   (63,833)   (43,091)   (60,080)

---------------                                                                 

(1) The Company's Odda Smelteverk (Norway) ("Odda"), Carbide Industries (U.K.)
   ("Carbide"), Mineral Resource Technologies, Inc. ("MRT"), and La Cornubia
S.A. (France) ("La Cornubia") businesses have been classified as      
     discontinued operations as discussed in the notes to consolidated financial
statements contained in this prospectus. The Company's selected       
     consolidated financial data have been reclassified to report separately the
  operating results, financial position and cash flows of the discontinued
operations.                                                           

(2) On November 30, 2000, the Company purchased the Medicated Feed Additives  
    ("MFA") business of Pfizer, Inc. The operating results, financial position
and cash flows of this business are included in the Company's selected
   consolidated financial data from the date of acquisition. The acquisition
     was financed through the issuance of a note payable to Pfizer, Inc. and the
issuance of the Series B and C redeemable preferred stock.            

(3) During May and June 2001, the Company sold its Agtrol crop protection     
     business to Nufarm, Inc. The sale included inventory and intangible assets,
  but did not include manufacturing facilities. The results of operations,
  financial position and cash flows of the Agtrol business are included in
 the Company's selected consolidated financial data through the dates of
divestiture.                                                          

(4) The Company's fiscal 2002 provision for income taxes includes a charge of 
$12,200 for an increased valuation allowance for deferred tax assets  
 recorded in previous years and a charge of $13,600 for a full valuation
     allowance for deferred tax assets relating to fiscal 2002 operating losses.
  The Company' fiscal 2003 provision for income taxes includes a charge of
$5,600 for increased valuation allowances for deferred tax assets in  
foreign jurisdictions.                                                

(5) The Company's selling, general and administrative expenses include        
     litigation income of $742 in fiscal 2002 and $3,040 in fiscal 2003 relating
to a class action suit brought against various vitamin manufacturers. 

(6) The Company recorded a net gain on extinguishment of debt relating to its 
refinancing activities in fiscal 2004 as discussed in the notes to    
consolidated financial statements contained in this prospectus.       

(7) Effective December 26, 2003, the Company completed the divestiture of     
    substantially all of the business and assets of its subsidiary, The Prince
 Manufacturing Company ("PMC") as discussed in the notes to consolidated
financial statements contained in this prospectus. The results of     
  operations, financial position and cash flows of PMC are included in the
Company's selected consolidated financial data through the date of    
divestiture.                                                          

(8) For purposes of computing the consolidated ratio of earnings to fixed     
 charges, earnings represents earnings from continuing operations before
    income taxes and fixed charges. Fixed charges include interest expense and
a portion of rentals determined to be representative of the interest  
 component of such rental expense. Management believes that one-third is
representative of the interest component of such rental expense.      

(9) For periods in which earnings before fixed charges were insufficient to   
   cover fixed charges, the dollar amount of coverage deficiency, instead of
the ratio, is disclosed.                                              

(10) Costs of goods sold includes Belgium Plant Transactions costs of $9,536 for
the six months ended December 31, 2004.                               

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

This information should be read in conjunction with the consolidated  
financial statements and related notes contained in this prospectus. The        
Company's MRT and LaCornubia businesses have been classified as discontinued    
operations. This discussion presents information only for continuing operations,
unless otherwise indicated. The Company presents its annual consolidated        
financial statements on the basis of its fiscal year ending June 30.            

GENERAL                                                                         

    The Company is a leading diversified global manufacturer and marketer of a
broad range of animal health and nutrition products, specifically medicated feed
additives (MFAs) and nutritional feed additives (NFAs), which are sold          
throughout the world predominantly to the poultry, swine and cattle markets.    
MFAs are used preventatively and therapeutically in animal feed to produce      
healthy livestock. The Company believes it is the third largest manufacturer and
marketer of MFAs in the world, and that certain of its MFA products have leading
positions in the marketplace. The Company is also a specialty chemicals         
manufacturer and marketer, serving primarily the United States pressure-treated 
wood and chemical industries. The Company has several proprietary products, and 
many of the Company's products provide critical performance attributes to       
customers' products, while representing a relatively small percentage of total  
end-product cost.                                                               

    On December 16, 2004, Phibro Animal Health SA ("PAH Belgium") entered into
an agreement with GlaxoSmithKline Biologicals ("GSK") to sell to GSK            
substantially all of PAH Belgium's facilities in Rixensart, Belgium (the        
"Belgium Plant"). Such sale, when completed, (the "Belgium Plant Transactions") 
will include the following elements (U.S. dollar amounts as of December 31, 2004
exchange rate): (i) the transfer of substantially all of the land and buildings 
and certain equipment of PAH Belgium at the Belgium Plant, as well as the       
industrial activities and intellectual property relating to certain solvent     
technology of PAH Belgium, for a purchase price of EUR 6.2 million ($8.4        
million), payable at closing; (ii) the transfer to GSK of a majority of the     
employees of PAH Belgium and the corresponding responsibility for statutory     
severance obligations; (iii) GSK agreeing to be responsible for cleaning-up, by 
demolition or otherwise, certain buildings not to be used by it, but for PAH    
Belgium to reimburse GSK up to a maximum of EUR 0.7 million ($0.9 million) for  
such clean-up costs; (iv) in recognition of the benefits to the Company from the
proposed transaction, PAH Belgium agreeing to pay to GSK EUR 1.5 million ($2.0  
million) within six months from the closing date, EUR 1.5 million ($2.0 million)
within eighteen months from the closing date, EUR 1.5 million ($2.0 million)    
within thirty months from the closing date, and EUR 0.5 million ($0.7 million)  
within forty-two months from the closing date; (v) PAH Belgium retaining certain
excess land (valued at approximately EUR 0.4 million ($0.5 million)) and being  
able to sell such land for its own account; (vi) PAH Belgium being responsible  
for certain plant closure costs and legally required severance indemnities in   
connection with workforce reductions, estimated in total to be EUR 9.1 million  
($12.3 million), of which an amount estimated to be approximately EUR 4.6       
million ($6.2 million) would be payable at or around the closing and an         
aggregate amount so estimated to be approximately EUR 4.5 million ($6.1 million)
would be payable over periods up to thirteen years; and (vii) PAH Belgium       
retaining certain equipment at the Belgium Plant, and being able to sell such   
equipment for the account of PAH Belgium or transfer such equipment, together   
with other assets and rights related to the production of virginiamycin, to     
Philipp Brothers Brasil Holdings Ltda. ("PAH Brazil") which owns a facility in  
Guarulhos, Brazil or in connection with alternative production arrangements.    

    The foregoing transactions and agreements are subject to a closing that is
expected to occur on November 30, 2005, but in no event earlier than July 1,    
2005 or later than June 30, 2006.                                               

    The Dutch Notes and related guarantees are collateralized by a mortgage on
the Belgium Plant which will be released in connection with the closing of the  
sale of the Belgium Plant to GSK.                                               

     As a result of the above agreement, the Company will depreciate the Belgium
plant to its estimated salvage value of EUR 2.5 million ($3.3 million) as of the
projected closing date of November 30, 2005. The Company recorded incremental   
depreciation expense of EUR 0.4 million ($0.5 million) in December 2004         

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and will record an additional EUR 8.7 million ($11.7 million) of incremental    
depreciation expense ratably through November 2005. The Company recorded        
severance expense of EUR 6.7 million ($9.0 million) in December 2004 for the    
estimated minimum severance amounts indicated by law, contract, and/or past     
practice. The Company estimates it will record additional expense of EUR 2.4    
million ($3.3 million) ratably through November 2005 for severance, retention   
agreements and other costs. The incremental depreciation expense of $0.5 million
and severance expense of $9.0 million recorded in December 2004 are included in 
cost of goods sold on the Company's condensed consolidated statements of        
operations and comprehensive income (loss).                                     

     The Company has determined that the carrying amount of the Belgium Plant at
December 31, 2004 is recoverable based on the estimated future cash flows       
arising from the use of the assets.                                             

In anticipation of transferring production of virginiamycin from the  
Belgium Plant to an alternative production location, the Company has been       
increasing inventory levels of virginiamycin to ensure adequate supplies during 
the transfer period. At December 31, 2004, worldwide virginiamycin inventories  
were approximately $40.0 million and are expected to continue to increase       
through November 2005, based on current production rates.                       

    On December 21, 2004, the Company completed a private placement (the "2004
Offering") pursuant to which the Company and Philipp Brothers Netherlands III   
B.V., an indirect wholly-owned subsidiary of the Company (the "Dutch Issuer" and
together with the Company, the "Issuers") issued and sold 22,491 additional     
units consisting of $18.2 million 13% Senior Secured Notes due 2007 of the      
Company (the "U.S. Notes") and $4.3 million 13% Senior Secured Notes due 2007 of
the Dutch Issuer (the "Dutch Notes" and together with the U.S. Notes, the       
"Additional Notes"), from which they received gross proceeds of $23.4 million.  
The proceeds were used to refinance indebtedness outstanding under the Company's
domestic senior credit facility. The Company incurred financing costs of $2.3   
million in connection with the issuance of the Additional Notes. The Additional 
Notes were issued under the Indenture dated October 21, 2003, as amended and    
supplemented (the "Indenture") under which the Issuers previously issued 105,000
units consisting of $85.0 million aggregate principal amount of U.S. Notes and  
$20.0 million aggregate principal amount of Dutch Notes.                        

In connection with the completion of the 2004 Offering, we solicited  
consents with regard to our outstanding senior secured notes to amendments to   
the indenture governing such notes to permit the sale of substantially all of   
the facilities owned by Phibro Animal Health SA (formerly Phibro Animal Health  
(Belgium) SPRL) ("PAH Belgium"), a wholly owned subsidiary of the Dutch issuer, 
in Rixensart, Belgium (the "Belgium Plant"), to reduce excess manufacturing     
capacity and to reduce operating expenses and, in furtherance thereof, to permit
the maximum amount of indebtedness under our domestic senior credit facility    
permitted under the indenture governing the notes to be increased from $15.0    
million to $37.5 and to permit the related transactions described herein. The   
requisite consents were obtained and the indenture was amended pursuant to the  
Second Supplemental Indenture dated as of December 8, 2004. The amendments      
became effective on December 21, 2004 in connection with the 2004 Offering.     

On January 14, 2005, the Company and its domestic subsidiaries filed a
registration statement with the Securities and Exchange Commission (the "SEC")  
on Form S-4 with respect to an exchange offer for all its Senior Secured Notes, 
comprised of 105,000 units sold on October 21, 2003 and 22,491 additional units 
sold on December 21, 2004. On February 4, 2005, such registration statement was 
declared effective.                                                             

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended its domestic senior credit facility to:   
(i) amend the EBITDA definition to exclude charges and expenses related to the  
sale of the Belgium Plant in an aggregate amount not to exceed $26.8 million for
purposes of calculating a certain financial covenant; (ii) amend the Indenture  
reserve definition to include scheduled payments of interest due on the         
Additional Notes; (iii) amend the maximum aggregate amount of borrowing         
available under the working capital facility to permit a temporary increase to  
$22.5 million and for its reduction to $17.5 million on such borrowings being   
refinanced by the proceeds of the Additional Notes; (iv) amend the Permitted    
Investments definition to include investments in connection with the sale of the
Belgium Plant and transfer of certain equipment, together with other assets and 
rights related to the                                                           

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production of virginiamycin, to PAH Brazil or in connection with alternative    
production arrangements; and (v) provide for the issuance of the Additional     
Notes and the sale of the Belgium Plant and related transactions.               

During February 2005, PAHC Holdings Corporation ("PAHC Holdings") was 
formed to hold the capital stock of the Company, except for its Series C        
Preferred Stock. On February 10, 2005, PAHC Holdings issued $29.0 million of its
15% Senior Secured Notes due 2010 (the "HoldCo Notes") in a private placement.  
Interest is payable at the option of PAHC Holdings in cash or pay-in-kind HoldCo
Notes. The Company is not obligated for the HoldCo Notes. The Company's ability 
to make payments to PAHC Holdings is subject to the terms of the Company's      
Senior Secured Notes, its Senior Subordinated Notes, and its domestic senior    
credit facility, and to applicable law.                                         

   The proceeds from the sale of the HoldCo Notes, upon release from escrow,
will be used, directly or indirectly, to redeem the Company's Series C Preferred
Stock either by PAHC Holdings (i) making a capital contribution to the Company  
to contemporaneously finance the redemption of the Company's Series C Preferred 
Stock, or (ii) purchasing a new series of the Company's preferred stock,        
referred to as Series D Preferred Stock, that may be issued by the Company to   
finance the redemption of the Company's Series C Preferred Stock. It is         
contemplated that such redemption will occur on or before February 28, 2005. On 
March 1, 2005, the applicable percentage for determining the equity value       
component of the redemption price increases, as currently provided in the       
Company's certificate of incorporation, from 18% to 22%. If on March 1, 2005,   
the Company has not redeemed its Series C Preferred Stock from escrow, PAHC     
Holdings will be required to redeem the HoldCo Notes, primarily with the        
proceeds of the HoldCo Notes placed in escrow.                                  

 PAHC Holdings was formed by the holders of all of the Company's capital
stock, other than the holders of Series C Preferred Stock. In particular, Jack  
Bendheim, Marvin Sussman and trusts for the benefit of Mr. Bendheim and his     
family exchanged all of their shares of Series A Preferred Stock and Class B    
Common Stock and Mr. Bendheim exchanged fifty percent (50%) of his shares of    
Class A Common Stock, for the same number and class of shares of PAHC Holdings, 
having the same designations, relative rights, privileges and limitations as the
Company's shares of such class (except to the extent that PAHC Holdings is a    
Delaware corporation and the Company is a New York corporation).                

 The HoldCo Notes are to be secured by all of PAHC Holdings' assets (now
consisting solely of the Company's capital stock and, until disbursed, the      
proceeds of the HoldCo Notes in escrow). Currently, such pledge covers all of   
the Company's Series A Preferred Stock and Class B Common Stock, the Company's  
non-voting classes of stock. In connection with the release of the proceeds of  
the HoldCo Notes from escrow and following the redemption of the Company's      
Series C Preferred Stock, Mr. Bendheim will contribute to PAHC Holdings the     
balance of the Company's outstanding Class A Common Stock, and all of the       
Company's outstanding Class A Common Stock, the Company's voting stock, will be 
pledged as security for the HoldCo Notes.                                       

    During 2004, the Company incurred $5.3 million of costs in connection with
a potential acquisition transaction that was not completed. The Company has     
charged the costs to expense in its 2004 results. The costs primarily consisted 
of professional fees for services in connection with the transaction.           

    On June 30, 2004, one of the Company's French subsidiaries, La Cornubia SA
("La Cornubia"), filed for bankruptcy under the insolvency laws of France. The  
Company believes that, as a result of the bankruptcy filing by La Cornubia, it  
is possible that LC Holding S.A. ("LC Holding"), La Cornubia's parent, a holding
company with no assets except for its investment in La Cornubia, may also file  
for bankruptcy in France. The Company does not believe that La Cornubia's       
bankruptcy filing, nor the possible bankruptcy filing by LC Holding, will have a
material adverse effect on its financial condition or results of operations.    

In August 2003, the Company completed the sale of MRT for net proceeds
after transaction costs of approximately $13.8 million. In December 2003, the   
Company completed the divestiture of substantially all of the assets of The     
Prince Manufacturing Company (see discussion below under "Prince Transactions").

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REFINANCING                                                                     

   On October 21, 2003, the Company issued 105,000 units consisting of $85.0
million of its 13% Senior Secured Notes due 2007 (the "US Senior Secured Notes")
and $20.0 million 13% of Senior Secured Notes due 2007 of Philipp Brothers      
Netherlands III B.V. (the "Dutch Senior Secured Notes" and, together with the US
Senior Secured Notes, the "Senior Secured Notes"), an indirect wholly-owned     
subsidiary of the Company (the "Dutch issuer"). The Company used the proceeds   
from the issuance to: (i) repurchase $52.0 million of its 9 7/8% Senior         
Subordinated Notes due 2008 at a price equal to 60% of the principal amount     
thereof, plus accrued and unpaid interest; (ii) repay $34.9 million under our   
then outstanding domestic senior credit facility; (iii) satisfy, for a payment  
of approximately $29.3 million certain of its outstanding obligations to Pfizer 
Inc., including: (a) $20.1 million aggregate principal amount of its promissory 
note plus accrued and unpaid interest, (b) $9.7 million of accounts payable, (c)
$9.0 million of accrued expenses, and (d) future contingent purchase price      
obligations under its agreements with Pfizer Inc. by which the Company acquired 
Pfizer's medicated feed additive business; and (iv) pay fees and expenses       
relating to the above transactions.                                             

     A net gain on extinguishment of debt is included in the Company's condensed
consolidated statement of operations, calculated as follows (amounts in         
thousands):                                                                     

                                                                [Download Table]
                                                                       
NET GAIN ON REPURCHASE OF 9 7/8% SENIOR SUBORDINATED NOTES             
  DUE 2008:                                                            
  Principal amount of repurchased notes.....................  $ 51,971 
  Repurchased at 60% of principal amount....................   (31,183)
  Transaction costs.........................................    (4,107)
                                                              -------- 
NET GAIN ON REPURCHASE OF NOTES.............................    16,681 
                                                              -------- 
LOSS ON REPAYMENT OF DOMESTIC SENIOR CREDIT FACILITY........    (1,018)
                                                              -------- 
NET GAIN ON PAYMENT OF PFIZER OBLIGATIONS:                             
  Obligations paid:                                                    
  -- promissory note........................................    20,075 
  -- accrued interest on promissory note....................     1,015 
  -- accounts payable and accrued expenses..................    18,788 
                                                              -------- 
  Total obligations paid....................................    39,878 
  Cash payment to Pfizer....................................   (29,315)
  Transaction costs.........................................    (3,000)
                                                              -------- 
NET GAIN ON PAYMENT OF PFIZER OBLIGATIONS...................     7,563 
                                                              -------- 
NET GAIN ON EXTINGUISHMENT OF DEBT..........................  $ 23,226 
                                                              ======== 

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

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

Also, on October 21, 2003, the Company entered into a new replacement 
domestic senior credit facility with Wells Fargo Foothill, Inc., providing for a
working capital facility plus a letter of credit facility. The aggregate amount 
of borrowings under such working capital and letter of credit facilities        
initially could not exceed $25.0 million including aggregate borrowings under   
the working capital facility up to $15.0 million. On April 29, 2004, the Company
amended the domestic senior credit facility to increase the aggregate amount of 
borrowings available under such working capital and letter of credit facilities 
from $25.0 million to $27.5 million and to increase the amount of aggregate     
borrowings available under the working capital facility from $15.0 million to   
$17.5 million. As of September 24, 2004, the Company amended the domestic senior
credit facility to: (i) increase the aggregate amount of borrowings available   
under such working capital and letter of credit facilities from $27.5 million to
$32.5 million; the amount of aggregate borrowings available under the working   
capital facility remained unchanged at $17.5 million; (ii) amend the EBITDA     
definition to exclude charges and expenses related to unsuccessful acquisitions 
and related financings in an aggregate amount not to exceed $5.3 million for the
period beginning January 1, 2004 and ending June 30, 2004; (iii) amend the      
definition of Additional Indebtedness to exclude advances under the working     
capital facility; (iv) amend the definition of Permitted Investments to allow   
other investments made during the period from January 1, 2004 through June 30,  
2004 in an aggregate amount not to exceed $336,000; and (v) establish covenant  
EBITDA levels for the periods ending after June 30, 2004. The amendment was     
effective June 30, 2004 for items (i), (ii) and (iii); effective January 1, 2004
for item (iv); and effective September 24, 2004 for all other items.            

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

Pursuant to the terms of an intercreditor agreement, as amended in    
connection with the 2004 Offering, the security interest securing the Senior    
Secured Notes and the guarantees made by the Company's domestic restricted      
subsidiaries is subordinated to a lien securing the domestic senior credit      
facility.                                                                       

PRINCE TRANSACTIONS                                                             

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

Pursuant to definitive purchase and other agreements executed on and  
effective as of the Closing Date, the Prince Transactions included the following
elements: (i) the transfer of substantially all of the business and assets of   
PMC to Buyer; (ii) the reduction of the value of the Company's Preferred Stock  
owned by the Palladium Investors from $72.2 million to $16.5 million (accreted  
through the Closing Date) by means of the redemption of all of its shares of    
Series B Preferred Stock and a portion of its Series C Preferred Stock; (iii)   
the termination of $2.2 million in annual management advisory fees payable by   
the Company to Palladium; (iv) a cash payment of $10.0 million to the Palladium 
Investors in respect of the portion of the                                      

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Company's Preferred Stock not exchanged in consideration of the business and    
assets of PMC; (v) the agreement of the Buyer to pay the Company for advisory   
fees for the next three years of $1.0 million, $0.5 million, and $0.2 million,  
respectively (which were pre-paid at closing by the Buyer and satisfied for $1.3
million, the net present value of such payments); and (vi) the Buyer agreed to  
supply manganous oxide and red iron oxide products and to provide certain       
mineral blending services to the Company's Prince Agriproducts subsidiary       
("Prince Agri"). Prince Agri agreed to continue to provide the Buyer with       
certain laboratory, MIS and telephone services, all on terms substantially      
consistent with the historic relationship between Prince Agri and PMC, and to   
lease to Buyer office space used by PMC in Quincy, Illinois. The Company has an 
agreement to receive certain treasury services from Palladium for $0.1 million  
per year. Pursuant to definitive agreements, the Company made customary         
representations, warranties and environmental and other indemnities, agreed to a
post-closing working capital adjustment, paid $4.0 million in full satisfaction 
of all intercompany debt owed to PMC, paid a closing fee to Palladium of $0.5   
million, made certain capital expenditure adjustments included as part of the   
intercompany settlement amount, and agreed to pay for certain out-of-pocket     
transaction expenses. PMC retained $0.4 million of its accounts receivable. The 
Company established a $1.0 million letter of credit escrow for two years to     
secure its working capital adjustment and certain indemnification obligations.  
The Company agreed to indemnify the Palladium Investors for a portion, at the   
rate of $0.65 for every dollar, of the amount they receive in respect of the    
disposition of Buyer for less than $21.0 million up to a maximum payment by the 
Company of $4.0 million (the "Backstop Indemnification Amount"). The Backstop   
Indemnification Amount would be payable on the earlier to occur of July 1, 2008 
or six months after the redemption date of all of the Company's Senior Secured  
Notes due 2007 if such a disposition closes prior to such redemption and six    
months after the closing of any such disposition if the disposition closes after
any such redemption. The Company's obligations with respect to the Backstop     
Indemnification Amount will cease if the Palladium Investors do not close the   
disposition of Buyer by January 1, 2009. The definition of "Equity Value" in the
Company's Certificate of Incorporation was amended to reduce the multiple of    
trailing EBITDA payable in connection with any future redemption of Series C    
Preferred to 6.0 from 7.5. The amount of consideration paid and payable in      
connection with the Prince Transactions and all matters in connection therewith 
were determined pursuant to arm's length negotiations.                          

     The excess of the reduction in redeemable preferred stock over total assets
divested and costs and liabilities incurred on the Prince Transactions was      
recorded as a decrease to accumulated deficit on the Company's condensed        
consolidated balance sheet at December 31, 2003, and was calculated as follows  
(amounts in thousands):                                                         

                                                                [Download Table]
                                                                     
SERIES B & C REDEEMABLE PREFERRED STOCK:                             
Accreted value pre-transaction..............................  $72,184
Accreted value post-transaction.............................   16,517
                                                              -------
REDUCTION IN REDEEMABLE PREFERRED STOCK.....................   55,667
                                                              -------
ASSETS DIVESTED AND COSTS INCURRED:                                  
PMC net assets divested.....................................    7,430
Cash paid to Palladium Investors for:                                
-- reduction of redeemable preferred stock..................   10,000
-- settlement of PMC intercompany debt......................    3,958
-- working capital adjustment...............................    1,331
-- closing fee..............................................      500
Transaction costs...........................................    8,310
Contingent Backstop Indemnification Amount accrued..........    4,000
                                                              -------
TOTAL ASSETS DIVESTED AND COSTS AND LIABILITIES INCURRED....   35,529
                                                              -------
EXCESS AMOUNT RECORDED AS A DECREASE TO ACCUMULATED                  
  DEFICIT...................................................  $20,138
                                                              =======

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PMC is included in the Company's Industrial Chemicals segment. The    
divestiture of PMC has not been reflected as a discontinued operation due to the
existence of the Backstop Indemnification and continuing supply and service     
agreements.                                                                     

OTHER RISKS AND UNCERTAINTIES                                                   

     The Company's ability to fund its operating plan depends upon the continued
availability of borrowing under its domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under   
the domestic senior credit facility based on its forecasted operating plan. In  
the event of adverse operating results and/or violation of covenants under this 
facility, there can be no assurance that the Company would be able to obtain    
waivers or amendments on favorable terms, if at all. The Company expects        
adequate liquidity throughout 2005, with periods of reduced availability around 
the dates of the semi-annual interest payments due June 1 and December 1 related
to its Senior Secured Notes and Senior Subordinated Notes. The Company is       
pursuing additional cost reduction activities, working capital improvement      
plans, and sales of non-strategic assets to ensure additional liquidity. The    
Company also has availability under foreign credit lines that likely would be   
available. There can be no assurance the Company will be successful in any of   
the above-noted actions.                                                        

The use of antibiotics in medicated feed additives is a subject of    
legislative and regulatory interest. The issue of potential for increased       
bacterial resistance to certain antibiotics used in certain food-producing      
animals is the subject of discussions on a worldwide basis and, in certain      
instances, has led to government restrictions on the use of antibiotics in      
food-producing animals. The sale of feed additives containing antibiotics is a  
material portion of the Company's business. Should regulatory or other          
developments result in further restrictions on the sale of such products, it    
could have a material adverse impact on the Company's financial position,       
results of operations and cash flows.                                           

The testing, manufacturing, and marketing of certain of the Company's 
products are subject to extensive regulation by numerous government authorities 
in the United States and other countries.                                       

  The Company has significant assets located outside of the United States,
and a significant portion of the Company's sales and earnings are attributable  
to operations conducted abroad.                                                 

 The Company has assets located in Israel and a portion of its sales and
earnings are attributable to operations conducted in Israel. The Company is     
affected by social, political and economic conditions affecting Israel, and any 
major hostilities involving Israel as well as the Middle East or curtailment of 
trade between Israel and its current trading partners, either as a result of    
hostilities or otherwise, could have a material adverse effect on the Company.  

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,     
generation, treatment, emission, release, discharge and disposal of certain     
materials and wastes, the remediation of contaminated soil and groundwater, the 
manufacture, sale and use of pesticides and the health and safety of employees. 
As such, the nature of the Company's current and former operations and those of 
its subsidiaries exposes the Company and its subsidiaries to the risk of claims 
with respect to such matters.                                                   

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SUMMARY CONSOLIDATED RESULTS OF CONTINUING OPERATIONS                           

                                                        [Enlarge/Download Table]

                                             THREE MONTHS ENDED    SIX MONTHS ENDED   
                                                DECEMBER 31,         DECEMBER 31,     
                                             ------------------   ------------------- 
                                              2004       2003       2004       2003   
                                             -------   --------   --------   -------- 
                                                (THOUSANDS)           (THOUSANDS)     
                                                                                      
Net sales................................... $93,060   $ 92,540   $181,335   $177,490 
Gross profit................................  13,869     22,549     36,491     43,709 
Selling, general and administrative.........  17,759     16,824     34,353     32,609 
Operating income............................  (3,890)     5,725      2,138     11,100 
Interest expense, net.......................   5,356      4,717     10,577      8,408 
Other expense (income), net.................    (791)       127       (767)      (458)
Net (gain) on extinguishment of debt........      --    (23,226)        --    (23,226)
Provision (benefit) for income taxes........    (884)     2,880         40      3,663 
Income from continuing operations........... $(7,571)  $ 21,227   $ (7,712)  $ 22,713 

COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 2004 AND 2003                 

     Net Sales of $93.1 million increased $0.5 million, or 1%. Animal Health and
Nutrition sales of $70.7 million grew $2.0 million, or 3%, due to volume        
increases offset in part by lower average selling prices. Specialty Chemical    
Group (comprised of the Industrial Chemicals, Distribution and All Other        
segments) sales of $22.4 million decreased $1.5 million. Excluding The Prince   
Manufacturing Company ("PMC"), which was divested effective December 26, 2003,  
Specialty Chemical Group sales increased by $3.9 million due to volume increases
in Industrial Chemicals and All Other segments. The Specialty Chemical Group    
included PMC sales of $5.4 million for the 2003 quarter.                        

     Gross Profit of $13.9 million decreased $8.7 million to 14.9% of net sales.
The Belgium Plant Transactions increased costs by $9.5 million for the current  
quarter. Excluding this charge, Animal Health and Nutrition gross profit        
increased due to higher unit volumes and lower unit costs offset in part by     
lower average selling prices. The Specialty Chemical Group also contributed to  
the improvement due to expanded sales of the Company's new copper-based wood    
treatment product. The Specialty Chemical Group included PMC gross profit of    
$1.7 million for the 2003 quarter.                                              

 Selling, General and Administrative Expenses of $17.8 million increased
$0.9 million. Expenses in the operating segments, excluding PMC, increased over 
the prior year due to higher research and development costs associated with     
registration trials, unfavorable foreign exchange rates, costs associated with  
the relocation of the Company's corporate office, higher depreciation and       
amortization charges and severance costs. Corporate expenses decreased due to   
the elimination of the Palladium management fee of $0.6 million in 2003 and     
income of $0.3 million from the PMC advisory fee. In addition, the Company      
recognized additional gains of $0.4 million from the previous sale of its       
etchant business. PMC expenses were $0.6 million for the 2003 quarter.          

   Operating Income (Loss) of ($3.9) million decreased $9.6 million from the
2003 quarter. Operating income, excluding the Belgium Plant Transactions and    
PMC, improved in both the Animal Health and Nutrition and Specialty Chemical    
Group with increased gross profit offset in part by higher selling, general and 
administrative expenses. PMC contributed $1.1 million for the 2003 quarter      
offset in part by the elimination of the $0.6 million Palladium management fee. 

    Interest Expense, Net of $5.4 million increased $0.6 million from the 2003
quarter, primarily due to higher average interest rates and also higher         
borrowing levels associated with the issuance of the Company's Senior Secured   
Notes.                                                                          

Other (Income) Expense, Net principally reflects foreign currency     
transaction net (gains) losses related to short-term inter-company balances and 
foreign currency translation (gains) losses.                                    

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Income Tax (Benefit) of ($0.9) million were recorded on a consolidated
pre-tax loss of $7.6 million. The tax rate reflects income tax provisions in    
profitable foreign jurisdictions and for state income taxes. A provision for    
U.S. federal income taxes has not been recorded due to the utilization of net   
operating loss carryforwards. The Company has recorded valuation allowances     
related to substantially all deferred tax assets. The Company will continue to  
evaluate the likelihood of recoverability of these deferred tax assets based    
upon actual and expected operating performance.                                 

COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003                   

  Net Sales of $181.3 million increased $3.8 million, or 2%. Animal Health
and Nutrition sales of $136.5 million grew $8.0 million, or 6%, due to volume   
increases offset in part by lower average selling prices. Specialty Chemical    
Group (comprised of the Industrial Chemicals, Distribution and All Other        
segments) sales of $44.8 million decreased $4.2 million. Excluding PMC,         
Specialty Chemical group sales increased by $7.0 million due to volume increases
in Industrial Chemicals and All Other segments. The Specialty Chemical Group    
included PMC sales of $11.1 million for the 2003 period.                        

     Gross Profit of $36.5 million decreased $7.2 million to 20.1% of net sales.
The Belgium Plant Transactions increased costs by $9.5 million for the current  
period. Excluding this charge, Animal Health and Nutrition gross profit         
increased due to higher unit volumes and lower unit costs offset in part by     
lower average selling prices. The Specialty Chemical Group also contributed to  
the improvement due to expanded sales of the Company's new copper-based wood    
treatment product and higher unit volumes in its Distribution and All Other     
businesses. The Specialty Chemical Group included PMC gross profit of $3.6      
million for the 2003 period.                                                    

 Selling, General and Administrative Expenses of $34.4 million increased
$1.7 million. Expenses in the operating segments, excluding PMC, increased over 
the prior year due to higher research and development costs associated with     
registration trials, unfavorable foreign exchange rates, costs associated with  
the relocation of the Company's corporate office, higher depreciation and       
amortization charges and severance costs. Corporate expenses decreased due to   
the elimination of the Palladium management fee of $1.1 million in 2003 and     
income of $0.5 million from the PMC advisory fee. In addition, the Company      
recognized additional gains of $0.7 million from the previous sale of its       
etchant business. PMC expenses were $1.3 million for the 2003 period.           

    Operating Income of $2.1 million decreased $9.0 million. Operating income,
excluding the Belgium Plant Transactions and PMC, improved in both the Animal   
Health and Nutrition and Specialty Chemical Group with increased gross profit   
offset in part by higher selling, general and administrative expenses. PMC      
contributed $2.3 million for the 2003 period offset in part by the elimination  
of the $1.1 million Palladium management fee.                                   

     Interest Expense, Net of $10.6 million increased $2.2 million from the 2003
period, primarily due to higher average interest rates and also higher borrowing
levels associated with the issuance of the Company's senior secured notes.      

Other (Income) Expense, Net principally reflects foreign currency     
transaction net (gains) losses related to short-term inter-company balances and 
foreign currency translation (gains) losses.                                    

    Income Taxes of $0.0 million were recorded on consolidated pre-tax loss of
$7.7 million. The tax rate reflects income tax provisions in profitable foreign 
jurisdictions and for state income taxes. A provision for U.S. federal income   
taxes has not been recorded due to the utilization of net operating loss        
carryforwards. The Company has recorded valuation allowances related to         
substantially all deferred tax assets. The Company will                         

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continue to evaluate the likelihood of recoverability of these deferred tax     
assets based upon actual and expected operating performance.                    

                                                        [Enlarge/Download Table]

                                                           YEAR ENDED JUNE 30,       
                                                      ------------------------------ 
                                                        2004       2003       2002   
                                                      --------   --------   -------- 
                                                                                     
Net Sales............................................ $358,274   $341,746   $328,676 
Gross Margin.........................................   90,403     90,546     81,265 
Selling, general and administrative expenses.........   66,128     65,050     70,636 
Costs of non-completed transaction...................    5,261         --         -- 
Operating income.....................................   19,014     25,496     10,629 
Interest expense, net................................   18,488     16,196     17,724 
Other expense (income), net..........................     (781)     1,539      3,349 
Net (gain) on extinguishment of debt.................  (23,226)        --         -- 
Provision for income taxes...........................    7,969     10,060     14,767 
Income (loss) from continuing operations............. $ 16,564   $ (2,299)  $(25,211)

COMPARISON OF YEARS ENDED JUNE 30, 2004 AND 2003                            

   Net Sales of $358.3 million increased $16.5 million, or 5%. Animal Health
and Nutrition sales of $265.4 million grew $14.7 million, or 6%, due to volume  
increases. Specialty Chemical Group sales (comprised of the Industrial          
Chemicals, Distribution and All Other segments) of $92.9 million increased $1.8 
million, or 2%, primarily due to volume increases in all segments, offset by a  
decrease in PMC sales. The Specialty Chemical Group included PMC sales of $11.1 
million and $22.3 million for 2004 and 2003, respectively.                      

     Gross Profit of $90.4 million decreased $0.1 million to 25.2% of net sales,
compared with 26.5% in 2003. Animal Health and Nutrition gross profit decreased 
due to lower average selling prices and unfavorable currency related to the     
effect of the Euro on Belgium manufacturing costs. Improvements in the Specialty
Chemical Group partially offset the Animal Health and Nutrition decline. The    
Specialty Chemical Group included PMC gross profit of $3.6 million and $6.2     
million, respectively, for the fiscal 2004 and 2003 periods.                    

     Gross profit increased $2.0 million in the fourth quarter of 2004 due to an
agreement related to the production and sale of amprolium, an anticoccidial MFA.
The Company acquired the rights to sell amprolium in most international markets.
In payment for the acquired rights, the Company relinquished its claims against 
the seller for certain purchase order commitments, and will make $2.1 million of
cash payments to the seller over the next five years. The present value of these
payments is $1.9 million and was recorded as a liability. The $2.4 million value
of the purchase order commitments was recorded as a reduction in cost of goods  
sold and inventory, and an intangible asset of $4.3 million was recorded        
representing the fair value of the acquired rights and is included on the       
Company's balance sheet at June 30, 2004. The Company will amortize this        
intangible over a 10 year period. No amortization was recorded in 2004.         
Amortization expense for each of the next five years from 2005 to 2009 is       
expected to be $0.4 million per year.                                           

 Selling, General and Administrative Expenses of $66.1 million increased
$1.1 million. Expenses in the operating segments, excluding PMC, approximated   
the prior year primarily due to lower environmental and severance accruals      
offset in part by unfavorable foreign exchange rates. Corporate expenses in the 
current fiscal year reflect the elimination of the Palladium annual management  
fee of $2.25 million as of December 31, 2003 and income of $0.5 million from the
PMC Advisory fee. Corporate expenses increased in fiscal 2004 due to higher     
depreciation and amortization charges and insurance costs offset by lower       
benefit charges. Corporate expenses in fiscal 2003 included vitamin settlement  
income of $3.0 million. PMC expenses were $1.3 million and $2.6 million for 2004
and 2003, respectively.                                                         

     Costs of non-completed transaction.  During 2004, the Company incurred $5.3
million of costs in connection with a potential acquisition transaction that was
not completed. The Company has charged the                                      

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costs to expense in its 2004 results. The costs primarily consisted of          
professional fees for services in connection with the transaction.              

     Net gain on extinguishment of debt.  The Company recorded a net gain on the
extinguishment of debt of $23.2 million due to the repurchase of senior         
subordinated notes ($16.7 million), and the repayment of Pfizer obligations     
($7.6 million) offset in part by a loss on repayment of the domestic senior     
credit facility ($1.0 million).                                                 

    Operating Income of $19.0 million decreased $6.5 million to 5.3% of sales.
The decrease was primarily due to the non-completed transaction costs described 
above. In addition, gross profit declined in the Animal Health and Nutrition    
segment but was offset in part by improved operating performance of the         
Specialty Chemical Group. PMC contributed $2.3 million and $3.6 million for 2004
and 2003, respectively.                                                         

Interest Expense, Net of $18.5 million increased $2.3 million from the
prior year, primarily due to higher borrowing levels and also higher average    
interest rates associated with the issuance of the Company's Senior Secured     
Notes.                                                                          

   Other (Income) Expense, Net of ($0.8) million improved in comparison with
$1.5 million of expense last year. During 2004, the Company's Phibro-Tech       
subsidiary received $1.0 million in exchange for the sale of certain assets     
related to the manufacture and sale of ferric chloride from its plant in Joliet,
Illinois and recognized a net gain of $0.7 million. The balance of other        
(income) expense principally reflects foreign currency transaction net (gains)  
losses related to short-term inter-company balances and foreign currency        
translation (gains) losses.                                                     

 Income Taxes of $8.0 million were 32% of consolidated pre-tax income of
$24.5 million. The tax rate reflects income tax provisions in profitable foreign
jurisdictions and for state income taxes. A provision for U.S. federal income   
taxes has not been recorded due to the utilization of net operating loss        
carryforwards. The Company has recorded valuation allowances related to         
substantially all deferred tax assets. The Company will continue to evaluate the
likelihood of recoverability of these deferred tax assets based upon actual and 
expected operating performance.                                                 

COMPARISON OF YEARS ENDED JUNE 30, 2003 AND 2002                            

   Net Sales of $341.7 million increased $13.1 million, or 4%. Animal Health
and Nutrition sales of $250.7 million grew $11.1 million, or 5%, due to volume  
increases. Specialty Chemical Group sales of $91.0 million increased $2.0       
million, or 2%, primarily due to volume increases in the Distribution and All   
Other businesses.                                                               

    Gross Profit of $90.5 million improved $9.3 million to 26.5% of net sales,
compared with 24.7% in 2002. Animal Health and Nutrition gross profit           
improvements were responsible for the overall increase. Purchase accounting     
adjustments related to the MFA acquisition resulted in a $3.3 million increase  
to cost of goods sold in 2002. Excluding the purchase accounting adjustment, the
gross profit ratio would have been 25.7% in 2002.                               

 Selling, General and Administrative Expenses of $65.1 million decreased
$5.6 million, or 8%. Expenses declined $6.5 million in the Specialty Chemicals  
Group due to downsizing and restructuring of the Industrial Chemicals segment,  
reflecting the decline in the printed circuit board market. Industrial Chemicals
included expense for additional environmental reserves and write-offs of        
unamortized permit fees at closed facilities of $1.0 million and $1.6 million   
for 2003 and 2002, respectively. Animal Health and Nutrition expenses decreased 
by approximately $0.4 million. Corporate expenses increased $1.3 million,       
primarily due to increased staff levels. Corporate expenses included a vitamin  
settlement income of $3.0 million and $0.7 million in 2003 and 2002,            
respectively, from the settlement of class action litigation against European   
vitamin manufacturers. Debt restructuring costs of $0.8 million, severance of   
$0.4 million, and expense related to a divested business of $0.2 million were   
also recorded in 2003. Included in 2002 was $0.4 million non-cash income to     
reflect the decrease in value of redeemable common stock; no amount was recorded
in 2003.                                                                        

     Operating Income of $25.5 million increased $14.9 million to 7.5% of sales.
The improvement was due to sales growth, gross margin improvements in Animal    
Health and Nutrition, and operating expense reductions.                         

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 Interest Expense, Net of $16.2 million decreased $1.5 million, compared
with $17.7 million in 2002, primarily due to lower average interest rates and   
reduced average borrowing levels.                                               

  Other Expense, Net of $1.5 million in fiscal 2003 improved in comparison
with $3.4 million in the prior year. The expense principally reflects foreign   
currency transaction and translation net losses related to short-term           
inter-company balances.                                                         

     Income Taxes of $10.1 million were primarily due to a $5.6 million increase
in valuation allowances for deferred tax assets in foreign jurisdictions where  
future profitability is not currently considered more likely than not, and      
income tax provisions in profitable foreign jurisdictions. The Company has      
recorded valuation allowances related to substantially all deferred tax assets. 
The Company will continue to evaluate the likelihood of recoverability of these 
deferred tax assets based upon actual and expected operating performance.       

OPERATING SEGMENTS                                                              

   The Animal Health and Nutrition segment manufactures and markets MFAs and
NFAs to the poultry, swine and cattle markets, and includes the operations of   
the Phibro Animal Health business unit, Prince AgriProducts, Koffolk (1949) Ltd.
and Planalquimica. The Industrial Chemicals segment manufacturers and markets   
specialty chemicals for use in the pressure treated wood and chemical           
industries, and includes Phibro-Tech and, until its divestiture, PMC. The       
Distribution segment markets a variety of specialty chemicals, and includes     
PhibroChem and Ferro operations. The All Other segment includes contract        
manufacturing of crop protection chemicals, Wychem and all other operations. Due
to the divestiture of PMC in December 2003, PMC's results are shown separately  
for comparability.                                                              

                                                        [Enlarge/Download Table]

                                              THREE MONTHS ENDED    SIX MONTHS ENDED  
                                                 DECEMBER 31,         DECEMBER 31,    
                                              -------------------  -------------------
                                                2004       2003      2004       2003  
                                              --------   --------  --------   --------
                                                  (THOUSANDS)          (THOUSANDS)    
                                                                                      
Net Sales                                                                             
  Animal Health & Nutrition.................. $70,708    $68,687   $136,514   $128,528
  Industrial Chemicals -- ex PMC.............   7,686      6,244     16,079     12,543
  Industrial Chemicals -- PMC................      --      5,435         --     11,118
  Distribution...............................   8,104      7,656     15,765     15,595
  All other..................................   6,562      4,518     12,977      9,706
                                              -------    -------   --------   --------
                                              $93,060    $92,540   $181,335   $177,490
                                              =======    =======   ========   ========

                                                        [Enlarge/Download Table]

                                             THREE MONTHS ENDED     SIX MONTHS ENDED   
                                                DECEMBER 31,          DECEMBER 31,     
                                             -------------------  ---------------------
                                               2004       2003     2004        2003    
                                             --------   --------  -------   -----------
                                                 (THOUSANDS)           (THOUSANDS)     
                                                                                       
Operating Income                                                                       
  Animal Health & Nutrition................. $(1,520)   $ 7,655   $ 6,295     $14,555  
  Industrial Chemicals -- ex PMC............     655       (287)    1,428        (678) 
  Industrial Chemicals -- PMC...............      --      1,065        --       2,278  
  Distribution..............................     796        692     1,660       1,533  
  All other.................................     455        657     1,160       1,326  
  Corporate expenses and adjustments........  (4,276)    (4,057)   (8,405)     (7,914) 
                                             -------    -------   -------     -------  
                                             $(3,890)   $ 5,725   $ 2,138     $11,100  
                                             =======    =======   =======     =======  

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OPERATING SEGMENTS COMPARISON OF THREE MONTHS ENDED DECEMBER 2004 AND 2003  

Animal Health and Nutrition                                                 

 Net Sales of $70.7 million increased $2.0 million, or 3%. MFA net sales
decreased by $0.8 million. Revenues were lower primarily for antibacterials and 
anticoccidials but were offset in part by higher sales of antibiotics. The      
decrease in MFA revenues was due to lower average selling prices offset in part 
by higher unit volumes and favorable currency effect on international sales. NFA
net sales increased by $2.8 million principally due to volume increases in trace
mineral premixes and other feed ingredients.                                    

   Operating Income (Loss) of ($1.5) million decreased $9.2 million from the
2003 period. Operating income, excluding costs relating to the Belgium          
Transactions of $9.5 million, improved due to higher unit volumes and lower unit
costs offset in part by lower average selling prices and increased selling,     
general and administrative expenses.                                            

Specialty Chemicals                                                         

  Industrial Chemicals net sales of $7.7 million, excluding PMC, increased
$1.4 million, or 23%. Sales of copper-related products to the wood treatment    
markets increased due to the introduction of new copper based wood treatment    
products. PMC, divested in December 2003, generated revenues of $5.4 million for
the 2003 quarter. Operating income, excluding PMC, of $0.7 million improved by  
$0.9 million from the 2003 quarter. This improvement was due to new product     
introductions and savings from previously implemented headcount reductions and  
facility restructurings in Phibro-Tech operations. PMC provided operating income
of $1.1 million for the 2003 quarter.                                           

Distribution net sales of $8.1 million increased $0.4 million, or 6%. 
Higher domestic unit volumes and slightly higher average selling prices were    
offset in part by lower sales volumes in Europe. Distribution operating income  
of $0.8 million improved by $0.1 million from the 2003 quarter. As a percentage 
of sales, operating income was 10% and 9% in 2004 and 2003, respectively.       

All Other net sales of $6.6 million increased $2.0 million, or 45%.   
Revenues for contract manufacturing increased $2.0 million due to increased     
volumes. Revenues from specialized lab projects and formulations approximated   
the prior period. Operating income of $0.5 million decreased by $0.2 million    
from the prior period due to higher manufacturing costs.                        

OPERATING SEGMENTS COMPARISON OF SIX MONTHS ENDED DECEMBER 2004 AND 2003    

Animal Health and Nutrition                                                 

  Net Sales of $136.5 million increased $8.0 million, or 6%. MFA net sales
increased by $1.6 million. Revenues were higher primarily for antibacterials and
antibiotics but were offset in part by lower sales of anticoccidials. The       
increase in MFA revenues was due to higher unit volumes and favorable currency  
effect on international sales offset in part by lower average selling prices.   
NFA net sales increased by $6.4 million principally due to volume increases in  
trace mineral premixes and other feed ingredients.                              

Operating Income of $6.3 million decreased $8.3 million from the 2003 
period. Operating income, excluding costs relating to the Belgium Transactions  
of $9.5 million, improved due to higher sales unit volumes and lower unit costs 
offset in part by lower average selling prices and increased selling, general   
and administrative expenses.                                                    

Specialty Chemicals                                                         

   Industrial Chemicals net sales of $16.1 million, excluding PMC, increased
$3.5 million, or 28%. Sales of copper-related products to the wood treatment    
markets increased due to the introduction of new copper based wood treatment    
products. PMC, divested in December 2003, generated revenues of $11.1 million   
for the 2003 period. Operating income, excluding PMC, of $1.4 million improved  
by $2.1 million from the 2003 period. This improvement was due to new product   
introductions and savings from previously implemented headcount                 

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reductions and facility restructurings in Phibro-Tech operations. PMC provided  
operating income of $2.3 million for the 2003 period.                           

Distribution net sales of $15.8 million increased $0.2 million, or 1%.
Higher domestic unit volumes and slightly higher average selling prices were    
offset in part by lower sales volumes in Europe. Distribution operating income  
of $1.7 million improved by $0.1 million from the 2003 period. As a percentage  
of sales, operating income was 11% and 10% in 2004 and 2003, respectively.      

All Other net sales of $13.0 million increased $3.3 million, or 34%.  
Revenues for contract manufacturing increased $2.8 million due to increased     
volumes and average selling prices. Revenues from specialized lab projects and  
formulations increased $0.5 million over the prior period. Operating income of  
$1.2 million decreased from the prior period due to higher manufacturing costs. 

                                                        [Enlarge/Download Table]

                                                           YEAR ENDED JUNE 30,       
                                                      ------------------------------ 
                                                        2004       2003       2002   
                                                      --------   --------   -------- 
                                                          (DOLLARS IN THOUSANDS)     
                                                                                     
Net Sales:                                                                           
  Animal Health & Nutrition.......................... $265,421   $250,706   $239,602 
  Industrial Chemicals -- ex PMC.....................   31,135     26,465     29,403 
  Industrial Chemicals -- PMC........................   11,118     22,332     21,451 
  Distribution.......................................   30,861     30,072     27,852 
  All other..........................................   19,739     12,171     10,368 
                                                      --------   --------   -------- 
                                                      $358,274   $341,746   $328,676 
                                                      ========   ========   ======== 
Operating Income:                                                                    
  Animal Health & Nutrition.......................... $ 33,307   $ 38,472   $ 28,298 
  Industrial Chemicals -- ex PMC.....................      621     (5,434)   (10,964)
  Industrial Chemicals -- PMC........................    2,278      3,579      3,640 
  Distribution.......................................    2,900      3,207      2,345 
  All other..........................................    2,301        620      1,164 
  Corporate expenses and adjustments.................  (22,393)   (14,948)   (13,854)
                                                      --------   --------   -------- 
                                                      $ 19,014   $ 25,496   $ 10,629 
                                                      ========   ========   ======== 

OPERATING SEGMENTS COMPARISON OF YEARS ENDED JUNE 30, 2004 AND 2003         

Animal Health and Nutrition                                                 

    Net Sales of $265.4 million increased $14.7 million, or 6%. Medicated Feed
Additives net sales decreased by $7.8 million. Revenues were lower primarily for
anticoccidials but were offset in part by higher sales of other medicated feed  
additives. Sales of anticoccidial products were $7.1 million lower due to       
contract negotiations with a major customer that were completed in the fourth   
quarter of 2004. The decrease in MFA revenues also was due to lower average     
selling prices offset in part by favorable currency effect on international     
sales. Nutritional Feed Additives net sales increased by $22.5 million,         
principally due to volume increases in core inorganic minerals, trace mineral   
premixes and other ingredients.                                                 

     Operating Income of $33.3 million decreased $5.2 million, or 13%. Operating
income declined due to product mix, higher cost of goods reflecting the stronger
Euro's effect on Belgian manufacturing cost and unfavorable currency effects on 
international selling, general and administrative expense. Lower average selling
prices also contributed to the decrease. Operating income increased $2.0 million
in the fourth quarter of 2004 due to an agreement related to the production and 
sale of amprolium, an anticoccidial MFA.                                        

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Specialty Chemicals                                                         

   Industrial Chemicals net sales of $31.1 million, excluding PMC, increased
$4.7 million, or 18%. Sales of copper related products to the wood treatment    
markets increased due to the introduction of new copper based wood treatment    
chemicals which offset the divestiture of the Company's Eastern United States   
etchant business in mid 2003. The Company continues its existing etchant        
business at one remaining facility. PMC, divested in December 2003, generated   
revenues of $11.1 million and $22.3 million for 2004 and 2003, respectively.    
Operating income of $0.6 million improved by $6.1 million from the prior year.  
This improvement was due to new product introductions and savings from headcount
reductions and facility restructurings in Phibro-Tech operations. PMC provided  
operating income of $2.3 million and $3.6 million for 2004 and 2003,            
respectively.                                                                   

Distribution net sales of $30.9 million increased $0.8 million, or 3%.
Higher sales volumes in Europe were offset in part by lower domestic unit       
volumes and lower average selling prices. Distribution operating income of $2.9 
million decreased $0.3 million from the prior year. As a percentage of sales,   
operating income was 9% and 11% in 2004 and 2003, respectively.                 

All Other net sales of $19.7 million increased $7.6 million, or 62%.  
Revenues for contract manufacturing increased $7.6 million due to increased     
volumes and average selling prices. Specialized lab projects and formulations   
approximated the prior year. Operating income of $2.3 million improved by $1.7  
million from the prior year due to higher revenues and increased margins on     
contract manufacturing.                                                         

OPERATING SEGMENTS COMPARISON OF YEARS ENDED JUNE 30, 2003 AND 2002         

Animal Health and Nutrition                                                 

    Net Sales of $250.7 million increased $11.1 million, or 5%. Medicated Feed
Additives net sales increased by $6.7 million. Revenues were higher for         
antibacterials, antibiotics and anticoccidials but were offset in part by lower 
sales of anthelmintics and other medicated feed additives. The increased        
revenues were due to volume increases offset in part by lower average selling   
prices, including the effect of currency devaluations in Latin America.         
Nutritional Feed Additives net sales increased by $4.4 million, principally due 
to volume increases in core inorganic minerals, trace mineral premixes and other
ingredients.                                                                    

     Operating Income of $38.5 million increased $10.2 million, or 36%. Purchase
accounting adjustments relating to inventory in the MFA acquisition resulted in 
a $3.3 million increase to 2002 cost of goods sold. The operating income ratio  
increased to 15% in 2003 from 13% in 2002 (excluding the purchase accounting    
adjustments). The improvement in operating income resulted from increased sales 
of higher margin products and close control of operating expenses.              

Specialty Chemicals                                                         

   Industrial Chemicals net sales of $26.5 million, excluding PMC, decreased
$2.9 million, or 10%. Industrial Chemicals net sales decreased due to the       
divestiture of the Company's Eastern United States etchant business in          
mid-fiscal 2003 and reduced sales of etchants to the printed circuit board      
market. PMC, divested in December 2003, generated revenues of $22.3 million and 
$21.5 million for fiscal periods 2003 and 2002, respectively. Industrial        
Chemicals operating loss of $5.4 million improved by $5.5 million from the year 
earlier loss. The improvement principally was due to the partial disposal during
2003 of the ammoniacal etchant business and savings from headcount reductions   
and facility restructurings. The gain on the transaction was not material. PMC  
provided operating income of $3.6 million in each of the 2003 and 2002 fiscal   
periods.                                                                        

Distribution net sales of $30.1 million increased $2.2 million, or 8%.
Higher sales volumes in Europe and improved product mix in domestic operations  
accounted for the increase. Distribution operating income of $3.2 million       
increased $0.9 million, or 37%. As a percentage of sales, operating income      
increased to 11% in 2003 from 8% in 2002. The improvement in operating income   
margins resulted principally from increased sales of higher margin products.    

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All Other net sales of $12.2 million increased $1.8 million, or 17%.  
Revenues for contract manufacturing increased $2.4 million due to increased     
volumes. Revenues from specialized lab projects and formulations declined $0.6  
million. Operating income of $0.6 million decreased primarily due to specialized
lab projects and formulations.                                                  

DISCONTINUED OPERATIONS                                                         

     In August 2003, the Company divested Mineral Resource Technologies, Inc and
shutdown its operations at La Cornubia. These businesses have been classified as
discontinued operations. The Company's consolidated financial statements have   
been reclassified to report separately the operating results and cash flows of  
the discontinued operations.                                                    

                                                        [Enlarge/Download Table]

                                                                THREE MONTHS ENDED      
                                                                DECEMBER 31, 2003       
                                                           ---------------------------- 
                                                            MRT    LA CORNUBIA   TOTAL  
                                                           -----   -----------   ------ 
                                                                                        
Net Sales................................................. $ --      $3,503      $3,503 
                                                           =====     ======      ====== 
Operating Loss............................................ $ --      $ (108)     $ (108)
Interest Expense, net.....................................   --          26          26 
Other Expense (Income), net...............................   --        (193)       (193)
Provision (benefit) for income tax........................   --          --          -- 
                                                           -----     ------      ------ 
Net Income (loss) from discontinued operations............ $ --      $   59      $   59 
                                                           =====     ======      ====== 
Depreciation and Amortization............................. $ --      $  101      $  101 
                                                           =====     ======      ====== 

                                                        [Enlarge/Download Table]

                                                               SIX MONTHS ENDED        
                                                               DECEMBER 31, 2003       
                                                         ----------------------------- 
                                                          MRT     LA CORNUBIA   TOTAL  
                                                         ------   -----------   ------ 
                                                                                       
Net Sales............................................... $3,327     $5,723      $9,050 
                                                         ======     ======      ====== 
Operating Loss.......................................... $ (124)    $ (480)     $ (604)
Interest Expense, net...................................     --         42          42 
Other Expense (Income), net.............................     --       (243)       (243)
Provision (benefit) for income tax......................     --         --          -- 
                                                         ------     ------      ------ 
Net Income (loss) from discontinued operations.......... $ (124)    $ (279)     $ (403)
                                                         ======     ======      ====== 
Depreciation and Amortization........................... $   --     $  201      $  201 
                                                         ======     ======      ====== 

   Mineral Resource Technologies, Inc. ("MRT").  In August 2003, the Company
divested MRT for net proceeds, after transaction costs, of approximately $13.8  
million. MRT was included in the Company's All Other segment.                   

   La Cornubia.  On June 30, 2004, one of the Company's French subsidiaries,
La Cornubia SA ("La Cornubia"), filed for bankruptcy under the insolvency laws  
of France. The Company believes that, as a result of the bankruptcy filing by La
Cornubia, it is possible that LC Holding S.A. ("LC Holding"), La Cornubia's     
parent, a holding company with no assets except for its investment in La        
Cornubia, may also file for bankruptcy in France. The Company does not believe  
that La Cornubia's bankruptcy filing, nor the possible bankruptcy filing by LC  
Holding, will have a material adverse effect on its financial condition or      
results of operations.                                                          

 During fiscal 2004, the Company shutdown its operations at La Cornubia.
During fiscal 2003, the Company shutdown or divested Odda Smelteverk (Norway),  
Carbide Industries (U.K.), and Mineral Resource Technologies, Inc. These        
businesses have been classified as discontinued operations. The Company's       
consolidated financial statements have been reclassified to report separately   
the operating results, financial                                                

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position, and cash flows of the discontinued operations. Prior year financial   
statements have been reclassified to conform to the 2004 presentation.          

                                                        [Enlarge/Download Table]

                                                     YEAR ENDED JUNE 30, 2004            
                                           --------------------------------------------- 
                                           LA CORNUBIA   ODDA/CARBIDE    MRT      TOTAL  
                                           -----------   ------------   ------   ------- 
                                                                                         
Net Sales.................................   $13,918        $  --       $3,327   $17,245 
                                             =======        =====       ======   ======= 
Operating Loss............................   $(1,491)       $  --       $ (124)  $(1,615)
Interest Expense, net.....................        94                                  94 
Other Expense (Income), net...............      (102)          --           --      (102)
Provision (benefit) for income tax........        18           --           --        18 
                                             -------        -----       ------   ------- 
Net Income (Loss) from discontinued                                                      
  operations..............................   $(1,501)       $  --       $ (124)  $(1,625)
                                             =======        =====       ======   ======= 
Depreciation & Amortization...............   $   400        $  --       $   --   $   400 
                                             =======        =====       ======   ======= 

                                                        [Enlarge/Download Table]

                                                    YEAR ENDED JUNE 30, 2003             
                                         ----------------------------------------------- 
                                         LA CORNUBIA   ODDA/CARBIDE     MRT      TOTAL   
                                         -----------   ------------   -------   -------- 
                                                                                         
Net Sales...............................   $13,479       $ 11,217     $18,671   $ 43,367 
                                           =======       ========     =======   ======== 
Operating Loss..........................   $  (359)      $(13,462)    $(3,454)  $(17,275)
Interest Expense, net...................        60                                    60 
Other Expense (Income), net.............      (389)        (2,327)         --     (2,716)
Provision (benefit) for income tax......        16             58          --        (42)
                                           -------       --------     -------   -------- 
Net Income (Loss) from discontinued                                                      
  operations............................   $   (46)      $(11,077)    $(3,454)  $(14,577)
                                           =======       ========     =======   ======== 
Depreciation & Amortization.............   $   359       $    894     $ 1,309   $  2,562 
                                           =======       ========     =======   ======== 

                                                        [Enlarge/Download Table]

                                                    YEAR ENDED JUNE 30, 2002             
                                         ----------------------------------------------- 
                                         LA CORNUBIA   ODDA/CARBIDE     MRT      TOTAL   
                                         -----------   ------------   -------   -------- 
                                                                                         
Net Sales...............................   $11,873       $ 31,219     $17,045   $ 60,137 
                                           =======       ========     =======   ======== 
Operating Loss..........................   $  (912)      $(27,709)    $(2,930)  $(31,551)
Interest Expense, net...................        78                                    78 
Other Expense (Income), net.............      (263)        (3,699)                (3,962)
Provision (benefit) for income tax......        62         (1,170)         --     (1,108)
                                           -------       --------     -------   -------- 
Net Income (Loss) from discounted                                                        
  operations............................   $  (789)      $(22,840)    $(2,930)  $(26,559)
                                           =======       ========     =======   ======== 
Depreciation & Amortization.............   $   325       $ 17,676     $ 1,192   $ 19,193 
                                           =======       ========     =======   ======== 

     Odda and Carbide.  During fiscal 2003, the Company determined that it would
permanently shutdown and no longer fund the operations of Odda. On February 28, 
2003, Odda filed for bankruptcy in Norway. The bankruptcy is proceeding in      
accordance with Norwegian law. The Company removed all assets, liabilities      
(except as noted below), and cumulative translation adjustments related to Odda 
from the Company's consolidated balance sheet as of June 30, 2003, and recorded 
the net result as a loss on disposal of discontinued operations. The Company has
been advised that, as a result of the bankruptcy, the creditors of Odda have    
recourse only to the assets of Odda, except in the case of certain debt         
guaranteed by the Company. During fiscal 2004, the Company paid the remaining   
guaranteed debt of $5.7 million. The Company has been advised by Norwegian      
counsel that it has obtained the benefit of the banks' position as a secured    
creditor upon payment pursuant to the guarantees. During fiscal 2003, the       
Company sold Carbide, previously a distributor                                  

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for one of Odda's product lines. Proceeds from the divestiture were not         
material. Odda was included in the Company's Industrial Chemicals segment and   
Carbide was included in the Company's Distribution segment.                     

  The Company recorded a $0.7 million loss on disposal of Odda and Carbide
during fiscal 2003. The loss primarily related to the write-off of Odda's       
remaining net assets, including the related cumulative currency translation     
adjustment.                                                                     

LIQUIDITY AND CAPITAL RESOURCES                                                 

     Net Cash (Used) by Operating Activities.  Cash (used) by operations for the
six months ended December 31, 2004 and 2003 was ($5.1) million and ($0.7)       
million, respectively. Cash used was due to higher working capital requirements 
offset in part by income from continuing operations. The Company is currently   
increasing inventory levels of virginiamycin to enhance future supply           
flexibility and reduce cost as part of the planned exit of the Belgium Plant.   
Cash provided by operations for fiscal 2004 and 2003 was $2.9 million and $34.7 
million, respectively. Cash provided in fiscal 2004 was due to income from      
continuing operations offset in part by working capital requirements. In        
addition, payment of the Pfizer obligations (shown in financing activities)     
eliminated additional working capital requirements that otherwise would have    
been necessary. Cash provided in fiscal 2003 was due to improved income from    
continuing operations and aggressive working capital management. The Company    
incurred $5.3 million of costs for a non-completed acquisition transaction and  
paid approximately $1.4 million of these charges in fiscal 2004.                

     Net Cash Provided (Used) by Investing Activities.  Net cash provided (used)
by investing activities for the six months ended December 31, 2004 and 2003 was 
($3.6) million and $12.1 million, respectively. Capital expenditures of $3.7    
million and $2.3 million for 2004 and 2003, respectively, were for new product  
capacity, for maintaining the Company's existing asset base and for             
environmental, health and safety projects. Discontinued operations, primarily   
from the sale of MRT, provided funds of $14.4 million in 2003. Net cash provided
(used) by investing activities for fiscal 2004 and 2003 was $9.1 million and    
($4.0) million, respectively. Discontinued operations, primarily from the sale  
of MRT, provided funds of $14.9 million in fiscal 2004. Discontinued operations 
provided $1.4 million in fiscal 2003. Capital expenditures of $6.2 million and  
$8.6 million for fiscal 2004 and 2003, respectively, were for new product       
capacity, for maintaining the Company's existing asset base and for             
environmental, health and safety projects. Proceeds from sales of fixed assets  
and other investing activities accounted for the remainder of cash provided by  
investing activities in fiscal 2004.                                            

     Net Cash Provided (Used) by Financing Activities.  Net cash provided (used)
by financing activities for the six months ended December 31, 2004 and 2003 was 
$12.9 million and ($14.2) million, respectively. Proceeds from long-term debt   
reflect the issuance of additional 13% Senior Secured Notes and borrowings of   
Koffolk Israel. The decrease in short-term debt is due to the reduction of the  
senior credit facility. Payments of long-term debt reflect the repayments of    
Koffolk Israel borrowings. Net cash (used) by financing activities for fiscal   
2004 and 2003 was ($17.8) million and ($26.4) million, respectively. Short-term 
debt decreased due to the reduction of the domestic senior credit facility of   
$21.2 million, debt payments related to Odda of $5.7 million and by other       
increases of $0.1 million in fiscal 2004. Proceeds from long-term debt reflect  
the issuance of $105.0 million Senior Secured Notes and an increase of $4.6     
million in foreign bank loans in fiscal 2004. Payments of long-term debt        
primarily reflect the retirement of Senior Subordinated Notes in fiscal 2004.   
Payments of the Pfizer obligations, the Prince transactions and costs related to
the refinancing account for the remainder of funds used by financing activities 
in fiscal 2004.                                                                 

   Working Capital and Capital Expenditures.  Working capital as of December
31, 2004 was $75.7 million compared to $54.4 million at June 30, 2004, an       
increase of $21.3 million. The fiscal 2005 increase in working capital primarily
was due to higher inventory levels and higher cash balances related to the      
issuance of new long-term debt.                                                 

 The Company anticipates spending approximately $8.0 million for capital
expenditures in fiscal 2005, primarily to cover the Company's asset replacement 
needs, to improve processes, and for environmental and regulatory compliance,   
subject to the availability of funds.                                           

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  Liquidity.  At December 31, 2004 the amount of credit extended under the
Company's domestic senior credit facility totaled $0.3 million under the working
capital facility and $9.8 million under the letter of credit facility, and the  
Company had $17.2 million available under the working capital facility. In      
addition, certain of the Company's foreign subsidiaries also had availability   
totaling $3.9 million under their respective loan agreements.                   

  As of September 24, 2004, the Company amended its domestic senior credit
facility to: (i) increase the aggregate amount of borrowings available under    
such working capital and letter of credit facilities to $32.5 million; the      
amount of aggregate borrowings available under the working capital facility     
remained unchanged at $17.5 million; (ii) amend the EBITDA definition to exclude
charges and expenses related to unsuccessful acquisitions and related financings
in an aggregate amount not to exceed $5.3 million for the period beginning      
January 1, 2004 and ending June 30, 2004; (iii) amend the definition of         
Additional Indebtedness to exclude advances under the working capital facility; 
(iv) amend the definition of Permitted Investments to allow other investments   
made during the period from January 1, 2004 through June 30, 2004 in an         
aggregate amount not to exceed $336,000; and (v) establish covenant EBITDA      
levels for the periods ending after June 30, 2004. The amendment was effective  
June 30, 2004 for items (i), (ii) and (iii); effective January 1, 2004 for item 
(iv); and effective September 24, 2004 for item (v).                            

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended the domestic senior credit facility to:   
(i) amend the EBITDA definition to exclude charges and expenses related to the  
sale of the Belgium Plant in an aggregate amount not to exceed $26.8 million for
purposes of calculating a certain financial covenant; (ii) amend the Indenture  
reserve definition to include scheduled payments of interest due on the         
Additional Notes; (iii) amend the maximum aggregate amount of borrowing         
available under the working capital facility to permit a temporary increase to  
$22.5 million and for its reduction to $17.5 million on such borrowings being   
refinanced by the proceeds of the Additional Notes; (iv) amend the Permitted    
Investments definition to include investments in connection with the sale of the
Belgium Plant and transfer of certain equipment, together with other assets and 
rights related to the production of virginiamycin, to PAH Brazil or in          
connection with alternative production arrangements; and (v) provide for the    
issuance of the Additional Notes and the sale of the Belgium Plant and related  
transactions.                                                                   

   The domestic senior credit facility contains a lock-box requirement and a
material adverse change clause should an event of default (as defined in the    
agreement) occur. Accordingly, the amounts outstanding have been classified as  
short-term and are included in loans payable to banks in the condensed          
consolidated balance sheet.                                                     

     The Company's ability to fund its operating plan depends upon the continued
availability of borrowing under its domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under   
the domestic senior credit facility based on its forecasted operating plan. In  
the event of adverse operating results and/or violation of covenants under this 
facility, there can be no assurance that the Company would be able to obtain    
waivers or amendments on favorable terms, if at all. The Company expects        
adequate liquidity throughout 2005, with periods of reduced availability around 
the dates of the semi-annual interest payments due June 1 and December 1 related
to its Senior Secured Notes and Senior Subordinated Notes. The Company is       
pursuing additional cost reduction activities, working capital improvement      
plans, and sales of non-strategic assets to ensure additional liquidity. The    
Company also has availability under foreign credit lines that likely would be   
available. There can be no assurance the Company will be successful in any of   
the above-noted actions.                                                        

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  The Company's contractual obligations (in millions) at December 31, 2004
mature as follows:                                                              

                                                        [Enlarge/Download Table]

                                                                   YEARS                            
                                               ---------------------------------------------        
                                               WITHIN 1   OVER 1 TO 3   OVER 3 TO 5   OVER 5  TOTAL 
                                               --------   -----------   -----------   ------  ------
                                                                                                    
Loans payable to banks........................  $ 0.3       $   --         $  --       $ --   $  0.3
Long-term debt (including current portion)....    4.1        129.8          48.8         --    182.7
Interest payments.............................   22.3         44.9           2.4         --     69.6
Lease commitments.............................    1.4          2.7           2.0        2.0      8.1
Acquisition of rights.........................    0.5          0.7           0.2         --      1.4
                                                -----       ------         -----       ----   ------
  Total contractual obligations...............  $28.6       $178.1         $53.4       $2.0   $262.1
                                                =====       ======         =====       ====   ======

SUPPLEMENTAL INFORMATION (UNAUDITED)                                            

     The Company shutdown Odda and divested Carbide during fiscal 2003, sold MRT
in August 2003, and shutdown La Cornubia in June 2004. These businesses have    
been classified as discontinued operations. The Company's consolidated financial
statements have been reclassified to report separately the operating results,   
financial position, and cash flows of the discontinued operations. In addition, 
the Company completed the Prince Transactions in December 2003, including the   
divestiture of PMC and the termination of management fees to the Palladium      
Investors.                                                                      

 To facilitate quarterly comparisons, the following unaudited statements
present the quarterly operating results of continuing operations, for the years 
ended June 30, 2004, 2003 and 2002. Amounts are in thousands.                   

                                                        [Enlarge/Download Table]

                                                         QUARTERS ENDED                  YEAR   
                                            -----------------------------------------   ENDED   
                                            SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,  JUN. 30, 
                                              2003       2003       2004       2004      2004   
                                            --------   --------   --------   --------  -------- 
                                                                                                
NET SALES:                                                                                      
  Animal Health & Nutrition................ $59,841    $ 68,687   $64,819    $72,074   $265,421 
  Industrial Chemicals -- ex PMC...........   6,299       6,244    10,000      8,592     31,135 
  Industrial Chemicals -- PMC..............   5,683       5,435        --         --     11,118 
  Distribution.............................   7,939       7,656     7,916      7,350     30,861 
  All Other................................   5,188       4,518     4,302      5,731     19,739 
                                            -------    --------   -------    -------   -------- 
     Total net sales.......................  84,950      92,540    87,037     93,747    358,274 
Cost of goods sold.........................  63,790      69,991    63,843     70,247    267,871 
                                            -------    --------   -------    -------   -------- 
     Gross profit..........................  21,160      22,549    23,194     23,500     90,403 
Selling, general and administrative                                                             
  expenses.................................  15,785      16,824    16,165     17,354     66,128 
Costs of non-completed transaction.........      --          --        --      5,261      5,261 
                                            -------    --------   -------    -------   -------- 
OPERATING INCOME (LOSS):                                                                        
  Animal Health & Nutrition................   6,900       7,655     8,370     10,382     33,307 
  Industrial Chemicals -- ex PMC...........    (391)       (287)    1,136        163        621 
  Industrial Chemicals -- PMC..............   1,213       1,065        --         --      2,278 
  Distribution.............................     841         692       789        578      2,900 
  All Other................................     669         657       557        418      2,301 
  Corporate Expenses.......................  (3,377)     (4,132)   (4,116)    (9,729)   (21,354)
  Eliminations.............................      82         638       293       (927)        86 
  Palladium management fee.................    (562)       (563)       --         --     (1,125)
                                            -------    --------   -------    -------   -------- 
     Total operating income (loss).........   5,375       5,725     7,029        885     19,014 

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                                                         QUARTERS ENDED                  YEAR   
                                            -----------------------------------------   ENDED   
                                            SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,  JUN. 30, 
                                              2003       2003       2004       2004      2004   
                                            --------   --------   --------   --------  -------- 
                                                                                                
OTHER:                                                                                          
  Interest expense.........................   3,933       4,549     4,918      5,218     18,618 
  Interest (income)........................    (242)        168       (43)       (13)      (130)
  Other expense, net.......................    (585)        127      (131)      (192)      (781)
  Net (gain) on extinguishment of debt.....      --     (23,226)       --         --    (23,226)
                                            -------    --------   -------    -------   -------- 
     Income (loss) from continuing                                                              
       operations before income taxes......   2,269      24,107     2,285     (4,128)    24,533 
Provision for income taxes.................     783       2,880     2,209      2,097      7,969 
                                            -------    --------   -------    -------   -------- 
     Income/(loss) from continuing                                                              
       operations..........................   1,486      21,227        76     (6,225)    16,564 
DISCONTINUED OPERATIONS:                                                                        
  Income (loss) from operations............    (462)         59      (471)      (751)    (1,625)
  Gain (loss) on disposal..................     231          --        --     (2,320)    (2,089)
                                            -------    --------   -------    -------   -------- 
     Net income/(loss)..................... $ 1,255    $ 21,286   $  (395)   $(9,296)  $ 12,850 
                                            =======    ========   =======    =======   ======== 
DEPRECIATION AND AMORTIZATION FROM                                                              
  CONTINUING OPERATIONS:                                                                        
  Animal Health & Nutrition................ $ 2,029    $  2,059   $ 2,086    $ 2,089   $  8,263 
  Industrial Chemicals -- ex PMC...........     406         395       403        432      1,636 
  Industrial Chemicals -- PMC..............     243         244        --         --        487 
  Distribution.............................       3           4         3          1         11 
  All Other................................     115          98       105        101        419 
  Corporate Expenses.......................     372         576       660        759      2,367 
                                            -------    --------   -------    -------   -------- 
     Total depreciation and amortization... $ 3,168    $  3,376   $ 3,257    $ 3,382   $ 13,183 
                                            =======    ========   =======    =======   ======== 

                                                        [Enlarge/Download Table]

                                                          QUARTERS ENDED                  YEAR  
                                             -----------------------------------------   ENDED  
                                             SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,  JUN. 30,
                                               2002       2002       2003       2003      2003  
                                             --------   --------   --------   --------  --------
                                                                                                
NET SALES:                                                                                      
  Animal Health & Nutrition................. $59,976    $66,650    $62,675    $61,405   $250,706
  Industrial Chemicals -- ex PMC............   8,138      5,946      6,449      5,932     26,465
  Industrial Chemicals -- PMC...............   5,756      5,285      5,743      5,548     22,332
  Distribution..............................   8,096      7,197      7,612      7,167     30,072
  All Other.................................   1,711      2,190      3,793      4,477     12,171
                                             -------    -------    -------    -------   --------
     Total net sales........................  83,667     87,268     86,272     84,529    341,746
Cost of goods sold..........................  61,638     63,366     63,306     62,890    251,200
                                             -------    -------    -------    -------   --------
     Gross profit...........................  22,039     23,902     22,966     21,639     90,546
Selling, general and administrative                                                             
  expenses..................................  15,544     15,874     17,496     16,136     65,050

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                                                          QUARTERS ENDED                  YEAR   
                                             -----------------------------------------   ENDED   
                                             SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,  JUN. 30, 
                                               2002       2002       2003       2003      2003   
                                             --------   --------   --------   --------  -------- 
                                                                                                 
OPERATING INCOME (LOSS):                                                                         
  Animal Health & Nutrition.................   9,420     11,593      8,902      8,557     38,472 
  Industrial Chemicals -- ex PMC............  (1,035)    (1,815)    (1,555)    (1,029)    (5,434)
  Industrial Chemicals -- PMC...............   1,127        901        839        712      3,579 
  Distribution..............................     750        802        900        755      3,207 
  All Other.................................      13        245        356          6        620 
  Corporate Expenses........................  (3,051)    (3,440)    (3,324)    (2,905)   (12,720)
  Eliminations..............................    (167)       305        (86)       (30)        22 
  Palladium management fee..................    (562)      (563)      (562)      (563)    (2,250)
                                             -------    -------    -------    -------   -------- 
     Total operating income (loss)..........   6,495      8,028      5,470      5,503     25,496 
OTHER:                                                                                           
  Interest expense..........................   4,489      3,641      3,958      4,193     16,281 
  Interest (income).........................    (126)        31        (39)        49        (85)
  Other expense, net........................   1,155        235        201        (52)     1,539 
                                             -------    -------    -------    -------   -------- 
     Income (loss) from continuing                                                               
       operations before income taxes.......     977      4,121      1,350      1,313      7,761 
Provision for income taxes..................     432      1,409        599      7,620     10,060 
                                             -------    -------    -------    -------   -------- 
     Income/(loss) from continuing                                                               
       operations...........................     545      2,712        751     (6,307)    (2,299)
DISCONTINUED OPERATIONS:                                                                         
  Income (loss) from operations.............    (702)   (10,547)    (1,681)    (1,647)   (14,577)
  Gain (loss) on disposal...................      --         --     (1,342)       659       (683)
                                             -------    -------    -------    -------   -------- 
     Net income/(loss)...................... $  (157)   $(7,835)   $(2,272)   $(7,295)  $(17,559)
                                             =======    =======    =======    =======   ======== 
DEPRECIATION AND AMORTIZATION FROM                                                               
  CONTINUING OPERATIONS:                                                                         
  Animal Health & Nutrition................. $ 1,892    $ 1,920    $ 1,890    $ 1,988   $  7,690 
  Industrial Chemicals -- ex PMC............     587        699        498        164      1,948 
  Industrial Chemicals -- PMC...............     232        239        240        245        956 
  Distribution..............................       3          3          2          4         12 
  All Other.................................      87         90         94         93        364 
  Corporate Expenses........................     355        395        405        399      1,554 
                                             -------    -------    -------    -------   -------- 
     Total depreciation and amortization.... $ 3,156    $ 3,346    $ 3,129    $ 2,893   $ 12,524 
                                             =======    =======    =======    =======   ======== 

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                                                          QUARTERS ENDED                  YEAR   
                                             -----------------------------------------   ENDED   
                                             SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,  JUN. 30, 
                                               2001       2001       2002       2002      2002   
                                             --------   --------   --------   --------  -------- 
                                                                                                 
NET SALES:                                                                                       
  Animal Health & Nutrition................. $57,943    $63,156    $59,378    $59,125   $239,602 
  Industrial Chemicals -- ex PMC............   6,591      6,253      7,258      9,301     29,403 
  Industrial Chemicals -- PMC...............   5,062      5,218      5,418      5,753     21,451 
  Distribution..............................   7,590      6,640      6,753      6,869     27,852 
  All Other.................................   2,377      2,448      2,595      2,948     10,368 
                                             -------    -------    -------    -------   -------- 
     Total net sales........................  79,563     83,715     81,402     83,996    328,676 
Cost of goods sold..........................  59,592     60,128     60,885     66,806    247,411 
                                             -------    -------    -------    -------   -------- 
     Gross profit...........................  19,971     23,587     20,517     17,190     81,265 
Selling, general and administrative                                                              
  expenses..................................  16,431     17,614     17,577     19,014     70,636 
OPERATING INCOME (LOSS):                                                                         
  Animal Health & Nutrition.................   7,365     10,259      6,246      4,428     28,298 
  Industrial Chemicals -- ex PMC............  (2,759)    (2,160)    (1,175)    (4,870)   (10,964)
  Industrial Chemicals -- PMC...............     821        588      1,058      1,173      3,640 
  Distribution..............................     612        544        496        693      2,345 
  All Other.................................     214        367        108        475      1,164 
  Corporate Expenses........................  (2,204)    (2,708)    (2,733)    (3,746)   (11,391)

                                                        [Enlarge/Download Table]

                                                         QUARTERS ENDED                   YEAR   
                                            -----------------------------------------    ENDED   
                                            SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,   JUN. 30, 
                                              2001       2001       2002       2002       2002   
                                            --------   --------   --------   --------   -------- 
                                                                                                 
Eliminations...............................      53       (354)      (498)        586       (213)
  Palladium management fee.................    (562)      (563)      (562)       (563)    (2,250)
                                            -------    -------    -------    --------   -------- 
     Total operating income (loss).........   3,540      5,973      2,940      (1,824)    10,629 
OTHER:                                                                                           
  Interest expense.........................   4,596      4,660      4,590       4,224     18,070 
  Interest (income)........................     (65)      (231)        (6)        (44)      (346)
  Other expense, net.......................   1,263        753        368         965      3,349 
                                            -------    -------    -------    --------   -------- 
     Income (loss) from continuing                                                               
       operations before income taxes......  (2,254)       791     (2,012)     (6,969)   (10,444)
Provision for income taxes.................    (197)     1,203      1,264      12,497     14,767 
                                            -------    -------    -------    --------   -------- 
     Income/(loss) from continuing                                                               
       operations..........................  (2,057)      (412)    (3,276)    (19,466)   (25,211)
DISCONTINUED OPERATIONS:                                                                         
  Income (loss) from operations............    (308)    (1,287)    (5,796)    (19,168)   (26,559)
  Gain (loss) on disposal..................      --         --         --          --         -- 
                                            -------    -------    -------    --------   -------- 
     Net income/(loss)..................... $(2,365)   $(1,699)   $(9,072)   $(38,634)  $(51,770)
                                            =======    =======    =======    ========   ======== 

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                                                         QUARTERS ENDED                  YEAR  
                                            -----------------------------------------   ENDED  
                                            SEP. 30,   DEC. 31,   MAR. 31,   JUN. 30,  JUN. 30,
                                              2001       2001       2002       2002      2002  
                                            --------   --------   --------   --------  --------
                                                                                               
DEPRECIATION AND AMORTIZATION FROM                                                             
  CONTINUING OPERATIONS:                                                                       
  Animal Health & Nutrition................ $ 1,810    $ 1,589    $ 1,996    $  2,043  $  7,438
  Industrial Chemicals -- ex PMC...........     633        579        609         748     2,569
  Industrial Chemicals -- PMC..............     242        240        242         242       966
  Distribution.............................       7         (1)         3           3        12
  All Other................................      81         78         80          82       321
  Corporate Expenses.......................     264        268        263         254     1,049
                                            -------    -------    -------    --------  --------
     Total depreciation and amortization... $ 3,037    $ 2,753    $ 3,193    $  3,372  $ 12,355
                                            =======    =======    =======    ========  ========

CRITICAL ACCOUNTING POLICIES                                                    

Critical accounting policies are those that require application of    
management's most difficult, subjective or complex judgments, often as a result 
of the need to make estimates about the effect of matters that are inherently   
uncertain and may change in subsequent periods.                                 

     Not all of these significant accounting policies require management to make
difficult, subjective or complex judgments or estimates. However, management of 
the Company is required to make certain estimates and assumptions during the    
preparation of consolidated financial statements in accordance with accounting  
principles generally accepted in the United States of America. These estimates  
and assumptions impact the reported amount of assets and liabilities and        
disclosures of contingent assets and liabilities as of the date of the          
consolidated financial statements. Estimates and assumptions are reviewed       
periodically and the effects of revisions are reflected in the period they are  
determined to be necessary. Actual results could differ from those estimates.   
The accounting policies and related risk described in our Annual Report on Form 
10-K for the year ended June 30, 2004 are those that depend most heavily on     
these judgments and estimates. As of December 31, 2004 there have been no       
material changes to any of the critical accounting policies contained therein.  

REVENUE RECOGNITION                                                         

Revenues are recognized when title to products and risk of loss are   
transferred to customers. Additional conditions for recognition of revenue are  
that collection of sales proceeds is reasonably assured and the Company has no  
further performance obligations. Net sales are comprised of total sales billed, 
less reductions for returned goods, trade discounts and customer allowances.    

LITIGATION                                                                  

   The Company is subject to legal proceedings and claims arising out of the
normal course of business. The Company routinely assesses the likelihood of any 
adverse judgments or outcomes to these matters as well as ranges of probable    
losses. A determination of the amount of the reserves required for these        
contingencies is based on an analysis of the various issues, historical         
experience, other third party judgments and outside specialists, where required.
The required reserves may change in the future due to new developments in each  
matter. For further discussion, see Note 15 to the Consolidated Financial       
Statements.                                                                     

ENVIRONMENTAL MATTERS                                                       

The Company determines the costs of environmental remediation of its  
facilities and formerly owned properties on the basis of current law and        
existing technologies. Uncertainties exist in these evaluations primarily due to
unknown conditions, changing governmental regulations and legal standards       
regarding liability, and evolving technologies. The liabilities are adjusted    
periodically as remediation efforts progress or                                 

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as additional information becomes available. The Company has recorded           
liabilities of $2.8 million at December 31, 2004 for such activities.           

LONG LIVED ASSETS                                                           

Long-lived assets, including plant and equipment, and other intangible
assets are reviewed for impairment when events or circumstances indicate that a 
diminution in value may have occurred, based on a comparison of undiscounted    
future cash flows to the carrying amount of the long-lived asset. If the        
carrying amount exceeds undiscounted future cash flows, an impairment charge is 
recorded based on the difference between the carrying amount of the asset and   
its fair value.                                                                 

 The assessment of potential impairment for a particular asset or set of
assets requires certain judgments and estimates by the Company, including the   
determination of an event indicating impairment; the future cash flows to be    
generated by the asset, including the estimated life of the asset and likelihood
of alternative courses of action; the risk associated with those cash flows; and
the Company's cost of capital or discount rate to be utilized.                  

USEFUL LIVES OF LONG-LIVED ASSETS                                           

    Useful lives of long-lived assets, including plant and equipment and other
intangible assets are based on management's estimates of the periods that the   
assets will be productively utilized in the revenue-generation process. Factors 
that affect the determination of lives include prior experience with similar    
assets and product life expectations and management's estimate of the period    
that the assets will generate revenue.                                          

INVENTORIES                                                                 

   Inventories are valued at the lower of cost or market. Cost is determined
on a first-in, first-out (FIFO) and average methods for most inventories. The   
determination of market value to compare to cost involves assessment of numerous
factors, including costs to dispose of inventory and estimated selling prices.  
Reserves are recorded for inventory determined to be damaged, obsolete, or      
otherwise unsaleable.                                                           

INCOME TAXES                                                                

    Deferred tax assets and liabilities are determined using enacted tax rates
for the effects of net operating losses and temporary differences between the   
book and tax bases of assets and liabilities. The Company records a valuation   
allowance on deferred tax assets when appropriate to reflect the expected future
tax benefits to be realized. In determining the appropriate valuation allowance,
certain judgments are made relating to recoverability of deferred tax assets,   
use of tax loss carryforwards, level of expected future taxable income and      
available tax planning strategies. These judgments are routinely reviewed by    
management. For further discussion, see Note 14 to the Consolidated Financial   
Statements.                                                                     

NEW ACCOUNTING PRONOUNCEMENTS                                                   

     During the quarter, the Financial Accounting Standards Board released three
new standards. These standards will be adopted by the Company during fiscal 2005
and are discussed in the notes to condensed consolidated financial statements   
included in this prospectus.                                                    

EFFECT OF INFLATION; FOREIGN CURRENCY EXCHANGE RATES                            

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

    The Company's substantial foreign operations expose it to risk of exchange
rate fluctuations. Financial position and results of operations of the Company's
international subsidiaries generally are measured using local currencies as the 
functional currency. Assets and liabilities of these operations are translated  
at the exchange rates in effect at each fiscal year end. The translation        
adjustments related to assets and liabilities that                              
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arise from the use of differing exchange rates from period to period are        
included in accumulated other comprehensive loss in shareholders' equity. Income
statement accounts are translated at the average rates of exchange prevailing   
during the year.                                                                

  A business unit of Koffolk and all of Planalquimica operate primarily in
U.S. dollars. The U.S. dollar is designated as the functional currency for these
businesses and translation gains and losses are included in determining net     
income or loss.                                                                 

Foreign currency transaction gains and losses primarily arise from    
short-term intercompany balances. Net foreign currency transaction and          
translation (gains) losses were ($116), $789 and $3,385 for fiscal 2004, 2003   
and 2002, respectively, and were included in other expense, net in the          
consolidated statements of operations.                                          

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, from    
time to time, 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 Company's debt portfolio is comprised of fixed rate and variable rate
debt of approximately $183.0 million as of December 31, 2004. Approximately 2%  
of the debt is variable and would be interest rate sensitive. For further       
details, see Note 9, to the Consolidated Financial Statements of the Company    
appearing elsewhere herein.                                                     

  For the purposes of the sensitivity analysis, an immediate 10% change in
interest rates would not have a material impact on the Company's cash flows and 
earnings over a one year period.                                                

 As of June 30, 2004, the fair value of the Company's senior secured and
subordinated notes are estimated based on quoted market rates at $158 million   
and the related carrying amount is $153 million.                                

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. From   
time to time, the Company may cover 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, the Brazilian Real, 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                                                                

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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. Based on  
the limited amount of foreign currency contracts at December 31, 2004, the      
Company does not believe that an instantaneous 10% adverse movement in foreign  
currency rates from their levels at December 31, 2004, with all other variables 
held constant, would have a material effect on the Company's results of         
operations, financial position or cash flows.                                   

COMMODITY PRICE RISK                                                        

The Company purchases certain raw materials, such as copper, under    
short-term supply contracts. The purchase prices thereunder are generally       
determined based on prevailing market conditions. The Company uses commodity    
derivative instruments to modify some of the commodity price risks. Assuming a  
10% change in the underlying commodity price, the potential change in the fair  
value of commodity derivative contracts held at December 31, 2004 would not be  
material when compared to the Company's operating results and financial         
position.                                                                       

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

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BUSINESS

OVERVIEW                                                                        

  We are a leading diversified global manufacturer and marketer of a broad
range of animal health and nutrition products, specifically medicated feed      
additives (MFAs) and nutritional feed additives (NFAs), which we sell throughout
the world predominantly to the poultry, swine and cattle markets. MFAs are used 
preventively and therapeutically in animal feed to produce healthy livestock. We
believe we are the third largest manufacturer and marketer of MFAs in the world,
and we believe that certain of our MFA products have leading positions in the   
marketplace. We are also a specialty chemicals manufacturer and marketer,       
serving primarily the United States pressure-treated wood and chemical          
industries. We have several proprietary products, and many of our products      
provide critical performance attributes to our customers' products, while       
representing a relatively small percentage of total end-product cost. We operate
in over 16 countries around the world and sell our animal health and nutrition  
products and specialty chemicals products into over 40 countries. Approximately 
76% of our fiscal 2004 net sales were from our Animal Health and Nutrition      
business, and approximately 24% of our fiscal 2004 net sales were from our      
Specialty Chemicals business.                                                   

    Our Animal Health and Nutrition segment manufactures and markets more than
500 formulations and concentrations of medicated and nutritional feed additives,
including antibiotics, antibacterials, anticoccidials, anthelmintics, trace     
minerals, vitamins, vitamin premixes and other animal health and nutrition      
products, to the livestock and pet food industries. Our MFA products are        
internationally recognized for quality and efficacy in the prevention and       
treatment of diseases in livestock, such as coccidiosis in poultry, dysentery in
swine and acidosis in cattle. We market our Animal Health and Nutrition products
under approximately 450 governmental product registrations, approving our MFA   
products with respect to animal drug safety and effectiveness.                  

Our Specialty Chemicals business manufactures and markets a number of 
specialty chemicals for use in the pressure-treated wood, chemical catalyst,    
semiconductor, automotive, aerospace and agricultural industries. We anticipate 
that our proprietary manufacturing process to produce a copper-based solution   
for one of the leading new products for manufacturing pressure-treated wood will
represent our largest growth opportunity in our Specialty Chemicals business.   
Over 39% of our fiscal 2004 net sales in our Specialty Chemicals business was   
derived from copper-based compounds, solutions or mixes.                        

     We have in recent years focused our business on animal health and nutrition
products. As a result of the rapid decline of the printed circuit board industry
in the United States, we have substantially exited that business, including our 
etchant recycling operations, and re-directed our productive capacity in niche  
markets. We have also sold other non-strategic businesses, such as our Agtrol   
copper fungicide business and our subsidiaries, Mineral Resource Technologies,  
Inc. ("MRT") and The Prince Manufacturing Company ("PMC"). In addition, we      
closed our operations in Odda, Norway ("Odda") and Bordeaux, France ("La        
Cornubia").                                                                     

In August 2003, the Company completed the sale of MRT for net proceeds
after transaction costs of approximately $13.8 million. MRT managed and sold    
coal combustion by-products, including fly ash.                                 

Effective December 26, 2003, the Company completed the divestiture of 
substantially all of the business and assets of PMC to a company formed by      
Palladium Equity Partners II, LP and certain of its affiliates (the "Palladium  
Investors"), and the related reduction of the Company's preferred stock held by 
the Palladium Investors. PMC manufactured and marketed various mineral oxides,  
including iron compounds and manganese compounds (see Note 4 to Consolidated    
Financial Statements) (the "Prince Transactions"). Unless otherwise indicated,  
the information in this prospectus does not include PMC.                        

     On June 30, 2004, one of the Company's French subsidiaries, La Cornubia SA,
filed for bankruptcy under the insolvency laws of France. The Company believes  
that as a result of the bankruptcy filing by La Cornubia, it is possible that LC
Holding S.A. ("LC Holding"), La Cornubia's parent, a holding company with no    
assets except for its investment in La Cornubia, may also file for bankruptcy in
France.                                                                         

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    On December 16, 2004, Phibro Animal Health SA ("PAH Belgium") entered into
an agreement with GlaxoSmithKline Biologicals ("GSK") to sell to GSK            
substantially all of PAH Belgium's facilities in Rixensart, Belgium (the        
"Belgium Plant"). Such sale, when completed, (the "Belgium Plant Transactions") 
will include the following elements (U.S. dollar amounts as of December 31, 2004
exchange rate): (i) the transfer of substantially all of the land and buildings 
and certain equipment of PAH Belgium at the Belgium Plant, as well as the       
industrial activities and intellectual property relating to certain solvent     
technology of PAH Belgium, for a purchase price of EUR 6.2 million ($8.4        
million), payable at closing; (ii) the transfer to GSK of a majority of the     
employees of PAH Belgium and the corresponding responsibility for statutory     
severance obligations; (iii) GSK agreeing to be responsible for cleaning-up, by 
demolition or otherwise, certain buildings not to be used by it, but for PAH    
Belgium to reimburse GSK up to a maximum of EUR 0.7 million ($0.9 million) for  
such clean-up costs; (iv) in recognition of the benefits to the Company from the
proposed transaction, PAH Belgium agreeing to pay to GSK EUR 1.5 million ($2.0  
million) within six months from the closing date, EUR 1.5 million ($2.0 million)
within eighteen months from the closing date, EUR 1.5 million ($2.0 million)    
within thirty months from the closing date, and EUR 0.5 million ($0.7 million)  
within forty-two months from the closing date; (v) PAH Belgium retaining certain
excess land (valued at approximately EUR 0.4 million ($0.5 million)) and being  
able to sell such land for its own account; (vi) PAH Belgium being responsible  
for certain plant closure costs and legally required severance indemnities in   
connection with workforce reductions, estimated in total to be EUR 9.1 million  
($12.3 million), of which an amount estimated to be approximately EUR 4.6       
million ($6.2 million) would be payable at or around the closing and an         
aggregate amount so estimated to be approximately EUR 4.5 million ($6.1 million)
would be payable over periods up to thirteen years; and (vii) PAH Belgium       
retaining certain equipment at the Belgium Plant, and being able to sell such   
equipment for the account of PAH Belgium or transfer such equipment, together   
with other assets and rights related to the production of virginiamycin, to     
Philipp Brothers Brasil Holdings Ltda. ("PAH Brazil") which owns a facility in  
Guarulhos, Brazil or in connection with alternative production arrangements.    

    The foregoing transactions and agreements are subject to a closing that is
expected to occur on November 30, 2005, but in no event earlier than July 1,    
2005 or later than June 30, 2006.                                               

    The Dutch Notes and related guarantees are collateralized by a mortgage on
the Belgium Plant which will be released in connection with the closing of the  
sale of the Belgium Plant to GSK.                                               

     As a result of the above agreement, the Company will depreciate the Belgium
plant to its estimated salvage value of EUR 2.5 million ($3.3 million) as of the
projected closing date of November 30, 2005. The Company recorded incremental   
depreciation expense of EUR 0.4 million ($0.5 million) in December 2004 and will
record an additional EUR 8.7 million ($11.7 million) of incremental depreciation
expense ratably through November 2005. The Company recorded severance expense of
EUR 6.7 million ($9.0 million) in December 2004 for the estimated minimum       
severance amounts indicated by law, contract, and/or past practice. The Company 
estimates it will record additional expense of EUR 2.4 million ($3.3 million)   
ratably through November 2005 for severance, retention agreements and other     
costs. The incremental depreciation expense of $0.5 million and severance       
expense of $9.0 million recorded in December 2004 are included in cost of goods 
sold on the Company's condensed consolidated statements of operations and       
comprehensive income (loss).                                                    

     The Company has determined that the carrying amount of the Belgium Plant at
December 31, 2004 is recoverable based on the estimated future cash flows       
arising from the use of the assets.                                             

In anticipation of transferring production of virginiamycin from the  
Belgium Plant to an alternative production location, the Company has been       
increasing inventory levels of virginiamycin to ensure adequate supplies during 
the transfer period. At December 31, 2004 worldwide virginiamycin inventories   
were approximately $40.0 million and are expected to continue to increase       
through November 2005, based on current production rates.                       

   On December 21, 2004, we completed a private placement of $22.491 million
of additional old units to refinance borrowings under our domestic senior credit
facility incurred to fund alternative virginiamycin                             

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production arrangements and the increase of virginiamycin inventory pending     
supply under such alternative production arrangements.                          

BUSINESS STRENGTHS                                                              

   Top Three MFA Provider in the World.  We believe we are the world's third
largest manufacturer and marketer of medicated feed additives in the poultry and
swine markets. We manufacture and market over 200 MFA formulations and          
concentrations. We believe our MFAs rank first in sales in Brazil, and third in 
the United States. Our Animal Health and Nutrition business serves our customers
in over 40 countries from 21 facilities. Many of our MFA products have been     
marketed for over 20 years.                                                     

Significant Barriers to Entry.  Medicated feed additives cannot be    
manufactured or marketed without governmental product registrations that are    
specific to each country -- the Food and Drug Administration ("FDA") for        
example, in the United States, Health Canada in Canada, and EFSA/EMEA           
authorities in Europe. Before a product registration is granted, the applicant  
must show the regulatory authority that the product and its proposed use are    
both effective and safe for the specified species and application. Obtaining an 
MFA product registration is comparable in cost and difficulty with obtaining    
approval for drugs used to treat humans. In addition to approval of formulation 
and labeling, regulatory authorities typically require approval and periodic    
inspection of the manufacturing facilities. Because of the costs and            
difficulties associated with obtaining MFA product registrations, there have    
been few new medicated feed additives developed and marketed over the last      
decade. The only two new MFA compounds approved for use in the last 10 years    
were semduramicin, one of our products, and ractopamine. Because of the inherent
difficulties and high costs of obtaining major product registrations and their  
absolute necessity to operate in this business, our existing broad portfolio of 
product registrations provides us strength in the marketplace.                  

  Strong Brand Name Recognition of Our Medicated Feed Additives.  We enjoy
strong brand name recognition with our medicated feed additives for the         
prevention and control of diseases in poultry, swine and cattle. In particular, 
virginiamycin, an antibiotic marketed under the Stafac(R), Eskalin(R) and       
V-Max(R) brand names, is a popular and efficacious choice of medicated feed     
additive in the poultry, swine and cattle industry. Semduramicin, sold under the
brand name Aviax(R), and salinomycin, sold under the brand name Coxistac(R), are
also leading poultry anticoccidials. In fiscal 2004, branded MFAs accounted for 
approximately 50% of our total Animal Health and Nutrition sales.               

     Established Global Network and Customer Base.  From our 23 facilities in 16
countries, we manufacture and market our products, which are sold through       
multiple distribution channels to over 2,800 customers in a wide variety of end 
use markets. We sell our products through an established global sales, marketing
and distribution network to customers in over 40 countries. In fiscal 2004, no  
single customer accounted for more than 5% of total revenues and our top 10     
customers accounted for less than 22% of total revenues.                        

 Extensive Technical Support for Customers.  We employ over 60 chemists,
technicians, PhDs and veterinarians (DVMs) at our various facilities involved in
providing technical services to customers. Our technical service group and sales
personnel are able to work directly with commercial feed manufacturers and      
integrated poultry, swine and cattle producers to promote animal health. We are 
able to offer our customers products targeted to local markets, allowing us to  
serve those local markets more effectively. Our MFA field personnel are skilled 
in the area of product differentiation and have extensive applications knowledge
so as to be able to work closely with customers in determining optimum benefits 
from usage of our products. As agricultural food production will continue to    
intensify and will adopt evolving technologies, our MFA personnel are constantly
working with customers to better understand their needs in order to best utilize
the products existing within our MFA portfolio. This commercial knowledge also  
plays a pivotal role within the R&D function to ensure that research results are
applicable to customer needs and concerns.                                      

Manufacturing Expertise.  Our manufacturing expertise and know-how in 
antibiotic manufacturing process and organic synthesis has given us unique      
positions in the marketplace. We believe that we are the only manufacturer of   
virginiamycin and semduramicin in the world. Our blending, compounding and      
formulation expertise is recognized by our customers in the animal health and   
nutrition market. In addition, in our Specialty Chemicals business, based on our
more than 50 years of expertise in the metal chemical area, we                  
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have become a leading supplier of the new copper-containing compound to the     
pressure-treated wood industry. We also believe we hold leading positions in    
agricultural and other industrial applications for copper-containing compounds. 

Proven Management Team.  We have assembled a strong and experienced   
management team at both the corporate and operating levels. Our top operating   
managers have an average of over 30 years of experience in the animal health and
nutrition and specialty chemicals industries. With our expanded management team,
we have added significant operational and international experience to our       
businesses. Our founding family owns 100% of our common stock.                  

BUSINESS STRATEGY                                                               

  Expand Applications for Animal Health and Nutrition Product Offerings to
Our Primary Markets.  We seek to increase our product lines through expanding   
the scope of our animal health and nutrition product registrations, through both
extending the use claims and formulations and the geographic areas of such      
registrations. We are actively working with the FDA and other regulators to     
obtain additional registrations and cross-clearances so that our MFA products   
can continue to be used in situations where another MFA is also in use. In the  
United States, we obtained from the FDA a zero-day withdrawal registration for  
the use of our oxytetracycline product in cattle and recently obtained a cross  
clearance for Mecadox(R) and Terramycin(R) in swine. We have obtained approval  
for Aviax(R) in the EU, and are pursuing a modification of our Aviax(R)         
registration in the United States allowing for site change of the active        
ingredient. We believe that our receipt of FDA approval of Aviax(R), together   
with our EU approval of Aviax(R) and our other registration efforts, has the    
potential to increase our sales over the next two to three years. By leveraging 
our global reach and our position as the only leading animal health company     
dedicated to MFAs and NFAs, we are natural partners for small players in the    
industry, who approach us to help them license or distribute new products they  
have developed, because we do not compete with their other products.            

    Expand Our Customer Base.  We intend to expand and strengthen our customer
base by (i) focusing on relationships with key accounts, (ii) continuing to     
incentive our sales force to concentrate on fast-growing, high-margin areas     
within existing product groups, and (iii) incent growth opportunities for our   
existing products in new markets. As certain of our MFA products are used in    
rotation by our customers, we seek to supply all or substantially all of the    
various MFA products which our customers may want to use. Our MFA business has  
historically been strongest in the poultry market, and we are seeking to develop
it further in the swine and cattle markets. We expect to continue to enhance our
sales force in the swine market, and believe that there are further growth      
opportunities from doing so. In addition, we believe the under-penetrated       
Chinese and Latin American markets offer growth opportunities. In China, we are 
seeking to partner with local distributors, to leverage our existing local sales
force.                                                                          

OUR ANIMAL HEALTH AND NUTRITION BUSINESS -- MEDICATED FEED ADDITIVES            

     We manufacture and market a broad range of medicated feed additive products
to the global livestock industry, either directly to large integrated producers 
or through a network of independent distributors. Feed additives provide both   
therapeutic benefits and increased conversion efficiency -- key drivers of      
profitability for livestock producers.                                          

Our MFA products can be grouped into five principal categories:       
antibiotics, antibacterials, anticoccidials, anthelmintics and other medicated  
feed additives. In fiscal 2004, antibiotics and antibacterials generated sales  
for us of approximately $79 million, anticoccidials generated sales for us of   
approximately $44 million, and anthelmintics and other medicated feed additives 
generated sales for us of approximately $9 million.                             

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Our core MFA products are listed in the table below:                  

                                                        [Enlarge/Download Table]

         BRAND            ACTIVE/ANTIGEN    MARKET ENTRY                 COMMENT                
         -----            --------------    ------------                 -------                
                                                                                                
Terramycin(R)/Neo-       oxytetracycline,     1951        Antibiotic with multiple applications 
  Terramycin(R)/Neo-     neomycin/OTC                     for a wide number of species          
  TM(R)                                                                                         
CLTC(R)                  chlortetracycline    1954        Antibiotic with multiple applications 
                                                          for a wide number of species          
Nicarb(R)                nicarbazin           1955        Anticoccidial for poultry             
Amprol(R)                amprolium            1960        Anticoccidial for poultry and cattle  
Bloatguard(R)            poloxalene           1966        Anti-bloat treatment for cattle       
Banminth(R)              pyrantel tartrate    1969        Anthelmintic for livestock            
Mecadox(R)               carbadox             1971        Antibacterial used in swine feeds to  
                                                          control salmonellosis and dysentery   
Stafac(R)/Eskalin(R)/V-  virginiamycin        1972        Antibiotic used to prevent and control
  Max(R)                                                  diseases in poultry, swine and cattle 
Coxistac(R)/Posistac(R)  salinomycin          1979        Anticoccidial for poultry; disease    
                                                          preventative in swine                 
Rumatel(R)               morantel tartrate    1981        Anthelmintic for livestock            
Cerditac(R)/Cerdimix(R)  oxibendazole         1982        Anthelmintic for livestock            
Aviax(R)                 semduramicin         1995        Anticoccidial for poultry             

ANTIBIOTICS                                                                 

   Antibiotics are natural products produced by fermentation and are used to
treat or to prevent diseases, thereby promoting more efficient growth. Several  
factors contribute to limit the efficiency, the weight gain and feed conversions
of livestock production, including poor nutrition, environmental and management 
problems, heat stress and subclinical disease.                                  

 Virginiamycin.  Virginiamycin is an antibiotic marketed under our brand
names Stafac(R) for treating swine, cattle, broilers and turkeys, Eskalin(R) for
dairy cows and V-Max(R) for feed lot cattle. We formulate virginiamycin to      
improve health in poultry, swine and cattle and prevent necrotic enteritis in   
poultry, dysentery in swine and liver abscesses in cattle. The product is sold  
to large poultry and swine producers and feed companies in North America, Latin 
America and Asia.                                                               

First discovered in Belgium in 1954, virginiamycin is an antibiotic   
produced from the streptomyces virginiae fungus. Virginiamycin has been         
successful due to a number of strong product features. For example, no          
withdrawal period is required since it is virtually unabsorbed from the         
digestive tract. It is excreted in very low concentrations and rapidly degraded.
It alleviates some of the production limiting effects of certain diseases of    
livestock and poultry. To date, no generic competition has been introduced due  
to our proprietary virginiamycin manufacturing technology.                      

    Terramycin and Neo-Terramycin.  Terramycin(R) and Neo-Terramycin(R), which
are derived from the active ingredient oxytetracycline, are effective against a 
range of diseases including:                                                    

- fowl cholera in chickens,                                           

- airsacculitis in turkeys,                                           

- pneumonia and enteritis in swine, and                               

- pneumonia, enteritis and liver abscesses in cattle.                 

We sell Terramycin(R) and Neo-Terramycin(R) feed additive products in 
various concentrations. Terramycin(R) is approved for use for poultry, swine,   
cattle and sheep. Neo-Terramycin(R) combines the active                         
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ingredients oxytetracycline and neomycin to prevent and treat a wide range of   
diseases caused by Gram-positive and Gram-negative organisms, including         
bacterial enteritis in chickens and turkeys, baby pig diarrhea in swine and calf
diarrhea. These terramycin products are sold mostly in the United States to     
livestock producers, feed companies and distributors. Limited quantities are    
sold in selected countries in Latin America and Asia.                           

ANTIBACTERIALS                                                              

 Antibacterials are produced through chemistry and are used to treat and
prevent diseases.                                                               

    Carbadox.  We market carbadox under the brand name Mecadox(R). Carbadox is
an antibacterial compound recommended for use in swine feeds to promote and to  
control swine salmonellosis and swine dysentery. In swine production, the       
primary objective of producers is the rapid and efficient development of swine  
at minimal cost. Since 1970, Mecadox(R) has been a leader in reducing livestock 
production costs through meaningful performance enhancement. Mecadox(R) is a    
leading product for starter/grower swine in the United States. In addition to   
its antimicrobial properties, it also improves nitrogen retention and increases 
the efficiency of amino acid metabolism, two critical factors in the development
of young swine. Mecadox(R) is chemically unrelated to any other antibacterial   
that is used in animals or humans. Mecadox(R) is sold primarily in North America
to feed companies and large integrated swine producers.                         

ANTICOCCIDIALS                                                              

 Anticoccidials are produced through fermentation and chemistry, and are
primarily used to prevent and control the disease coccidiosis in poultry and in 
cattle. Coccidiosis is a disease of the digestive tract that is of great concern
to animal producers. Caused by the protozoan parasite Eimeria spp., coccidiosis 
is one of the most destructive diseases facing the world's poultry producers.   
Common effects of this disease (such as weight loss, wet droppings, poor feed   
utilization and higher mortality rates) rapidly affect an entire flock of       
poultry, resulting in annual losses of hundreds of millions of dollars for the  
poultry industry.                                                               

Modern, large scale poultry production is based on intensive animal   
management practices. This type of animal production requires routine preventive
medications in order to prevent health problems. Coccidiosis is one of the      
critical disease challenges which poultry producers face globally. We sell our  
anticoccidials globally, primarily to integrated poultry producers and feed     
companies in North America, the Middle East, Latin America and Asia, and to     
international animal health companies.                                          

Nicarbazin and Amprolium.  We produce nicarbazin and amprolium for    
distribution to the world-wide poultry industry through major multinational life
science and veterinary companies. Nicarbazin is a broad-spectrum anticoccidial  
which works by interfering with mitochondrial metabolism. It is classified as an
oxidative phosphorylation uncoupler and is used for coccidiosis prevention in   
broiler chickens.                                                               

     We believe that we are the largest volume world-wide producer of amprolium,
and the largest volume world-wide producer of nicarbazin. We are also the sole  
Latin American producer of nicarbazin. Nicarbazin and amprolium, along with     
salinomycin and semduramicin, are among the most effective medications for the  
prevention of coccidiosis in chickens when used in rotation with other          
anticoccidials. In the United States, we market nicarbazin under the trademark  
Nicarb(R).                                                                      

  Other Anticoccidials.  From a class of compounds known as ionophores, we
developed Aviax(R) and Coxistac(R) to combat coccidiosis. These two products    
have demonstrated increased feed efficiency and the ability to suppress         
coccidial lesions, with minimal side-effects. Through a third product,          
Posistac(R), we have extended the application of the active ingredient in       
Coxistac(R) to swine.                                                           

    Aviax(R) contains the ionophore semduramicin which provides protection for
poultry against all major coccidial parasites. The product can be incorporated  
into virtually any type of feed, and provided to broilers of any production     
stage. We have received regulatory approval to sell Aviax(R) in the EU and have 
applied in the United States for the sale of Aviax(R) in mycelial dosage form.  
This dosage form is significantly more cost-effective and may improve           
profitability.                                                                  

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   Coxistac(R) contains the ionophore salinomycin. The product acts early in
the coccidial life cycle by killing sporozoites, trophozoites and early         
developing schizonts before poultry can be severely damaged. Coxistac(R) has    
proven to be effective and safe with minimal resistance development evident in  
commercial studies. The recommended dosage provides a high level of protection  
against coccidiosis even through temporary periods of low feed intake caused by 
disease or adverse climatic conditions. No withdrawal period is required for    
poultry before slaughter. Coxistac(R) is a leading anticoccidial in Asia, Latin 
America, the Middle East and Canada.                                            

    Posistac(R) contains salinomycin which acts as a productivity enhancer for
grower/finisher swine. The compound increases the utilization and digestion of  
feed ingredients by mature swine thereby allowing swine to reach market weight  
earlier and at less cost than swine fed conventional feed additives. Posistac(R)
can be used up to the slaughter phase without the need for withdrawal.          

ANTHELMINTICS                                                               

     Anthelmintics protect against internal parasites. Our anthelmintic products
are marketed under the Rumatel(R) and Banminth(R) brand names.                  

Rumatel(R).  Rumatel(R) is a potent broad-spectrum anthelmintic that  
effectively eliminates the major internal nematode parasites in cattle. Unlike  
other single-dose dewormers, Rumatel(R) may be administered to lactating dairy  
cattle with no milk withdrawal. Dairy cattle may be treated with Rumatel(R) at  
any time during their production cycle, whether dry, pregnant or lactating.     

Banminth(R).  Banminth(R) is an anthelmintic compound, a member of the
class of synthetic compounds called tetra-hydropyrimidines. Banminth(R) has a   
mode of action that works effectively in protecting swine against the two major 
internal parasites, large roundworms (Ascaris suum) and nodular worms           
(Oesophagostomum spp.). Banminth(R) kills adult parasites and prevents roundworm
larval migration, preventing damage to the liver and lungs of swine. When used  
continuously in feeds, Banminth(R) prevents re-infection of swine raised on     
dirt.                                                                           

OTHER MEDICATED FEED ADDITIVES                                              

   Our other medicated feed additives include a range of products sold under
the Bloat Guard(R) brand name. Bloat Guard(R) controls legume or wheat pasture  
bloat in cattle. The products control bloat for at least 12 hours after a single
dose with no adverse effect on reproduction, rumen function or milk production. 

  We manufacture bulk active ingredients for our MFA products primarily in
four modern facilities located in:                                              

- Guarulhos, Brazil (salinomycin and semduramicin),                   

     - Rixensart, Belgium (virginiamycin and semduramicin), which facility is to
be sold (see "Prospectus Summary -- The Company -- Recent         
Developments -- Sale of Belgium Plant"),                          

- Ramat Hovav, Israel (nicarbazin and amprolium), and                 

- Braganca Paulista, Brazil (nicarbazin).                             

    Active ingredients are further processed in our facilities and in contract
premix facilities located in each major region of the world.                    

    We have established sales and technical offices for our MFA products in 14
countries including: the United States, Canada, Mexico, Venezuela, Brazil,      
Argentina, Costa Rica, Australia, China, Thailand, Malaysia, South Africa,      
Belgium and Israel. The business is not dependent on any one customer.          

   The use of MFAs is controlled by regulatory authorities that are specific
to each country (e.g., the Food and Drug Administration ("FDA") in the United   
States, Health Canada in Canada, EFSA/EMEA authorities in Europe, etc.),        
responsible for the safety and wholesomeness of the human food supply, including
feed additives for animals from which human foods are derived. Each product is  
registered separately in each country where it is sold. The appropriate         
registration files pertaining to such regulations and approvals are             

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continuously monitored, maintained and updated by us. In certain countries where
we are working with a third party distributor, local regulatory requirements may
require registration in the name of such distributor.                           

ANIMAL HEALTH AND NUTRITION -- NUTRITIONAL FEED ADDITIVES                       

    We manufacture and market trace minerals, trace mineral premixes, vitamins
and other nutritional ingredients to the livestock feed and pet food industries,
predominantly in the United States and Israel. These products generally fortify,
enhance or make more nutritious or palatable the livestock feeds and pet foods  
with which they are mixed. The majority of the other ingredients that we sell   
are nutrients that are used as supplements for animal feed. We serve customers  
in major feed segments, including swine, dairy, poultry and beef. We customize  
trace mineral premixes at our blending facilities in Marion, Iowa, Bremen,      
Indiana and Petach Tikva, Israel, and market a diverse line of other trace      
minerals and macro-minerals. Our major customers for these products are         
medium-to-large feed companies, co-ops, blenders, integrated poultry operations 
and pet food companies. We sell other ingredients, such as buffers, yeast,      
palatants, vitamin K and amino acids, including lysine, tryptophan and          
threonine. We also market copper sulfate as an animal feed supplement.          

OUR SPECIALTY CHEMICALS BUSINESS                                                

  We manufacture and market a number of specialty chemicals for use in the
wood treatment, chemical catalyst, semiconductor, automotive, aerospace and     
agricultural industries. Our manufacturing customers incorporate our specialty  
chemicals products into their finished products in various industrial markets.  
We seek to take advantage of opportunistic niche markets where we believe that  
our expertise and capabilities can be leveraged.                                

COPPER WOOD TREATMENT PRODUCTS                                              

     For many years, we were a major supplier of an important ingredient (copper
oxide) used in the manufacture of CCA (chromated-copper-arsenic) wood treating  
solutions for the pressure-treated wood industry. Pursuant to a United States   
Environmental Protection Agency ("EPA") ruling, since December 31, 2003, all    
pressure-treated wood for the residential and recreational markets can no longer
be treated using the standard chromated-copper-arsenic (CCA) solution. A leading
replacement solution for CCA pressure-treated wood is a copper carbonate        
compound. We currently estimate that the total potential size of this copper    
solution to the pressure-treated wood market is approximately $120 million      
annually. We have already signed a multi-year, take-or-pay contract with a major
chemicals supplier to the pressure-treated wood industry to provide it with this
new product, which we estimate will increase our sales by approximately $30     
million over the life of the contract, based on existing forecasts. A patent    
with respect to the manufacturing process of our solution, and the claims in our
patent application was granted and issued on November 11, 2003. We believe that 
our manufacturing process allows us to operate in this market with a lower cost 
of capital and higher factory through-put than our competition. To take         
advantage of this potential new market, we have constructed and are operating   
commercial production facilities in Sumter, South Carolina and in Joliet,       
Illinois. In addition, we have filed a provisional patent for a new, large      
molecule pressure-treated wood copper compound product. We believe that this new
product may be the next generation in copper-based wood treatment products, with
the potential to substantially increase the duration of protection for treated  
wood.                                                                           

OTHER COPPER PRODUCTS                                                       

  We manufacture on a contract basis copper compounds for use primarily in
agricultural fungicides from our Sumter, South Carolina facility. This contract 
was part of the sale by us of our Agtrol business to Nufarm, Inc. in the fourth 
quarter of fiscal 2001. Utilizing our over fifty-year history in producing      
copper chemicals, we supply various metal-based chemicals to the catalyst and   
electronics industries. We also manufacture copper compounds for a broad variety
of industrial customers.                                                        

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OTHER SPECIALTY CHEMICALS PRODUCTS                                          

   We market and distribute fine and specialty chemicals to manufacturers of
health and personal care products and chemical coating products to customers in 
the automotive, metal finishing and chemical intermediate markets. Among our    
products for such applications are sodium fluoride and stannous fluoride, DL    
Panthenol and selenium disulfide. Sodium fluoride is the active anti-cavity     
ingredient in fluoride toothpaste, powders and mouthwashes. Selenium disulfide  
is used as a dandricide in shampoo and hair care preparations.                  

SALES, MARKETING AND DISTRIBUTION                                           

We have approximately 2,800 customers. Sales to our top ten customers 
represented approximately 22% of our fiscal 2004 net sales and no single        
customer represented more than 5% of our fiscal 2004 net sales.                 

  Our world-wide sales and marketing network consists of approximately 118
employees, 5 independent agents and 125 distributors who specialize in          
particular markets.                                                             

Our products are often critical to the performance of our customers'  
products, while representing a relatively small percentage of the total         
end-product cost. We believe the three key factors to marketing our products    
successfully are high quality products, a highly trained and technical sales    
force, and customer service.                                                    

Most of our plants have chemists and technicians on staff involved in 
product development, quality assurance, quality control and also providing      
technical services to customers. Technical assurance is an important aspect of  
our overall sales effort. We field Animal Health and Nutrition technical service
people throughout the world, with capabilities to interface with all key        
customers on a marketing, sales training and technical (product) basis, and who 
work directly with commercial feed manufacturers and integrated poultry, swine  
and cattle producers to promote animal health. Our MFA and NFA field personnel  
are skilled in the area of product differentiation and have extensive           
application knowledge so as to work closely with customers in determining       
optimum benefits from product usage. As agricultural food production will       
continue to intensify and will adopt evolving technologies, our MFA and NFA     
personnel are constantly working with customers to better understand their needs
in order to best utilize the products existing within our portfolio. This       
commercial knowledge also plays a pivotal role within the research and          
development function to ensure that research results are applicable to customer 
needs and concerns.                                                             

PRODUCT REGISTRATIONS, PATENTS AND TRADEMARKS                                   

   We own certain product registrations, patents, tradenames and trademarks,
and use know-how, trade secrets, formulae and manufacturing techniques which    
assist in maintaining the competitive positions of certain of our products.     
Product registrations are required to manufacture and sell medicated feed       
additives. Formulae and know-how are of particular importance in the manufacture
of a number of the products sold in our specialty chemicals business. We believe
that no single patent or trademark is of material importance to our business    
and, accordingly, that the expiration or termination thereof would not          
materially affect our business. See "Government Regulation."                    

PROPERTIES                                                                      

  In December 2004, we relocated our principal executive offices and sales
offices to 34,000 square feet of leased space in Ridgefield Park, New Jersey. We
operate company-owned manufacturing facilities and utilize third party toll     
manufacturers. The chart below sets forth the locations and sizes of the        
principal manufacturing and other facilities operated by us and uses of such    
facilities, all of which are owned, except as noted.                            

                                                                [Download Table]

                                        APPROXIMATE                            
LOCATION                               SQUARE FOOTAGE                   USES   
--------                               --------------                   ----   
                                                                               
ANIMAL HEALTH AND NUTRITION                                                    
Bangkok, Thailand(a)..................         500     Sales                   
Braganca Paulista, Brazil.............      35,000     Sales, Manufacturing and
                                                       Administrative          

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                                                        [Enlarge/Download Table]

                                        APPROXIMATE                                       
LOCATION                               SQUARE FOOTAGE                   USES              
--------                               --------------                   ----              
                                                                                          
Bremen, Indiana.......................      50,000     Sales, Premixing and Warehouse     
Buenos Aires, Argentina(a)............         900     Sales and Administrative           
San Jose, Costa Rica..................         800     Sales and Administrative           
Guarulhos, Brazil(b)..................   1,234,000     Sales, Premixing, Manufacturing and
                                                       Administrative                     
Hong Kong, China(a)...................         750     Sales and Administrative           
Kuala Lumpur, Malaysia(a).............       7,300     Sales, Premixing and Warehouse     
Ladora, Iowa..........................       9,500     Warehouse                          
Lee's Summit, Missouri(a).............       1,500     Sales                              
Marion, Iowa..........................      32,500     Premixing and Warehouse            
Petach Tikva, Israel..................      60,000     Sales, Premixing, Warehouse and    
                                                       Administrative                     
Pretoria, South Africa(a).............       3,200     Sales and Administrative           
Quincy, Illinois(c)...................      50,000     Sales, Warehouse, Research and     
                                                       Administrative                     
Rixensart, Belgium(d).................     865,000     Sales, Manufacturing, Research and 
                                                       Administrative                     
Ramat Hovav, Israel...................     140,000     Manufacturing and Research         
Regina, Canada(a).....................       1,000     Sales and Administrative           
Queretaro, Mexico(a)..................       3,500     Sales and Administrative           
Sydney, Australia(a)..................       3,500     Sales and Administrative           
Valencia, Venezuela(a)................       1,100     Sales and Administrative           

SPECIALTY CHEMICALS                                                                       
Garland, Texas........................      20,000     Manufacturing                      
Joliet, Illinois......................      34,500     Manufacturing                      
Reading, United Kingdom(a)............       3,100     Sales and Administrative           
Santa Fe Springs, California(e).......      90,000     Manufacturing                      
Stradishall, United Kingdom...........      20,000     Sales, Manufacturing and           
                                                       Administrative                     
Sumter, South Carolina................     123,000     Manufacturing and Research         

---------------                                                                 

(a)  This facility is leased. Our leases expire through 2027. For information   
concerning our rental obligations, see Note 15 to our Consolidated    
Financial Statements included herein.                                 

(b)  Our Guarulhos, Brazil plant utilizes fermentation processes to produce the 
  active ingredients semduramicin-mycelial and salinomycin. The plant also
produces Aviax(R), Terramycin(R), Stafac(R) and Coxistac(R) Granular  
formulations. The plant is cGMP compliant and is FDA approved.        

(c)  Comprises three facilities, including a warehouse, laboratory and office.  

(d)  Our Rixensart, Belgium plant utilizes fermentation processes to produce the
  active ingredients semduramicin-crystalline and virginiamycin. The plant
also produces Stafac(R) formulations and is responsible for all of our
     fermentation development activities. The plant has been approved by the FDA
and is cGMP compliant. We have entered into an agreement to sell the  
Rixensart facility (see "Prospectus Summary -- The Company -- Recent  
Developments -- Sale of Belgium Plant").                              

(e)  We lease the land under this facility from a partnership owned by Jack     
     Bendheim, Marvin Sussman and James Herlands. See "Certain Relationships and
Related Party Transactions."                                          

   Our subsidiary, CP Chemicals, Inc., leases portions of a previously owned
inactive, former manufacturing facility in Sewaren, New Jersey, and another of  
our subsidiaries owns inactive, former manufacturing facilities in Powder       
Springs, Georgia, Union, Illinois, Union City, California and Wilmington,       
Illinois.                                                                       

We believe that our existing and planned facilities are and will be   
adequate for the conduct of our business as currently conducted and as currently
contemplated to be conducted.                                                   

 We and our subsidiaries are subject to extensive regulation by numerous
governmental authorities, including the FDA and corresponding state and foreign 
agencies, and to various domestic and foreign safety standards. Our             
manufacturing facilities in Ramat Hovav, Israel, Rixensart, Belgium (to be sold;
see                                                                             

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"Prospectus Summary -- The Company -- Recent Developments -- Sale of Belgium    
Plant"), and Guarulhos, Brazil manufacture products that conform to the FDA's   
cGMP regulations. Three domestic facilities involved with recycling have final  
RCRA Part B hazardous waste storage and treatment permits. Our regulatory       
compliance programs include plans to achieve compliance with international      
quality standards known as ISO 9000 standards, which became mandatory in Europe 
in 1999 and environmental standards known as ISO 14000. The FDA is in the       
process of adopting the ISO 9000 standards as regulatory standards for the      
United States, and it is anticipated that these standards will be phased in for 
U.S. manufacturers over a period of time. Our plant in Petach Tikva, Israel has 
achieved ISO 9000 certification. We do not believe that adoption of the ISO 9000
standards by the FDA will have a material effect on our financial condition,    
results of operations or cash flows.                                            

RAW MATERIALS                                                                   

The raw materials used in our business include certain active drug    
ingredients, a wide variety of chemicals, mineral ores and copper metal that are
purchased from manufacturers and suppliers in the United States, Europe and     
Asia. In fiscal 2004, no single raw material accounted for more than 5% of our  
cost of goods sold. Total raw materials cost was approximately $133 million or  
38% of net sales in fiscal 2004. We believe that for most of our raw materials, 
alternate sources of supply are available to us at competitive prices.          

RESEARCH AND DEVELOPMENT                                                        

  Research, development and technical service efforts are conducted at our
various facilities. We operate research and development facilities in Rixensart,
Belgium (which is to be sold; see "Prospectus Summary -- The Company -- Recent  
Developments -- Sale of Belgium Plant"), Sumter, South Carolina, Ramat Hovav,   
Israel and Stradishall, England. These facilities provide research and          
development services relating to fermentation development in the areas of       
micro-biological strain improvement as well as: process scale-up; wood treatment
products; and organic chemical intermediates.                                   

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

CUSTOMERS                                                                       

   We do not consider our business to be dependent on a single customer or a
few customers, and the loss of any of our customers would not have a material   
adverse effect on our results. No single customer accounted for more than 5% of 
our fiscal 2004 net sales. We typically do not enter into long-term contracts   
with our customers.                                                             

COMPETITION                                                                     

     We are engaged in highly competitive industries and, with respect to all of
our major products, we face competition from a substantial number of global and 
regional competitors. Some of our competitors have greater financial, research  
and development, production and other resources than we do. Our competitive     
position is based principally on customer service and support, product quality, 
manufacturing technology, facility location and price. We have competitors in   
every market in which we participate. Many of our products face competition from
products that may be used as an alternative or substitute.                      

EMPLOYEES                                                                       

As of June 30, 2004, we had 1,051 employees worldwide. Of these, 210  
employees were in management and administration, 118 were in sales and          
marketing, 132 were chemists, technicians or quality control personnel, and 591 
were in production. Certain employees are covered by individual employment      
agreements. Our Israeli operations continue to operate under the terms of       
Israel's national collective bargaining agreement,                              

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portions of which expired in 1994. We consider our relations with both our union
and non-union employees to be good.                                             

ENVIRONMENTAL MATTERS                                                           

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

   Our subsidiaries have, from time to time, implemented procedures at their
facilities designed to respond to obligations to comply with environmental laws.
We believe that our operations are currently in material compliance with such   
environmental laws, although at various sites our subsidiaries are engaged in   
continuing investigation, remediation and/or monitoring efforts to address      
contamination associated with their historic operations. As many environmental  
laws impose a strict liability standard, however, we can provide no assurance   
that future environmental liability will not arise.                             

     In addition, we cannot predict the extent to which any future environmental
laws may affect any market for our products or services or our costs of doing   
business. Alternatively, changes in environmental laws might increase the cost  
of our products and services by imposing additional requirements on us. States  
that have received authorization to administer their own hazardous waste        
management programs may also amend their applicable statutes or regulations, and
may impose requirements which are stricter than those imposed by the EPA. We can
provide no assurance that such changes will not adversely affect our ability to 
provide products and services at competitive prices and thereby reduce the      
market for our products and services.                                           

The nature of our and our subsidiaries' current and former operations 
exposes us and our subsidiaries to the risk of claims with respect to           
environmental matters and we can provide no assurance that we will not incur    
material costs and liabilities in connection with such claims. Based upon our   
experience to date, we believe that the future cost of compliance with existing 
environmental laws, and liability for known environmental claims pursuant to    
such environmental laws, will not have a material adverse effect on us. Based   
upon information available, we estimate the cost of further investigation and   
remediation of identified soil and groundwater problems at operating sites,     
closed sites and third-party sites, (including the litigation referred to under 
"Legal Proceedings") to be approximately $2.9 million, which is included in     
current and long-term liabilities in our June 30, 2004 consolidated balance     
sheet. However, future events, such as new information, changes in existing     
environmental laws or their interpretation, and more vigorous enforcement       
policies of regulatory agencies, may give rise to additional expenditures or    
liabilities that could be material. For all purposes of the discussion under    
this caption, under "Legal Proceedings" and elsewhere in this prospectus, it    
should be noted that we take and have taken the position that neither Phibro    
Animal Health Corporation, nor any of our subsidiaries is liable for            
environmental or other claims made against one or more of our other subsidiaries
or for which any of such other subsidiaries may ultimately be responsible.      

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FEDERAL REGULATION                                                          

     The following summarizes the principal federal environmental laws affecting
our business:                                                                   

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

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

The Federal Water Pollution Control Act, as amended (the "Clean Water 
Act").  The Clean Water Act prohibits the discharge of pollutants to the waters 
of the United States without governmental authorization. Like RCRA, the Clean   
Water Act provides that states with programs approved by the EPA may administer 
and enforce their own water pollution control programs. Pursuant to the mandate 
of the Clean Water Act, the EPA has promulgated "pre-treatment" regulations,    
which establish standards and limitations for the introduction of pollutants    
into publicly-owned treatment works.                                            

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

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

   Under FIFRA, the EPA also has the right to "call in" additional data from
existing registrants of a pesticide, should the EPA determine, for example, that
the data already in the file need to be updated or that a specific issue or     
concern needs to be addressed. The existing registrants have the option of      
submitting data separately or by joint agreement. Alternatively, if one         
registrant agrees to generate and submit the data, the                          

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other(s) may meet their obligations under the statute by making a statutory     
offer to jointly develop or share in the costs of developing the data. In that  
event, the offering party must, again, agree to binding arbitration to resolve  
any dispute as to the terms of the data development arrangement.                

     The Clean Air Act.  The Federal Clean Air Act of 1970 ("Clean Air Act") and
amendments to the Clean Air Act, and corresponding state laws regulate the      
emissions of materials into the air. Such laws affect the coal industry both    
directly and indirectly and, therefore, the operations of MRT, which was        
divested in August 2003. Phibro-Tech is also impacted by the Clean Air Act and  
has various air quality permits, including a Title V operating air permit at its
Sumter, South Carolina facility.                                                

STATE AND LOCAL REGULATION                                                  

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

FOREIGN REGULATION                                                          

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

REGULATION OF RECYCLING ACTIVITIES                                          

We have substantially reduced our recycling activities at our Joliet, 
Illinois; Garland, Texas; Sumter, South Carolina; and Sewaren, New Jersey sites.
Our recycling activities may be broken down into the following segments for     
purposes of regulation under RCRA or equivalent state programs: (i) transport of
wastes to our facilities; (ii) storage of wastes prior to processing; (iii)     
treatment and/or recycling of wastes; (iv) corrective action at our RCRA        
facilities; and (v) management of wastes and residues from the recycling        
process. Although all aspects of the treatment and recycling of waste at our    
recycling facilities are not currently the subject of federal RCRA regulation,  
our subsidiaries decided to permit our recycling facilities as RCRA regulated   
facilities. Final RCRA "Part B" permits to operate as hazardous waste treatment 
and storage facilities have been issued at our facilities in Santa Fe Springs,  
California; Garland, Texas; Joliet, Illinois; Sumter, South Carolina; and       
Sewaren, New Jersey (expired August 2003, see "Particular Facilities -- Sewaren,
NJ" below). Part B renewal applications have been submitted for the Santa Fe    
Springs, Garland and Joliet sites. The applications are being reviewed.         

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

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

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

WASTE BYPRODUCTS                                                            

In connection with our subsidiaries' production of finished chemical  
products, limited quantities of waste by-products are generated. Depending on   
the composition of the by-product, our subsidiaries either sell it, send it to  
smelters for metal recovery or send it for treatment or disposal to regulated   
facilities.                                                                     

PARTICULAR FACILITIES                                                       

     The following is a description of certain environmental matters relating to
certain facilities of certain of our subsidiaries. References to "we" or "us"   
throughout this section is intended to refer only to the applicable subsidiary  
unless the context otherwise requires. These matters should be read in          
conjunction with the description of Legal Proceedings below, certain of which   
involve such facilities, and Note 15 to our Consolidated Financial Statements.  

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

Sumter, SC.  In 2003, the South Carolina Department of Health and     
Environmental Control ("DHEC") ordered Phibro-Tech, Inc., a subsidiary          
("Phibro-Tech"), to prepare a RCRA Facility Investigation ("RFI") and to prepare
and propose Corrective Action Plans. Phibro-Tech has done so, and such proposed 
investigatory activities and Corrective Action Plans are being reviewed by the  
State. Additional Corrective Action is also being undertaken by Phibro-Tech     
pursuant to prior agreements with DHEC to remedy certain deficiencies in the    
plant's hazardous waste closure, storage and management system.                 

    Santa Fe Springs, CA.  Phibro-Tech submitted an application for renewal of
the Part B Permit for the Santa Fe Springs, California facility. Such           
application is presently under review by the State of California and may require
certain corrective actions including, but not limited to, a pump and treat      
system utilizing existing water treatment facilities. Phibro-Tech has submitted 
a report to the State recommending that soil be remediated instead of           
groundwater. This recommendation is also under review by the State.             

  Joliet, IL.  Phibro-Tech has submitted an application for renewal of the
Part B Permit for the Joliet, Illinois facility. In connection with this        
application, Phibro-Tech completed an initial investigation and determined that 
certain minor corrective action was required. Phase I and Phase II corrective   
action work has been completed. The application for renewal is presently pending
and is expected to be issued in the first quarter of 2005.                      

     Garland, TX.  The renewal application for the Part B Permit at the Garland,
Texas facility has been granted effective September 12, 2003. As part of an     
earlier site investigation, certain corrective action was required including    
upgrading of pollution control equipment and additional site characterization.  
Both of these are presently underway.                                           

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    Powder Springs, GA.  Phibro-Tech's facility in Powder Springs, Georgia has
been operationally closed since 1985. Phibro-Tech retains environmental         
compliance responsibility for this facility and has effected a RCRA closure of  
the regulated portion of the facility, a surface impoundment. Post-closure      
monitoring and corrective action are required pursuant to a state-issued permit.
As required by the permit, corrective action for groundwater has begun, and     
Phibro-Tech has submitted and received approval from the state for a remedial   
investigation plan.                                                             

     Sewaren, NJ.  Operations at the Sewaren facility were curtailed on or about
September 30, 1999. In June, 2000, CP Chemicals, Inc., a subsidiary ("CP"),     
transferred title to the Sewaren property to Woodbridge Township while, at the  
same time, entering into a 10-year lease with the Township providing for lease  
payments aggregating $2 million, and covering certain areas of the property,    
including those areas of the property relating to the existing hazardous waste  
storage, treatment and transfer permit, loading docks and pads, and a building, 
as well as access, parking, scale use and office space.                         

    The property is the subject of an Administrative Consent Order executed in
March 1991 between the New Jersey Department of Environmental Protection (or    
"DEP") and CP. CP has ongoing obligations under that Administrative Consent     
Order. CP is required to complete the implementation of the Remedial Action Work
Plan approved by the Department of Environmental Protection and the United      
States Environmental Protection Agency. Remediation of soils at the Sewaren     
facility is complete, with the exception of long term maintenance, and          
groundwater remediation is underway. Although some of the obligations of the    
Administrative Consent Order, specifically with respect to groundwater, have    
been assumed by the Township under the Lease, CP remains responsible to the     
Department of Environmental Protection and the United States Environmental      
Protection Agency. CP is currently engaged in discussions with the Department of
Environmental Protection, the United States Environmental Protection Agency and 
the Township concerning the ongoing groundwater remediation. CP has posted      
financial assurance, based on the estimated costs of implementation, under the  
Administrative Consent Order.                                                   

The property is also regulated under the Corrective Action Program    
administered by the United States Environmental Protection Agency pursuant to   
the Resource Conservation and Recovery Act. The property has been designated as 
a RCRA facility for which achieving the Environmental Indicators is a priority. 
Currently, CP is interfacing with the Department of Environmental Protection and
the Environmental Protection Agency to coordinate its efforts under this program
and the Administrative Consent Order discussed above. Much of the effort        
required by CP in this program is already being conducted as part of the        
requirements of the Administrative Consent Order discussed above.               

    The hazardous waste facility permit issued to CP for this facility expired
in August 2003. CP has completed the implementation of its approved closure plan
and is awaiting DEP approval. Based on a formula established by the Department  
of Environmental Protection, those closure costs were estimated at $292,823 and 
submitted to the Department in April 2003. CP has also advised the New Jersey   
Division of Law of its intent to withdraw from the licensing program governing  
facilities.                                                                     

  Union City, CA.  Closure of the Union City, California facility has been
completed.                                                                      

    Union, IL.  The facility in Union, Illinois, has been closed since 1986. A
revised remedial action plan ("RAP") has been submitted to the Illinois         
Environmental Protection Agency (the "IEPA"). Negotiations between the IEPA and 
Phibro-Tech have resulted in an agreed closure plan consistent with the proposed
RAP. The agreed closure plan is expected to resolve Phibro-Tech's appeal of the 
IEPA's initial closure requirements. That appeal is currently pending before the
Illinois Pollution Control Board but is expected to be voluntarily dismissed    
upon receipt of IEPA's written approval of the negotiated closure plan.         

   Ramat Hovav, Israel.  Koffolk (1949) Ltd's ("Koffolk Israel") Ramat Hovav
plant produces a wide range of organic chemical intermediates for the animal    
health, chemical, pharmaceutical and veterinary industries. Israeli legislation 
enacted in 1997 amended certain environmental laws by authorizing the relevant  
administrative and regulatory agencies to impose certain sanctions, including   
issuing an order against any person that violates such environmental laws to    
remove the environmental hazard. In addition, this legislation imposes criminal 
liability on the officers and directors of a corporation that violates such     
environmental laws,                                                             

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and increases the monetary sanctions that such officers, directors and          
corporations may be ordered to pay as a result of such violations. The Ramat    
Hovav plant operates under the regulation of the Ministry of Environment of the 
State of Israel. The sewage system of the plant is connected to the Ramat Hovav 
Local Industrial Council's central installation, where Koffolk Israel's sewage  
is treated together with sewage of other local plants. Owners of the plants in  
the area, including Koffolk Israel, have been required by the Israeli Ministry  
of Environment to build facilities for pre-treatment of their sewage.           

GOVERNMENT REGULATION                                                           

     Most of our Animal Health and Nutrition Group products require licensing by
a governmental agency before marketing. In the United States, governmental      
oversight of animal nutrition and health products is shared primarily by the    
United States Department of Agriculture ("USDA") and the Food and Drug          
Administration. A third agency, the Environmental Protection Agency, has        
jurisdiction over certain products applied topically to animals or to premises  
to control external parasites.                                                  

  The issue of the potential for increased bacterial resistance to certain
antibiotics used in certain food producing animals is the subject of discussions
on a worldwide basis and, in certain instances, has led to government           
restrictions on the use of antibiotics in these food producing animals. The sale
of feed additives containing antibiotics is a material portion of our business. 
Should regulatory or other developments result in restrictions on the sale of   
such products, it could have a material adverse impact on our financial         
position, results of operations and cash flows.                                 

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

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

     FDA approval is based on satisfactory demonstration of safety and efficacy.
Efficacy requirements are based on the desired label claim and encompass all    
species for which label indication is desired. Safety requirements include      
target animal safety and, in the case of food animals, drug residues and the    
safety of those residues must be considered. In addition to the safety and      
efficacy requirements for animal drugs used in food producing animals, the      
environmental impact must be determined. Depending on the compound, the         
environmental studies may be quite extensive and expensive. In many instances   
the regulatory hurdles for a drug which will be used in food producing animals  
are at least as stringent if not more so than those required for a drug used in 
humans. For FDA approval of a new animal drug it is estimated the cost is $100  
million to $150 million and time for approval could be 8 to 10 years.           

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

The FDA may deny a NADA if applicable regulatory criteria are not     
satisfied, require additional testing or information, or require postmarketing  
testing and surveillance to monitor the safety or efficacy of a product. There  
can be no assurances that FDA approval of any NADA will be granted on a timely  
basis or at all. Moreover, if regulatory approval of a product is granted, such 
approval may entail limitations on the indicated                                

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uses for which it may be marketed. Finally, product approvals may be withdrawn  
if compliance with regulatory standards is not maintained or if problems occur  
following initial marketing. Among the conditions for NADA approval is the      
requirement that the prospective manufacturer's quality control and             
manufacturing procedures conform to Current Good Manufacturing Practice         
("cGMP"). The plant must be inspected biannually by the FDA for determination of
compliance with cGMP after an initial preapproval inspection. After FDA         
approval, any manufacturing changes that may have an impact on the safety and/or
efficacy must be approved by the FDA prior to implementation. In complying with 
standards set forth in these regulations, manufacturers must continue to expend 
time, monies and effort in the area of production and quality control to ensure 
compliance.                                                                     

    For clinical investigation and marketing outside the United States, we are
also subject to foreign regulatory requirements governing investigation,        
clinical trials and marketing approval for animal drugs. The foreign regulatory 
approval process includes all of the risks associated with FDA approval set     
forth above. Currently, in the EU, feed additives which are successfully        
sponsored by a manufacturer are assigned to an Annex. Initially, they are       
assigned to Annex II. During this period, member states may approve the feed    
additive for local use. After five years or earlier, the product passes to Annex
I if no adverse reactions or trends develop over the probationary period.       

    The EU is in the process of centralizing the regulatory process for animal
drugs for member states. In 1997, the EU drafted new regulations requiring the  
re-registration of feed additives, including coccidiostats. Part of these       
regulations include a provision for manufacturers to submit quality data for    
their own formulation, in effect adopting a Product License procedure similar to
that of the FDA. The provision is known as Brand Specific Approval ("BSA"), and 
provides manufacturers with the opportunity to register their own unique brands,
instead of simply the generic compound. The BSA process is being implemented    
over time. The new system is more like the U.S. system, where regulatory        
approval is for the formulated product or "brand." A number of manufacturers,   
including us, have submitted dossiers in order to re-register various           
anticoccidials for the purpose of obtaining regulatory approval from the        
European Commission. As a result of its review of said dossiers, the Commission 
withdrew marketing authorization of a number of anticoccidials, including       
nicarbazin, as the Commission did not consider the submissions to be in full    
compliance with its new regulations. We have subsequently resubmitted our       
nicarbazin dossier. Feasibility and timetable for new registration will depend  
on the nature of demands and remarks from the Commission. Notwithstanding the   
Commission's actions with respect to our nicarbazin dossier, we are able to     
sell, and do sell, nicarbazin as an active ingredient for another MFA marketer's
product which has obtained a BSA and is sold in the EU.                         

LEGAL PROCEEDINGS                                                               

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

    In addition to such matters, we or certain of our subsidiaries are subject
to certain litigation described below.                                          

     On or about April 17, 1997, CP and we were served with a complaint filed by
Chevron U.S.A. Inc. ("Chevron") in the United States District Court for the     
District of New Jersey, alleging that the operations of CP at its Sewaren plant 
affected adjoining property owned by Chevron and alleging that we, as the parent
of CP, are also responsible to Chevron. In July 2002, a phased settlement       
agreement was reached and a Consent Order entered by the Court. That settlement 
is in the process of being implemented. Our portion of the settlement for past  
costs and expenses through the entry of the Consent Order was $495,000 and is   
included in selling, general and administrative expenses in the June 30, 2002   
statement of operations and comprehensive income. Such amount was paid in July  
2002. The Consent Order then provides for a period of due diligence             
investigation of the property owned by Chevron. The investigation has been      
conducted and the results are under review. The investigation costs are being   
split with one other defendant, Vulcan Materials Company. Upon completion of the
review of the results of the investigation, a decision will be made whether to  
opt out of the settlement or proceed. If no party opts out of the settlement,   
Phibro Animal Health Corporation and CP                                         

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will take title to the adjoining Chevron property, probably through the use of a
three-member New Jersey limited liability company. In preparation to move       
forward, a limited liability company has been formed, with Vulcan Materials     
Company as the third member. We also have commenced negotiations with Chevron   
regarding its allocation of responsibility and associated costs under the       
Consent Order. While the costs cannot be estimated with any degree of certainty 
at this time, we believe that insurance recoveries will be available to offset  
some of those costs.                                                            

   Our Phibro-Tech subsidiary was named in 1993 as a potentially responsible
party ("PRP") in connection with an action commenced under CERCLA by the EPA,   
involving a former third-party fertilizer manufacturing site in Jericho, South  
Carolina. An agreement has been reached under which we have agreed to contribute
up to $900,000 of which $634,596 has been paid as of December 31, 2004. Some    
recovery from insurance and other sources is expected. We have also accrued our 
best estimate of any future costs.                                              

    Phibro-Tech, Inc. has resolved certain alleged technical permit violations
with the California Department of Toxic Substance Control ("DTSC") and has      
reached an agreement to pay $425,000 over a six (6) year period ending October  
2008. The annual payments required under this agreement are not expected to have
any material adverse impact on us.                                              

Phibro-Tech, Inc. and DTSC are currently negotiating the settlement of
certain alleged technical permit violations from 2003. Phibro-Tech, Inc.        
believes most if not all of the alleged violations will be withdrawn. In the    
event penalties are assessed, they are not expected to exceed $50,000.          

    In February 2000, the EPA notified numerous parties of potential liability
for waste disposed of at a licensed Casmalia, California disposal site,         
including a business, assets of which were originally acquired by a subsidiary  
of ours in 1984. A settlement has been reached in this matter and we have paid  
$171,103 in full settlement.                                                    

On or about April 5, 2002, the Company was served, as a potentially   
responsible party, with an information request from the EPA relating to a       
third-party superfund site in Rhode Island. The Company is investigating the    
matter, which relates to events in the 1950's and 1960's, but management does   
not believe that the Company has any liability in this matter.                  

On or about August 13, 2004 the Company was served with a Request for 
Information pursuant to Section 104 of CERCLA and Section 3007 of RCRA relating 
to possible discharges into Turkey Creek in Sumter, South Carolina. The Company 
is preparing its response to the Request for Information and believes that,     
because its Sumter, South Carolina facility is distant from Turkey Creek and    
does not discharge into Turkey Creek, there is a low probability of liability   
associated with this matter.                                                    

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

CONDITIONS IN ISRAEL

     The following information discusses certain conditions in Israel that could
affect our Israeli subsidiary, Koffolk Israel. Israeli operations (excluding    
Koffolk Israel's non-Israeli subsidiaries) accounted for approximately 13% of   
our consolidated assets as of December 31, 2004 and approximately 12% of our    
consolidated net sales for fiscal 2004. We are, therefore, directly affected by 
the political, military and economic conditions in Israel.                      

POLITICAL AND MILITARY CONDITIONS                                               

   Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and a state of 
hostility, varying from time to time in intensity and degree, has led to        
security and economic problems for Israel. Although Israel has entered into     
various                                                                         

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agreements with certain Arab countries and the Palestinian Authority, since     
October 2000 there has been a significant increase in violence and terrorist    
activity in Israel. In April 2002, and from time to time thereafter, Israel     
undertook military operations in several Palestinian cities and towns. We cannot
predict whether the current violence and unrest will continue and to what extent
it will have an adverse impact on Israel's economic development or on Koffolk   
Israel's or our results of operations. We also cannot predict whether or not any
further hostilities will erupt in Israel and the Middle East and to what extent 
such hostilities, if they do occur, will have an adverse impact on Israel's     
economic development or on Koffolk Israel's or our results of operations.       

     Certain countries, companies and organizations continue to participate in a
boycott of Israeli firms and other companies doing business in Israel or with   
Israel companies. We do not believe that the boycott has had a material adverse 
effect on us, but we can not provide assurance that restrictive laws, policies  
or practices directed toward Israel or Israeli businesses will not have an      
adverse impact on our operations or expansion of the our business.              

    Generally, male adult citizens who are permanent residents of Israel under
the age of 40 are, unless exempt, obligated to perform certain military duty    
annually. Additionally, all such residents are subject to being called to active
duty at any time under emergency circumstances. Some of the employees of Koffolk
Israel currently are obligated to perform annual reserve duty. While Koffolk    
Israel has operated effectively under these and similar requirements in the     
past, we cannot assess the full impact of such requirements on Koffolk Israel   
and us in the future, particularly if emergency circumstances occur and         
employees of Koffolk Israel are called to active duty.                          

ECONOMIC CONDITIONS                                                             

Israel is currently experiencing the longest recession since the      
establishment of Israel in 1948. Factors affecting Israel's economy include the 
Intifada, which began in September 2000, the slowdown in world trade and the    
global slump in the high-tech industry. In addition, Israel's economy has been  
subject to numerous destabilizing factors, including a period of rampant        
inflation in the early to mid-1980's, low foreign exchange reserves,            
fluctuations in world commodity prices, military conflicts and security         
incidents. Further disruptions to the Israeli economy as a result of these or   
other factors could have a material adverse affect on Koffolk Israel's and our  
results of operations.                                                          

     Koffolk Israel receives a portion of its revenues in U.S. dollars while its
expenses are principally payable in New Israeli Shekels. Dramatic changes in the
currency rates could have an adverse effect on Koffolk Israel's results of      
operations.                                                                     

INVESTMENT INCENTIVES                                                           

 Certain of our Israeli production facilities have been granted Approved
Enterprise status pursuant to the Law for the Encouragement of Capital          
Investments, 1959, and consequently may enjoy certain tax benefits and          
investment grants. Taxable income of Koffolk Israel derived from these          
production facilities is subject to a lower rate of company tax than the normal 
rate applicable in Israel. Dividends distributed by Koffolk Israel out of the   
same income are subject to lower rates of withholding tax than the rate normally
applicable to dividends distributed by an Israeli company to a non-resident     
corporate shareholder. The grant available to newly Approved Enterprises was    
decreased throughout recent years. Certain of our Israeli production facilities 
further enjoyed accelerated depreciation under regulation extended from time to 
time and other deductions. We cannot provide assurance that we will, in the     
future, be eligible for or receive such or similar grants.                      

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS                                                

  Set forth below is certain information with respect to our directors and
executive officers.                                                             

                                                        [Enlarge/Download Table]

NAME                                       AGE                   POSITION                  
----                                       ---                   --------                  
                                                                                           
Jack C. Bendheim.......................... 58   Chairman of the Board of Directors and     
                                                President                                  
Gerald K. Carlson......................... 61   Chief Executive Officer                    
Marvin S. Sussman......................... 57   Vice Chairman of the Board of Directors and
                                                President, Prince Agri                     
James O. Herlands......................... 62   Director and Executive Vice President      
Richard G. Johnson........................ 55   Chief Financial Officer                    
Daniel M. Bendheim........................ 33   President, Specialty Chemicals Group*      
Steven L. Cohen........................... 60   Vice President, General Counsel and        
                                                Assistant Secretary                        
Keith Collins............................. 50   President, Phibro Animal Health Division** 
Daniel A. Welch........................... 54   Senior Vice President, Human Resources     
Sam Gejdenson............................. 56   Director, Noteholder Representative        
Peter A. Joseph........................... 52   Director                                   
Mary Lou Malanoski........................ 48   Director                                   
Marcos Rodriguez.......................... 43   Director                                   

---------------                                                                 

 * William A. Mathison, the former President, Specialty Chemicals Group, retired
in August 2004.                                                           

** David G. McBeath, the former President, Animal Health Group, returned, as    
planned, to his private consulting business in December 2004.             

Jack C. Bendheim Chairman of the Board of Directors and President. Mr.
Bendheim has been President since 1988. He was Chief Operating Officer from 1988
to 1998, and was Chief Executive Officer from 1998 to May 2002. He has been a   
director since 1984. Mr. Bendheim joined us in 1969 and served as Executive Vice
President and Treasurer from 1983 to 1988 and as Vice President and Treasurer   
from 1975 to 1983. Mr. Bendheim is also a director of The Berkshire Bank in New 
York, New York, and Empire Resources, Inc., a metals trading company in Fort    
Lee, New Jersey.                                                                

 Gerald K. Carlson Chief Executive Officer. Mr. Carlson joined us in May
2002 and has served as our Chief Executive Officer since then. Prior to joining 
us, Mr. Carlson served as the Commissioner of Trade and Development for the     
State of Minnesota from January 1999 to March 2001. Mr. Carlson served as Senior
Vice President -- Corporate Planning and Development from June 1996 to his      
retirement in October 1998 from Ecolab, Inc. During his thirty-two year career  
at Ecolab, Mr. Carlson also served as Senior Vice President of International as 
well as Senior Vice President and General Manager -- Institutional North        
America.                                                                        

    Marvin S. Sussman Vice Chairman of the Board of Directors and President of
our Prince Agri subsidiary. He has been a director since 1988 and was Chief     
Operating Officer from 1998 to 2002. Mr. Sussman joined us in 1971. Since then, 
he has served in various executive positions with us. Mr. Sussman was President 
of our Prince Group from 1988 to 2002. Mr. Sussman is the brother-in-law of Jack
Bendheim.                                                                       

   James O. Herlands Director; Executive Vice President. Mr. Herlands joined
us in 1964. Since then, he has served in various capacities in sales/marketing  
and purchasing. He has been a director since 1988 and served as President of our
CP/PhibroChem division since 1992. In addition, Mr. Herlands has served as our  
Executive Vice President since 1988. Mr. Herlands is the first cousin of Jack   
Bendheim.                                                                       

Richard G. Johnson Chief Financial Officer. Mr. Johnson joined us in  
September 2002 and has served as our Chief Financial Officer since then. Prior  
to joining us, Mr. Johnson served as Director of Financial                      
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Management for Laserdyne Prima, Inc. from 2001 to 2002 and as Vice              
President -- Planning and Control, Latin America for Ecolab, Inc. from 1992 to  
1999. In addition, Mr. Johnson served in various senior financial positions at  
Ecolab over a fifteen year period.                                              

Daniel M. Bendheim President, Specialty Chemicals Group. Mr. Bendheim 
joined the Company in 1998. In 2001 he was appointed Vice President of Business 
Development, and was appointed to his current position of President, Specialty  
Chemicals Group in September, 2004. Prior to joining the Company Mr. Bendheim   
worked as an analyst at SouthCoast Capital. Mr. Bendheim received a JD from     
Harvard Law School in 1996 and a BA from Yeshiva University in 1993. Mr.        
Bendheim is a son of Jack Bendheim.                                             

    Steven L. Cohen Vice President and General Counsel. Mr. Cohen joined us in
October 2000 and has served as our Vice President -- Regulatory and General     
Counsel since then. Prior to joining us, Mr. Cohen was, from 1997 to 2000,      
General Counsel of Troy Corporation, a multi-national chemical company. From    
1994 to 1997, Mr. Cohen was in the private practice of law.                     

Keith R. Collins President, Phibro Animal Health Division. Mr Collins 
joined us in August 2004. Prior to joining us, Mr. Collins was, from 2000 to    
2004, Director, Global Strategic Marketing for Cattle and Swine with Merial     
Ltd., the world's largest animal health company. From 1995 to 2000, he was      
Director of European Operations with Hoechst Roussel Vet and Intervet based in  
Germany and Holland respectively. Mr Collins is a Fellow of the New Zealand     
Institute of Management.                                                        

    Daniel A. Welch Senior Vice President Human Resources. Mr. Welch joined us
on August 9, 2004. Prior to joining us, he was Director of Human Resources of   
Pfizer Inc. since 2001. From 1998 to 2001, Mr. Welch was the President of Value 
Growth Dynamics, LLC, a consulting firm focused on strategic change.            

     Sam Gejdenson Director. From 1981 to 2000, Congressman Sam Gejdenson served
eastern Connecticut in the U.S. House of Representatives. Mr. Gejdenson was the 
senior Democrat on the House International Relations Committee. He received an  
A.S. degree from Mitchell College in New London, Connecticut in 1968 and a B.A. 
from the University of Connecticut in Storrs, Connecticut in 1970. In 1974, he  
was elected to the Connecticut House of Representatives, serving two terms      
before accepting a post in the administration of Connecticut Governor Ella T.   
Grasso. Mr. Gejdenson is now involved in international trade in his own company 
Sam Gejdenson International.                                                    

 Peter A. Joseph Director. Mr. Joseph has served as one of our Directors
since February 2001. From 1998 to present, he has been a member of Palladium    
Equity Partners, LLC. From 1986 to 1997, Mr. Joseph was a general partner of    
Joseph Littlejohn & Levy, a buyout firm.                                        

   Mary Lou Malanoski Director. Ms. Malanoski currently serves as a Managing
Director at Morgan Joseph & Co. Inc. From 1994 until June 2001, Ms. Malanoski   
served as Managing Director and Chief Financial Officer of New Street Advisors  
LP, a private equity firm that she co-founded. Ms. Malanoski began her career at
Drexel Burnham Lambert in 1980 in the Corporate Finance Department. She         
subsequently served in various positions, finally serving as Managing Director  
in the Mergers and Acquisitions Department and Chair of the Corporate Finance   
Underwriting Commitment Committee. Following Drexel's bankruptcy filing in 1990,
Ms. Malanoski was responsible for formulating the firm's plan of reorganization,
which was successfully consummated in 1992. She remained at the reorganized     
firm, which was renamed New Street Capital Corp., as a Managing Director        
responsible for many of the firm's merchant banking investments. Following New  
Street Capital's sale in 1994, Ms. Malanoski co-founded New Street Advisors. She
is a Trustee of Rosemont College, from which she received a B.A. degree in      
Mathematics, and she also received an MBA from the Johnson School of Cornell    
University.                                                                     

Marcos A. Rodriguez Director. Mr. Rodriguez founded Palladium Equity  
Partners in 1997 and serves as Managing Member. Prior to forming Palladium, Mr. 
Rodriguez was a partner of Joseph Littlejohn & Levy (JLL), a buyout firm which  
he joined in 1989. He was responsible for spearheading a number of JLL's major  
investments. Before launching his private equity career 14 years ago, Mr.       
Rodriguez worked in operations for General Electric Company in the U.S., Mexico 
and France and graduated from GE's Manufacturing Management Program. Mr.        
Rodriguez serves on the Board of Directors of portfolio companies Haden         
International, The Hilsinger Company and Wise Foods. In addition, Mr. Rodriguez 
serves as                                                                       
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Chairman of the Development Committee and Treasurer of the Board of Directors of
The Robert Toigo Foundation, a not-for-profit organization that supports the    
advancement of exceptional minority business degree students and alumni within  
the finance industry through scholarships, mentoring, internships and job       
placement. He is also a member of the New America Alliance. Mr. Rodriguez earned
a B.S. in Mechanical Engineering from Columbia University, an M.B.A from the    
Wharton School and an M.A. in International Studies from the Lauder Institute of
the University of Pennsylvania.                                                 

BOARD COMPOSITION                                                               

Our entire Board of Directors consists of 7 members, all of whom are  
currently designated and serving as directors. Our board of directors is elected
annually, and our directors hold office until the next annual meeting of        
shareholders or until their successors are elected and qualified. Each officer  
serves at the discretion of the Board of Directors.                             

COMPENSATION OF DIRECTORS                                                       

Except for the payment of $50,000 annually to Mr. Sam Gejdenson, the  
director designated by the holders of the Senior Secured Notes, our directors do
not receive any cash compensation for service on our Board of Directors.        
Directors may be reimbursed for certain expenses in connection with attendance  
at board meetings, however. We have entered into certain transactions with      
certain of the directors. See "Certain Relationships and Related Party          
Transactions."                                                                  

CODE OF ETHICS                                                                  

   Our Board of Directors has not adopted a code of ethics applicable to our
principal executive, financial or accounting officers. The Board of Directors   
believes that our current internal control procedures and business practices are
adequate to promote honest and ethical conduct and to deter wrongdoing by these 
executives.                                                                     

COMMITTEES OF THE BOARD OF DIRECTORS                                            

     We are not a "listed issuer" as defined under Section 10A-3 of the Exchange
Act and are therefore not required to have an audit committee comprised of      
independent directors. We currently do not have an audit committee and our Board
of Directors has determined that we do not have an audit committee financial    
expert. The Board of Directors believes that each of its members has the        
requisite financial background, experience, and knowledge to fulfill the duties 
and obligations that an audit committee would have, and therefore does not      
believe that it is necessary at this time to search for a person who would      
qualify as an audit committee financial expert.                                 

Our Board of Directors has not created any committees other than the  
compensation committee.                                                         

   The duties of the Compensation Committee are to recommend to the Board of
Directors a compensation program, including incentives, for the Chief Executive 
Officer and other senior officers of the Company, for approval by the full Board
of Directors.                                                                   

     The current members of the Compensation Committee are Mr. Jack C. Bendheim,
Mr. Joseph and Mr. Gejdenson.                                                   

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EXECUTIVE COMPENSATION                                                          

 The following table sets forth the cash compensation paid by us and our
subsidiaries for services during fiscal 2004, 2003, and 2002 to each of our five
most highly compensated executive officers:                                     

                                                        [Enlarge/Download Table]

                                                  ANNUAL COMPENSATION                           
                                          ------------------------------------                  
                                                                  OTHER ANNUAL      ALL OTHER   
NAME AND PRINCIPAL POSITION         YEAR    SALARY      BONUS     COMPENSATION   COMPENSATION(1)
---------------------------         ----  ----------   --------   ------------   ---------------
                                                                                                
Jack C. Bendheim................... 2004  $1,650,000   $     --     $     --         $ 2,050    
  Chairman of the Board; President  2003   1,650,000         --      150,000(2)        6,500    
                                    2002   1,500,000    265,000           --           6,000    
Gerald K. Carlson(3)............... 2004     500,000    575,000       24,000           1,458    
  Chief Executive Officer           2003     500,000         --       24,000              --    
                                    2002      49,350         --           --              --    
Marvin S. Sussman(4)............... 2004   1,000,000    101,372           --          24,581(6) 
  Vice Chairman of the Board;       2003   1,000,000         --           --          24,500(6) 
  President of Prince Agri          2002   1,000,000         --           --           6,000    
James O. Herlands.................. 2004     400,000     95,519           --           6,581    
  Executive Vice President          2003     400,000    150,000           --           6,500    
                                    2002     400,000    150,000           --           6,000    
Richard G. Johnson(5).............. 2004     268,750    200,000       13,500           6,703    
  Chief Financial Officer           2003     192,308         --       39,000              --    

---------------                                                                 

(1) Represents contributions by us under our 401(k) Retirement and Savings Plan.
See "Compensation Pursuant to Plans."                                   

(2) In fiscal 2003, Mr. Bendheim was paid $150,000 for temporary deferral of    
fiscal 2002 compensation.                                               

(3) 2002 salary is for a partial year commencing May 2002. In fiscal 2004 and   
 2003, Mr. Carlson received $24,000 for relocation and housing assistance.

(4) Pursuant to a Stockholders Agreement between us and Mr. Sussman, we are     
   required to purchase, at book value, all shares of our Class B Common Stock
 owned by Mr. Sussman in the event of his retirement, death, disability or
 the termination of his employment by us. Should Mr. Sussman elect to sell
his shares, we have a right of first offer and an option to purchase the
shares. See "Certain Relationships and Related Party Transactions." As a
result, each year, we are required to record as compensation expense    
(income) in our results of operations the change in our book value      
  attributable to Mr. Sussman's shares. For 2004, 2003 and 2002, the expense
(income) attributable to Mr. Sussman's shares was $0, $0 and ($378,000),
respectively. No distributions have been made to Mr. Sussman under this 
agreement.                                                              

(5) Salary is since date of employment for 2003. In fiscal 2004 and 2003, Mr.   
Johnson received $13,500 and $39,000, respectively, for relocation and  
housing assistance.                                                     

(6) Of such amount, $18,000 represents the cost of the term portion of a life   
   insurance policy purchased by the Company in the face amount of $10 million
 on the life of Mr. Sussman, with a required premium of $252,000 per year.
The policy commenced in April 2002.                                     

     In fiscal 2004, no options were granted to the named executive officers and
no options were held or exercised by any of the named executive officers.       

EMPLOYMENT AND SEVERANCE AGREEMENTS                                             

     We entered into an employment agreement with Gerald K. Carlson in May 2002,
whereby Mr. Carlson will serve as our Chief Executive Officer. The agreement    
provides for a base salary of $500,000 during the first year of its term. Mr.   
Carlson is eligible to receive an annual bonus of up to 150% of his base salary 
based on our achievement of certain specified EBITDA growth targets. If Mr.     
Carlson is terminated without Cause (as defined) or he voluntarily terminates   
the agreement with Good Reason (as defined), he is entitled to receive the      
accrued portion of the target annual bonus, as well as an amount ranging from   
two to eight months of base                                                     

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salary depending on when such termination occurs. If, within six months after a 
Change of Control (as defined), Mr. Carlson is terminated without cause or he   
voluntarily terminates the agreement with Good Reason, he will be entitled to   
receive a lump sum payment equal to the amount of annual target bonus accrued to
the date of termination, plus 100% of base salary and 50% of annual target      
bonus. We are obligated under the agreement to provide separate indemnification 
insurance to Mr. Carlson in the amount of the current coverage provided to our  
current board of directors.                                                     

    We entered into an employment agreement with Marvin S. Sussman in December
1987. The term of employment is from year-to-year, unless terminated by us at   
any time or by his death or permanent disability.                               

     In December 2004, David McBeath resigned as President, Animal Health Group.
We entered into a consulting agreement with Mr. McBeath in November 2004,       
pursuant to which Mr. McBeath agreed to provide to us consulting services       
through December 2005. The consulting agreement provides that Mr. McBeath shall 
work ten days per month at a rate of GBP1,000 per day from January through June 
2005 and five days per month at a rate of GBP1,100 per day through December     
2005.                                                                           

  In 1995, James O. Herlands purchased stock in Phibro-Tech. In connection
therewith, we entered into a severance agreement with him. The agreement        
provides that, upon his Actual or Constructive Termination or a Change in       
Control Event (as such terms are defined), he is entitled to receive a cash     
Severance Amount (as defined therein), based upon a multiple of Phibro-Tech's   
pre-tax earnings (as defined therein). In addition, if an Extraordinary Event   
(as defined) occurs within 12 months after the occurrence of an Actual or       
Constructive Termination, the executive is entitled to receive an additional    
Catch-up Payment (as defined). At June 30, 2004, no severance payments would    
have been due to Mr. Herlands if he were terminated. See "Certain Relationships 
and Related Party Transactions."                                                

COMPENSATION PURSUANT TO PLANS                                                  

401(k) Plan.  We maintain for the benefit of our employees a 401(k)   
Retirement and Savings Plan (the "Plan"), which is a defined contribution,      
profit sharing plan qualified under Section 401(k) of the Internal Revenue Code 
of 1986, as amended (the "Code"). Our employees are eligible for participation  
in the Plan once they have attained age 21 and completed a year of service (in  
which the employee completed 1,000 hours of service). Up to $200,000 (indexed   
for inflation) of an employee's base salary may be taken into account for Plan  
purposes. Under the Plan, employees may make pre-tax contributions of up to     
60.0% of such employee's base salary, and we will make non-matching             
contributions equal to 1% of an employee's base salary and matching contribution
equal to 50.0% of an employee's pre-tax contribution up to 3.0% of such         
employee's base salary and 25.0% of such employee's pre-tax contribution from   
3.0% to 6.0% of base salary. Participants are vested in employer contributions  
in 20% increments beginning after completion of the second year of service and  
become fully vested after five years of service. Distributions are generally    
payable in a lump sum after termination of employment, retirement, death,       
disability, plan termination, attainment of age 59 1/2, disposition of          
substantially all of our assets or upon financial hardship. The Plan also       
provides for Plan loans to participants.                                        

   The accounts of Messrs. Bendheim, Carlson, Sussman, Herlands, and Johnson
were credited with employer contributions of $2,050, $1,458, $6,581, $6,581, and
$6,703, respectively, for fiscal 2004.                                          

Retirement Plan.  We have adopted The Retirement Plan of Phibro Animal
Health Corporation and Subsidiaries and Affiliates, which is a defined benefit  
pension plan (the "Retirement Plan"). Our employees are eligible for            
participation in the Retirement Plan once they have attained age 21 and         
completed a year of service (which is a Plan Year in which the employee         
completes 1,000 hours of service). The Retirement Plan provides benefits equal  
to the sum of (a) 1.0% of an employee's "average salary" plus 0.5% of the       
employee's "average salary" in excess of the average of the employee's social   
security taxable wage base, times years of service after July 1, 1989, plus (b) 
the employee's frozen accrued benefit, if any, as of June 30, 1989 calculated   
under the Retirement Plan formula in effect at that time. For purposes of       
calculating the portion of the benefit based on "average salary" in excess of   
the average wage base, years of service shall not exceed 35. "Average salary"   
for these purposes means the employee's salary over the consecutive five year   
period in the last ten years preceding retirement or other termination of       
employment which produces the highest average;                                  
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or, if an employee has fewer than five years of service, all such years of      
service. An employee becomes vested in his plan benefit once he completes five  
years of service with us. In general, benefits are payable after retirement or  
disability in the form of a 50%, 75% or 100% joint or survivor annuity, life    
annuity or life annuity with a five or ten year term. In some cases benefits may
also be payable under the Retirement Plan in the event of an employee's death.  

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

                                                        [Enlarge/Download Table]

                                                     YEARS OF SERVICE                
                                      -----------------------------------------------
AVERAGE COMPENSATION                    15        20        25        30        35   
--------------------                  -------   -------   -------   -------   -------
                                                                                     
$25,000.............................. $ 3,750   $ 5,000   $ 6,250   $ 7,500   $ 8,750
$50,000.............................. $ 7,500   $10,000   $12,500   $15,000   $17,500
$75,000.............................. $11,420   $15,000   $18,750   $22,500   $26,250
$100,000............................. $17,040   $22,000   $26,980   $31,990   $37,280
$150,000............................. $28,290   $37,000   $45,730   $54,490   $63,530
$200,000............................. $39,540   $52,000   $64,480   $76,990   $89,780

As of June 30, 2004, Messrs. Bendheim, Carlson, Sussman, Herlands, and
Johnson had 35, 2, 33, 40 and 2 estimated credited years of service,            
respectively, under the Retirement Plan. The compensation covered by the        
Retirement Plan for each of these officers as of June 30, 2004 is $205,000. Such
individuals, at normal retirement age 65, will have 43, 6, 41, 43 and 12        
credited years of service, respectively. The annual expected benefit after      
normal retirement at age 65 for each of these individuals, based on the         
compensation taken into account as of June 30, 2004, is $118,200, $16,580,      
$134,110, $129,240, and $32,000, respectively.                                  

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

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

    The following table shows the estimated benefits from this plan as of June
30, 2004.                                                                       

                                                        [Enlarge/Download Table]

                                                    ANNUAL      SURVIVOR'S    DEFERRED  
                                                  RETIREMENT      INCOME    COMPENSATION
                                                INCOME BENEFIT   BENEFIT      BENEFIT   
                                                --------------  ----------  ------------
                                                                                        
Jack C. Bendheim...............................    $35,309      $1,500,000    $386,368  
Marvin S. Sussman..............................    $35,309      $1,000,000    $128,451  
James O. Herlands..............................    $35,085      $  400,000    $347,104  

We determine the Retirement Income Benefit based upon the employee's  
salary, years of service and age at retirement. At present, it is contemplated  
that a benefit of 1% of each participant's eligible compensation will be accrued
each year. The benefit is payable upon retirement (after age 65 with at least 10
years of service) in monthly installments over a 15 year period to the          
participant or his named beneficiary. The Survivor's Income Benefit for the     
current participants is one times annualized compensation at the time of death, 
capped at $1,500,000, payable in 24 equal monthly installments. The Deferred    
Compensation Benefit is substantially funded by compensation deferred by the    
participants. Such benefit is based upon a participant making an election to    
defer no less than $3,000 and no more than $20,000 of his compensation in excess
of $150,000, payable in a lump sum or in monthly installments for up to 15      
years. We make a matching contribution of $3,000. Participants have no claim    
against us other than as unsecured creditors. We intend to fund the payments    
using the cash value or the death benefit from the life insurance policies      
insuring each Executive's life.                                                 
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   Executive Income Program.  On March 1, 1990, we entered into an Executive
Income Program to provide a pre-retirement death benefit and a retirement       
benefit to certain of our executives. The Program consists of a Split-Dollar    
Agreement and a Deferred Compensation Agreement with Jack Bendheim, Marvin S.   
Sussman and James O. Herlands (the "Executives"). The Split Dollar Agreement    
provides for us to own a whole life insurance policy in the amount of $1,000,000
(plus additions) on the life of each Executive.                                 

  Each policy also contains additional paid-up insurance and extended term
insurance. On the death of the Executive prior to his 60th birthday or his      
actual retirement date, whichever is later: (i) the first $1,000,000 of the     
death benefit is payable to the Executive's spouse, or issue; (ii) the excess is
payable to us up to the aggregate amount of premiums paid by us; and (iii) any  
balance is payable to the Executive's spouse or issue. The Split-Dollar         
Agreement terminates and no benefit is payable if the Executive dies after his  
retirement. The Deferred Compensation Agreement provides that upon the          
Executive's retirement, at or after attaining age 65, we will make retirement   
payments to the Executive during his life for 10 years or until he or his       
beneficiaries have received a total of 120 monthly payments. Participants have  
no claim against us other than as unsecured creditors. We intend to fund the    
payments using the cash value or the death benefit from the life insurance      
policies insuring each Executive's life. The retirement benefits are as follows:
Jack Bendheim $30,000; Marvin S. Sussman $30,000; and James O. Herlands $20,000.

   1993 Split Dollar Agreement.  On August 12, 1993, we entered into a Split
Dollar Agreement with David Butler and Gail Bendheim, as trustees under an      
Indenture of Trust dated August 12, 1993 (the "Trust"). This Agreement provides 
for the Trust to purchase and own life insurance policies on the life of Jack C.
Bendheim in the aggregate face amount of $5,000,000 (plus additions). The       
premiums for such insurance are paid in part by the Trust (to the extent of the 
lesser of the P.S. 58 rates, or the insurers' current published premium rate for
annually renewable term insurance for standard risks) and in part by us (we pay 
the balance of the premiums not paid by the Trust). Upon the death of Jack C.   
Bendheim or upon the cancellation of the policies or the termination of the     
Agreement, we have the right to be repaid the total amount we advanced toward   
payment of premiums. To secure our right to be repaid, the Trust has assigned   
each policy to us as collateral. After repayment of the amount due to us, the   
remaining cash surrender value or the remaining death benefit is payable to the 
Trust, the beneficiaries of which are the wife and issue of Jack C. Bendheim.   

MEETINGS OF DIRECTORS                                                           

 During fiscal 2004, the Board of Directors took certain actions by both
written consent and at regular meetings. Directors are elected annually and     
serve until the next annual meeting of Shareholders or until their successors   
are elected and qualified.                                                      

REPORT OF THE COMPENSATION COMMITTEE                                            

The compensation committee was established during fiscal 2004. The    
responsibility of the compensation committee is to recommend to the Board of    
Directors a compensation program, including incentives, for the Chief Executive 
Officer and other senior officers, for approval by the full Board of Directors. 
The compensation committee will prepare recommendations to the Board of         
Directors for the 2005 fiscal year. Executive compensation for the 2004 fiscal  
year was determined by the Board as a whole. During fiscal 2004 the directors   
participated in deliberations regarding compensation of our officers.           

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

   Jack Bendheim, Marvin S. Sussman and James O. Herlands are members of our
Board of Directors and are executive officers. Jack Bendheim, Peter Joseph and  
Sam Gejdenson are members of the compensation committee. None of our executive  
officers serve as a member of the Board of Directors of any other non-Company   
entity which has one or more members serving as a member of our Board of        
Directors, except that Jack Bendheim and Peter Joseph serve as directors of     
Penick Holding Company. Messrs. Bendheim, Sussman, Herlands, Joseph and         
Rodriguez have participated in certain transactions with us and our subsidiaries
and affiliates. See "Certain Relationships and Related Transaction."            

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PRINCIPAL STOCKHOLDERS

    The table sets forth certain information as of December 31, 2004 regarding
beneficial ownership of our capital stock by each of our directors and named    
executive officers, each beneficial owner of 5% or more of the outstanding      
shares of capital stock and all directors and officers as a group.              

                                                        [Enlarge/Download Table]

                                                           NUMBER OF COMMON SHARES         
                                                            (PERCENTAGE OF CLASS)          
                                                  -----------------------------------------
NAME                                              CLASS A VOTING(1)   CLASS B NON-VOTING(2)
----                                              -----------------   ---------------------
                                                                                           
Jack Bendheim(3)(4)..............................   12,600(100)%         10,699.65(90)%    
Marvin S. Sussman................................       --                1,188.85(10)%    
All other officers and directors(5)..............       --                      --         
All officers and directors as a group............   12,600(100)%         11,888.50(100)%   

---------------                                                                 

(1) The entire voting power is exercised by the holders of Class A Common Stock,
 except that the holders of Class A Common Stock currently are entitled to
    elect all but four of the directors. The holders of Class B Common Stock are
entitled to elect one and the holders of Series C Preferred Stock are   
entitled to elect two directors but do not vote on any other matters. In
    addition, the holders of the units of senior secured notes have the right to
designate one member of the Board of Directors.                         

(2) Class B Common shareholders will receive the entire equity upon our         
liquidation, after payment of preferences to holders of all classes of  
preferred stock and Class A Common Stock.                               

(3) Jack Bendheim also owns 5,207 (100%) shares of Series A Preferred Stock.    

(4) Includes 6,308.527 shares of Class B Common Stock owned by trusts for the   
    benefit of Jack Bendheim, his spouse, his children and their spouses and his
grandchildren.                                                          

(5) Peter A. Joseph and Marcos Rodriguez have been designated as directors of   
the Company by Palladium Equity Partners II, LP ("Palladium") which     
  beneficially owns 10,591 shares of our Series C Preferred Stock. Palladium
has the right to designate two directors to the Board of Directors. See 
"Certain Relationships and Related Party Transactions."                 

    In February, 2005, the holders of all of our capital stock, other than the
holders of our Series C Preferred Stock, formed a holding company, PAHC Holdings
Corporation ("HoldCo"), to own their shares. In particular, Jack Bendheim,      
Marvin S. Sussman and trusts for the benefit of Mr. Bendheim and his family     
exchanged all of their shares of Series A Preferred Stock and Class B Common    
Stock and Mr. Bendheim exchanged fifty percent (50%) of his shares of Class A   
Common Stock, for the same number and class of shares of HoldCo, having the same
designations, relative rights, privileges and limitations as our shares of such 
class (except to the extent that HoldCo is a Delaware corporation and we are a  
New York corporation). See "Prospectus Summary -- The Company -- Recent         
Developments -- The Formation of a Holding Company and its Note Offering" for   
more information on this matter.                                                

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DESCRIPTION OF CAPITAL STOCK

 Our authorized capital stock consists of 30,300 shares of Common Stock,
allocated as follows: 16,200 shares of Class A Common Stock, par value $0.10 per
share, and 14,100 shares of Class B Common Stock, par value $0.10 per share, and
155,750 shares of Preferred Stock, par value $100 per share, of which the       
following series have been established: 5,207 shares of Series A Preferred Stock
and 20,000 shares of Series C Redeemable Participating Preferred Stock ("Series 
C Preferred Stock").                                                            

 At the date of this prospectus, there are issued and outstanding 12,600
shares of Class A Common Stock, 11,888.50 shares of Class B Common Stock, 5,207 
shares of Series A Preferred Stock and 10,591 shares of Series C Preferred      
Stock.                                                                          

 The following description of the terms of all classes and series of our
common and preferred stock is not complete and is subject to and qualified in   
its entirety by reference to our amended certificate of incorporation (the      
"Certificate of Incorporation").                                                

   The entire voting power is vested in the holders of Class A Common Stock,
except that the holders of shares of Class A Common Stock are entitled to elect 
all but four of the directors. The holders of Class B Common Stock are entitled 
to elect one director and holders of the Series C Preferred Stock are entitled  
by contract to elect two directors and are not entitled to vote on any other    
corporate action except as required by applicable law. In addition, under the   
indenture one member of the Board of Directors is designated on behalf of the   
holders of the units of senior secured notes. Holders of units are not entitled 
to vote on any other corporate action. The holders of shares of Class A Common  
Stock are entitled to one vote per share upon all matters submitted for a vote  
of the shareholders. The Certificate of Incorporation does not provide for      
cumulative voting. The holders of Common Stock are entitled to preemptive       
rights.                                                                         

 No dividends may be paid to holders of Common Stock until all dividends
have been paid to holders of Preferred Stock. The holders of Series C Preferred 
Stock are entitled to cumulative cash dividends, payable semi-annually, at 15%  
per annum of the liquidation value. The liquidation value of the Series C       
Preferred Stock is an amount equal to $1,000 per share plus all accrued and     
unpaid dividends (the "Liquidation Value"), plus a percentage of our equity     
value, as defined in the Certificate of Incorporation. The equity value is      
calculated as a multiple of the earnings before interest, tax, depreciation and 
amortization of our business, and with deductions for, among other things,      
outstanding indebtedness ("Equity Value"). In connection with the PMC           
transaction, the definition of Equity Value in the Company's Certificate of     
Incorporation was amended to reduce the multiple of trailing EBITDA payable in  
connection with any future redemption of Series C Preferred to 6.0 from 7.5. In 
connection with the 2004 Offering, we agreed with the holders of the Series C   
Preferred Stock that, for purposes of calculating the Equity Value, the total   
net debt of Phibro Animal Health Corporation would not exceed $170 million.     
Directors elected by the holders of Class A Common Stock have the exclusive     
right and power to cause us to declare and pay other dividends. Non-cumulative  
dividends are payable on the outstanding Series A Preferred Stock and Common    
Stock, in the following order only when and as declared by the Board: each share
of Series A Preferred Stock -- $1.00 per year; each share of Class A Common     
Stock -- $0.0055 per year; and each share of Class B Common Stock, as determined
by the Board.                                                                   

 Beginning November 30, 2003, and on each anniversary thereafter, we may
redeem, for cash only, in whole the Series C Preferred Stock, at the Liquidation
Value plus the Equity Value payment. At any time after the redemption of the    
Senior Subordinated Notes due 2008, Palladium has the right to require us to    
redeem, for cash, the Series C Preferred Stock at the Liquidation Value plus the
Equity Value payment. In connection with the Palladium repurchase and           
divestiture of PMC, all of the shares of Series B Preferred Stock were          
repurchased and all of the shares of Series C Preferred Stock other than shares 
having a value as of December 26, 2003, the date of repurchase, of $16.5 million
were repurchased. See "Certain Relationships and Related Party Transactions."   

 The shares of Series A Preferred Stock are redeemable at our option, in
whole or part, at any time or from time to time, for a redemption price equal to
the par value thereof plus any declared but unpaid dividends.                   

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    In the event of any complete liquidation, dissolution or winding up of the
business, or sale of all of our assets, after redemption of the Series C        
Preferred Stock, each share of Series A Preferred Stock is entitled to a        
distribution equal to the par value thereof and any declared but unpaid         
dividends. Thereafter, our remaining assets shall be distributed, first to the  
holders of Class A Common Stock in an amount equal to $0.10 per share, and then 
to the holders of Class B Common Stock. In the event that no shares of Class B  
Common Stock are then outstanding, all remaining assets will be paid to the     
holders of Class A Common Stock. The Board of Directors is authorized to issue  
shares of Preferred Stock in one or more series and to fix the rights,          
preferences, privileges and restrictions thereof, including dividend rights,    
dividend rates, conversion rights, voting rights, terms of redemption,          
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by 
the stockholders. The issuance of Preferred Stock may have the effect of        
delaying, deferring or preventing a change in control of us without further     
action by the stockholders. The issuance of Preferred Stock with voting and     
conversion rights may adversely affect the voting power of the holders of Common
Stock, including the loss of voting control to others. At present, we have no   
plans to issue any shares of Preferred Stock.                                   

  The authorized share capital of the Dutch issuer is Euro 90,000, divided
into 900 ordinary shares with a nominal value of Euro 100 each, of which 180    
fully paid shares have been issued.                                             

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our Phibro-Tech subsidiary leases the property underlying its Santa Fe
Springs, California facility from First Dice Road Company, a California limited 
partnership ("First Dice"), in which Jack Bendheim, our President and principal 
stockholder, Marvin S. Sussman and James O. Herlands, directors, own 39.0%,     
40.0% and 20.0% limited partnership interests, respectively. The general        
partner, having a 1% interest in the partnership, is Western Magnesium Corp., a 
wholly-owned subsidiary of ours, of which Jack Bendheim is the president. The   
lease expires on June 30, 2008. The annual rent is $250,000. Phibro-Tech is also
required to pay all real property taxes, personal property taxes and liability  
and property insurance premiums. In June 2001, Jack Bendheim entered into a     
secured $1.4 million revolving credit arrangement with First Union National     
Bank, which replaced a prior loan from Fleet Bank. Mr. Bendheim reloans         
borrowings under the First Union credit line to First Dice on the same terms as 
his borrowing from First Union. We believe that the terms of such lease and loan
are on terms no less favorable to Phibro-Tech than those that reasonably could  
be obtained at such time in a comparable arm's-length transaction from an       
unrelated third-party.                                                          

     Pursuant to a Shareholders Agreement dated December 29, 1987 between Marvin
S. Sussman and us, we are required to purchase, at book value, all shares of our
Class B Common Stock owned by Mr. Sussman, in the event of his retirement,      
death, permanent disability or the termination of his employment by us. Should  
Mr. Sussman elect to sell his shares, we have a right of first offer and an     
option to purchase the shares.                                                  

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

    We advanced $200,000 to Marvin Sussman and his wife in 1987, pursuant to a
secured promissory note that is payable on demand and bears interest at the     
annual rate of 9%.                                                              

     Certain relatives of Jack Bendheim, other than Mr. Sussman and Mr. Herlands
named above, provide services to us, in one case through a consulting firm      
controlled by a relative, and in other cases as employees, and received directly
or through such consulting firm annual aggregate payments of approximately      
$650,000 for the fiscal year ended June 30, 2004.                               

On January 5, 2000, the United States Bankruptcy Court for the Eastern
District of New York confirmed a Plan of Reorganization for Penick Corporation  
and Penick Pharmaceutical, Inc. (collectively, "Penick") which prior to such    
confirmation were debtors in proceedings in such Court for reorganization under 
Chapter 11 of the Bankruptcy Code, and awarded Penick to Penick Holding Company 
("PHC"). PHC is a corporation formed to effect such acquisition by the Company, 
PBCI LLC, a limited liability company controlled by Mr. Jack Bendheim, and      
several other investors, including Peter A. Joseph, a director of the Company.  
Pursuant to a Shareholders' Agreement among the shareholders of PHC, Messrs.    
Bendheim and Joseph have been designated as two of three directors of PHC, and  
Mr. Katzenstein, our Secretary, has been designated as Secretary and Treasurer  
of PHC. The Company has invested approximately $2,300,000 for shares of Series A
Preferred Stock of PHC bearing an 8.5 percent annual cumulative dividend, and   
PBCI LLC invested approximately $500,000 for approximately 15 percent of the    
Common Stock of PHC. Mr. Joseph owns or controls approximately 12 percent of the
Common Stock of PHC.                                                            

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     In connection with the sale of our Series B and Series C Preferred Stock to
the Palladium Investors, we and Jack Bendheim entered into a Stockholders       
Agreement (the "Palladium Stockholders Agreement") dated November 30, 2000 with 
the Palladium Investors. The Palladium Stockholders Agreement provides for our  
Board to include two directors to be designated by the Palladium Investors.     
Peter A. Joseph and Marcos Rodriguez are currently the two designees of the     
Palladium Investors serving as directors. If and for so long as we fail to      
redeem any share of Series B or Series C Preferred Stock requested for          
redemption by a Palladium Investor after the earliest to occur of June 1, 2008  
(the maturity date of our 9 7/8% Senior Subordinated Notes due 2008), the       
redemption of such Notes in full prior thereto or a change in control of us,    
then (x) the Palladium Investors may take control of our Board of Directors, and
(y) Jack C. Bendheim has agreed to cause all equity securities owned by him to  
be voted in the manner directed by the Palladium Investors; provided, that, we  
must pay Jack Bendheim and Marvin Sussman, whether or not employed by us, an    
amount not less than their respective annual base salaries in effect immediately
prior to such assumption of control, until the earlier to occur of the          
expiration of control by the Palladium Investors and the fifth anniversary of   
their assumption of control.                                                    

 The Palladium Stockholders Agreement contains covenants which restrict,
without the consent of at least one director designated by the Palladium        
Investors (or, if no such director is then serving on the Board, at least one   
Palladium Investor), among other things, certain (a) issuances of any equity    
securities, unless the purchaser agrees to be bound by the Palladium            
Stockholders Agreement, (b) sales of assets in excess of $10 million, (c)       
purchases of businesses and other investments in excess of $10 million, (d) the 
incurrence of indebtedness for borrowed money, including guarantees, in excess  
of $12.5 million, (e) redemptions, acquisitions or other purchases of equity    
securities, (f) transactions with officers, directors, stockholders or employees
or any family member or affiliate thereof in excess of $500,000, (g)            
compensation and benefits of certain officers, and (h) transactions involving a 
change of control. The Palladium Stockholders Agreement also provides that we   
shall furnish the Palladium Investors certain financial reporting and           
environmental information each year and grant to the Palladium Investors        
registration rights comparable to any such rights granted to any third party,   
and requires us to maintain certain key man life insurance on Jack C. Bendheim  
for the benefit of the Palladium Investors. The Palladium Stockholders Agreement
provides certain limitations on the ability of Jack C. Bendheim to transfer     
voting shares, and certain limitations on the ability of the Palladium Investors
to transfer their shares, including a right of first refusal in favor of us and 
Mr. Bendheim.                                                                   

   Pursuant to the Management and Advisory Services Agreement dated November
30, 2000 between us and the Palladium Investors, we agreed to pay, on a         
quarterly basis, the Palladium Investors an annual management advisory fee of   
$2.25 million until such time as all shares of Series B and Series C Preferred  
Stock are redeemed. Pursuant to the sale of PMC described below, our obligations
for this fee have been terminated.                                              

Our policy with respect to the sale, lease or purchase of assets or   
property of any related party is that such transaction should be on terms that  
are no less favorable to us or our subsidiary, as the case may be, than those   
that could reasonably be obtainable at such time in a comparable arm's length   
transaction from an unrelated third party. The indenture and the domestic senior
credit facility both include a similar restriction on us and our domestic       
subsidiaries with respect to the sale, purchase, exchange or lease of assets,   
property or services, subject to certain limitations as to the applicability    
thereof.                                                                        

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

Pursuant to definitive purchase and other agreements executed on and  
effective as of the Closing Date, the Prince Transactions included the following
elements: (i) the transfer of substantially all of the business and assets of   
PMC to Buyer; (ii) the reduction of the value of the Company's Preferred Stock  
owned by the Palladium Investors from $72.2 million to $16.5 million (accreted  
through the Closing Date) by means of the redemption of all of its shares of    
Series B Preferred Stock and a portion of its Series C Preferred Stock;         

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(iii) the termination of $2.2 million in annual management advisory fees payable
by the Company to Palladium; (iv) a cash payment of $10.0 million to the        
Palladium Investors in respect of the portion of the Company's Preferred Stock  
not exchanged in consideration of the business and assets of PMC; (v) the       
agreement of the Buyer to pay the Company for advisory fees for the next three  
years of $1.0 million, $0.5 million, and $0.2 million, respectively (which were 
pre-paid at closing by the Buyer and satisfied for $1.3 million, the net present
value of such payments); and (vi) the Buyer agreed to supply manganous oxide and
red iron oxide products and to provide certain mineral blending services to the 
Company's Prince Agriproducts subsidiary ("Prince Agri"). Prince Agri agreed to 
continue to provide the Buyer with certain laboratory, MIS and telephone        
services, all on terms substantially consistent with the historic relationship  
between Prince Agri and PMC, and to lease to Buyer office space used by PMC in  
Quincy, Illinois. The Company has an agreement to receive certain treasury      
services from Palladium for $0.1 million per year. Pursuant to definitive       
agreements, the Company made customary representations, warranties and          
environmental and other indemnities, agreed to a post-closing working capital   
adjustment, paid $4.0 million in full satisfaction of all intercompany debt owed
to PMC, paid a closing fee to Palladium of $0.5 million, made certain capital   
expenditure adjustments included as part of the intercompany settlement amount, 
and agreed to pay for certain out-of-pocket transaction expenses. PMC retained  
$0.4 million of its accounts receivable. The Company established a $1.0 million 
letter of credit escrow for two years to secure its working capital adjustment  
and certain indemnification obligations. The Company agreed to indemnify the    
Palladium Investors for a portion, at the rate of $0.65 for every dollar, of the
amount they receive in respect of the disposition of Buyer for less than $21.0  
million up to a maximum payment by the Company of $4.0 million (the "Backstop   
Indemnification Amount"). The Backstop Indemnification Amount would be payable  
on the earlier to occur of July 1, 2008 or six months after the redemption date 
of all of the Company's Senior Secured Notes due 2007 if such a disposition     
closes prior to such redemption and six months after the closing of any such    
disposition if the disposition closes after any such redemption. The Company's  
obligations with respect to the Backstop Indemnification Amount will cease if   
the Palladium Investors do not close the disposition of Buyer by January 1,     
2009. The definition of "Equity Value" in the Company's Certificate of          
Incorporation was amended to reduce the multiple of trailing EBITDA payable in  
connection with any future redemption of Series C Preferred to 6.0 from 7.5. The
amount of consideration paid and payable in connection with the Prince          
Transactions and all matters in connection therewith were determined pursuant to
arm's length negotiations.                                                      

 In connection with the 2004 Offering, we agreed with the holders of the
Series C Preferred Stock that, for purposes of calculating the Equity Value,    
which is calculated as part of the calculation of the Liquidation Value of the  
Series C Preferred Stock, the total net debt of Phibro Animal Health Corporation
would not exceed $170 million. See "Description of Capital Stock."              

   On February 10, 2005, PAHC Holdings Corporation sold $29.0 million of its
15% Senior Secured Notes due 2010 (the "HoldCo Notes") in a private placement.  
HoldCo was formed by the holders of all of our capital stock, other than the    
holders of our Series C Preferred Stock. The proceeds from the sale of the      
HoldCo Notes, upon release from escrow, will be used, directly or indirectly, to
redeem our Series C Preferred Stock. It is contemplated that such redemption    
will occur on or before February 28, 2005. See "Prospectus Summary -- The       
Company -- Recent Developments -- The Formation of a Holding Company and its    
Note Offering" for more information on this matter.                             

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DESCRIPTION OF CERTAIN INDEBTEDNESS 

  The following is a summary of certain of our indebtedness. To the extent
such summary contains descriptions of the credit agreements and other loan      
documents, such descriptions do not purport to be complete and are qualified in 
their entirety by reference to such documents, which are available at or through
the SEC or upon request from us.                                                

DOMESTIC SENIOR CREDIT FACILITY                                                 

     Substantially simultaneously with the completion of the offering of the old
units, on October 21, 2003, we entered into a new replacement domestic senior   
credit facility with Wells Fargo Foothill, Inc., providing for a working capital
facility plus a letter of credit facility. The aggregate amount of borrowings   
under such working capital and letter of credit facilities originally were not  
permitted to exceed $25.0 million, including aggregate borrowings under the     
working capital facility of up to $15.0 million. On April 29, 2004, we amended  
the domestic senior credit facility to increase the aggregate amount of         
borrowings available under such working capital and letter of credit facilities 
from $25.0 million to $27.5 million and to increase the amount of aggregate     
borrowings available under the working capital facility from $15.0 million to   
$17.5 million. As of September 24, 2004, we amended the domestic senior credit  
facility to: (i) increase the aggregate amount of borrowings available under    
such working capital and letter of credit facilities from $27.5 million to $32.5
million; the amount of aggregate borrowings available under the working capital 
facility remained unchanged at $17.5 million; (ii) amend the EBITDA definition  
to exclude charges and expenses related to unsuccessful acquisitions and related
financings in an aggregate amount not to exceed $5.3 million for the period     
beginning January 1, 2004 and ending June 30, 2004; (iii) amend the definition  
of Additional Indebtedness to exclude advances under the working capital        
facility; (iv) amend the definition of Permitted Investments to allow other     
investments made during the period from January 1, 2004 through June 30, 2004 in
an aggregate amount not to exceed $336,000; and (v) establish covenant EBITDA   
levels for the periods after June 30, 2004. The amendment was effective June 30,
2004 for items (i), (ii) and (iii); effective January 1, 2004 for item (iv); and
effective September 24, 2004 for all other items.                               

    Concurrent with the completion of the 2004 Offering, on December 21, 2004,
we amended the domestic senior credit facility to (i) amend the EBITDA          
definition to exclude charges and expenses related to the sale of the Belgium   
Plant in an aggregate amount not to exceed $26.8 million for purposes of        
calculating a certain financial covenant, (ii) amend the Indenture Reserve      
definition to include scheduled payments of interest due on the additional      
notes, (iii) amend the maximum aggregate amount of borrowings available under   
the working capital facility to permit a temporary increase to $22.5 million and
for its reduction to $17.5 million on such borrowings being refinanced by the   
proceeds of the additional old notes issues in the 2004 Offering, (iv) amend the
Permitted Investments definition to include investments in connection with the  
sale of the Belgium Plant and transfer of certain equipment, together with other
assets and rights related to the production of virginiamycin, to our subsidiary 
in Brazil or in connection with alternative production arrangements, and (v)    
provide for the issuance of the additional notes and the sale of the Belgium    
Plant and related transactions.                                                 

Borrowings under the domestic senior credit facility are subject to a 
borrowing base formula based on percentages of eligible domestic receivables and
domestic inventory. Under the domestic senior credit facility, we may choose    
between two interest rate options: (i) the applicable base rate as defined plus 
0.50% and (ii) the LIBOR rate as defined plus 2.75%. Indebtedness under the     
domestic senior credit facility is secured by a first priority lien on          
substantially all of our assets and assets of substantially all of our domestic 
subsidiaries. We are required to pay an unused line fee of 0.375% on the unused 
portion of the domestic senior credit facility, a monthly servicing fee and     
standard letter of credit fees to issuing banks. Borrowings under the domestic  
senior credit facility are available until, and are repayable no later than,    
October 31, 2007, although borrowings must be repaid by June 30, 2007 if the    
maturity of the Senior Secured Notes has not been extended, as required by the  
domestic senior credit facility, by that date. Pursuant to the terms of an      
intercreditor agreement, as amended in connection with the 2004 Offering, the   
security interest securing the Senior Secured Notes and the guarantees made by  
our domestic restricted subsidiaries is subordinated to a lien securing the     
domestic senior credit facility.                                                
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   The domestic senior credit facility also contains various covenants which
restrict us and our subsidiaries with respect to, among other things, incurring 
indebtedness, entering into merger or consolidation transactions, disposing of  
assets (other than in the ordinary course of business), acquiring assets (with  
permitted exceptions), making certain restricted payments, making optional      
redemptions of, or excess cash flow offers for the notes, repaying our Senior   
Subordinated Notes not purchased by us with the proceeds of the offering of old 
notes, creating any liens on our assets, making investments, creating guarantee 
obligations and entering into sale and leaseback transactions and transactions  
with affiliates. In the event our total availability under our domestic senior  
credit facility falls below specified levels, the facility will require that we 
comply with various financial covenants, including meeting a minimum EBITDA     
requirement and limitations on capital expenditures. The domestic senior credit 
facility agreement provides for certain events of default, including default    
upon the nonpayment of principal, interest, fees or other amounts, a cross      
default with respect to other obligations of ours and our subsidiaries, failure 
to comply with certain covenants, conditions or provisions under the domestic   
senior credit facility, the existence of certain unstayed or undischarged       
judgments, the invalidity or unenforceability of the relevant security          
documents, the making of materially false or misleading representations or      
warranties, commencement of reorganization, bankruptcy, insolvency or similar   
proceedings and the occurrence of certain ERISA events. Upon the occurrence of  
an event of default under the domestic senior credit facility, the lenders may  
declare all obligations thereunder to be immediately due and payable.           

We may from time to time, prior to the maturity date of the notes,    
refinance, replace, restructure, substitute for, amend or supplement the        
domestic senior credit facility. The actual terms of any new or modified credit 
facility which replaces the domestic senior credit facility could differ        
substantially from the facility summarized above.                               

OTHER INDEBTEDNESS AND CREDIT FACILITIES                                        

   In June 1998, we issued $100 million aggregate principal amount of 9 7/8%
Senior Subordinated Notes due 2008. Proceeds of the offering of the old units   
issued on October 21, 2003 were used to complete the repurchase of $51,971,000  
of our 9 7/8% Senior Subordinated Notes at a price equal to 60% of the principal
amount thereof plus accrued and unpaid interest. The Senior Subordinated Notes  
are general unsecured obligations and are subordinated in right of payment to   
all existing and future senior debt (as defined in the indenture), and rank pari
passu in right of payment with all other existing and future senior subordinated
indebtedness. The Senior Subordinated Notes are unconditionally guaranteed on a 
senior subordinated basis by our domestic subsidiaries. The restrictive         
covenants in the indenture for the Senior Subordinated Notes were amended in    
certain respects.                                                               

     Certain of our foreign subsidiaries have existing local credit arrangements
which will continue in effect after the offering. Our subsidiary in Israel,     
Koffolk Israel, has a $10.5 million working capital facility with Israeli banks 
for loans in various currencies, including dollars, euros and shekels.          
Borrowings under such facility bear interest at the LIBOR rate as defined plus  
2.25%. Such facility matures every twelve months, subject to renewal, and is    
secured by a general floating lien over the accounts receivables and inventories
of Koffolk Israel and its Israeli subsidiaries.                                 

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THE EXCHANGE OFFER

    Simultaneously with the sale of the old units in October 2003 and December
2004, the US issuer, the Dutch issuer and the guarantors entered into           
substantially similar registration rights agreements with Jefferies & Company,  
Inc., the initial purchaser of the old units. We are conducting the exchange    
offer to satisfy our obligations under the registration rights agreements.      

    The form and terms of the new units are identical in all material respects
to the form and terms of the old units, except that the new units will be       
registered under the Securities Act; will not bear restrictive legends          
restricting their transfer under the Securities Act; will not be entitled to the
registration rights that apply to the old units; and will not contain provisions
relating to increased interest rates in connection with the old units under     
circumstances related to the timing of the exchange offer.                      

   The new units will evidence the same debt as the old units. The new units
will be issued under and entitled to the benefits of the same indenture that    
authorized the issuance of the old units. Consequently, both the old units and  
the new units will be treated as a single series of debt securities under the   
indenture. For a description of the indenture, see "Description of the New      
Notes."                                                                         

The exchange offer is not extended to, nor will we accept tenders for 
exchange from, old unit holders in any jurisdiction where the exchange offer    
does not comply with the securities or blue sky laws of that jurisdiction.      

TERMS OF THE EXCHANGE OFFER                                                     

 We are offering to exchange an aggregate number of up to 127,491 units,
each unit consisting of:                                                        

     - $809.5238 principal amount of 13% Senior Secured Notes due 2007 of the US
issuer; and                                                       

  - $190.4762 principal amount of 13% Senior Secured Notes due 2007 of the
Dutch issuer.                                                     

  Holders may only exchange old units for new units. The old units must be
tendered properly in accordance with the conditions set forth in this prospectus
and the accompanying letter of transmittal on or prior to the expiration date   
and not withdrawn as permitted below. The exchange offer is not conditioned upon
holders tendering a minimum number of old units. As of the date of this         
prospectus, all of the old units are outstanding.                               

  Only whole units will be accepted in the exchange offer; no fractions of
old units will be accepted.                                                     

     Holders of the old units do not have any appraisal or dissenters' rights in
connection with the exchange offer. If you do not tender your old units or if   
you tender old units that we do not accept, your old units will remain          
outstanding and continue to accrue interest and you will be entitled to the     
rights and benefits holders have under the indenture relating to the old units  
and the new units. Existing transfer restrictions would continue to apply to    
such old units. See "Risk Factors -- If you fail to exchange your old units for 
new units, your old units will continue to be subject to restrictions on        
transfer" for more information regarding old units outstanding after the        
exchange offer.                                                                 

None of the US issuer, the Dutch issuer or the guarantors, or our     
respective boards of directors or management, recommends that you tender or not 
tender old units in the exchange offer or has authorized anyone to make any     
recommendation. You must decide whether to tender in the exchange offer and, if 
you decide to tender, the aggregate number of old units to tender.              

    The expiration date is 5:00 p.m., New York City time, on March 7, 2005, or
such later date and time to which the exchange offer is extended.               

We have the right, in accordance with applicable law, at any time:    

- to delay the acceptance of the old units;                           

     - to terminate the exchange offer and not accept any old units for exchange
       if we determine that any of the conditions to the exchange offer have not
occurred or have not been satisfied;                              

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  - to extend the expiration date of the exchange offer and retain all old
  units tendered in the exchange offer other than those units properly
withdrawn; and                                                    

  - to waive any condition or amend the terms of the exchange offer in any
manner.                                                           

If we materially amend the exchange offer, we will as promptly as     
practicable distribute a prospectus supplement to the holders of the old units  
disclosing the change and extend the exchange offer for a period of five to ten 
business days, depending upon the significance of the amendment and the manner  
of disclosure to the registered holders, if the exchange offer would otherwise  
expire during the five to ten business day period.                              

If we exercise any of the rights listed above, we will as promptly as 
practicable give oral notice, promptly confirmed in writing, to the exchange    
agent and will make a public announcement of such action. In the case of an     
extension, an announcement will be made no later than 9:00 a.m., New York City  
time on the next business day after the previously scheduled expiration date.   
Without limiting the manner in which we may choose to make public announcements 
of any delay in acceptance, extension, termination or amendment of the exchange 
offer, we will have no obligation to publish, advertise, or otherwise           
communicate any public announcement, other than by making a timely release to a 
financial news service.                                                         

    During an extension, all old units previously tendered will remain subject
to the exchange offer and may be accepted for exchange by us. Any old units not 
accepted for exchange for any reason will be returned without cost to the holder
that tendered them promptly after the expiration or termination of the exchange 
offer.                                                                          

   We will accept all old units validly tendered and not withdrawn. Promptly
after the expiration date, we will issue new units registered under the         
Securities Act and deliver them to the exchange agent.                          

     The exchange agent might not deliver the new units to all tendering holders
at the same time. The timing of delivery depends upon when the exchange agent   
receives and, after the expiration date, processes the required documents.      

We will be deemed to have exchanged old units validly tendered and not
withdrawn when we give oral notice, promptly confirmed in writing, to the       
exchange agent of our acceptance of the tendered old units. The exchange agent  
is our agent for receiving tenders of old units, letters of transmittal and     
related documents.                                                              

     In tendering old units, you must warrant in the letter of transmittal or in
an agent's message (described below) that:                                      

   - you have full power and authority to tender, exchange, sell, assign and
transfer old units;                                               

   - we will acquire good, marketable and unencumbered title to the tendered
     old units, free and clear of all liens, restrictions, charges and other
encumbrances; and                                                 

     - the old units tendered for exchange are not subject to any adverse claims
or proxies.                                                       

  You also must warrant and agree that you will, upon request, execute and
deliver any additional documents requested by us or the exchange agent to       
complete the exchange, sale, assignment and transfer of the old units.          

PROCEDURES FOR TENDERING OLD UNITS                                              

VALID TENDER                                                                

We have forwarded to you, along with this prospectus, a letter of     
transmittal relating to this exchange offer. The letter of transmittal is to be 
completed by a holder of old units either if (1) a tender of old units is to be 
made by delivering physical certificates for such old units to the exchange     
agent, (2) a tender of old units is to be made by book-entry transfer to the    
account of the exchange agent for the exchange offer at DTC, or by confirmation 
of blocking instructions in accordance with the standard operating procedures of
Euroclear or Clearstream, as the case may be, pursuant to the procedures set    
forth below or (3) a tender of old units is to be made according to the         
guaranteed delivery procedures set forth below.                                 

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   Only a holder of record of old units may tender old units in the exchange
offer. To tender in the exchange offer, a holder must comply with the procedures
of DTC, Euroclear or Clearstream, as applicable, and either:                    

    - complete, sign and date the letter of transmittal, or a facsimile of the
    letter of transmittal; have the signature on the letter of transmittal
  guaranteed if the letter of transmittal so requires; and deliver the
   letter of transmittal or facsimile to the exchange agent prior to the
expiration date; or                                               

     - in lieu of delivering a letter of transmittal, instruct DTC, Euroclear or
    Clearstream, as the case may be, to transmit on behalf of the holder a
     computer-generated message to the exchange agent in which the holder of
       the old units acknowledges and agrees to be bound by the terms of, and to
      make all of the representations contained in, the letter of transmittal,
which agent's message (as defined below) shall be received by the 
      exchange agent prior to 5:00 p.m., New York City time, on the expiration
date.                                                             

In addition, either:                                                  

- the exchange agent must receive old units along with the letter of  
transmittal; or                                                   

     - the exchange agent must receive, before expiration of the exchange offer,
   timely confirmation of book-entry transfer of such old units into the
exchange agent's account at DTC, according to the procedure for   
book-entry transfer described below; or                           

- the exchange agent must receive, before the expiration date, timely 
      confirmation from Euroclear or Clearstream, as the case may be, that the
     securities account to which the old units are credited has been blocked
      from and including the day on which the confirmation is delivered to the
       exchange agent and that no transfers will be effected in relation to such
old units at any time after such date.                            

  To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the       
address set forth below under the caption "-- Exchange Agent" before expiration 
of the exchange offer. To receive confirmation of valid tender of old units, a  
holder should contact the exchange agent at the telephone number listed under   
the caption "-- Exchange Agent."                                                

The tender by a holder that is not withdrawn before expiration of the 
exchange offer will constitute a binding agreement between that holder and us in
accordance with the terms and subject to the conditions set forth in this       
prospectus and in the letter of transmittal. Only a registered holder of old    
units may tender the old units in the exchange offer. If you tender fewer than  
all of your old units, you should fill in the amount of units tendered in the   
appropriate box on the letter of transmittal. The amount of old units delivered 
to the exchange agent will be deemed to have been tendered unless otherwise     
indicated.                                                                      

     The method of delivery of the certificates for the old units, the letter of
transmittal and all other required documents is at the election and sole risk of
the holders. If delivery is by mail, we recommend registered mail with return   
receipt requested, properly insured, or overnight delivery service. In all      
cases, you should allow sufficient time to assure timely delivery. No letters of
transmittal or old units should be sent directly to PAH or PB Netherlands.      
Delivery is complete when the exchange agent actually receives the items to be  
delivered. Delivery of documents to DTC in accordance with their respective     
procedures does not constitute delivery to the exchange agent.                  

 If you beneficially own old units and those units are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee or    
custodian and you wish to tender your old units in the exchange offer, you      
should contact the registered holder as soon as possible and instruct it to     
tender the old units on your behalf and comply with the instructions set forth  
in this prospectus and the letter of transmittal.                               

   If the applicable letter of transmittal is signed by the record holder(s)
of the old units tendered, the signature must correspond with the name(s)       
written on the face of the old unit without alteration, enlargement or any      
change whatsoever. If the applicable letter of transmittal is signed by a       
participant in DTC, Euroclear or Clearstream, as applicable, the signature must 
correspond with the name as it appears on the security position listing as the  
holder of the old units.                                                        

   If any letter of transmittal, endorsement, bond power, power of attorney,
or any other document required by the letter of transmittal is signed by a      
trustee, executor, administrator, guardian, attorney-in-fact, officer of        
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a corporation or other person acting in a fiduciary or representative capacity, 
that person must indicate such capacity when signing. In addition, unless waived
by us, the person must submit proper evidence satisfactory to us, in our sole   
discretion, of his or her authority to so act.                                  

Holders should receive copies of the letter of transmittal with the   
prospectus. A holder may obtain additional copies of the letter of transmittal  
for the old units from the exchange agent at its offices listed under the       
caption "-- Exchange Agent."                                                    

SIGNATURE GUARANTEES                                                            

 Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution unless the old units 
surrendered for exchange are tendered:                                          

- by a registered holder of old units who has not completed the box   
entitled "Special Issuance Instructions" or "Special Delivery     
Instructions" on the letter of transmittal; or                    

- for the account of an eligible institution.                         

    An "eligible institution" is a firm or other entity which is identified as
an "Eligible Guarantor Institution" in Rule 17Ad-15 under the Exchange Act,     
including:                                                                      

- a bank;                                                             

 - a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer;                                      

- a credit union;                                                     

- a national securities exchange, registered securities association or
clearing agency; or                                               

- a savings association.                                              

   If old units are registered in the name of a person other than the signer
of the letter of transmittal, the old units surrendered for exchange must be    
endorsed or accompanied by a written instrument or instruments of transfer or   
exchange, in satisfactory form as determined by us in our sole discretion, duly 
executed by the registered holder with the holder's signature guaranteed by an  
eligible institution.                                                           

DTC BOOK-ENTRY TRANSFERS                                                        

  For tenders by book-entry transfer of old units cleared through DTC, the
exchange agent will make a request to establish an account at DTC for purposes  
of the exchange offer. Any financial institution that is a DTC participant may  
make book-entry delivery of old units by causing DTC to transfer the old units  
into the exchange agent's account at DTC in accordance with DTC's procedures for
transfer. The exchange agent and DTC have confirmed that any financial          
institution that is a participant in DTC may use the Automated Tender Offer     
Program, or ATOP, procedures to tender old units. Accordingly, any participant  
in DTC may make book-entry delivery of old units by causing DTC to transfer     
those old units into the exchange agent's account in accordance with its ATOP   
procedures for transfer.                                                        

   Notwithstanding the ability of holders of old units to effect delivery of
old units through book-entry transfer at DTC, the letter of transmittal or a    
facsimile thereof, or an agent's message in lieu of the letter of transmittal,  
with any required signature guarantees and any other required documents must be 
transmitted to and received by the exchange agent prior to the expiration date  
at the address given below under "-- Exchange Agent." In this context, the term 
"agent's message" means a message, transmitted by DTC and received by the       
exchange agent and forming part of a book-entry confirmation, which states that 
DTC has received an express acknowledgment from a participant tendering old     
units that are the subject of the book-entry confirmation that the participant  
has received and agrees to be bound by the terms of the letter of transmittal,  
and that we may enforce that agreement against the participant.                 

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EUROCLEAR AND CLEARSTREAM PROCEDURES FOR BLOCKING INSTRUCTIONS                  

The registered holder of the old units on the records of Euroclear or 
Clearstream must instruct Euroclear or Clearstream to block the securities in   
the account in Euroclear or Clearstream to which such old units are credited. In
order for the exchange offer to be accepted, the exchange agent must have       
received, prior to the expiration date, a confirmation from Euroclear or        
Clearstream that the securities account of old units tendered has been blocked  
from and including the day on which the confirmation is delivered to the        
exchange agent and that no transfers will be effected in relation to the old    
units at any time after such date. Old units should be blocked in accordance    
with the procedures of Euroclear or Clearstream, as the case may be. The        
exchange of the old units so tendered will be made only after a timely receipt  
by the exchange agent of an agent's message and any other documents required by 
the letter of transmittal. The term "agent's message" means a message,          
transmitted by Euroclear or Clearstream and received by the exchange agent that 
states that Euroclear or Clearstream has received an express acknowledgment from
a participant tendering old units that the participant has received and agrees  
to be bound by the terms of the letter of transmittal, and that we may enforce  
that agreement against the participant.                                         

GUARANTEED DELIVERY PROCEDURES                                                  

     If a registered holder of the old units desires to tender the old units and
the old units are not immediately available, or time will not permit the        
holder's old units or other required documents to reach the exchange agent      
before the expiration date of the exchange offer, or the procedure for          
book-entry transfer or a confirmation of blocking instructions cannot be        
completed on a timely basis, a tender may nonetheless be effected if:           

- the tender is made through a firm which is a member of a registered 
     national securities exchange or a member of the National Association of
      Securities Dealers, Inc. or a commercial bank or trust company having an
office or correspondent in the United States;                     

  - prior to the expiration date of the exchange offer, the exchange agent
received from the firm which is a member of a registered national 
       securities exchange or a member of the National Association of Securities
   Dealers, Inc. or commercial bank or trust company having an office or
       correspondent in the United States a properly completed and duly executed
     Letter of Transmittal (or a facsimile of the Letter of Transmittal) and
     Notice of Guaranteed Delivery, substantially in the form provided by us
   (by facsimile transmission, mail or hand delivery), setting forth the
     name and address of the holder of old units and the amount of old units
   tendered, stating that the tender is being made and guaranteeing that
within five New York Stock Exchange trading days after the date of
      execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered old units, in proper form for transfer, or a  
 confirmation of a book-entry transfer or a confirmation of blocking
       instructions, as the case may be, and any other documents required by the
      Letter of Transmittal will be deposited by the firm which is a member of
   a registered national securities exchange or a member of the National
 Association of Securities Dealers, Inc. or commercial bank or trust
     company having an office or correspondent in the United States with the
exchange agent; and                                               

  - the certificates for all physically tendered old units, in proper form
for transfer, or a confirmation of a book-entry transfer or a     
      confirmation of blocking instructions, as the case may be, and all other
 documents required by the Letter of Transmittal are received by the
       exchange agent within five New York Stock Exchange trading days after the
date of execution of the Notice of Guaranteed Delivery.           

DETERMINATION OF VALIDITY                                                       

   We, in our sole discretion, will resolve all questions regarding the form
of documents, validity, eligibility, including time of receipt, and acceptance  
for exchange and withdrawal of any tendered old units. Our determination of     
these questions as well as our interpretation of the terms and conditions of the
exchange offer, including the letter of transmittal, will be final and binding  
on all parties. A tender of old units is invalid until all defects and          
irregularities have been cured or waived. Holders must cure any defects and     
irregularities in connection with tenders of old units for exchange within such 
reasonable period of time as we will                                            
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determine, unless we waive the defects or irregularities. Neither we, any of our
affiliates or assigns, the exchange agent nor any other person is under any     
obligation to give notice of any defects or irregularities in tenders nor will  
we or they be liable for failing to give any such notice.                       

We reserve the absolute right, in our sole and absolute discretion:   

- to reject any tenders determined to be in improper form or unlawful;

- to waive any of the conditions of the exchange offer; and           

    - to waive any condition or irregularity in the tender of old units by any
holder.                                                           

Any waiver to the exchange offer will apply to all old units tendered.

WITHDRAWAL RIGHTS                                                               

   You can withdraw tenders of old units at any time prior to 5:00 p.m., New
York City time, on the expiration date.                                         

For a withdrawal to be effective, you must deliver a written notice of
withdrawal to the exchange agent. The notice of withdrawal must:                

   - specify the name of the person tendering the old units to be withdrawn;

 - identify the old units to be withdrawn, including the total principal
amount of old units to be withdrawn; and                          

- where certificates for old units are transmitted, the name of the   
registered holder of the old units if different from the person   
withdrawing the old units.                                        

   If you delivered or otherwise identified old units to the exchange agent,
you must submit the serial numbers of the old units to be withdrawn and the     
signature on the notice of withdrawal must be guaranteed by an eligible         
institution, except in the case of old units tendered for the account of an     
eligible institution. If you tendered old units as a book-entry transfer or     
through the blocking procedures described above, the notice of withdrawal must  
specify the name and number of the account at DTC, Euroclear or Clearstream, as 
applicable, to be credited with the withdrawn old units and you must deliver the
notice of withdrawal to the exchange agent and otherwise comply with the        
procedures of the facility. You may not rescind withdrawals of tender; however, 
properly withdrawn old units may again be tendered by following one of the      
procedures described under "-- Procedures for Tendering Old Units" above at any 
time prior to 5:00 p.m., New York City time, on the expiration date.            

     We will determine all questions regarding the form of withdrawal, validity,
eligibility, including time of receipt, and acceptance of withdrawal notices.   
Our determination of these questions as well as our interpretation of the terms 
and conditions of the exchange offer (including the letter of transmittal) will 
be final and binding on all parties. Neither we, any of our affiliates or       
assigns, the exchange agent nor any other person is under any obligation to give
notice of any irregularities in any notice of withdrawal, nor will we be liable 
for failing to give any such notice.                                            

     Withdrawn old units will be returned to the holder after withdrawal. In the
case of old units tendered by book-entry transfer through DTC, the old units    
withdrawn or not exchanged will be credited to an account maintained with DTC.  
The old units will be returned or credited to the account maintained with DTC   
promptly after withdrawal, rejection of tender or termination of the exchange   
offer. In the case of old units tendered in accordance with the blocking        
procedures of Euroclear or Clearstream, as the case may be, the old units will  
be returned to their holder by cancellation of the blocking instruction in      
accordance with the standard operating procedures of Euroclear or Clearstream,  
as applicable. Any old units which have been tendered for exchange but which are
not exchanged for any reason will be returned to the holder thereof without cost
to the holder.                                                                  

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CONDITIONS TO THE EXCHANGE OFFER                                                

Notwithstanding any other provision of the exchange offer, we are not 
required to accept for exchange, or to issue new units in exchange for, any old 
units, and we may terminate or amend the exchange offer, if at any time prior to
5:00 p.m., New York City time, on the expiration date, we determine that:       

    - the new units to be received will not be tradable by the holder, without
   restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of    
substantially all of the states of the United States;             

- we have not received all applicable governmental approvals;         

- the exchange offer, or the making of any exchange by a holder of old
     units, would violate applicable law or any applicable interpretation or
policy of the staff of the SEC; or                                

   - any action or proceeding has been instituted or threatened in any court
  or by or before any governmental agency with respect to the exchange
      offer that would reasonably be expected to impair our ability to proceed
with the exchange offer.                                          

   The foregoing conditions are for our sole benefit, and we may assert them
regardless of the circumstances giving rise to any such condition, or we may    
waive the conditions, completely or partially, whenever or as many times as we  
choose, in our reasonable discretion. The foregoing rights are not deemed waived
because we fail to exercise them, but continue in effect, and we may still      
assert them whenever or as many times as we choose. However, any such waiver,   
other than a waiver involving governmental approval, must be satisfied or waived
before the expiration of the offer. If we determine that a waiver of conditions 
materially changes the exchange offer, the prospectus will be amended or        
supplemented, and the exchange offer extended, if appropriate, as described     
under "-- Terms of the Exchange Offer."                                         

    In addition, at a time when any stop order is threatened or in effect with
respect to the registration statement of which this prospectus constitutes a    
part or with respect to the qualification of the indenture under the Trust      
Indenture Act of 1939, as amended, we will not accept for exchange any old units
tendered, and no new units will be issued in exchange for any such old units.   

     If we terminate or suspend the exchange offer based on a determination that
the exchange offer violates applicable law or SEC policy, the registration      
rights agreement requires that we, as soon as practicable after such            
determination, use all commercially reasonable efforts to cause a shelf         
registration statement covering the resale of the old units to be filed and     
declared effective by the SEC. See "-- Registration Rights and Additional       
Interest on the Old Units."                                                     

EXCHANGE AGENT                                                                  

    We appointed HSBC Bank USA, National Association as exchange agent for the
exchange offer. You should direct questions and requests for assistance,        
requests for additional copies of this prospectus, the Letter of Transmittal or 
the Notice of Guaranteed Delivery to the exchange agent at the address and phone
number as follows:                                                              

HSBC Bank USA, National Association 
One Hanson Place, Lower Level 
Brooklyn, NY 10018
Attention: Paulette Shaw -- Issuer Services 
By facsimile (for eligible institutions only): (718) 488-4488 
Confirm facsimile by telephone ONLY: (718) 488-4475 

   If you deliver letters of transmittal and any other required documents to
an address or facsimile number other than those listed above, your tender is    
invalid.                                                                        

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FEES AND EXPENSES                                                               

   The registration rights agreement provides that we will bear all expenses
in connection with the performance of our obligations relating to the           
registration of the new units and the conduct of the exchange offer. These      
expenses include registration and filing fees, accounting and legal fees and    
printing costs, among others. We will pay the exchange agent reasonable and     
customary fees for its services and reasonable out-of-pocket expenses. We will  
also reimburse brokerage houses and other custodians, nominees and fiduciaries  
for customary mailing and handling expenses incurred by them in forwarding this 
prospectus and related documents to their clients that are holders of old units 
and for handling or tendering for such clients.                                 

 We have not retained any dealer-manager in connection with the exchange
offer and will not pay any fee or commission to any broker, dealer, nominee or  
other person, other than the exchange agent, for soliciting tenders of old units
pursuant to the exchange offer.                                                 

TRANSFER TAXES                                                                  

  Holders who tender their old units for exchange will not be obligated to
pay any transfer taxes in connection with the exchange. If, however, new units  
issued in the exchange offer are to be delivered to, or are to be issued in the 
name of, any person other than the holder of the old units tendered, or if a    
transfer tax is imposed for any reason other than the exchange of old units in  
connection with the exchange offer, then the holder must pay any such transfer  
taxes, whether imposed on the registered holder or on any other person. If      
satisfactory evidence of payment of, or exemption from, such taxes is not       
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to the tendering holder.                                     

ACCOUNTING TREATMENT                                                            

     The new units will be recorded at the same carrying value as the old units.
Accordingly, PAH will not recognize any gain or loss for accounting purposes.   
PAH intends to amortize the expenses of the exchange offer and issuance of the  
old units over the term of the new units.                                       

REGISTRATION RIGHTS AND ADDITIONAL INTEREST ON CERTAIN OLD UNITS                

     In the event that applicable interpretations of the Staff do not permit the
issuers and the guarantors to effect the exchange offer or if for any other     
reason the exchange offer is not consummated by the 210th day following the     
Issue Date, or if the initial purchaser so requests with respect to the units   
not eligible to be exchanged for exchange units in the exchange offer or if any 
holder of units is prohibited by law or Commission policy from participating in 
the exchange offer or does not receive freely tradeable exchange units in the   
exchange offer, the issuers and the guarantors will, at their expense, (a)      
promptly file the Shelf Registration Statement permitting resales from time to  
time of the units, (b) use our best efforts to cause the Shelf Registration     
Statement to become effective and (c) use our best efforts to keep the Shelf    
Registration Statement current and effective until two years from the Issue Date
or such shorter period that will terminate when all the units covered by the    
Shelf Registration Statement have been sold pursuant thereto. The issuers and   
the guarantors, at their expense, will provide to each holder of the units      
copies of the prospectus, which is a part of the Shelf Registration Statement,  
notify each such holder when the Shelf Registration Statement has become        
effective and take certain other actions as are required to permit unrestricted 
resales of the units from time to time. A holder of units who sells such units  
pursuant to the Shelf Registration Statement generally will be required to be   
named as a selling securityholder in the related prospectus and to deliver a    
prospectus to purchasers, will be subject to certain of the civil liability     
provisions under the Securities Act in connection with such sales and will be   
bound by the provisions of the Registration Rights Agreement which are          
applicable to such holder (including certain indemnification obligations).      

In the event that:                                                    

       (i) the Exchange Offer Registration Statement is not filed with the
  Commission on or prior to the 120th day after the Issue Date or declared
effective on or prior to the 180th day after the Issue Date,          

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          (ii) the Exchange Offer is not consummated on or prior to the 30th day
   following the effectiveness of the Exchange Offer Registration Statement,

   (iii) the Shelf Registration Statement is not filed or declared
effective within the required time periods or                         

(iv) the Exchange Offer Registration Statement or the Shelf 
  Registration Statement is declared effective but thereafter ceases to be
 effective (except as specifically permitted therein) for a period of 15
consecutive days without being succeeded immediately by an additional 
   Exchange Offer Registration Statement or Shelf Registration Statement, as
the case may be, filed and declared effective (each such event, a     
"Registration Default"),                                              

then, the interest rate borne by the notes shall be increased by 0.25% per annum
for the 90-day period following such Registration Default. Such interest rate   
will increase by an additional 0.25% per annum at the beginning of each         
subsequent 90-day period following such Registration Default, up to a maximum   
aggregate increase of 1.0% per annum. From and after the date that all          
Registration Defaults have been cured, the notes will bear interest at the rate 
set forth on the cover page of this prospectus. Following the cure of all       
Registration Defaults, the accrual of such increased interest rate will cease.  

    We filed a registration statement with the SEC on Form S-4 with respect to
an exchange offer for the 105,000 old units issued in October 2003, but due to  
pending confidential acquisition negotiations, such registration statement did  
not become effective and the Company caused a notice of withdrawal to be        
submitted to the SEC on November 15, 2004. As a result, a Registration Default  
existed with respect to the old notes issued in October 2003 and such notes have
borne additional interest. However, the effectiveness of the Registration       
Statement of which this prospectus is a part cured such Registration Default,   
subject to the consummation of the exchange offer of new units for old units    
within thirty (30) days thereafter. In such event, from and after such date,    
such old notes bear interest at the rate set forth on the cover page of this    
prospectus and cease to accrue such additional interest.                        

RESALES OF NEW UNITS                                                            

    Based on existing SEC interpretations issued to third parties in unrelated
transactions, we believe that the new units will be freely transferable by      
holders other than affiliates of us after the registered exchange offer without 
further registration under the Securities Act if the holder of the new units is 
acquiring the new units in the ordinary course of its business, has no          
arrangement or understanding with any person to participate in the distribution 
of the new units and is not an affiliate of us, as such terms are interpreted by
the SEC; provided that broker-dealers receiving new units in the exchange offer 
will have a prospectus delivery requirement with respect to resales of such new 
units. While the SEC has not taken a position with respect to this particular   
transaction, under existing SEC interpretations relating to transactions        
structured substantially like the exchange offer, participating broker-dealers  
may fulfill their prospectus delivery requirements with respect to the new units
(other than a resale of an unsold allotment of the units) with the prospectus   
contained in the exchange offer registration statement. We will not seek our own
interpretive letter. As a result, we cannot assure you that the staff will take 
the same position on this exchange offer as it did in interpretive letters to   
other parties in similar transactions.                                          

By tendering old units, the holder, other than participating          
broker-dealers, as defined below, of those old units will represent to us that, 
among other things:                                                             

  - the new units acquired in the exchange offer are being obtained in the
ordinary course of business of the person receiving the new units,
whether or not that person is the holder;                         

- neither the holder nor any other person receiving the new units is  
     engaged in, intends to engage in or has an arrangement or understanding
      with any person to participate in a "distribution" (as defined under the
Securities Act) of the new units; and                             

 - neither the holder nor any other person receiving the new units is an
"affiliate" (as defined under the Securities Act) of us.          

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If any holder or any such other person is an "affiliate" of us or is  
engaged in, intends to engage in or has an arrangement or understanding with any
person to participate in a "distribution" of the new units, such holder or other
person:                                                                         

  - may not rely on the applicable interpretations of the staff of the SEC
referred to above; and                                            

     - must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction.     

    Each broker-dealer that receives new units for its own account in exchange
for old units must represent that the old units to be exchanged for the new     
units were acquired by it as a result of market-making activities or other      
trading activities and acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any offer to resell,      
resale or other retransfer of the new units. Any such broker-dealer is referred 
to as a participating broker-dealer. However, by so acknowledging and by        
delivering a prospectus, the participating broker-dealer will not be deemed to  
admit that it is an "underwriter" (as defined under the Securities Act). If a   
broker-dealer acquired old units as a result of market-making or other trading  
activities, it may use this prospectus, as amended or supplemented, in          
connection with offers to resell, resales or retransfers of new units received  
in exchange for the old units pursuant to the exchange offer. We have agreed    
that, for a period of 90 days after the effective date of the registration      
statement of which this prospectus is a part, we will make this prospectus      
available to any broker-dealer for use in connection with any such resale. See  
"Plan of Distribution" for a discussion of the exchange and resale obligations  
of broker-dealers in connection with the exchange offer.                        

DESCRIPTION OF THE NEW UNITS

     We are offering 127,491 new units (the "New Units"), consisting of $103.207
million 13% senior secured notes due 2007 (the "U.S. Notes") of Phibro Animal   
Health Corporation (the "U.S. Issuer") and $24.284 million 13% senior secured   
notes due 2007 (the "Dutch Notes" and, together with the U.S. Notes, the "New   
Notes") of Philipp Brothers Netherlands III B.V. (the "Dutch Issuer" and,       
together with the U.S. Issuer, the "Issuers"). The New Notes of each Issuer that
comprise the New Units will not trade separately unless (i) an event of default 
under the indenture has occurred, (ii) a tax redemption of the New Notes issued 
by Dutch Issuer related to certain changes affecting withholding taxes has      
occurred or (iii) there has been a change of control of the Dutch Issuer. See   
"Description of the New Notes" for further information concerning the New Notes.

DESCRIPTION OF THE NEW NOTES

You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." For purposes of this description:   

   - the words "we", "our" and "us" refer only to the Issuers and not to any
of their respective subsidiaries;                                 

  - the word "Company" refers only to Phibro Animal Health Corporation and
not to any of its subsidiaries;                                   

   On October 21, 2003, we issued 105,000 Units, consisting of $85.0 million
aggregate principal amount of U.S. Notes and $20.0 million aggregate principal  
amount of Dutch Notes and on December 21, 2004 we issued 22,491 additional      
Units, consisting of $18.207 million aggregate principal amount of U.S. Notes   
and $4.284 million aggregate principal amount of Dutch Notes (the "Outstanding  
Notes") under an indenture (the "Indenture"), dated as of October 21, 2003, as  
amended and supplemented, among us, the Guarantors and HSBC Bank USA, National  
Association, as trustee (the "Trustee") and collateral agent (the "Collateral   
Agent"). As used in this "Description of the New Notes," except as the context  
otherwise requires, the term "Notes" means all U.S. Notes issued by the U.S.    
Issuer and all Dutch Notes issued by the Dutch Issuer pursuant to the Indenture 
(including the notes offered hereby, the Outstanding Notes and any additional   
notes that we may issue from time to time under the Indenture). The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (the "Trust                     

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Indenture Act"). The Collateral Agreements referred to herein under the         
subcaption "Security" contain the terms of the security interests that secure   
the Notes.                                                                      

  The following description is a summary of the material provisions of the
Indenture and the Collateral Agreements. It does not restate those agreements in
their entirety. We urge you to read the Indenture and the Collateral Agreements 
because they, and not this description, define your rights. Copies of the       
Indenture and the Collateral Agreements are available from the Company.         

The terms of the new notes are the same as the terms of the old notes,
except that:                                                                    

 - the new notes will be registered under the Securities Act of 1933, as
amended;                                                          

- the new notes will not bear restrictive legends restricting their   
transfer under the Securities Act;                                

    - the holder of the new notes are not entitled to certain rights under the
registration rights agreement; and                                

    - the new notes will not contain provisions relating to increased interest
       rates in connection with the old notes under circumstances related to the
timing of the exchange offer.                                     

BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES                               

     The Notes Generally.  The U.S. Notes will be the several obligations of the
U.S. Issuer and the Dutch Notes will be the several obligations of the Dutch    
Issuer, and statements herein to the effect of "we will pay all principal,      
interest and premiums and Additional Interest, if any, on the Notes" or of      
similar import should be interpreted as the several payment by the U.S. Issuer  
of all principal, interest and premiums and Additional Interest, if any, on the 
U.S. Notes and the Dutch Issuer of all principal, interest and premiums and     
Additional Interest, if any, on the Dutch Notes.                                

   The Notes of each Issuer will not trade separately unless (i) an Event of
Default has occurred, (ii) a redemption of the Dutch Notes as described under   
"-- Taxation; Redemption For Taxation Reasons" has occurred (a "Tax Redemption")
or (iii) a Change of Control of the Dutch Issuer has occurred (each, a          
"Separation Event").                                                            

The U.S. Notes.  The U.S. Notes:                                      

- will be the general obligations of the U.S. Issuer;                 

   - will rank equally in right of payment with all other senior obligations
of the U.S. Issuer;                                               

- will rank senior in right of payment to all Indebtedness of the U.S.
Issuer which by its terms is subordinated to the U.S. Notes;      

    - will be secured by security interests in substantially all assets of the
     U.S. Issuer and the current and future Domestic Restricted Subsidiaries
  of the U.S. Issuer (other than real property and interests therein),
subject to Permitted Liens;                                       

- will be structurally subordinated to all liabilities of the Foreign 
Subsidiaries and Unrestricted Subsidiaries of the U.S. Issuer; and

   - will be guaranteed, jointly and severally, on a senior secured basis by
    each of the current and future Domestic Restricted Subsidiaries of the
U.S. Issuer.                                                      

     Pursuant to the terms of the Intercreditor Agreement, the security interest
on the assets of the U.S. Issuer and its current and future Domestic Restricted 
Subsidiaries that secure the Notes, the Domestic Guarantees and the Company     
Guarantee will be subordinated to a Lien securing the Credit Agreement.         

The Dutch Notes.  The Dutch Notes:                                    

- will be the general obligations of the Dutch Issuer;                

   - will rank equally in right of payment with all other senior obligations
of the Dutch Issuer;                                              

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 - will rank senior in right of payment to all Indebtedness of the Dutch
Issuer which by its terms is subordinated to the Dutch Notes;     

- will be secured by                                                  

- a pledge of all of the accounts receivable, a security interest or  
    floating charge on the inventory to the extent permitted by applicable
       law and a mortgage on substantially all real property of the Dutch Issuer
and its current and future Restricted Subsidiaries,               

  - a pledge of 100% of the Capital Stock of each direct Subsidiary of the
  Dutch Issuer and each Restricted Subsidiary of the Dutch Issuer, and

- a pledge of the intercompany loans made by the Dutch Issuer to its  
Restricted Subsidiaries,                                          

in each case, subject to Permitted Liens;                                       

- will be structurally subordinated to all liabilities of the Foreign 
  Subsidiaries of the U.S. Issuer (other than the Dutch Issuer and its
Restricted Subsidiaries) and Unrestricted Subsidiaries of the U.S.
Issuer; and                                                       

   - will be guaranteed, jointly and severally, on a senior secured basis by
    the U.S. Issuer and each of the current and future Domestic Restricted
   Subsidiaries of the U.S. Issuer and by each of the current and future
Restricted Subsidiaries of the Dutch Issuer.                      

The Guarantees.  Each Guarantee of each Guarantor:                    

- will be the general obligation of such Guarantor;                   

   - will rank equally in right of payment with all other senior obligations
of such Guarantor; and                                            

- will rank senior in right of payment to all Indebtedness of such    
Guarantor which by its terms is subordinated to the Guarantees;   

provided, that:                                                                 

   - the Guarantee of each Foreign Guarantor shall only be in respect of the
  Dutch Notes and the other Obligations of the Dutch Issuer and not in
       respect of the U.S. Notes or any other Obligation of the U.S. Issuer; and

- the Guarantee of each Guarantor will be secured,                    

 - in the case where such Guarantor is a Domestic Guarantor, by security
      interests in substantially all assets of such Guarantor (other than real
property and interests therein), and                              

- in the case where such Guarantor is a Foreign Guarantor, by security
 interests in all of the accounts receivable, a security interest or
    floating charge on the inventory to the extent permitted by applicable
     law and a mortgage on substantially all real property of such Guarantor
    and a pledge of 100% of the Capital Stock of each direct Subsidiary of
such Guarantor.                                                   

    The U.S. Issuer will also guarantee the payment of the Dutch Notes and the
other Obligations of the Dutch Issuer under the Indenture. Such guarantee of the
U.S. Issuer will have the same characteristics that are described above with    
respect to the Guarantee of each Domestic Guarantor in respect of the           
Obligations of the Dutch Issuer that are guaranteed thereunder.                 

METHODS OF RECEIVING PAYMENTS ON THE NOTES                                      

 If a Holder has given wire transfer instructions to us, we will pay all
principal, interest and premium and Additional Interest, if any, on that        
Holder's Notes in accordance with those instructions. All other payments on the 
Notes will be made at the office or agency of the paying agent and registrar    
unless we elect to make interest payments by check mailed to the Holders at     
their addresses set forth in the register of Holders.                           

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PAYING AGENT AND REGISTRAR FOR THE NOTES                                        

     The Trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the Holders of the Notes, 
and we or any of our Subsidiaries may act as paying agent or registrar.         

TRANSFER AND EXCHANGE                                                           

  A Holder may transfer or exchange the Units and Notes in accordance with
the Indenture. The registrar and the trustee may require a Holder, among other  
things, to furnish appropriate endorsements and transfer documents in connection
with a transfer of the Units or Notes. No service charge will be made for any   
transfer, exchange or redemption of the Units or Notes. However, Holders will be
required to pay all taxes due on transfer. We are not required to transfer or   
exchange any Unit or Note selected for redemption. Also, we are not required to 
transfer or exchange any Unit or Note for a period of 15 days before a selection
of the Units or Notes to be redeemed.                                           

PRINCIPAL, MATURITY AND INTEREST                                                

The Indenture does not limit the maximum principal amount of Units and
Notes that we may issue thereunder. We will issue 127,491 Units in this offering
which will be comprised of U.S. Notes in an aggregate principal amount of       
$103.207 million and Dutch Notes in an aggregate principal amount of $24.284    
million. We may issue additional notes ("Additional Notes") in additional units 
("Additional Units") from time to time, subject to the limitations set forth    
under "-- Certain Covenants -- Limitation on Incurrence of Indebtedness." The   
Notes and any Additional Notes will be substantially identical other than the   
issuance dates and the dates from which interest will accrue. We will issue the 
Units in denominations of $1,000 and in integral multiples of $1,000. The Notes 
will mature on December 1, 2007.                                                

    Interest on the Notes will accrue at the rate of 13% per annum and will be
payable semi-annually in arrears on June 1 and December 1 in each year,         
commencing on June 1, 2005, to Holders of record on the immediately preceding   
May 15 and November 15, respectively. Interest on the Notes will accrue from the
date it was most recently paid or, if no interest has been paid, from October   
21, 2003 in the case of the old notes issued in October 2003 and from December  
21, 2004 in the case of the old notes issued in the 2004 Offering. We will pay  
interest on overdue principal at 1% per annum in excess of the above rate and we
will pay interest on overdue installments of interest at such higher rate to the
extent lawful. Interest will be computed on the basis of a 360-day year         
comprised of twelve 30-day months.                                              

Any Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange  
Offer, will be treated as a single class of securities under the Indenture.     
Because, however, any Additional Notes may not be fungible with the Notes for   
federal income tax purposes, they may have a different CUSIP number or numbers, 
be represented by a different Global Note or Notes, and otherwise be treated as 
a separate class or classes of Notes for other purposes.                        

SECURITY                                                                        

Pursuant to the terms of the Domestic Collateral Agreements, the      
Outstanding Notes and the related Company Guarantee and Domestic Guarantees of  
the current and future Domestic Guarantors are, and the Notes offered hereby and
the related Company Guarantee and Domestic Guarantees of the current and future 
Domestic Guarantors will be, secured by substantially all of the assets of the  
U.S. Issuer and such Domestic Guarantors (other than real property and interests
therein), including a pledge of the Capital Stock owned directly by the U.S.    
Issuer and such Domestic Guarantors. However, no such pledge will include more  
than 65% of the Voting Stock of our Foreign Subsidiaries directly owned by the  
U.S. Issuer or any such Domestic Guarantor.                                     

In addition to the arrangements described in the immediately preceding
sentence, the outstanding Dutch Notes and the related Foreign Guarantees of the 
Foreign Guarantors are, and the Dutch Notes offered hereby and the related      
Foreign Guarantees of the Foreign Guarantors will be, secured, pursuant to the  
Foreign                                                                         

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Collateral Agreements, by a pledge of all of the accounts receivable, a security
interest or floating charge on the inventory to the extent permitted by         
applicable law and a mortgage on substantially all real property of the Dutch   
Issuer and the Foreign Guarantors, a pledge of 100% of the Capital Stock of each
direct Subsidiary of the Dutch Issuer and each Foreign Guarantor and a pledge of
the intercompany loans made by the Dutch Issuer to its Restricted Subsidiaries. 

    The Domestic Collateral that secures the Outstanding Notes and the related
Company Guarantee and Domestic Guarantees that will secure the Notes offered    
hereby and the related Company Guarantee and Domestic Guarantees currently      
serves as collateral to secure the obligations under the Credit Agreement. The  
U.S. Issuer, the Domestic Guarantors and the Collateral Agent, on behalf of     
itself, the Trustee and the Holders, and the Administrative Agent, on behalf of 
the Lenders, entered into the Intercreditor Agreement on the Issue Date of the  
Units issued in October 2003, and amended the Intercreditor Agreement in        
connection with the issuance of the Units issued in December 2004. The          
Intercreditor Agreement, as amended, provides, among other things, that (1)     
Liens in the Domestic Collateral securing the Notes are junior to the security  
interests in favor of the Administrative Agent under the Credit Agreement, and  
consequently, the Lenders will be entitled to receive proceeds from the         
foreclosure of any Domestic Collateral prior to the Holders, (2) during any     
insolvency proceedings, the Administrative Agent and the Collateral Agent will  
coordinate their efforts to give effect to the relative priority of their       
security interests in such assets and (3) the Administrative Agent will,        
following the occurrence and during the continuance of an Event of Default or an
event of default under the Credit Agreement, have the sole and exclusive right  
to make all decisions with respect to the foreclosure of any such Domestic      
Collateral, including the timing and method of any disposition thereof. The     
Intercreditor Agreement also provides that the Collateral Agent and the         
Administrative Agent will provide notices to each other with respect to the     
occurrence of events of default and the acceleration of the Notes or the        
Indebtedness outstanding under the Credit Agreement, as the case may be.        

    Subject to the restrictions on incurring Indebtedness in the Indenture, we
and our Restricted Subsidiaries will also have the right to grant Liens securing
Capital Lease Obligations and Purchase Money Obligations constituting Permitted 
Indebtedness and to acquire any such assets subject to such Liens.              

   Upon the occurrence of an Event of Default, the proceeds from the sale of
Collateral securing the Notes will likely be insufficient to satisfy our        
obligations under the Notes. No appraisals of any of the Collateral have been   
prepared in connection with the Offering. Moreover, the amount to be received   
upon such a sale would be dependent upon numerous factors, including the        
condition, age and useful life of the Collateral at the time of such sale, as   
well as the timing and manner of such sale. By its nature, all or some of the   
Collateral will be illiquid and may have no readily ascertainable market value. 
Accordingly, there can be no assurance that the Collateral, if saleable, can be 
sold in a short period of time.                                                 

  To the extent third parties hold Permitted Liens, such third parties may
have rights and remedies with respect to the property subject to such Liens     
that, if exercised, could adversely affect the value of the Collateral. Given   
the intangible nature of certain of the Collateral, any such sale of such       
Collateral separately from the Company as a whole may not be feasible.          
Additionally, the inclusion of the fixtures of the U.S. Issuer of the current   
and future Domestic Guarantors in the Collateral securing the Notes will be     
limited by the extent to which (a) such fixtures are deemed not to be personal  
property, and (b) any applicable state laws would, for purposes of perfecting   
security interests with respect thereto, require that the Collateral Agent      
effectuate certain filings in applicable real estate land records. Our ability  
to grant a security interest in certain Collateral may be limited by legal or   
other logistical considerations. The ability of the Holders to realize upon the 
Collateral may be subject to certain bankruptcy law limitations in the event of 
a bankruptcy. See "-- Certain Bankruptcy and Other Limitations."                

   The U.S. Issuer is permitted to form new Domestic Restricted Subsidiaries
and to transfer all or a portion of the Collateral to one or more of its        
Domestic Restricted Subsidiaries. Each such new Domestic Restricted Subsidiary  
will be required to execute a Guarantee in respect of our obligations under the 
Notes and the Indenture and a security agreement granting to the Collateral     
Agent a security interest in substantially all of the assets of such Domestic   
Restricted Subsidiary (other than real property and interests therein) on the   
same                                                                            

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basis and subject to the same limitations as the currently existing Domestic    
Restricted Subsidiaries of the U.S. Issuer as described above.                  

In addition, the Dutch Issuer is permitted to form new Restricted     
Subsidiaries and to transfer all or a portion of the Foreign Collateral to the  
U.S. Issuer or one or more of the Guarantors. Each such newly formed Restricted 
Subsidiary will be required to execute a Foreign Guarantee in respect of the    
obligations of the Dutch Issuer under the Dutch Notes and the Indenture and     
Foreign Collateral Agreements granting to the Collateral Agent a pledge of all  
the accounts receivable, a security interest or floating charge on the inventory
to the extent permitted by applicable law and a mortgage on substantially all   
real property of such Restricted Subsidiary, as well as 100% of the Capital     
Stock of each Subsidiary of each Restricted Subsidiary, on the same basis and   
subject to the same limitations as our currently existing Restricted            
Subsidiaries of the Dutch Issuer as described above.                            

   So long as no Event of Default shall have occurred and be continuing, and
subject to certain terms and conditions in the Indenture, the Domestic          
Collateral Agreements and the Intercreditor Agreement, we and our Domestic      
Restricted Subsidiaries will be entitled to receive all cash dividends, interest
and other payments made upon or with respect to the Capital Stock of any of our 
Subsidiaries and until delivery of a written notice from the Collateral Agent,  
to exercise any voting, consensual rights and other rights pertaining to such   
pledged Capital Stock.                                                          

Upon the occurrence and during the continuance of an Event of Default,
subject to the terms of the Intercreditor Agreement as it relates to any        
Collateral constituting Domestic Collateral, upon notice from the Collateral    
Agent:                                                                          

        (a) all of our rights to exercise such voting, consensual rights, or
    other rights shall cease following the delivery of such written notice and
    all such rights shall become vested in the Collateral Agent, which, to the
     extent permitted by law, shall have the sole right to exercise such voting,
consensual rights or other rights;                                    

     (b) all of our rights to receive all cash dividends, interest and
     other payments made upon or with respect to the Collateral shall cease, and
such cash dividends, interest and other payments shall be paid to the 
Collateral Agent; and                                                 

        (c) the Collateral Agent may sell the Collateral or any part thereof
     in accordance with, and subject to the terms of, the Collateral Agreements.
   All funds distributed under the Collateral Agreements and received by the
Collateral Agent for the ratable benefit of the Holders shall be      
  distributed by the Collateral Agent in accordance with the provisions of
the Indenture.                                                        

  The collateral release provisions of the Indenture permit the release of
Collateral without substitution of collateral having at least equal value under 
certain circumstances, including asset sales made in compliance with the        
Indenture.                                                                      

CERTAIN BANKRUPTCY AND OTHER LIMITATIONS                                        

    The right of the Collateral Agent to repossess and dispose of or otherwise
exercise remedies relating to the Collateral upon the occurrence and during the 
continuance of an Event of Default is likely to be significantly impaired by    
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or 
against the Company or any of its Domestic Restricted Subsidiaries prior to the 
Collateral Agent having repossessed and disposed of the Collateral or otherwise 
completed the exercise of its remedies with respect to the Collateral. Under the
Bankruptcy Code, a secured creditor such as the Collateral Agent is prohibited  
from repossessing its security from a debtor in a bankruptcy case, or from      
disposing of security repossessed from such debtor, without bankruptcy court    
approval. Moreover, the Bankruptcy Code permits the debtor to continue to retain
and to use collateral even though the debtor is in default under the applicable 
debt instruments; provided that, under the Bankruptcy Code, the secured creditor
is given "adequate protection." The meaning of the term "adequate protection"   
may vary according to circumstances, but it is intended in general to protect   
the value of the secured creditor's interest in the collateral securing the     
obligations owed to it and may include cash payments or the granting of         
additional security, if and at such times as the bankruptcy                     
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court in its discretion determines, for any diminution in the value of such     
collateral as a result of the stay of repossession or disposition or any use of 
the collateral by the debtor during the pendency of the bankruptcy case. In view
of the lack of a precise definition of the term "adequate protection" and the   
broad discretionary powers of a bankruptcy court, it is impossible to predict   
how long payments under the Notes could be delayed following commencement of a  
bankruptcy case, whether or when the Collateral Agent could repossess or dispose
of the Domestic Collateral or whether or to what extent Holders would be        
compensated for any delay in payment or loss of value of the Domestic Collateral
through the requirement of "adequate protection."                               

There are two primary insolvency regimes under Dutch law: the first,  
moratorium of payment (surseance van betaling) is intended to facilitate the    
reorganization of a debtor's debts and enable the debtor to continue as a going 
concern. The second, bankruptcy (faillissement), is designed to liquidate and   
distribute the assets of a debtor to its creditors. Under Netherlands law the   
Holders of the Dutch Notes can in the event of bankruptcy or moratorium of      
payment exercise the rights afforded to pledgees as if there were no bankruptcy 
or moratorium of payment. However, bankruptcy or moratorium of payment involving
the Dutch Issuer would affect the position of the Holders of the Dutch Notes as 
pledgees in some respects, the most important of which are: (i) the right of    
pledge will not extend to accounts receivable that arise under an agreement     
creating continuing obligations of the Dutch Issuer and become due and payable  
on or after the date on which the Dutch Issuer is declared bankrupt or granted a
moratorium of payments, (ii) the right of pledge will not extend to inventory   
that is acquired by the Dutch Issuer on or after the date on which the Dutch    
Issuer is declared bankrupt or granted a moratorium of payments, (iii) payments 
received by the Dutch Issuer from the debtors of pledged accounts receivable    
after bankruptcy or moratorium of payments involving the Dutch Issuer having    
been declared, will be part of the bankrupt estate, although the Holders of the 
Dutch Notes have the right to receive such amounts by preference after deduction
of certain costs, (iv) a mandatory "cooling-off" period of up to two months may 
apply in case of bankruptcy or moratorium of payments involving the Dutch       
Issuer, which, if applicable, would delay the exercise of the rights of pledge  
on the shares of Phibro Belgium and the accounts receivable and (v) the Holders 
of the Dutch Notes may be obliged to enforce their rights of pledge within a    
reasonable period as determined by the judge-commissioner (rechter-commissaris) 
appointed by the court in case of bankruptcy of the Dutch Issuer.               

     Under Belgian insolvency law, the right of the Collateral Agent to seize or
to enforce against the Foreign Collateral provided by Phibro Belgium would be   
severely restricted or prohibited altogether if Phibro Belgium were subject to  
insolvency proceedings at the time of seizure or enforcement. In bankruptcy,    
secured creditors may not proceed against assets from the declaration of        
bankruptcy at least until the end of the proceeding for verification of claims. 
Even thereafter, the trustee in bankruptcy may petition the court to disallow   
enforcement for up to one year. In judicial composition (reorganization),       
secured creditors cannot take enforcement or attachment measures during the     
provisional composition (up to nine months) and may be barred for a further 18  
months pursuant to the definitive plan of composition, if interest is paid.     

     Moreover, the Collateral Agent's ability to foreclose on the Collateral may
be subject to lack of perfection, the consent of third parties, prior liens and 
practical problems associated with the realization of the Collateral Agent's    
Lien on the Collateral.                                                         

   In addition, because a portion of the Collateral consists of pledges of a
portion of the Capital Stock of certain of the Foreign Subsidiaries of the      
Company, the validity of those pledges under applicable foreign law, and the    
ability of the Collateral Agent to realize upon that Collateral under applicable
foreign law, may be limited by such law, which limitations may or may not affect
such Liens.                                                                     

THE GUARANTEES                                                                  

     The Guarantors will fully and unconditionally guarantee on a senior secured
basis (each a "Guarantee" and, collectively, the "Guarantees"), jointly and     
severally, to each Holder, the Collateral Agent and the Trustee, the full and   
prompt performance of the Issuers' Obligations under the Indenture and the      
Notes; provided, that the Guarantee of each Foreign Guarantor shall only be in  
respect of the Dutch Notes and the other Obligations of the Dutch Issuer and not
in respect of the U.S. Notes or any other Obligation of the U.S. Issuer.        
Pursuant to the Company Guarantee, the U.S. Issuer will also fully and          
unconditionally guarantee                                                       

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on a senior secured basis to each Holder, the Collateral Agent and the Trustee, 
the full and prompt performance of the Dutch Issuer's Obligations under the     
Indenture and the Dutch Notes. The Company Guarantee and the Domestic Guarantees
will be the joint and several Obligation of the U.S. Issuer and the Domestic    
Guarantors. The Obligations of each Guarantor will be limited as necessary to   
prevent its Guarantee from constituting a fraudulent conveyance or fraudulent   
transfer under applicable law. Each Domestic Guarantor may consolidate with or  
merge into or sell its assets to the Company or any other Domestic Guarantor    
without limitation. Each Foreign Guarantor may consolidate with or merge into or
sell its assets to the Dutch Issuer or any other Guarantor without limitation.  
See "-- Merger, Consolidation and Sale of Assets" and "-- Certain               
Covenants -- Limitation on Asset Sales."                                        

     A Guarantor will be released from its Guarantee without any action required
on the part of the Trustee or any Holder:                                       

          (1) if (a) all of the Capital Stock issued by such Guarantor or all or
substantially all of the assets of such Guarantor is sold or otherwise
     disposed of (including by way of merger or consolidation) to a Person other
than us or any of our Domestic Restricted Subsidiaries or (b) such    
     Guarantor ceases to be a Restricted Subsidiary, and we otherwise comply, in
  each case, to the extent applicable, with the provisions of the covenant
  described below under the caption "-- Certain Covenants -- Limitation on
   Asset Sales" that are required to be satisfied thereunder either prior to
or concurrent with the consummation of the applicable transaction;    

       (2) if we designate such Guarantor as an Unrestricted Subsidiary in
    accordance with the covenant described below under the caption "-- Certain
Covenants -- Limitation on Restricted Payments"; or                   

      (3) upon satisfaction and discharge of the Indenture or payment in
    full of the principal of, premium, if any, accrued and unpaid interest and
  Additional Interest, if any, on the Notes and all other Obligations that
are then due and payable.                                             

The U.S. Issuer will be released from the Company Guarantee upon      
satisfaction of the condition described in clause (3) above to the extent the   
Obligations described therein relate to the Dutch Notes and all other           
Obligations of the Dutch Issuer.                                                

At our request and expense, the Trustee will execute and deliver any  
instrument evidencing such release. A Guarantor and the U.S. Issuer may also be 
released from its obligations under its Guarantee or the Company Guarantee, as  
applicable, in connection with a permitted amendment. See "-- Amendment,        
Supplement and Waiver."                                                         

REDEMPTION                                                                      

     Mandatory Redemption; Offers to Purchase; Open Market Purchases.  The Notes
are not subject to any mandatory sinking fund redemption prior to maturity.     
However, under certain circumstances, we may be required to offer to purchase   
the Notes as described under the captions "-- Change of Control" and "-- Certain
Covenants -- Limitation on Asset Sales." We may at any time and from time to    
time purchase Units or Notes (in the event that a Separation Event has occurred)
in the open market or otherwise.                                                

OPTIONAL REDEMPTIONS                                                        

  Optional Redemption Prior to June 1, 2005.  At any time prior to June 1,
2005, the Issuers may, at their option, on one or more occasions redeem all or  
part of their Notes at a redemption price equal to the greater of (1) 100% of   
the aggregate principal amount of the Notes being redeemed and (2) the sum of   
the present values of 114% of the aggregate principal amount of the Notes being 
redeemed and scheduled payments of interest on such Notes to and including June 
1, 2005 discounted to the date of redemption on a semi-annual basis (assuming a 
360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50   
basis points, together with, in each case, accrued and unpaid interest, if any, 
to the date of redemption. The foregoing optional redemption of the Notes prior 
to June 1, 2005 shall include both U.S. Notes and Dutch Notes on a pro rata     
basis based on the aggregate principal amount of the Notes outstanding at the   
time of redemption, unless a Change in Control of the Dutch Issuer has occurred.
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  "Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable   
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption period.                                                         

"Comparable Treasury Issue" means the United States Treasury security 
selected by a Reference Treasury Dealer appointed by the Company as having a    
maturity comparable to the remaining term of the Notes (as if the final maturity
of the Notes was June 1, 2005) that would be utilized at the time of selection  
and in accordance with customary financial practice in pricing new issues of    
corporate debt securities of comparable maturity to the remaining term of the   
Notes (as if the final maturity of the Notes was June 1, 2005).                 

     "Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of the bid and asked prices for the Comparable Treasury Issue       
(expressed in each case as a percentage of its principal amount) on the third   
business day preceding such redemption date, as set forth in the daily          
statistical release (or any successor release) published by the Federal Reserve 
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.        
Government Securities" or (2) if such release (or any successor release) is not 
published or does not contain such prices on such business day, (A) the average 
of the Reference Treasury Dealer Quotations (as defined below) for such         
redemption date, after excluding the highest and lowest such Reference Treasury 
Dealer Quotation or (B) if the Company obtains fewer than three such Reference  
Treasury Dealer Quotations, the average of all such Reference Treasury Dealer   
Quotations.                                                                     

     "Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the      
Company, of the bid and asked prices for the Comparable Treasury Issue          
(expressed in each case as a percentage of its principal amount) quoted in      
writing to the Company by such Reference Treasury Dealer at 5:00 p.m. on the    
third business day preceding such redemption date.                              

  "Reference Treasury Dealer" means any primary U.S. government securities
dealer in the City of New York selected by the Company.                         

    Optional Redemption on or After June 1, 2005.  The Notes are redeemable at
our option, in whole or in part, at any time on or after June 1, 2005 at the    
redemption prices (expressed as percentages of the principal amount of the      
Notes) set forth below plus in each case accrued and unpaid interest and        
Additional Interest, if any, to the date of redemption, if redeemed during the  
six-month period beginning on the dates indicated below:                        

                                                                [Download Table]

PERIOD                                                        PERCENTAGE
------                                                        ----------
                                                                        
June 1, 2005................................................    114.0%  
December 1, 2005............................................    109.0%  
June 1, 2006................................................    105.0%  
December 1, 2006, and thereafter............................    101.0%  

In addition, at any time prior to June 1, 2005, we may, at our option,
redeem up to 35% of the sum of (i) the initial aggregate principal amount of the
Notes issued in the Offering and (ii) the respective initial aggregate principal
amount of the Notes issued under the Indenture after the Issue Date, on one or  
more occasions with the net proceeds of one or more Public Equity Offerings at  
113% of the principal amount thereof, plus accrued and unpaid interest and      
Additional Interest, if any, to the date of redemption; provided, that          
immediately after giving effect to such redemption, at least 65% of the sum of  
(i) $105.0 million (the initial aggregate principal amount of the Notes issued  
in the Offering) and (ii) the respective initial aggregate principal amount of  
the Notes issued under the Indenture after the Issue Date remain outstanding    
(other than any Notes owned by the Company or any of its Affiliates). In order  
to effect the foregoing redemption with the proceeds of any Public Equity       
Offering, we will make such redemption not more than 90 days after the          
consummation of any such Public Equity Offering.                                

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   "Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Stock) of the Company pursuant to an effective   
registration statement filed under the Securities Act.                          

 The foregoing optional redemption of the Notes on or after June 1, 2005
shall include both U.S. Notes and Dutch Notes on a pro rata basis based on the  
aggregate principal amount of the Notes outstanding at the time of redemption,  
unless a Change of Control of the Dutch Issuer has occurred.                    

    Selection and Notice.  If less than all of the Notes are to be redeemed at
any time, selection of the Notes to be redeemed will be made by the Trustee in  
compliance with the requirements of the principal national securities exchange, 
if any, on which the Notes are listed or, if the Notes are not listed on a      
securities exchange, on a pro rata basis or by lot or any other method as the   
Trustee shall deem fair and appropriate; provided, that Notes redeemed in part  
shall only be redeemed in integral multiples of $1,000; provided further, that  
any such redemption pursuant to the provisions relating to a Public Equity      
Offering shall be made on a pro rata basis or on as nearly a pro rata basis as  
practicable (subject to the procedures of The Depository Trust Company or any   
other depositary), unless such method is otherwise prohibited.                  

  Notices of any optional or mandatory redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to  
each Holder to be redeemed at such Holder's registered address. If any Note is  
to be redeemed in part only, the notice of redemption that relates to such Note 
shall state the portion of the principal amount thereof to be redeemed, and the 
Trustee shall authenticate and mail to the Holder of the original Note a Note in
principal amount equal to the unredeemed portion of the original Note promptly  
after the original Note has been canceled. On and after the redemption date,    
interest and Additional Interest, if applicable, will cease to accrue on Notes  
or portions thereof called for redemption.                                      

TAXATION; REDEMPTION FOR TAXATION REASONS                                       

 All payments by the Dutch Issuer and any Guarantor (and the U.S. Issuer
with respect to the Company Guarantee) in respect of the Dutch Notes shall be   
made without withholding or deduction for or on account of any present or future
taxes, duties, assessments or other governmental charges of whatsoever nature,  
including penalties, interest and any other liabilities related thereto         
("Taxes"), imposed or levied by or on behalf of The Netherlands, or any other   
jurisdiction in which any Guarantor (or the U.S. Issuer with respect to the     
Company Guarantee) in respect of the Dutch Notes is organized or resident for   
tax purposes of any such jurisdiction, as the case may be, or, in each case, any
other relevant jurisdiction or any political subdivision or authority of or in  
any such jurisdiction having power to tax (for purposes of this "-- Taxation;   
Redemption For Taxation Reasons," the "Relevant Jurisdiction"), unless the Dutch
Issuer or any such Guarantor (or the U.S. Issuer with respect to the Company    
Guarantee) is compelled by law to deduct or withhold such taxes, duties,        
assessments or other governmental charges. In such event, the Dutch Issuer or   
such Guarantor (or the U.S. Issuer with respect to the Company Guarantee) shall 
pay such additional amounts ("Additional Amounts") as may be necessary to ensure
that the net amounts received by the holders of the Dutch Notes after such      
withholding or deduction shall equal the amounts of such payments that would    
have been receivable in respect of the Dutch Notes in the absence of such       
withholding or deduction, except that no such Additional Amounts shall be       
payable in respect of any Dutch Note (i) presented for payment of principal more
than 60 days after the later of (x) the date on which such payment first became 
due and (y) if the full amount payable has not been received in New York City by
the Trustee on or prior to such due date, the date on which, the full amount    
having been so received, notice to that effect shall have been given to the     
holders by the Trustee, except to the extent that the holders would have been   
entitled to such Additional Amounts on presenting such Dutch Note for payment on
the last day of the applicable 60 day period, (ii) if any tax, assessment or    
other governmental charge is imposed or withheld by reason of the failure to    
comply by the holder or, if different, the beneficial owner of the interest     
payable on the Dutch Note with a timely request of the Dutch Issuer addressed to
such holder or beneficial owner to complete and return an official document     
concerning the nationality, residence, identity or connection with the          
Netherlands or any Relevant Jurisdiction of such holder or beneficial owner     
which is required or imposed by a statute, treaty, regulation or administrative 
practice of the Netherlands or any Relevant Jurisdiction as a precondition to   
exemption from all or part of such tax, assessment or governmental charge and   
provided that the request to so comply is made in writing and delivered to such 
holder or beneficial owner, as applicable, not later than 60 days prior to the  
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date by which the delivery of such official document is required, (iii) held by 
or on behalf of a holder who is liable for Taxes giving rise to such Additional 
Amounts in respect of such Dutch Note by reason of having some connection with  
the Netherlands or any Relevant Jurisdiction other than the mere purchase,      
holding or disposition of any Dutch Note, or the receipt of principal or        
interest in respect thereof, including, without limitation, such holder being or
having been a citizen or resident thereof or being or having been present or    
engaged in a trade or business therein or having had a permanent establishment  
therein, (iv) where such withholding or deduction is imposed on a payment to an 
individual who is resident for tax purposes in a jurisdiction which is a member 
state of the European Union (whether such payment is made through a paying agent
or otherwise) and is required to be made pursuant to European Union Directive   
2003/48/EC of 3 June 2003 on the taxation of savings or any law implementing or 
complying with, or introduced in order to conform to such Directive and (v) any 
combination of clause (i), (ii), (iii) or (iv) above; nor shall Additional      
Amounts be paid with respect to any payment of the principal of, or any interest
on, any Dutch Note to any holder who is a fiduciary or partnership or other than
the sole beneficial owner of such payment to the extent that a beneficiary or   
settlor or beneficial owner would not have been entitled to any Additional      
Amounts had such beneficiary or settlor or beneficial owner been the holder. The
Dutch Issuer or such Guarantor (or the U.S. Issuer with respect to the Company  
Guarantee) will also (a) make such withholding or deduction compelled by        
applicable law and (b) remit the full amount deducted or withheld to the        
relevant authority in accordance with applicable law. The Dutch Issuer or such  
Guarantor (or the U.S. Issuer with respect to the Company Guarantee) will       
furnish copies of such receipts evidencing the payment of any Taxes so deducted 
or withheld in such form as provided in the normal course by the taxing         
authority imposing such Taxes and as is reasonably available to the Dutch Issuer
or such Guarantor (or the U.S. Issuer with respect to the Company Guarantee) to 
the Trustee within 60 days after the date of receipt of such evidence. The      
Trustee will make such evidence available to the holders of Dutch Notes upon    
request.                                                                        

All references herein and in the Indenture or the Dutch Notes to the  
principal of or interest or other payments on, or in respect of, a Dutch Note   
shall be deemed to include, without duplication, any Additional Amounts payable 
in connection therewith.                                                        

     The Dutch Issuer will pay any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies that     
arise in any jurisdiction from the execution, delivery or registration of the   
Dutch Notes or any other document or instrument referred to in the Indenture or 
Dutch Notes.                                                                    

     Dutch Notes may be redeemed, at the option of the Dutch Issuer, as a whole,
but not in part (limited to Dutch Notes with respect to which an Additional     
Amount (as described above) is or may be required), at any time, upon giving    
notice to holders not less than 30 days nor more than 60 days prior to the date 
fixed for redemption (which notice shall be irrevocable), at a redemption price 
equal to 100% of the principal amount thereof, together with interest accrued to
the date fixed for redemption and any Additional Amounts payable with respect   
thereto, if the Dutch Issuer determines and certifies to the Trustee immediately
prior to the giving of such notice that (i) the Dutch Issuer or any Guarantor   
(or the U.S. Issuer with respect to the Company Guarantee) in respect of the    
Dutch Notes has or will become obligated to pay Additional Amounts in respect of
such Dutch Notes as a result of any change in or amendment to the laws (or any  
regulations or rulings promulgated thereunder) of the Netherlands or any        
Relevant Jurisdiction or any political subdivision or taxing authority thereof  
or therein affecting taxation, or any change in the official position regarding 
the application or interpretation of such laws, regulations or rulings          
(including a holding by a court of competent jurisdiction) which change or      
amendment becomes effective on or after the date of issuance of such Dutch Notes
and (ii) such obligation cannot be avoided by the Dutch Issuer or such Guarantor
(or the U.S. Issuer with respect to the Company Guarantee) taking reasonable    
measures available to it, provided, that no such notice of redemption shall be  
given earlier than 60 days prior to the earliest date on which the Dutch Issuer 
or such Guarantor (or the U.S. Issuer with respect to the Company Guarantee)    
would be obligated to pay such Additional Amounts if a payment in respect of    
such Dutch Notes was then due. Prior to the giving of any notice of redemption  
described in this paragraph, the Dutch Issuer shall deliver to the Trustee (a) a
certificate signed by two directors of the Dutch Issuer stating that the        
obligation to pay Additional Amounts cannot be avoided by the Dutch Issuer or   
such Guarantor (or the U.S. Issuer with respect to the Company Guarantee)       

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taking reasonable measures available to them and (b) a written opinion of       
independent legal counsel to the Dutch Issuer to the effect that the Dutch      
Issuer or such Guarantor (or the U.S. Issuer with respect to the Company        
Guarantee) has become obligated to pay Additional Amounts as a result of such a 
change or amendment described above and that the Dutch Issuer or such Guarantor 
(or the U.S. Issuer with respect to the Company Guarantee) cannot avoid payment 
of such Additional Amounts by taking reasonable measures available to them.     

CHANGE OF CONTROL                                                               

  In the event of a Change of Control of the U.S. Issuer, each Holder will
have the right, unless we have given a notice of redemption, subject to the     
terms and conditions of the Indenture, to require us to offer to purchase all or
any portion (equal to $1,000 or an integral multiple thereof) of such Holder's  
Notes at a purchase price in cash equal to 101% of the aggregate principal      
amount thereof, plus accrued and unpaid interest and Additional Interest, if    
any, to the date of purchase, in accordance with the terms set forth below. Any 
such repurchase of the Notes will include both U.S. Notes and Dutch Notes on a  
pro rata basis based on the aggregate principal amount of the Notes outstanding 
at the time of redemption, unless a Change of Control of the Dutch Issuer has   
occurred.                                                                       

   In the event of a Change of Control of the Dutch Issuer, the Dutch Issuer
may, at its option at any time, redeem the Dutch Notes in whole, and not in     
part, at the optional redemption price specified in "-- Redemption -- Optional  
Redemption" with respect to the date such redemption is to be effected (such    
right, a "Change of Control Redemption of Dutch Notes Right", and such          
redemption, a "Change of Control Redemption of Dutch Notes"). If the Dutch      
Issuer has not delivered a notice of redemption within 30 days following a      
Change of Control of the Dutch Issuer, each Holder of a Dutch Note shall have   
the right to require that the Dutch Issuer repurchase all or a portion of such  
Holder's Dutch Notes at a purchase price in cash equal to 101% of the principal 
amount thereof plus accrued and unpaid interest and Additional Amounts, if any, 
to the date of repurchase (subject to the right of Holders of record on the     
relevant record date to receive interest due on the relevant interest payment   
date), in accordance with the next paragraph; provided that at any time prior to
the consummation of the offer to purchase required by the Dutch Issuer in       
accordance with the next paragraph, the Dutch Issuer may deliver an optional    
redemption notice to redeem all of the Dutch Notes in lieu of completing such   
offer to purchase.                                                              

  We currently have no outstanding securities or liabilities that are pari
passu with the Notes and also contain mandatory Change of Control repayment     
provisions; however, the Credit Agreement may contain an event of default based 
upon a change of control and upon the occurrence of such event of default the   
obligations thereunder may be accelerated by the requisite holders thereof. In  
addition, other debt instruments of the Company may in the future contain a     
"change of control" provision that is similar to the provision in the Indenture 
relating to a Change of Control, and the occurrence of such a "change of        
control" could constitute a default under such debt instruments.                

     If a Change of Control were to occur, there can be no assurance that we (or
the Dutch Issuer, if it were to exercise its Change of Control Redemption of    
Dutch Notes Right) would have sufficient assets to satisfy our obligations under
other agreements relating to indebtedness (including the Credit Agreement) and  
to purchase all of (i) the Notes that might be delivered by Holders seeking to  
accept a Change of Control Offer (as defined below) or (ii) if a Change of      
Control of the Dutch Issuer were to occur and the Dutch Issuer were to exercise 
its Change of Control Redemption of Dutch Notes Right, all of the Dutch Notes.  
In the event we are required to purchase outstanding Notes pursuant to a Change 
of Control Offer or the Dutch Issuer is required to purchase the Dutch Notes in 
connection with a Change of Control Redemption of Dutch Notes, we expect that we
would seek third party financing to the extent we do not have available funds to
meet our purchase obligations. However, there can be no assurance that we would 
be able to obtain such financing and the terms of the Credit Agreement and/or   
the Indenture may restrict the our ability to obtain such financing. See "Risk  
Factors -- We may not be able to satisfy our obligations to Holders upon a      
change of control."                                                             

The Indenture provides the Holders protection in the event of a highly
leveraged transaction to the extent that our ability to effect a highly         
leveraged transaction, in connection with any Change of Control or otherwise,   

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is subject to the provisions of the Indenture described below under the caption 
"-- Certain Covenants," including without limitation the provisions described   
thereunder under the headings "Limitation on Incurrence of Indebtedness." The   
covenant described below under the heading "Limitation on Incurrence of         
Indebtedness" does not specifically limit the leverage of any particular        
transaction, but requires that we have a ratio of consolidated cash flow to     
interest expense above a specified level in order to incur Indebtedness, subject
to certain enumerated exceptions.                                               

In general, the Change of Control provisions would not be triggered if
either Issuer was to recapitalize or to enter into transactions with management 
or its affiliates unless at least one of the events relating to such Issuer and 
specified in the definition of the term "Change of Control" were also to occur. 
See "-- Certain Definitions."                                                   

    Without the consent of each Holder affected, no amendment of the Indenture
or waiver of any Default or Event of Default thereunder, will, following the    
occurrence of a Change of Control, amend, change or modify our obligation to    
make and consummate a Change of Control Offer as a result of such a Change of   
Control a Change of Control Redemption of Dutch Notes as a result of such a     
Change of Control and the exercise by the Dutch Issuer of the Change of Control 
Redemption of Dutch Notes Right or modify the provisions or definitions with    
respect thereto in a manner adverse to the Holders with respect to such Change  
of Control. See "-- Amendment, Supplement and Waiver."                          

On or before the 30th day following the occurrence of any Change of   
Control, we will, and within 30 days following any Change of Control of the     
Dutch Issuer, the Dutch Issuer will, mail an offer (each, a "Change of Control  
Offer") to each Holder at such Holder's registered address a notice by          
first-class mail stating: (i) that a Change of Control has occurred and that    
such Holder has the right to require us or the Dutch Issuer, as the case may be,
to purchase all or a portion (equal to $1,000 or an integral multiple thereof)  
of such Holder's Notes or Dutch Notes, as the case may be, at a purchase price  
in cash equal to 101% of the aggregate principal amount thereof, plus accrued   
and unpaid interest and Additional Interest, if any, to the date of purchase    
(the "Change of Control Purchase Date"), which shall be a business day,         
specified in such notice, that is not earlier than 30 days or later than 60 days
from the date such notice is mailed, (ii) the amount of accrued and unpaid      
interest and Additional Interest, if any, as of the Change of Control Purchase  
Date, (iii) that any Note not tendered will continue to accrue interest and     
Additional Interest, if applicable, (iv) that, unless we or the Dutch Issuer, as
the case may be, default in the payment of the purchase price for the Notes     
payable pursuant to the Change of Control Offer, any Notes accepted for payment 
pursuant to the Change of Control Offer shall cease to accrue interest and      
Additional Interest, if applicable, on the Change of Control Purchase Date, (v) 
the procedures, consistent with the Indenture, to be followed by a Holder in    
order to accept a Change of Control Offer or to withdraw such acceptance, and   
(vi) such other information as may be required by the Indenture and applicable  
laws and regulations.                                                           

    We or the Dutch Issuer, as the case may be, will not be required to make a
Change of Control Offer upon a Change of Control if a third party makes the     
Change of Control Offer in the manner, at the times and otherwise in compliance 
with the requirements set forth in the Indenture applicable to a Change of      
Control Offer made by us or the Dutch Issuer, as the case may be, and purchases 
all Notes validly tendered and not withdrawn under such Change of Control Offer.

     On the Change of Control Purchase Date, we or the Dutch Issuer, as the case
may be, will (i) accept for payment all Notes or portions thereof tendered      
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent the 
aggregate purchase price of all Notes or portions thereof accepted for payment, 
and (iii) deliver or cause to be delivered to the Trustee all Notes tendered    
pursuant to the Change of Control Offer. The Paying Agent shall promptly mail to
each Holder whose Notes or portions thereof were accepted for payment an amount 
equal to the purchase price for such Notes or portion thereof plus accrued and  
unpaid interest and Additional Interest, if any, thereon, and the Trustee shall 
promptly authenticate and mail to each Holder whose Notes or portions thereof   
were accepted for payment in part a Note equal in principal amount to any       
unpurchased portion of the Notes, and any Note not accepted for payment in whole
or in part shall be promptly returned to the Holder of such Note. On and after a
Change of Control Purchase Date, interest and Additional Interest, if           
applicable, will cease to accrue on the Notes or portions thereof accepted for  
payment,                                                                        

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unless we or the Dutch Issuer, as the case may be, defaults in the payment of   
the purchase price therefor. We will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control       
Purchase Date.                                                                  

As used in the definition of Change of Control, the phrase "all or    
substantially all" of the Capital Stock or assets of the Company and its        
Restricted Subsidiaries will likely be interpreted under applicable state law   
and will be dependent upon particular facts and circumstances. As a result,     
there may be a degree of uncertainty in ascertaining whether a sale or          
disposition of "all or substantially all" of the Capital Stock or assets of the 
Company and its Restricted Subsidiaries has occurred, in which case a Holder's  
ability to obtain the benefit of a Change or Control Offer may be impaired.     

We will comply with the applicable tender offer rules, including the  
requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all    
other applicable securities laws and regulations in connection with any Change  
of Control Offer and will be deemed not to be in violation of any of the        
covenants under the Indenture to the extent such compliance is in conflict with 
such covenants.                                                                 

EXCESS CASH FLOW OFFER                                                          

     Within 120 days after the end of each fiscal year of the Company (beginning
with the fiscal year ending June 30, 2005), we may, if excess cash flow for such
fiscal year was at least $250,000, be required to make an offer (an "Excess Cash
Flow Offer") to all Holders to purchase the maximum principal amount of Notes   
that may be purchased with 50% of Excess Cash Flow for such fiscal year (the    
"Excess Cash Flow Offer Amount"), at a purchase price in cash equal to 102.5% of
the principal amount of the Notes to be purchased, plus accrued and unpaid      
interest and Additional Interest, if any, to the date of such purchase. The     
Indenture will provide for each Excess Cash Flow Offer to remain open for a     
period of 30 days, unless a longer period is required by law. If the Excess Cash
Flow Offer Amount exceeds the aggregate amount of Notes tendered pursuant to any
Excess Cash Flow Offer, we shall make an offer at the end of such period to all 
holders of Existing Notes, to purchase the maximum principal amount of Existing 
Notes that may be purchased with such excess, at a purchase price in cash equal 
to 100% of the principal amount of the Existing Notes to be purchased, plus     
accrued and unpaid interest thereon to the date of such purchase. If any excess 
remains following such offer in respect of the Existing Notes, we may, subject  
to the other provisions of the Indenture, use any such remaining excess for     
general corporate purposes. Upon receiving notice of the Excess Cash Flow Offer,
Holders may elect to tender their Notes, in whole or in part, in integral       
multiples of $1,000 principal amount in exchange for cash. Any such repurchase  
of the Notes shall include both U.S. Notes and Dutch Notes on a pro rata basis  
based upon the aggregate principal amount of the Notes outstanding at the time  
of such repurchase, unless a change of control of the Dutch Issuer has occurred.
Any Excess Cash Flow Offer Amount may be reduced by prior open market purchases 
of Units or Notes during such fiscal year.                                      

   Within 30 days prior to the required purchase date, we will mail an offer
to each Holder, with a copy to the Trustee, which offer will govern the terms of
the Excess Cash Flow Offer. Such offer will state, among other things the       
purchase date and price.                                                        

We will comply with the applicable tender offer rules, including the  
requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all    
other applicable securities laws and regulations in connection with any Excess  
Cash Flow Offer and will be deemed not to be in violation of any of the         
covenants under the Indenture to the extent such compliance is in conflict with 
such covenants. However, each Excess Cash Flow Offer is likely to be subject to 
limitations in the Credit Agreement.                                            

CERTAIN COVENANTS                                                               

    Limitation on Incurrence of Indebtedness.  The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, create,     
incur, assume or directly or indirectly guarantee or in any other manner become 
directly or indirectly liable for ("incur") any Indebtedness (including Acquired
Debt), except that the Company and any Domestic Guarantor may incur Indebtedness
(including Acquired Debt) if, immediately after giving pro forma effect to, such
incurrence of Indebtedness, the Consolidated Cash Flow Coverage Ratio of the    
Company for the most recently ended four fiscal quarters would be at least 2.25 
to 1.0 if                                                                       
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incurred during the period from the Issue Date through the second anniversary   
thereof, and 2.50 to 1.0 if incurred thereafter.                                

The foregoing limitations do not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:                                                             

   (i) Indebtedness of the Company and its Restricted Subsidiaries
     arising under the Credit Agreement, in an aggregate principal amount not to
   exceed at any time outstanding an amount equal to (w) $37.5 million, less
(x) during the 30 day period preceding the date on which a scheduled  
payment of interest is due on the Notes, the aggregate amount of such 
   interest, less (y) during the 30 day period preceding the date on which a
   scheduled payment of interest is due on the Existing Notes, the aggregate
   amount of such interest, less (z) the aggregate principal amount of Notes
issued pursuant to clause (xx) below;                                 

          (ii) Indebtedness of the Issuers and the Guarantors represented by the
  Notes issued on the Issue Date in the Offering, Exchange Notes issued in
    exchange for such Notes or in exchange for Notes issued in compliance with
 the first paragraph of this covenant and the related Guarantees and the
Company Guarantee;                                                    

     (iii) Indebtedness of the Company or any Restricted Subsidiary in
    existence, and Indebtedness pursuant to any commitment in effect under any
  credit agreement or facility, in each case, on the Issue Date ("Existing
Indebtedness");                                                       

        (iv) Indebtedness of a Domestic Restricted Subsidiary of the Company
    to the Company or to a Restricted Subsidiary of the Company for so long as
    such Indebtedness is held by the Company or a Restricted Subsidiary of the
    Company or the holder of a Permitted Lien thereon of the type described in
    clause (i), (vii) or (xv) of the definition thereof, in each case, subject
to no Lien held by a Person other than the Company or a Restricted    
 Subsidiary of the Company or the holder of a Permitted Lien of the type
    described in clause (i), (vii) or (xv) of the definition thereof; provided
that (a) any such Indebtedness is subordinated, pursuant to a written 
     agreement by the holder thereof, to such Subsidiary's Obligations under the
     Indenture and its Guarantee and (b) if as of any date any Person other than
  the Company or a Restricted Subsidiary of the Company or the holder of a
   Permitted Lien thereon of the type described in clause (i), (vii) or (xv)
  of the definition thereof owns or holds any such Indebtedness or holds a
Lien in respect of such Indebtedness, such date shall be deemed the   
  incurrence of Indebtedness not constituting Permitted Indebtedness under
this clause (iv) by the issuer of such Indebtedness;                  

         (v) Indebtedness of a Foreign Restricted Subsidiary of the Company to
 the Company or to a Restricted Subsidiary of the Company for so long as
   such Indebtedness is permitted to be made as a Permitted Investment under
 clause (i)(B), (ix) or (x) of the definition thereof and is held by the
   Company or a Restricted Subsidiary of the Company, as the case may be, or
     the holder of a Permitted Lien thereon of the type described in clause (i),
   (vii) or (xv) of the definition thereof, in each case, subject to no Lien
   held by a Person other than the Company or a Restricted Subsidiary of the
    Company, as the case may be, or the holder of a Permitted Lien of the type
    described in clause (i), (vii) or (xv) of the definition thereof; provided
that (a) if such Indebtedness was made as a Permitted Investment under
    clause (i)(B) of the definition thereof to the Dutch Issuer or any Foreign
   Guarantor, such Indebtedness shall be subordinated, pursuant to a written
agreement by the holder thereof, to the Dutch Issuer's or such Foreign
  Guarantor's, as the case may be, Obligations under the Indenture and the
   Dutch Notes or its Foreign Guarantee, as applicable, and (b) if as of any
  date any Person other than the Company or a Restricted Subsidiary of the
   Company, as the case may be, or the holder of a Permitted Lien thereon of
   the type described in clause (i), (vii) or (xv) of the definition thereof
owns or holds any such Indebtedness or holds a Lien in respect of such
    Indebtedness, such date shall be deemed the incurrence of Indebtedness not
    constituting Permitted Indebtedness under this clause (v) by the issuer of
such Indebtedness;                                                    

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   (vi) (A) Indebtedness of a Foreign Restricted Subsidiary of the
   Company to a Foreign Restricted Subsidiary of the Company that is not the
Dutch Issuer or a Restricted Subsidiary thereof for so long as such   
   Indebtedness is held by such Foreign Restricted Subsidiary of the Company
   or the holder of a Permitted Lien thereon of the type described in clause
    (xv) of the definition thereof, in each case, subject to no Lien held by a
    Person other than the Company or such Foreign Restricted Subsidiary of the
   Company or the holder of a Permitted Lien of the type described in clause
    (xv) of the definition thereof (provided that if as of any date any Person
    other than such Foreign Restricted Subsidiary of the Company or the holder
 of a Permitted Lien thereon of the type described in clause (xv) of the
   definition thereof owns or holds any such Indebtedness or holds a Lien in
   respect of such Indebtedness, such date shall be deemed the incurrence of
     Indebtedness not constituting Permitted Indebtedness under this clause (vi)
    (A) by the issuer of such Indebtedness); and (B) Indebtedness of the Dutch
   Issuer or any Restricted Subsidiary thereof to a Restricted Subsidiary of
  the Dutch Issuer or the Dutch Issuer for so long as such Indebtedness is
    held by a Restricted Subsidiary of the Dutch Issuer or the Dutch Issuer or
the holder of a Permitted Lien thereon of the type described in clause
   (vii) or (xv) of the definition thereof, in each case, subject to no Lien
    held by a Person other than a Restricted Subsidiary of the Dutch Issuer or
     the Dutch Issuer or the holder of a Permitted Lien of the type described in
    clause (vii) or (xv) of the definition thereof (provided that (1) any such
     Indebtedness is subordinated, pursuant to a written agreement by the holder
     thereof, to the Dutch Issuer's or such Restricted Subsidiary's, as the case
may be, Obligations under the Indenture and the Dutch Notes or its    
Guarantee, as applicable, and (2) if as of any date any Person other a
     Restricted Subsidiary of the Dutch Issuer or the Dutch Issuer or the holder
   of a Permitted Lien thereon of the type described in clause (vii) or (xv)
  of the definition thereof owns or holds any such Indebtedness or holds a
Lien in respect of such Indebtedness, such date shall be deemed the   
  incurrence of Indebtedness not constituting Permitted Indebtedness under
this clause (vi)(B) by the issuer of such Indebtedness);              

       (vii) Indebtedness of the Company to a Restricted Subsidiary of the
     Company for so long as such Indebtedness is held by a Restricted Subsidiary
 of the Company, in each case, subject to no Lien other than a Permitted
   Lien of the type described in clause (i), (vii) or (xv) of the definition
    thereof; provided that (a) any such Indebtedness is subordinated, pursuant
    to a written agreement by the holder thereof, to the Company's Obligations
under the Indenture and the Notes and (b) if as of any date any Person
other than a Restricted Subsidiary of the Company or the holder of a  
  Permitted Lien of the type described in clause (i), (vii) or (xv) of the
     definition thereof, owns or holds any such Indebtedness or any Person holds
a Lien in respect of such Indebtedness, such date shall be deemed the 
  incurrence of Indebtedness not constituting Permitted Indebtedness under
this clause (vii) by the Company;                                     

   (viii) Indebtedness of the Company or any Restricted Subsidiary
  arising with respect to (A) Interest Rate Agreement Obligations incurred
  for the purpose of fixing or hedging interest rate risk or currency risk
   with respect to any fixed or floating rate Indebtedness that is permitted
by the terms of the Indenture to be outstanding to the extent that the
notional amount of any such Interest Rate Agreement Obligations do not
exceed at the time of the incurrence thereof, the principal amount of 
   Indebtedness to which such Interest Rate Agreement Obligations relate and
  (B) Currency Agreement Obligations incurred for the purpose of fixing or
hedging currency risk with respect to any receivable or liability the 
     payment of which is determined by reference to a foreign currency (provided
that in the case of Currency Agreement Obligations which relate to    
Indebtedness, such Currency Agreement Obligations do not increase the 
 Indebtedness of the Company and its Restricted Subsidiaries outstanding
   other than as a result of fluctuations in foreign currency exchange rates
 or by reason of fees, indemnities and compensation payable thereunder);

        (ix) Indebtedness represented by performance, completion, guarantee,
   surety and similar bonds and assurances provided by or for the Company or
any Restricted Subsidiary in the ordinary course of business;         

         (x) any Indebtedness incurred in connection with or given in exchange
for the renewal, extension, substitution, refunding, defeasance,      
   refinancing or replacement, in whole or in part (a "refinancing"), of any
Indebtedness incurred as permitted under the first paragraph of this  
covenant or any Indebtedness                                          
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described in any of clauses (ii) or (iii) above, and this clause (x)  
 ("Refinancing Indebtedness"); provided, however, that (a) the principal
amount of such Refinancing Indebtedness shall not exceed the principal
   amount (or accreted amount, if less, or in the case of a revolving credit
   facility the maximum amount of the facility, if more) of the Indebtedness
   so refinanced (plus accrued interest on the Indebtedness being refinanced
plus the premiums, if any, on the Indebtedness being refinanced and   
     reasonable expenses to be paid in connection therewith, which, with respect
to such premiums, shall not exceed the stated amount of any premium or
 other payment required to be paid in connection with such a refinancing
 pursuant to the terms of the Indebtedness being refinanced); (b) if the
   Weighted Average Life to Maturity of the Indebtedness being refinanced is
equal to or greater than the Weighted Average Life to Maturity of the 
   Notes, the Refinancing Indebtedness shall have a Weighted Average Life to
    Maturity equal to or greater than the Weighted Average Life to Maturity of
the Indebtedness being refinanced; (c) the final maturity of such     
  Refinancing Indebtedness shall not be earlier than the final maturity of
the Indebtedness being Refinanced; (d) with respect to Refinancing    
   Indebtedness refinancing Subordinated Indebtedness, shall be subordinated
to the Notes at least to the same extent and in the same manner as the
Indebtedness being refinanced; and (e) the obligor on such Refinancing
 Indebtedness shall be the obligor on the Indebtedness being refinanced;

     (xi) Indebtedness of the Company or any Restricted Subsidiary (a)
   representing Capital Lease Obligations and any amendments, modifications,
  renewals, refundings, replacements or refinancings thereof and/or (b) in
     respect of Purchase Money Obligations for property acquired, constructed or
   improved in the ordinary course of business and any refinancings thereof,
   which taken together in the aggregate principal amount do not exceed $5.0
million at any one time outstanding;                                  

         (xii) (A) commodity agreements entered into in the ordinary course of
     business to protect against fluctuations in the prices of raw materials and
not for speculative purposes and (B) foreign currency forward exchange
contracts entered into in the ordinary course of business to protect  
against fluctuations in the relative values of currencies that could  
adversely affect our results of operations and not for speculative    
purposes;                                                             

 (xiii) Indebtedness incurred by the Company or any Restricted
   Subsidiary constituting reimbursement obligations with respect to letters
   of credit issued in the ordinary course of business (A) in respect of (1)
  workers' compensation claims or self-insurance or (2) other Indebtedness
with respect to reimbursement type obligations regarding workers'     
  compensation claims or self-insurance or (B) for regulatory or insurance
purposes;                                                             

          (xiv) Indebtedness incurred in respect of letters of credit issued for
 the account of the Company or any Restricted Subsidiary in an aggregate
stated amount not to exceed $5.0 million (or the foreign currency     
equivalent thereof being determined as of the later of the date of the
   issuance thereof or any date on which the stated amount of such letter of
credit is increased);                                                 

        (xv) Indebtedness of Foreign Restricted Subsidiaries of the Company,
     in an aggregate principal amount at any time outstanding not to exceed $2.5
million, incurred to finance losses or costs relating to catastrophic 
occurrences or expenses occurring outside of the ordinary course of   
business; provided, that, in the case of losses or costs relating to  
   catastrophic occurrences, the amount of any such losses or costs shall be
deemed to be reduced by all insurance and condemnation proceeds on the
  thirtieth day following the receipt thereof by the Company or any of its
     Restricted Subsidiaries in connection with such catastrophic occurrence(s);

        (xvi) Any guaranty by the Company and its Restricted Subsidiaries of
each other's Indebtedness; provided that such other Indebtedness is   
permitted to be incurred under the Indenture;                         

      (xvii) Indebtedness of the Company or any Restricted Subsidiary in
  addition to that described in clauses (i) through (xvi) above and clause
 (xviii) below, and any amendments, modifications, renewals, refundings,
     replacements or refinancings of such Indebtedness, so long as the aggregate
    principal amount of all such Indebtedness incurred pursuant to this clause
(xvii) does not exceed $2.5 million at any one time outstanding;      

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    (xviii) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for the guarantee, indemnification,   
     adjustment of purchase price or similar obligations, in each case, incurred
   in connection with the disposition of any business, assets or Subsidiary,
    other than guarantees of Indebtedness incurred by any Person acquiring all
  or any portion of such business, assets or Subsidiary for the purpose of
   financing such acquisition; provided that the maximum aggregate liability
    in respect of such Indebtedness shall at no time exceed the gross proceeds
or value of the consideration actually received by the Company and its
Restricted Subsidiaries in connection with such transaction;          

     (xix) Indebtedness of the Company and its Restricted Subsidiaries
arising under the Belgium Purchase Agreement; and                     

          (xx) Indebtedness of the Issuers and the Guarantors represented by the
Additional Notes issued after the Issue Date in an aggregate principal
amount not to exceed $22.5 million, the proceeds of which are used to 
  refinance or replace Indebtedness incurred pursuant to clause (i) above,
     Exchange Notes issued in exchange for such Additional Notes and the related
Guarantees and the Company Guarantee.                                 

 For purposes of determining any particular amount of Indebtedness under
this covenant, any guaranty, Liens or obligations with respect to letters of    
credit supporting Indebtedness otherwise included in the determination of such  
particular amount shall not be included, except in the case of any such letter  
of credit to the extent the stated amount thereof exceeds the principal amount  
of such other Indebtedness so supported.                                        

 Indebtedness of any Person which is outstanding at the time such Person
becomes a Restricted Subsidiary or is merged with or into or consolidated with  
the Company or a Restricted Subsidiary shall be deemed to have been incurred at 
the time such Person becomes a Restricted Subsidiary or is merged with or into  
or consolidated with the Company or a Restricted Subsidiary, and Indebtedness   
which is assumed at the time of the acquisition of any asset shall be deemed to 
have been incurred at the time of such acquisition.                             

     Limitation on Restricted Payments.  The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or         
indirectly, make any Restricted Payment, unless at the time of and immediately  
after giving effect to the proposed Restricted Payment (with the value of any   
such Restricted Payment, if other than cash, to be determined reasonably and in 
good faith by the Board of Directors of the Company):                           

 (i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;                   

          (ii) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant described
   under "-- Certain Covenants -- Limitation on Incurrence of Indebtedness;"
and                                                                   

     (iii) the aggregate amount of all Restricted Payments made by the
Company and its Restricted Subsidiaries after the Issue Date shall not
exceed the sum of:                                                    

          (a) an amount equal to 50% of the Company's aggregate cumulative
       Consolidated Net Income accrued on a cumulative basis during the period
    (treated as one accounting period) beginning on the first day of the
        first calendar month after the Issue Date and ending on the date of such
proposed Restricted Payment (or, if such aggregate cumulative   
      Consolidated Net Income for such period shall be a deficit, minus 100%
of such deficit); plus                                          

          (b) the aggregate amount of all net cash proceeds received since
       the Issue Date by the Company from the issuance and sale (other than to
    a Restricted Subsidiary) of, or equity contribution with respect to,
      Capital Stock (other than Disqualified Stock) and the principal amount
     of Indebtedness of the Company or any Restricted Subsidiary issued or
   incurred on or after the Issue Date that has been converted into or
        exchanged for Capital Stock (other than Disqualified Stock), in any such
        case and solely for purposes of avoiding duplication, to the extent that
        such proceeds are not theretofore used (x) to redeem, repurchase, retire
        or otherwise acquire Capital Stock or any Indebtedness of the Company or
any Restricted Subsidiary pursuant to clause (ii) of the next   

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     paragraph or (y) to make any Restricted Investment pursuant to clause
(iv) of the next paragraph; plus                                

            (c) the amount of the net reduction in Investments in Unrestricted
Subsidiaries resulting from (x) the payment of dividends or the 
     repayment in cash of the principal of loans or the cash return on any
     Investment, in each case to the extent received by the Company or any
        Restricted Subsidiary from Unrestricted Subsidiaries, (y) the release or
  extinguishment of any guaranty of Indebtedness of any Unrestricted
     Subsidiary, and (z) the redesignation of Unrestricted Subsidiaries as
    Restricted Subsidiaries (valued as provided in the definition of the
 term "Investment"), such aggregate amount of the net reduction in
        Investments not to exceed in the case of any Unrestricted Subsidiary the
      amount of Restricted Investments previously made by the Company or any
       Restricted Subsidiary in such Unrestricted Subsidiary, which amount was
      included in the calculation of the amount of Restricted Payments; plus

        (d) to the extent that any Restricted Investment that was made
      after the Issue Date is sold for cash or the proceeds of such sale are
   converted into cash or otherwise liquidated or repaid for cash, the
amount of cash proceeds received with respect to such Restricted
       Investment, net of taxes and the cost of disposition, not to exceed the
amount of Restricted Investments made after the Issue Date.     

     The foregoing provisions do not prohibit, so long as no Default or Event of
Default is continuing or would occur as a consequence thereof, the following    
actions (collectively, "Permitted Payments"):                                   

    (i) the payment of any dividend within 60 days after the date of
  declaration thereof, if at such declaration date such payment would have
   been permitted under the Indenture (which payment shall be deemed to have
   been paid on such date of declaration for purposes of clause (iii) of the
preceding paragraph);                                                 

       (ii) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or any Indebtedness of the Company or any Restricted
  Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Restricted Subsidiary) of, or equity 
    contribution with respect to, Capital Stock of the Company (other than any
Disqualified Stock);                                                  

        (iii) any purchase or defeasance of Subordinated Indebtedness to the
extent required upon a Change of Control by the Indenture or other    
  agreement or instrument pursuant to which such Subordinated Indebtedness
     was issued or any refinancing of Subordinated Indebtedness permitted by the
Indenture or other agreement or instrument pursuant to which such     
    Subordinated Indebtedness was issued, but only if the Company has complied
 with its obligations under the provisions described under "-- Change of
Control;"                                                             

       (iv) any Restricted Investment to the extent the sole consideration
  for which consists of, or is made with the proceeds of the substantially
concurrent sale (other than to a Restricted Subsidiary) of, or equity 
    contribution with respect to, Capital Stock of the Company (other than any
Disqualified Stock);                                                  

          (v) the repurchase of Capital Stock of the Company (including options,
   warrants or other rights to acquire such Capital Stock) from departing or
deceased directors, officers and employees of the Company and its     
    Subsidiaries pursuant to the terms of an employee benefit plan or employee
   agreement in an aggregate amount that shall not exceed $500,000 since the
    Issue Date plus the aggregate cash proceeds from any payments on insurance
     policies in which the Company or any of its Subsidiaries is the beneficiary
     with respect to any directors, officers or employees of the Company and its
   Subsidiaries which proceeds are used to purchase the Capital Stock of the
 Company or any Restricted Subsidiary of the Company held by any of such
  directors, officers or employees; and the repurchase of Capital Stock of
  the Company or a Restricted Subsidiary by the Company or such Restricted
 Subsidiary pursuant to the terms of any of the Shareholders Agreements;

    (vi) loans or advances to employees of the Company or any of its
 Subsidiaries which loans or advances exist on the Issue Date, and other
loans or advances to employees of the Company or any                  

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    Subsidiary to pay reasonable relocation expenses or otherwise entered into
    in the ordinary course of business not to exceed $500,000 in the aggregate
principal amount at any one time outstanding;                         

   (vii) Restricted Payments in an amount such that the sum of the
    aggregate amount of Restricted Payments made pursuant to this clause (vii)
after the Issue Date does not exceed $2.5 million at any one time     
outstanding; and                                                      

    (viii) payments pursuant to any of the Transactions or made in a
    manner consistent with the information under the caption "Use of Proceeds"
   (other than general corporate purposes) in the Offering Circular pursuant
to which the Notes are offered and sold.                              

   For purposes of clause (iii) of the first paragraph of this covenant, the
Permitted Payments referred to in clauses (i) and (v) above shall be included in
the aggregate amount of Restricted Payments made since the Issue Date, and any  
other Permitted Payments described above shall be excluded.                     

  Limitation on Asset Sales.  The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sale      
unless:                                                                         

      (i) the Company or such Restricted Subsidiary, as the case may be,
     receives consideration at the time of such Asset Sale at least equal to the
   Fair Market Value (as evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee) of the
assets or other property sold or disposed of in the Asset Sale; and   

      (ii) at least 75% of such consideration consists of either cash or
     Cash Equivalents (other than in the case of an Asset Sale consummated prior
  to the 180th day following the Issue Date of all or substantially all of
the Capital Stock or assets of Wychem Limited, an English company     
indirectly wholly-owned by the Company).                              

   For purposes of this covenant, "cash" shall include (x) the amount of any
Indebtedness (other than any Indebtedness that is by its terms subordinated to  
the Notes and/or the Guarantees and/or the Company Guarantee), accounts payable 
and accrued expenses of the Company or such Restricted Subsidiary that is       
assumed by the transferee of any such assets or other property in such Asset    
Sale (and excluding any liabilities that are incurred in connection with or in  
anticipation of such Asset Sale), but only to the extent that such assumption of
Indebtedness is effected on a basis such that there is no further recourse to   
the Company or any of the Restricted Subsidiaries with respect to such          
liabilities (other than customary indemnifications to the transferee and its    
Affiliates) and (y) any notes, obligations or securities received by the Company
or such Restricted Subsidiary from such transferee that are due and payable     
within 60 days by the Company or such Restricted Subsidiary into cash (to the   
extent of the cash received).                                                   

Within 270 days after receipt of Net Proceeds from any Asset Sale, the
Company may elect to apply the Net Proceeds from such Asset Sale:               

(a)(i) to repay Indebtedness under the Credit Agreement and 
   permanently reduce the commitments thereunder (provided, however, that no
  such Net Proceeds shall be used to repay such Indebtedness to the extent
     such Net Proceeds arose from an Asset Sale of any Foreign Collateral), (ii)
    in the case where the property or asset that was the subject of such Asset
 Sale does not constitute Collateral, to repay Indebtedness secured by a
 Lien of the type described in clause (i), (iii), (vi), (viii), (xiv) or
 (xv) of the definition of the term "Permitted Lien" (provided, however,
that no such Net Proceeds shall be used to repay Indebtedness of any  
   Foreign Restricted Subsidiary except to the extent that such Net Proceeds
     arose from an Asset Sale of the assets of a Foreign Restricted Subsidiary),
    (iii) in the case where the property or asset that was the subject of such
     Asset Sale is the property or asset of a Foreign Restricted Subsidiary that
does not constitute Foreign Collateral, to repay Indebtedness of any  
Foreign Restricted Subsidiary or (iv) a combination of the foregoing  
clauses (i), (ii) and (iii); and/or                                   

         (b) make an investment in, or acquire assets and properties that will
be used in, the business of the Company or a Restricted Subsidiary,   
 existing on the Issue Date or in a Related Business; provided, however,
  that no such investments in or acquisitions of assets or properties that
    are to be used in the business of any Foreign Restricted Subsidiary or any
Related Business thereof may be made using any                        
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     such Net Proceeds except to the extent that such Net Proceeds arose from an
Asset Sale of the assets of a Foreign Restricted Subsidiary.          

    Pending the final application of any such Net Proceeds, the Company or any
Restricted Subsidiary may temporarily reduce Indebtedness of the Company under  
the Credit Agreement or temporarily invest such Net Proceeds in cash or Cash    
Equivalents. Any Net Proceeds from an Asset Sale not applied or invested as     
provided in the first sentence of this paragraph within 270 days of such Asset  
Sale will be deemed to constitute "Excess Proceeds."                            

    Each date that the aggregate amount of Excess Proceeds in respect of which
an Asset Sale Offer (as defined below) has not been made exceeds $5.0 million   
shall be deemed an "Asset Sale Offer Trigger Date." As soon as practicable, but 
in no event later than 20 business days after each Asset Sale Offer Trigger     
Date, the Company shall commence an offer (an "Asset Sale Offer") to purchase   
the maximum principal amount of Notes that may be purchased out of the Excess   
Proceeds. Any Notes to be purchased pursuant to an Asset Sale Offer shall be    
purchased pro rata based on the aggregate principal amount of Notes outstanding,
and all Notes shall be purchased at an offer price in cash in an amount equal to
100% of the principal amount thereof, plus accrued and unpaid interest and      
Additional Interest, if any, to the date of purchase. To the extent that any    
Excess Proceeds remain after completion of an Asset Sale Offer, the Company may 
use the remaining amount for general corporate purposes otherwise permitted by  
the Indenture. Upon the consummation of any Asset Sale Offer, the amount of     
Excess Proceeds shall be deemed to be reset to zero.                            

     Notice of an Asset Sale Offer shall be mailed by the Company not later than
the 20th business day after the related Asset Sale Offer Trigger Date to each   
Holder at such Holder's registered address, stating:                            

       (i) that an Asset Sale Offer Trigger Date has occurred and that the
    Company is offering to purchase the maximum principal amount of Notes that
    may be purchased out of the Excess Proceeds (to the extent provided in the
  immediately preceding paragraph), at an offer price in cash in an amount
equal to 100% of the principal amount thereof, plus accrued and unpaid
    interest and Additional Interest, if any, to the date of the purchase (the
     "Asset Sale Offer Purchase Date"), which shall be a business day, specified
     in such notice, that is not earlier than 30 days or later than 60 days from
the date such notice is mailed;                                       

 (ii) the amount of accrued and unpaid interest and Additional
Interest, if any, as of the Asset Sale Offer Purchase Date;           

         (iii) that any Note not tendered will continue to accrue interest and
Additional Interest, if applicable;                                   

         (iv) that, unless the Company defaults in the payment of the purchase
 price for the Notes payable pursuant to the Asset Sale Offer, any Notes
     accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
     interest and Additional Interest, if applicable, after the Asset Sale Offer
Purchase Date;                                                        

          (v) the procedures, consistent with the Indenture, to be followed by a
Holder in order to accept an Asset Sale Offer or to withdraw such     
acceptance; and                                                       

       (vi) such other information as may be required by the Indenture and
applicable laws and regulations.                                      

On the Asset Sale Offer Purchase Date, the Company will (i) accept for
payment the maximum principal amount of Notes or portions thereof tendered      
pursuant to the Asset Sale Offer that can be purchased out of Excess Proceeds   
from such Asset Sale that are to be applied to an Asset Sale Offer, (ii) deposit
with the Paying Agent the aggregate purchase price of all Notes or portions     
thereof accepted for payment, and (iii) deliver or cause to be delivered to the 
Trustee all Notes tendered pursuant to the Asset Sale Offer.                    

If less than all Notes tendered pursuant to the Asset Sale Offer are  
accepted for payment by the Company for any reason consistent with the          
Indenture, selection of the Notes to be purchased by the Company shall be in    
compliance with the requirements of the principal national securities exchange, 
if any, on which the Notes are listed or, if the Notes are not so listed, on a  
pro rata basis or by lot; provided, however,                                    

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that Notes accepted for payment in part shall only be purchased in integral     
multiples of $1,000. The Paying Agent shall promptly mail to each Holder or     
portions thereof accepted for payment an amount equal to the purchase price for 
such Notes plus accrued and unpaid interest and Additional Interest, if any,    
thereon, and the Trustee shall promptly authenticate and mail to such Holder    
accepted for payment in part a Note equal in principal amount to any unpurchased
portion of the Notes, and any Note not accepted for payment in whole or in part 
shall be promptly returned to the Holder of such Note. On and after an Asset    
Sale Offer Purchase Date, interest and Additional Interest, if applicable, will 
cease to accrue on the Notes or portions thereof accepted for payment, unless   
the Company defaults in the payment of the purchase price therefor. The Company 
will publicly announce the results of the Asset Sale Offer on or as soon as     
practicable after the Asset Sale Offer Purchase Date.                           

    Any repurchase of Notes pursuant to an Asset Sale Offer shall include both
U.S. Notes and Dutch Notes on a pro rata basis based upon the aggregate         
principal amount of the Notes outstanding at the time of such repurchase, unless
a Change of Control of the Dutch Issuer has occurred. The foregoing provisions  
will not apply to a transaction consummated in compliance with the provisions of
the Indenture described under "-- Merger, Consolidation and Sale of Assets"     
below.                                                                          

   The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Asset   
Sale Offer and will be deemed not to be in violation of any of the covenants    
under the Indenture to the extent such compliance is in conflict with such      
covenants.                                                                      

     Limitation on Liens.  The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create,   
incur, assume or suffer to exist any Lien on any asset now owned or hereafter   
acquired, or any income or profits therefrom, or assign or convey any right to  
receive income therefrom, in each case, other than Permitted Liens.             

     Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries.  The Indenture provides that the Company will not, and will not   
permit any Restricted Subsidiary to, directly or indirectly, create or otherwise
cause to become effective any consensual encumbrance or consensual restriction  
on the ability of any Restricted Subsidiary to (i) pay dividends or make any    
other distributions to the Company or any other Restricted Subsidiary on its    
Capital Stock or with respect to any other interest or participation in, or     
measured by, its profits, or pay any Indebtedness owed to the Company or any    
other Restricted Subsidiary, (ii) make loans or advances to, or issue any       
guaranty for the benefit of, the Company or any other Restricted Subsidiary or  
(iii) transfer any of its properties or assets to the Company or any other      
Restricted Subsidiary, except for such encumbrances or restrictions existing    
under or by reason of                                                           

    (a) the Credit Agreement as in effect on the Issue Date, and any
amendments, modifications, renewals, refundings, replacements or      
refinancings thereof; provided that such amendments, modifications,   
    renewals, refundings, replacements or refinancings are no more restrictive
in the aggregate with respect to such dividend and other payment      
restrictions than those contained in the Credit Agreement (or, if more
  restrictive, than those contained in the Indenture) immediately prior to
any such amendment, restatement, renewal, replacement or refinancing; 

(b) applicable law;                                         

    (c) any instrument governing Indebtedness or Capital Stock of an
Acquired Person acquired by the Company or any of its Restricted      
  Subsidiaries as in effect at the time of such acquisition (except to the
extent such Indebtedness was incurred in connection with or in        
contemplation of such acquisition); provided, however, that no such   
   encumbrance or restriction is applicable to any Person, or the properties
or assets of any Person, other than the Acquired Person;              

       (d) customary non-assignment, subletting or net worth provisions in
  leases or other agreements entered into the ordinary course of business;

        (e) Purchase Money Obligations for property acquired in the ordinary
course of business that impose restrictions only on the property so   
acquired;                                                             

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         (f) an agreement for the sale or disposition of assets or the Capital
    Stock of a Restricted Subsidiary; provided, however, that such restriction
    or encumbrance is only applicable to such Restricted Subsidiary or assets,
   as applicable, and such sale or disposition otherwise is permitted by the
 provisions described under "-- Certain Covenants -- Limitation on Asset
 Sales;" provided further, however, that such restriction or encumbrance
 shall be effective only for a period from the execution and delivery of
 such agreement through a termination date not later than 270 days after
     such execution and delivery (other than any such restriction or encumbrance
contained in the Belgium Purchase Agreement);                         

         (g) Refinancing Indebtedness permitted under the Indenture; provided,
   however, that the restrictions contained in the agreements governing such
Refinancing Indebtedness are no more restrictive in the aggregate than
those contained in the agreements governing the Indebtedness being    
refinanced immediately prior to such refinancing;                     

       (h) the Indenture, the Notes, the Guarantees, the Company Guarantee
and the Collateral Agreements; and                                    

          (i) encumbrances and restrictions imposed by amendments, restatements,
 renewals, replacements or refinancings of the contracts, instruments or
 obligations referred to in clauses (a) through (h) above; provided that
   such encumbrances and restrictions are, in the good faith judgment of the
     Company's Board of Directors, no more restrictive, in any material respect,
than those contained in such contracts, instruments or obligations    
   immediately prior to such amendment, restatement, renewal, replacement or
refinancing.                                                          

  Limitation on Transactions with Affiliates.  The Indenture provides that
the Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into or suffer to exist any transaction or series of       
related transactions (including, without limitation, the sale, purchase,        
exchange or lease of assets, property or services) with any Affiliate of the    
Company unless (1) such transaction or series of transactions is on terms that  
are no less favorable to the Company or such Restricted Subsidiary, as the case 
may be, than those that could reasonably be obtainable at such time in a        
comparable transaction in arm's-length dealings with an unrelated third party,  
and (2) the Company delivers to the Trustee (a) with respect to any transaction 
or series of transactions involving aggregate payments in excess of $250,000, an
Officer's Certificate certifying that such transaction or series of related     
transactions has been approved by a majority of the members of the Board of     
Directors of the Company, and (b) with respect to any transaction or series of  
transactions involving aggregate payments in excess of $5.0 million, an opinion 
as to the fairness of the transaction to the Company from a financial point of  
view issued by an accounting, appraisal or investment banking firm of national  
standing.                                                                       

Notwithstanding the foregoing, this covenant does not apply to:       

 (i) employment agreements or compensation or employee benefit
   arrangements with any officer, director or employee of the Company or any
of its Restricted Subsidiaries entered into in the ordinary course of 
business (including customary benefits thereunder and including       
    reimbursement or advancement of out-of-pocket expenses, and director's and
officer's liability insurance);                                       

       (ii) any transaction entered into by or among the Company or one of
     its Restricted Subsidiaries with one or more Restricted Subsidiaries of the
Company;                                                              

 (iii) any transaction permitted by the second paragraph under
"-- Certain Covenants -- Limitation on Restricted Payments,"          

      (iv) transactions permitted by, and complying with, the provisions
described under "-- Merger, Consolidation and Sale of Assets";        

      (v) any Transaction or any transaction described under the caption
    "Use of Proceeds" in the Offering Circular pursuant to which the Notes are
offered and sold; and                                                 

          (vi) agreements to make the payments described in clause (y)(2) of the
second sentence of the definition of the term "Investment."           

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     The Indenture provides that as of the Issue Date, the cash salary and bonus
in the aggregate payable to Jack Bendheim in respect of each fiscal year        
beginning on or after July 1, 2003 (i) for which Cash Flow of the prior fiscal  
year is less than $25.0 million shall be capped at $750,000, (ii) for which Cash
Flow of the prior fiscal year is greater than or equal to $25.0 million but less
than $36.0 million, shall not exceed the sum of (A) $750,000 plus (B)(I)        
$900,000 times (II) a ratio, the numerator of which is Cash Flow with respect to
such prior fiscal year less $25.0 million and the denominator of which is $11.0 
million and (iii) for which Cash Flow of the prior fiscal year is greater than  
or equal to $36.0 million, shall be determined by the Compensation Committee of 
the Board of Directors and shall not exceed $2.0 million.                       

  Limitation on Issuances and Sales of Capital Stock of Subsidiaries.  The
Company will not permit or cause any of its Restricted Subsidiaries to issue or 
sell any Capital Stock except:                                                  

     (1) to the Company or a Wholly-Owned Restricted Subsidiary of the
 Company and so long as concurrently with the issuance thereof all steps
  necessary for the Collateral Agent to have a perfected security interest
therein, subject to the Permitted Liens, shall have been taken;       

     (2) issuances of director's qualifying shares or sales to foreign
    nationals of shares of Capital Stock of Foreign Restricted Subsidiaries to
the extent required by applicable law;                                

          (3) if, immediately after giving effect to such issuance or sale, such
  Restricted Subsidiary would no longer constitute a Restricted Subsidiary
 and any Investment in such Person remaining after giving effect to such
     issuance or sale would have been permitted to be made under the "Limitation
  on Restricted Payments" covenant if made on the date of such issuance or
sale; or                                                              

        (4) sales of (i) all of the Capital Stock of a Restricted Subsidiary
   of the Company or (ii) Common Stock of a Foreign Subsidiary, in each case
in compliance with the provisions of the "Limitation on Asset Sales"  
covenant.                                                             

Limitation on Designation of Unrestricted Subsidiaries.  The Indenture
provides that the Company will not designate any Subsidiary of the Company      
(other than a newly created Subsidiary in which no Investment has previously    
been made) as an "Unrestricted Subsidiary" under the Indenture (a "Designation")
unless:                                                                         

          (a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;                              

        (b) immediately after giving effect to such Designation, the Company
would be able to incur $1.00 of additional Indebtedness (other than   
Permitted Indebtedness) under the covenant described under "-- Certain
Covenants -- Limitation on Incurrence of Indebtedness;" and           

    (c) the Company would not be prohibited under the Indenture from
making an Investment at the time of Designation in an amount (the     
  "Designation Amount") equal to the greater of (x) the book value of such
  Restricted Subsidiary on such date and (y) the Fair Market Value of such
Restricted Subsidiary on such date.                                   

   In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant   
described under "-- Certain Covenants -- Limitation on Restricted Payments" for 
all purposes of the Indenture in an amount equal to the Designation Amount.     

The Indenture further provides that the Company will not designate an 
Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation"), unless: 

       (a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Redesignation; and                    

  (b) all Liens and Indebtedness of such Unrestricted Subsidiary
 outstanding immediately following such Redesignation shall be deemed to
have been incurred at such time and shall have been permitted to be   
incurred for all purposes of the Indenture.                           

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 The Indenture, which as previously stated was entered into on the Issue
Date in connection with the issuance of the Outstanding Notes, contains a       
requirement that PMC, MRT Holdings, LLC and Prince MFG, LLC would be deemed to  
be redesignated as a Restricted Subsidiaries on January 1, 2004 if the PMC Sale 
Transactions were not consummated on or prior to such date. No such             
redesignation occurred as we consummated the PMC Sale Transactions on December  
26, 2003. See "Management's Discussion and Analysis of Financial Condition and  
Results of Operations -- Prince Transactions."                                  

An Unrestricted Subsidiary shall be deemed to be redesignated as a    
Restricted Subsidiary at any time if (a) the Company or any other Restricted    
Subsidiary (i) provides credit support for, or a guarantee of, any Indebtedness 
of such Unrestricted Subsidiary (including any undertaking, agreement or        
instrument evidencing such Indebtedness) or (ii) is directly or indirectly      
liable for any Indebtedness of such Unrestricted Subsidiary or (b) a default    
with respect to any Indebtedness of such Unrestricted Subsidiary (including any 
right which the holders thereof may have to take enforcement action against it) 
would permit (upon notice, lapse of time or both) any holder of any other       
Indebtedness of the Company or any Restricted Subsidiary to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or       
payable prior to its final scheduled maturity, except in the case of clause (a) 
to the extent permitted under the covenant described above under the caption    
"-- Certain Covenants -- Limitation on Restricted Payments."                    

    If any Unrestricted Subsidiary is (or is deemed to have been) redesignated
as a Restricted Subsidiary, each Subsidiary of the Company that owns all or any 
portion of the Capital Stock of such Unrestricted Subsidiary shall be deemed to 
have been redesignated as a Restricted Subsidiary as well.                      

MRT Holdings, LLC and Prince MFG, LLC and its direct wholly-owned     
subsidiary, PMC, were the only Unrestricted Subsidiaries as of the Issue Date.  

    All Designations and Redesignations must be evidenced by Board Resolutions
delivered to the Trustee certifying compliance with the foregoing provisions.   
Subsidiaries that are not designated by the Board of Directors as Restricted or 
Unrestricted Subsidiaries will be deemed to be Restricted Subsidiaries. The     
Designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be   
deemed a Designation of all of the Subsidiaries of such Unrestricted Subsidiary 
as Unrestricted Subsidiaries.                                                   

    Noteholder Representative.  The Indenture provides that from and after the
Issue Date until the date on which all principal and interest (including any    
Additional Interest) on all of the outstanding Units (and the underlying Notes) 
have been paid in full as provided in the Indenture, the Company will take such 
action as shall be necessary in accordance with applicable law and its          
certificate of incorporation and by-laws so that the Board of Directors of the  
Company may include one Noteholder Representative.                              

   The Noteholder Representative shall be designated mutually by Jefferies &
Company, Inc. ("Jefferies") and the Company. If Jefferies and the Company cannot
agree on a mutually acceptable candidate within 60 days after the Issue Date (or
the date of any subsequent vacancy), each of Jefferies and the Company shall    
nominate a candidate meeting the criteria below and the Company shall mail a    
ballot to the Holders within 90 days of the Issue Date (or the date of any      
subsequent vacancy). The ballot may include biographical and other information  
with respect to each candidate under Regulation 14A of the Securities Exchange  
Act of 1934, as amended. The Noteholder Representative will be selected by      
Holders of a majority in aggregate principal amount of the Notes who complete   
and submit to the Company a ballot. The initial Noteholder Representative       
designated by the holders of the Notes in accordance with this covenant was Mr. 
Sam Gejdenson. See "Management -- Directors and Executive Officers."            

   Each candidate submitted by Jefferies and the Company for election as the
Noteholder Representative shall be a person who is not an executive officer or  
director of (i) a significant supplier of the Company or any Subsidiary or      
Affiliate thereof or (ii) any competitor of the Company or any Subsidiary or    
Affiliate thereof, unless otherwise agreed by the Company.                      

   If a Noteholder Representative resigns, dies or becomes incapacitated, or
such position is otherwise vacant, no action requiring the affirmative vote of  
the Noteholder Representative shall be taken until the earlier of (i) the       
expiration of 45 days after the mailing of such ballot and (ii) the designation 
of a successor                                                                  

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Noteholder Representative by the Holders and approval of such action by the     
successor Noteholder Representative.                                            

The Noteholder Representative shall be a member of the Compensation   
Committee and, except as provided above, all decisions of the Compensation      
Committee shall require the consent of the Noteholder Representative.           

     Business Activities.  The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, engage in any business   
other than such business as conducted by it on the Issue Date and any Related   
Business. The Indenture also provides that for so long as any of MRT Holdings,  
LLC, Prince MFG, LLC or PMC shall be an Unrestricted Subsidiary of the Company  
or the PMC Sale Transactions shall not have been consummated, no such entity    
shall engage in any activities other than those currently conducted by such     
entity or those necessary or incidental to consummating the PMC Sale            
Transactions; provided, however, that notwithstanding the foregoing, no such    
entity shall incur any Indebtedness, make any Investments, or pay the           
obligations of any other person or entity, in an aggregate amount exceeding     
$25,000 or dispose of any of its assets other than in the ordinary course of    
business, if such entity is an Unrestricted Subsidiary of the Company other than
as necessary or incidental to consummate the PMC Sale Transactions.             

   Impairment of Security Interest.  No Issuer nor any Guarantor may take or
knowingly omit to take any action which would materially impair the Liens in    
favor of the Collateral Agent, on behalf of itself, the Trustee and the Holders,
with respect to any material portion of the Collateral securing the Notes or any
Guarantee either the U.S. Notes, the Domestic Guarantees and the Company        
Guarantee or the Dutch Notes and the Foreign Guarantees. No Issuer nor any      
Guarantor may grant to any Person (other than the Collateral Agent), or permit  
any Person (other than the Collateral Agent) to retain any interest whatsoever  
in the Collateral other than Permitted Liens or as otherwise permitted by the   
Indenture. No Issuer nor any Guarantor may enter into any agreement that        
requires the proceeds received from any sale of Collateral to be applied to     
repay, redeem, defease or otherwise acquire or retire any Indebtedness of any   
Person, other than as permitted by the Indenture, the Notes and the Collateral  
Agreements, subject to the terms of the Intercreditor Agreement (as it relates  
to the Domestic Collateral). Each Issuer and each Guarantor will, at its sole   
cost and expense, execute and deliver all such agreements and instruments as the
Collateral Agent or the Trustee shall reasonably request to more fully or       
accurately describe the property intended to be Collateral or the obligations   
intended to be secured by the Collateral Agreements. Each Issuer and each       
Guarantor will, at its sole cost and expense, file any such notice filings or   
other agreements or instruments as may be required under applicable law to      
perfect the Liens created by the Collateral Agreements, subject to Permitted    
Liens.                                                                          

 Landlord, Bailee and Consignee Waivers.  Each of the Company, the Dutch
Issuer, each Domestic Restricted Subsidiary of the Company and each Restricted  
Subsidiary of the Dutch Issuer that is a lessee of, or becomes a lessee of, real
property (whether used for manufacturing purposes or otherwise) on or in which  
it will maintain, store, hold or locate all or any of its assets having an      
aggregate fair market value of at least $50,000, is, and will be, required to   
use commercially reasonable best efforts (which shall not require the           
expenditure of cash or the making of any material concessions under any relevant
lease that was in effect on the Issue Date or if such (i) Domestic Restricted   
Subsidiary of the Company was not a Domestic Restricted Subsidiary of the       
Company on the Issue Date, the date such Domestic Restricted Subsidiary became a
Domestic Restricted Subsidiary of the Company or (ii) Restricted Subsidiary of  
the Dutch Issuer was not a Restricted Subsidiary of the Dutch Issuer on the     
Issue Date, the date such Restricted Subsidiary became a Restricted Subsidiary  
of the Dutch Issuer) to deliver to the Collateral Agent a landlord waiver,      
substantially in the form of the exhibit form thereof to be attached to the     
Indenture, executed by the lessor of such real property; provided that in the   
case where such lease is a lease in existence on the Issue Date or the lessee   
thereof that is a (A) Domestic Restricted Subsidiary of the Company was not a   
Domestic Restricted Subsidiary of the Company on the Issue Date or (B)          
Restricted Subsidiary of the Dutch Issuer was not a Restricted Subsidiary of the
Dutch Issuer on the Issue Date, the Company or its Domestic Restricted          
Subsidiary or the Dutch Issuer or its Restricted Subsidiary that is the lessee  
thereunder shall have 60 days from the Issue Date (or from the date the lessee  
thereof becomes a Domestic Restricted Subsidiary of the Company or a Restricted 
Subsidiary of the Dutch Issuer) to satisfy such requirement and shall be        
relieved of                                                                     
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such obligation with respect to any landlord waiver to the extent such lessor   
has refused to deliver such a waiver following such Person's use of such        
commercially reasonable efforts. Each of the Company, each of its Domestic      
Restricted Subsidiaries, the Dutch Issuer and each of its Restricted            
Subsidiaries that provides any of its assets having an aggregate fair market    
value of at least $50,000 to a bailee or consignee agrees to be bound by the    
terms of the immediately preceding sentence, mutatis mutandis; provided that (i)
the terms "landlord", "lessee" and "lease" shall be replaced, respectively, with
the terms "bailee" or "consignee", as applicable, "bailor" or "consignor", as   
applicable, and the "applicable agreement" and (ii) the condition that the      
lessee maintain, store, hold or locate all or any of its assets having an       
aggregate fair market value of at least $50,000 shall instead be replaced with  
the condition that the fair market value of the assets subject to the applicable
bailment or consignment have a fair market value of at least $50,000.           

  Real Estate Mortgages and Recordings.  With respect to any real property
(individually and collectively, the "Premises") that (a) is owned as of the     
Issue Date by the Dutch Issuer or any of its Restricted subsidiaries or (b)(i)  
is acquired by Dutch Issuer or any of its Restricted Subsidiaries after the     
Issue Date and (ii) has a purchase price or a Fair Market Value, of at least    
$250,000 (other than properties purchased subject to Acquired Indebtedness or   
Purchase Money Indebtedness), the Dutch Issuer or such Restricted Subsidiary, as
the case may be, shall, at its sole cost and expense:                           

        (A) take all such actions as the Collateral Agent deems necessary or
desirable to cause the Collateral Agent to have a valid first priority
perfected Lien in such Premises free and clear of all defects and     
   encumbrances (other than Permitted Liens), including, without limitation,
(1) duly executing and delivering a Foreign Collateral Agreement, (2) 
     recording, registering or filing such Foreign Collateral Agreement with the
necessary offices or authorities to result in such Lien being a valid,
   perfected first priority Lien against the such Premises under the laws of
the jurisdiction in which such Premises is located and (3) paying all 
recordation taxes, fees and expenses required in connection with such 
recordation, registration or filing; and                              

         (B) deliver to the Collateral Agent, with respect to such Premises, a
     copy of such Foreign Collateral Agreement and evidence of such recordation,
     registration or filing, as the case may be, local counsel opinions and such
     other documents, instruments, certificates and agreements as the Collateral
   Agent and its counsel shall, consistent with the laws of the jurisdiction
     in which such Premises is located, reasonably request or as may be required
under the Indenture;                                                  

provided that the Dutch Issuer or such Restricted Subsidiary, as the case may   
be, shall have a period of 90 days from (x) the date of the Issue Date to       
satisfy the foregoing requirements with respect to any such Premises that is    
owned by the Dutch Issuer or such Restricted Subsidiary, as the case may be, as 
of the Issue Date and (y) the date such interest was acquired by the Dutch      
Issuer or such Restricted Subsidiary, as the case may be, to satisfy the        
foregoing requirements with respect to any such Premises that was acquired after
the Issue Date.                                                                 

Future Guarantors.  The Indenture provides that the Company and each  
Domestic Guarantor shall cause each Domestic Restricted Subsidiary of the       
Company which, after the date of the Indenture (if not then a Guarantor),       
becomes a Domestic Restricted Subsidiary (including, without limitation, as the 
result of the redesignation of an Unrestricted Subsidiary that is a Domestic    
Subsidiary as a Restricted Subsidiary) to:                                      

   (1) execute and deliver to the Trustee a supplemental indenture
     pursuant to which such Domestic Restricted Subsidiary shall unconditionally
    guarantee on a senior secured basis all of the Company's obligations under
   the U.S. Notes and the Indenture on the terms set forth in the Indenture;

       (2) (a) execute and deliver to the Collateral Agent and the Trustee
     such amendments or supplements to the Domestic Collateral Agreements as may
     be necessary or as the Collateral Agent deems reasonably desirable in order
  to grant to Collateral Agent, for the benefit of itself, the Holders and
     the Trustee, a perfected security interest in the Capital Stock of such new
     Domestic Restricted Subsidiary and the debt securities of such new Domestic
   Restricted Subsidiary, subject to Permitted Liens, which are owned by the
  Company or any Domestic Restricted Subsidiary and required to be pledged
pursuant to the Domestic Collateral Agreements, and (b) deliver to    
Collateral Agent the                                                  

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    certificates representing such Capital Stock and debt securities, together
with (i) in the case of such Capital Stock, undated stock powers or   
    instruments of transfer, as applicable, endorsed in blank, and (ii) in the
    case of such debt securities, endorsed in blank, in each case executed and
delivered by a Officer of the Company or such Domestic Restricted     
Subsidiary, as the case may be;                                       

          (3) cause such new Domestic Restricted Subsidiary to take such actions
as may be necessary or as necessary or as the Collateral Agent deems  
  reasonably desirable to grant to the Collateral Agent for the benefit of
itself, the Holders and the Trustee a perfected security interest in  
    substantially all of the assets of such new Domestic Restricted Subsidiary
(excluding real property and interests therein), subject to Permitted 
     Liens, including the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required by the Domestic Collateral   
  Agreements or by law or as may be reasonably requested by the Collateral
Agent;                                                                

   (4) take such further action and execute and deliver such other
   documents specified in the Indenture or otherwise reasonably requested by
the Trustee or the Collateral Agent to effectuate the foregoing; and  

    (5) deliver to the Trustee an opinion of counsel relating to the
     foregoing actions and the perfection of such security interests so granted,
in each case, to the extent required under the Trust Indenture Act.   

The Indenture also provides that the Dutch Issuer and each Restricted 
Subsidiary of the Dutch Issuer shall cause each Restricted Subsidiary of the    
Dutch Issuer which, after the date of the Indenture (if not then a Foreign      
Guarantor), becomes a Restricted Subsidiary of the Dutch Issuer (including,     
without limitation, as the result of the redesignation of an Unrestricted       
Subsidiary that is a Subsidiary of the Dutch Issuer as a Restricted Subsidiary  
thereof) to take the actions and make the deliveries specified in the           
immediately preceding paragraph, mutatis mutandis; provided that (i) the terms  
"Domestic Restricted Subsidiary", "Company's" and "U.S. Notes" as used in the   
immediately preceding paragraph shall be deemed to refer to the terms           
"Restricted Subsidiary", "Dutch Issuer's" and "Dutch Notes", respectively, and  
(ii) clauses (2) and (3) thereof shall be deemed to read in their respective    
entireties as follows:                                                          

         "(2) execute and deliver to the Collateral Agent and the Trustee such
     Foreign Collateral Agreements or amendments or supplements thereto and take
all such other actions including, without limitation, recording,      
   registering or filing such amendments, supplements or any other documents
 or instruments and paying all such taxes, fees and expenses required in
    connection with such recordation, registration or filing, in each case, as
   may be necessary or as the Collateral Agent deems reasonably desirable in
order to grant to the Collateral Agent, for the benefit of itself, the
  Holders and the Trustee, a Lien in 100% of the Capital Stock of such new
     Restricted Subsidiary, which is owned by the Dutch Issuer or any Restricted
 Subsidiary of the Dutch Issuer, and provide the Collateral Agent with a
 valid first priority perfected Lien (subject to Permitted Liens) in all
    such Capital Stock for the benefit of itself, the Holders and the Trustee;

       (3) cause such new Restricted Subsidiary of the Dutch Issuer to (x)
  execute and deliver to the Collateral Agent and the Trustee such Foreign
 Collateral Agreements or amendments or supplements thereto and take all
     such other actions including, without limitation, recording, registering or
   filing such amendments, supplements or any other documents or instruments
  and paying all such taxes, fees and expenses required in connection with
     such recordation, registration or filing, in each case, as may be necessary
    or as the Collateral Agent deems reasonably desirable in order to grant to
the Collateral Agent, for the benefit of itself, the Holders and the  
     Trustee, a Lien in all of the accounts receivable, inventory (to the extent
     permitted by applicable law) and Capital Stock of each direct Subsidiary of
     such new Restricted Subsidiary that is then owned or thereafter acquired by
 such new Restricted Subsidiary, and provide the Collateral Agent with a
 valid first priority perfected Lien (subject to Permitted Liens) in all
    such accounts receivable, inventory (to the extent permitted by applicable
law) and Capital Stock for the benefit of itself, the Holders and the 
   Trustee and (y) to the extent such new Restricted Subsidiary of the Dutch
Issuer owns any real property on the date it became a new Restricted  
Subsidiary of the Dutch Issuer, comply with the requirements of the   
covenant "-- Certain Covenants -- Real Estate Mortgages               

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  and Recordings" as if such new Restricted Subsidiary of the Dutch Issuer
had acquired such real property on such date;".                       

   Provision of Financial Statements and Information.  Whether or not either
Issuer is then subject to Section 13(a) or 15(d) of the Exchange Act, the       
Indenture provides that the Company will file with the Commission following the 
effectiveness of the Exchange Offer Registration Statement, so long as any Notes
are outstanding, the annual reports, quarterly reports and other periodic       
reports which the Company would have been required to file with the Commission  
pursuant to such Section 13(a) or 15(d) if the Company were so subject, and such
documents shall be filed with the Commission on or prior to the respective dates
(the "Required Filing Dates") by which the Company would have been required so  
to file such documents if the Company were so subject; provided the Commission  
will accept such filings. The Company will also in any event (i) within 15 days 
of each Required Filing Date following the effectiveness of the Exchange Offer  
Registration Statement, file with the Trustee, and supply the Trustee with      
copies for delivery to the Holders and prospective purchasers of the Notes, the 
annual reports, quarterly reports and other periodic reports which the Company  
would have been required to file with the Commission pursuant to Section 13(a)  
or 15(d) of the Exchange Act if the Company were subject to such Sections and   
(ii) if the Commission will not accept the filing of such documents promptly    
upon written request and payment of the reasonable cost of duplication and      
delivery, supply copies of such documents to any prospective Holder of the      
Notes. Prior to the effectiveness of the Exchange Offer Registration Statement, 
the Company will provide upon request from Holders or prospective Holders of    
Notes the information required by Rule 144A(d)(4) under the Securities Act.     

   Payments for Consent.  Neither Issuer will, nor will either Issuer permit
any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any 
consideration to or for the benefit of any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the Indenture,
the Notes, the Registration Rights Agreement, the Collateral Agreements or the  
Intercreditor Agreement unless such consideration is offered to be paid or is   
paid to all Holders that consent, waive or agree to amend in the time frame set 
forth in the solicitation documents relating to such consent, waiver or         
agreement.                                                                      

   Additional Covenants.  The Indenture also contains covenants with respect
to the following matters: (i) payment of principal, premium, interest and       
Additional Interest; (ii) maintenance of an office or agency in The City of New 
York; (iii) maintenance of corporate existence; (iv) payment of taxes and other 
claims; (v) maintenance of properties; and (vi) maintenance of insurance.       

MERGER, CONSOLIDATION AND SALE OF ASSETS                                        

The Indenture provides that the Company shall not, in any single      
transaction or series of related transactions, consolidate or merge with or into
(whether or not the Company is the Surviving Person), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) in one or more related transactions to, another Person, and the   
Company will not permit any Restricted Subsidiary to enter into any such        
transaction or series of related transactions if such transaction or series of  
related transactions, in the aggregate, would result in a sale, assignment,     
transfer, lease, conveyance or other disposition of all or substantially all of 
the properties and assets of the Company and the Restricted Subsidiaries, taken 
as a whole, to another Person, unless:                                          

         (i) the Surviving Person is a corporation organized or existing under
the laws of the United States, any State thereof or the District of   
Columbia;                                                             

         (ii) the Surviving Person (if other than the Company) assumes (a) all
    the obligations of the Company under the U.S. Notes (and the Guarantees of
the Company's Domestic Restricted Subsidiaries shall be confirmed as  
applying to such Surviving Person's obligations), the Indenture, the  
     Company Guarantee and, if then in effect, the Registration Rights Agreement
 pursuant to a supplemental indenture or other written agreement, as the
  case may be, in a form reasonably satisfactory to the Trustee and (b) by
amendment, supplement or other instrument (in form and substance      
satisfactory to the Trustee and the Collateral Agent), executed and   
delivered to the Trustee, all Obligations of the Company under the    
  Collateral Agreements and the Intercreditor Agreement, and in connection
therewith shall cause such                                            
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  instruments to be filed and recorded in such jurisdictions and take such
   other actions as may be required by applicable law to perfect or continue
   the perfection of the Lien created under the Collateral Agreements on the
Collateral owned by or transferred to the surviving entity;           

 (iii) immediately both before and after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;                                                           

         (iv) after giving pro forma effect to such transaction, the Surviving
     Person (x) would have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately preceding such      
transaction and (y) would be permitted to incur at least $1.00 of     
     additional Indebtedness (other than Permitted Indebtedness) pursuant to the
    covenant described under "-- Certain Covenants -- Limitation on Incurrence
of Indebtedness;" and                                                 

       (v) the Company or the Surviving Person shall have delivered to the
  Trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,   
 conveyance or other disposition and, if a supplemental indenture or any
amendment or supplement to the Collateral Agreements is required in   
connection with such transaction, such supplemental indenture or such 
amendment or supplement comply with the applicable provisions of the  
  Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied to the extent such conditions are
    required to be satisfied thereunder either prior to or concurrent with the
consummation of the applicable transaction.                           

 Notwithstanding clauses (iii) and (iv) above, any Restricted Subsidiary
(other than the Dutch Issuer) may consolidate with, merge into or transfer all  
or part of its properties and assets to the Company.                            

In the event of any transaction (other than a lease) described in and 
complying with the conditions listed in the immediately preceding paragraph in  
which the Company is not the Surviving Person, such Surviving Person shall      
succeed to, and be substituted for, and may exercise every right and power of,  
the Company, and the Company shall be discharged from its obligations under, the
Indenture, the U.S. Notes, the Domestic Collateral Agreements and the           
Registration Rights Agreement.                                                  

   Each Domestic Guarantor (other than any Domestic Guarantor whose Domestic
Guarantee is to be released in accordance with the terms of the Domestic        
Guarantee and the Indenture in connection with any transaction complying with   
the provisions of "-- Certain Covenants -- Limitation on Asset Sales") will not,
and the Company will not cause or permit any Domestic Guarantor to, consolidate 
with or merge with or into any Person other than the Company or any other       
Domestic Guarantor unless:                                                      

          (1) the entity formed by or surviving any such consolidation or merger
(if other than the Domestic Guarantor) or to which such sale, lease,  
conveyance or other disposition shall have been made is a corporation 
 organized and existing under the laws of the United States or any State
thereof or the District of Columbia;                                  

      (2) such entity assumes (a) by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the 
Trustee, all of the obligations of the Domestic Guarantor under the   
Domestic Guarantee and, to the extent applicable, the Intercreditor   
     Agreement and (b) by amendment, supplement or other instrument (in form and
  substance satisfactory to the Trustee and the Collateral Agent) executed
   and delivered to the Trustee and the Collateral Agent, all obligations of
     the Domestic Guarantor under the Domestic Collateral Agreements and, to the
    extent applicable, the Intercreditor Agreement and in connection therewith
     shall cause such instruments to be filed and recorded in such jurisdictions
     and take such other actions as may be required by applicable law to perfect
or continue the perfection of the Lien created under the Domestic     
Collateral Agreements on the Collateral owned by or transferred to the
surviving entity;                                                     

(3) immediately both before and after giving effect to such 
transaction, no Default or Event of Default shall have occurred and be
continuing;                                                           

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          (4) immediately after giving effect to such transaction and the use of
    any net proceeds therefrom on a pro forma basis, the Company could satisfy
    the provisions of clause (iv) of the first paragraph of this covenant; and

    (5) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that such         
 consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and, if a supplemental indenture or any amendment or
    supplement to the Domestic Collateral Agreements is required in connection
 with such transaction, such supplemental indenture or such amendment or
    supplement comply with the applicable provisions of the Indenture and that
     all conditions precedent in the Indenture relating to such transaction have
been satisfied.                                                       

     Notwithstanding clauses (3) and (4) above, any Restricted Subsidiary (other
than the Dutch Issuer) may consolidate with, merge into or transfer all or part 
of its properties and assets to the Company or any Domestic Guarantor.          

   Any merger or consolidation of (i) a Domestic Guarantor with and into the
Company (with the Company being the surviving entity) or another Domestic       
Guarantor or (ii) a Domestic Guarantor or the Company with an Affiliate         
organized solely for the purpose of reincorporating such Domestic Guarantor or  
the Company in another jurisdiction in the United States or any State thereof or
the District of Columbia or changing the legal form of such Domestic Guarantor  
or the Company need only comply with in the case of a merger or consolidation   
involving (x) the Company as described in clause (ii) above, clauses (ii) and   
(v) of the first paragraph of this covenant and (y) in the case of a Domestic   
Guarantor as described in (1) clause (i) above, clause (5) of the immediately   
preceding paragraph and (2) clause (ii) above, clauses (2) and (5) of the       
immediately preceding paragraph.                                                

    The Indenture will contain similar restrictions on mergers, consolidations
and sales of assets by the Dutch Issuer and the Foreign Guarantors as those     
contained in the paragraphs set forth above in this covenant, mutatis mutandis; 
provided that                                                                   

 (i) the terms "Company", "Restricted Subsidiary", "Restricted
 Subsidiaries", "the United States, any State thereof or the District of
  Columbia", "U.S. Notes", "Domestic Guarantee", "Domestic Guarantor", and
 "Domestic Collateral Agreements" as used in the preceding paragraphs of
 this covenant, other than clause (iv) of the first paragraph hereof and
   clause (4) of the third paragraph hereof shall remain unchanged, shall be
    deemed to refer to the terms "Dutch Issuer", "Restricted Subsidiary of the
Dutch Issuer", "Restricted Subsidiaries of the Dutch Issuer", "the    
    jurisdiction of organization of the Dutch Issuer or Foreign Guarantor that
  is the subject of such transaction", "Dutch Notes", "Foreign Guarantee",
 "Foreign Guarantor", and "Foreign Collateral Agreements", respectively;

      (ii) the words "of the Company's Domestic Restricted Subsidiaries"
   contained in clause (ii)(a) of the first paragraph of this covenant shall
   be deemed to have been replaced with the words "of the Guarantors and the
Company Guarantee";                                                   

        (iii) clause (ii) of the first paragraph of this covenant shall also
be deemed to be revised to delete the words "and the Intercreditor    
Agreement" and the words ", the Company Guarantee" therefrom;         

        (iv) the last sentence of the first paragraph of this covenant shall
     be deemed to read in its entirety as follows "Notwithstanding clauses (iii)
and (iv) above, any Restricted Subsidiary of the Dutch Issuer may     
    consolidate with, merge into or transfer all or part of its properties and
assets to the Dutch Issuer.";                                         

        (v) clause (2) of the third paragraph of this covenant shall also be
  deemed to be revised to delete the words "and, to the extent applicable,
the Intercreditor Agreement";                                         

        (vi) the last sentence of the third paragraph of this covenant shall
   be deemed to read in its entirety as follows "Notwithstanding clauses (3)
and (4) above, any Restricted Subsidiary of the Dutch Issuer may      
    consolidate with, merge into or transfer all or part of its properties and
 assets to the Dutch Issuer, the U.S. Issuer or any other Guarantor; and

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       (vii) at the end of such covenant, the following provision would be
inserted as an additional provision thereof:                          

    "Notwithstanding the foregoing, the Dutch Issuer may permit, and there may
be effected, the Belgium Plant Sale and Virginiamycin Production Transactions." 

POSSESSION, USE AND RELEASE OF COLLATERAL                                       

Unless an Event of Default shall have occurred and be continuing, each
Issuer and each Guarantor has the right to remain in possession and retain      
exclusive control of its Collateral securing the Notes (other than as set forth 
in the Collateral Agreements), to freely operate the Collateral and to collect, 
invest and dispose of any income therefrom; provided that until delivery of a   
written notice from the Collateral Agent to the Company or the applicable       
Domestic Guarantor, when any Event of Default shall have occurred and be        
continuing, to refrain from exercising any voting, consensual rights and other  
rights pertaining to Collateral consisting of Capital Stock pledged by it to the
Collateral Agent for the benefit of itself, the Trustee and the Holders, the    
Company or such Domestic Guarantor, as the case may be, shall be entitled to    
exercise all such voting, consensual rights and other rights pertaining to such 
Collateral.                                                                     

Release of Collateral.  Upon compliance by the applicable Issuer or   
Guarantor with the conditions set forth below under the caption "-- Asset Sale  
Release," "-- Non-Asset Sale Release" or "-- Release of Inventory and Accounts  
Receivable Collateral" in respect of any release of items of its Collateral     
described thereunder (and in the case of any such items of Collateral subject to
the conditions set forth below under the caption "-- Asset Sale Release," upon  
delivery by the Company to the Collateral Agent and the Trustee of an opinion of
counsel to the effect that such conditions have been met), (a)(i) in the case of
any such items of Collateral subject to the conditions set forth below under the
caption "-- Asset Sale Release," the Collateral Agent will terminate and release
its Lien granted under the Collateral Agreements on such items of Collateral and
(ii) in the case of any such items of Collateral subject to the conditions set  
forth below under the caption "-- Non-Asset Sale Release" or "-- Release of     
Inventory and Accounts Receivable Collateral", the Lien granted under the       
Collateral Agreements on such items of Collateral shall terminate and be        
released automatically and without any action by or on behalf of the Collateral 
Agent, and (b) in each such case, the Collateral Agent shall, at the sole cost  
and expense of such applicable Issuer or Guarantor, execute and deliver to such 
applicable Issuer or Guarantor such documents, without any representation,      
warranty or recourse of any kind whatsoever, as or such applicable Issuer or    
Guarantor shall reasonably request to evidence such termination and release.    

   Asset Sale Release.  Each Issuer and Guarantor have the right to obtain a
release of items of Collateral (the "Released Interests") subject to an Asset   
Sale permitted hereunder upon compliance with the condition that the Company    
deliver to the Collateral Agent the following:                                  

    (1) A notice from the Company requesting the release of Released
Interests: (i) describing the proposed Released Interests; and (ii)   
specifying the Fair Market Value of such Released Interests on a date 
within 60 days of such notice (the "Valuation Date"); and             

         (2) An Officers' Certificate of the Company certifying that: (i) such
 Asset Sale complies with the terms and conditions of the Indenture with
respect to such Asset Sale to the extent such terms and conditions are
    required to be satisfied thereunder either prior to or concurrent with the
consummation of such Asset Sale; (ii) there is no Default or Event of 
 Default in effect or continuing on the date thereof or the date of such
Asset Sale; (iii) the release of the Collateral will not result in a  
  Default or Event of Default under the Indenture; (iv) the purchase price
received is at least equal to the Fair Market Value of the Released   
     Interests; (v) the release of such Released Interests would not be expected
     to interfere in any material respect with the Collateral Agent's ability to
  realize the value of the remaining Collateral and will not impair in any
     material respect the maintenance and operation of the remaining Collateral;
    and (vi) all conditions precedent in the Indenture relating to the release
in question have been or will be complied with.                       

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Non-Asset Sale Releases.  The Liens granted in favor of the Collateral
Agent for the benefit of itself, the Trustee and the Holders on Collateral      
(including Collateral consisting of the Capital Stock of any Restricted         
Subsidiary and any equipment that is obsolete or no longer useful in the        
business of the applicable Issuer or Guarantor) and proceeds thereof that is    
sold, conveyed or otherwise disposed of by the applicable Issuer or Guarantor   
(including by way of a sale-and-leaseback) in the ordinary course of business,  
whether in a single transaction or a series of related transactions, to any     
Person (other than to the Company or any Guarantor) for Net Proceeds of $250,000
or less shall be subject to termination and release upon the consummation of any
such sale, conveyance or disposition.                                           

   Release of Inventory and Accounts Receivable Collateral.  Notwithstanding
any provision to the contrary in the Indenture, Collateral comprised of accounts
receivable, inventory or (prior to an Event of Default) the proceeds of the     
foregoing shall be subject to termination and release upon sales of such        
inventory and collection of the proceeds of such receivables in the ordinary    
course of business.                                                             

EVENTS OF DEFAULT                                                               

   The Indenture provides that each of the following constitutes an event of
default (each, an "Event of Default"):                                          

         (i) a default for 30 days in the payment when due of premium, if any,
     or interest or Additional Interest, if any, on or with respect to any Note;

    (ii) a default in the payment when due of principal on any Note,
whether upon maturity, acceleration, optional or mandatory redemption,
required repurchase or otherwise;                                     

      (iii) failure to perform or comply with any covenant, agreement or
     warranty in the Indenture (other than the defaults specified in clauses (i)
    and (ii) above) or any Collateral Agreement which failure continues for 30
days after written notice thereof has been given to the Company by the
     Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes;             

     (iv) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Restricted   
   Subsidiary then has outstanding Indebtedness in excess of $5.0 million in
the aggregate and, if not already matured at its final maturity in    
  accordance with its terms, such Indebtedness shall have been accelerated
  and such acceleration is not rescinded, annulled or cured within 10 days
thereafter;                                                           

         (v) one or more judgments, orders or decrees for the payment of money
   in excess of $5.0 million, either individually or in the aggregate, shall
     be entered against the Company or any Restricted Subsidiary or any of their
    respective properties and which judgments, orders or decrees are not paid,
  discharged, bonded or stayed or stayed pending appeal for a period of 60
days after their entry;                                               

      (vi) certain events of bankruptcy, insolvency or reorganization of
either Issuer or any Significant Subsidiary;                          

  (vii) any Guarantee of a Significant Subsidiary or the Company
  Guarantee ceases to be in full force and effect (other than as expressly
provided for under the Indenture) or is declared null and void, or any
    Guarantor which is a Significant Subsidiary or the U.S. Issuer denies that
    it has any further liability under its Guarantee or the Company Guarantee,
    as applicable, or gives notice to such effect (other than by reason of the
   termination of the Indenture or the release of such Guarantor or the U.S.
Issuer from its Guarantee or the Company Guarantee, as applicable, in 
accordance with the Indenture); or                                    

          (viii) any Collateral Agreement at any time for any reason shall cease
    to be in full force and effect, or either Issuer or any Guarantor which is
     a Significant Subsidiary denies that it has any further liability under any
    Collateral Agreement, or gives notice to such effect (other than by reason
   of the termination of the Indenture or the release of such Guarantor from
any Collateral Agreement in accordance with the Indenture), or any    
     Collateral Agreement at any time for any reason shall cease to be effective
    in all material respects to grant the Collateral Agent the Liens purported
to be created thereby on a material                                   
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 portion of the Collateral thereunder, subject to Permitted Liens and no
other Liens except as permitted by the Indenture or the Collateral    
 Agreements, in each case for 30 days after the Company receives written
    notice thereof specifying such occurrence from the Trustee, the Collateral
     Agent or the Holders of at least 25% of the outstanding principal amount at
maturity of the Notes.                                                

If any Event of Default (other than as specified in clause (vi) of the
preceding paragraph with respect to either Issuer) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes may, and the Trustee at the request of such Holders shall,    
declare all the Notes to be due and payable immediately by notice in writing to 
the Issuers, and to the Issuers and the Trustee if by the Holders, specifying   
the respective Event of Default and that such notice is a "notice of            
acceleration," and the Notes shall become immediately due and payable.          
Notwithstanding the foregoing, in the case of an Event of Default arising from  
the events specified in clause (vi) of the preceding paragraph with respect to  
either Issuer, the principal of, premium, if any, and any accrued interest and  
Additional Interest, if any, on all outstanding Notes of both Issuers shall ipso
facto become immediately due and payable without further action or notice.      
Holders may not enforce the Indenture or the Notes except as provided in the    
Indenture and under the Trust Indenture Act.                                    

   The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of all of the Holders waive  
any existing Default or Event of Default and its consequences under the         
Indenture except (i) a continuing Default or Event of Default in the payment of 
the principal of, or premium, if any, or interest or Additional Interest, if    
any, on, the Notes (which may only be waived with the consent of each affected  
Holder), or (ii) in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of each Holder. Subject to    
certain limitations, the Holders of a majority in principal amount of the then  
outstanding Notes may direct the Trustee in its exercise of any trust or power. 
The Trustee may withhold from the Holders notice of any continuing Default or   
Event of Default (except a Default or Event of Default relating to the payment  
of principal, premium, interest or Additional Interest) if it determines that   
withholding notice is in their interest.                                        

 The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon      
becoming aware of any Default or Event of Default, to deliver to the Trustee a  
statement specifying such Default or Event of Default.                          

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS        

  The Indenture provides that no recourse for the payment of the principal
of, premium, if any, interest on or Additional Interest, if any, with respect to
any of the Notes or for any claim based thereon or otherwise in respect thereof,
and no recourse under or upon any obligation, covenant or agreement of either   
Issuer in the Indenture, or in any of the Notes or because of the creation of   
any Indebtedness represented thereby, shall be had against any officer,         
employee, incorporator, direct or indirect controlling person, shareholder,     
member, partner or Affiliate of such Issuer or of any successor Person thereof. 
Each Holder, by accepting the Notes, and the Collateral Agent and the Trustee,  
waive and release all such liability.                                           

DEFEASANCE                                                                      

The Issuers may, at their option and at any time, elect to have the   
obligations of the Issuers discharged with respect to the outstanding Notes     
("defeasance"). Such defeasance means that the Issuers shall be deemed to have  
paid and discharged the entire Indebtedness represented by the outstanding Notes
and to have satisfied all other obligations under the Notes and the Indenture   
except for:                                                                     

        (i) the rights of the Holders to receive, solely from the trust fund
    described below, payments in respect of the principal of, premium, if any,
and interest and Additional Interest, if any, on such Notes when such 
payments are due;                                                     

      (ii) the Issuers' obligations with respect to the Notes concerning
    issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
  or stolen Notes, and the maintenance of an office or agency for payment;

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          (iii) the rights, powers, trusts, duties and immunities of the Trustee
under the Indenture; and                                              

(iv) the defeasance provisions of the Indenture.            

 In addition, the Issuers may, at their option and at any time, elect to
have the obligations of the Issuers released with respect to certain covenants  
that are described in the Indenture ("covenant defeasance") and any omission to 
comply with such obligations shall not constitute a Default or an Event of      
Default with respect to the Notes. In the event that a covenant defeasance      
occurs, certain events (not including non-payment, bankruptcy and insolvency    
events) described under "-- Events of Default" will no longer constitute Events 
of Default with respect to the Notes.                                           

In order to exercise either defeasance or covenant defeasance:        

        (i) the Issuers shall irrevocably deposit with the Trustee, as trust
funds in trust, for the benefit of the Holders, cash in United States 
  dollars, U.S. Government Obligations (as defined in the Indenture), or a
   combination thereof, in such amounts as will be sufficient, in the report
of a nationally recognized firm of independent public accountants or a
 nationally recognized investment banking firm, to pay and discharge the
 principal of, premium, if any, and interest and Additional Interest, if
any, on the outstanding Notes to redemption or maturity;              

      (ii) the Issuers shall have delivered to the Trustee an opinion of
counsel in the United States to the effect that the Holders will not  
    recognize income, gain or loss for Federal income tax purposes as a result
    of such defeasance or covenant defeasance, as the case may be, and will be
   subject to Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or   
   covenant defeasance, as the case may be, had not occurred (in the case of
  defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable Federal income tax 
laws);                                                                

   (iii) no Default or Event of Default shall have occurred and be
    continuing on the date of such deposit or insofar as clause (vi) under the
first paragraph under "-- Events of Default" is concerned, at any time
during the period ending on the 91st day after the date of deposit;   

     (iv) such defeasance or covenant defeasance shall not result in a
  breach or violation of, or constitute a Default under the Indenture or a
     default under any other agreement or instrument to which either Issuer is a
party or by which it is bound;                                        

   (v) the Issuers shall have delivered to the Trustee opinions of
   counsel to the effect that (A) the trust funds will not be subject to any
  rights of holders of Indebtedness (other than the Holders) and (B) after
    the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally; and               

  (vi) the Issuers shall have delivered to the Trustee Officers'
Certificate and opinions of counsel, each stating that all conditions 
    precedent under the Indenture to either defeasance or covenant defeasance,
  as the case may be, have been complied with and that no violations under
agreements governing any other outstanding Indebtedness would result  
therefrom.                                                            

SATISFACTION AND DISCHARGE                                                      

 The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the   
Notes, as expressly provided for in the Indenture) as to all outstanding Notes  
when:                                                                           

    (i) either (a) all Notes theretofore authenticated and delivered
  (except lost, stolen or destroyed Notes which have been replaced or paid
   and Notes for whose payment money has theretofore been deposited in trust
  and thereafter repaid to the Issuers) have been delivered to the Trustee
    for cancellation or (b) all Notes not theretofore delivered to the Trustee
for cancellation have become due and payable and the Issuers have     
    irrevocably deposited or caused to be deposited with the Trustee an amount
in United States dollars sufficient to pay and discharge the entire   
indebtedness on the Notes not theretofore                             

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   delivered to the Trustee for cancellation, for the principal of, premium,
   if any, interest and Additional Interest, if any, to the date of deposit;

          (ii) the Issuers have paid or caused to be paid all other sums payable
under the Indenture by the Company; and                               

         (iii) the Issuers have delivered to the Trustee Officers' Certificate
  and opinions of counsel each stating that all conditions precedent under
   the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with.                                              

RELEASE OF GUARANTEE                                                            

    So long as no Event of Default shall have occurred and be continuing, upon
(i)(A) the sale or disposition (whether by merger, stock purchase, asset or sale
or otherwise) of a Guarantor (or all or substantially all of the assets of any  
such Guarantor or all of the Capital Stock of any such Guarantor) to an entity  
which is not a Subsidiary of the Company or (B) such Guarantor ceases to be a   
Restricted Subsidiary, and our compliance, in each case, to the extent          
applicable, with the provisions of the covenant described above under the       
caption "-- Certain Covenants -- Limitation on Asset Sales" that are required to
be satisfied thereunder either prior to or concurrent with the consummation of  
the applicable transaction; (ii) the designation by the Company of such         
Guarantor as an Unrestricted Subsidiary in accordance with the "-- Certain      
Covenants -- Limitation on Restricted Payments" covenant described above; (iii) 
upon satisfaction and discharge of the Indenture or payment in full of the      
principal of, premium, if any, accrued and unpaid interest and Additional       
Interest, if any, on the Notes and all other Obligations that are then due and  
payable, such Guarantor or the U.S. Issuer with respect to the Company Guarantee
shall be deemed released from all its obligations under its Guarantee of the    
Notes and the Indenture or the Company Guarantee, as applicable, or (iv) in the 
case of any Foreign Guarantor or the U.S. Issuer with respect to the Company    
Guarantee, upon payment in full of the principal of, premium, if any, accrued   
and unpaid interest and Additional Interest, if any, on the Dutch Notes and all 
other Obligations of the Dutch Issuer that are then due and payable, such       
Foreign Guarantor or the U.S. Issuer, as the case may be, shall be deemed       
released from all its Obligations under its Foreign Guarantee of the Dutch Notes
and the Indenture or the Company Guarantee, as applicable. Upon the release of  
any Guarantor or the U.S. Issuer, as the case may be, from its Guarantee or the 
Company Guarantee, as applicable, pursuant to the provisions of the Indenture,  
each other Guarantor not so released shall remain liable for the full amount of 
principal of, premium, if any, and interest and Additional Interest, if any, on,
the Notes as and to the extent provided in the Indenture.                       

    Upon delivery by the Company to the Collateral Agent and the Trustee of an
opinion of counsel to the effect that the conditions described in the           
immediately preceding paragraph have been met, the Collateral Agent shall, at   
the sole cost and expense of the Company, execute and deliver to the Company    
such documents, without any representation, warranty or recourse of any kind    
whatsoever, as the Company shall reasonably request to evidence such release.   

AMENDMENT, SUPPLEMENT AND WAIVER                                                

  Except as provided in the next two paragraphs, the Indenture, the Notes,
the Collateral Agreements, the Guarantees, the U.S. Guarantee or the            
Registration Rights Agreement may be amended or supplemented with the written   
consent of the Holders of at least a majority in aggregate principal amount of  
the then outstanding Notes (including consents obtained in connection with a    
tender offer or exchange offer for the Notes), and any existing Default or Event
of Default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in aggregate principal     
amount of the then outstanding Notes (including consents obtained in connection 
with a tender offer or exchange offer for Notes).                               

   Without the consent of each affected Holder, an amendment or waiver shall
not:                                                                            

   (i) reduce the principal amount of the Notes whose Holders must
consent to an amendment, supplement or waiver;                        

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          (ii) reduce the principal of or change the fixed maturity of any Note,
or alter or waive the provisions with respect to the redemption of the
Notes in a manner adverse to the Holders other than with respect to a 
Change of Control Offer or an Asset Sale Offer;                       

          (iii) reduce the rate of or change the time for payment of interest or
Additional Interest on any Notes;                                     

        (iv) waive a Default or Event of Default in the payment of principal
 of, premium, if any, or interest or Additional Interest, if any, on the
Notes (except that the Holders of at least a majority in aggregate    
principal amount of the then outstanding Notes may (a) rescind an     
     acceleration of the Notes that resulted from a non-payment default, and (b)
waive the payment default that resulted from such acceleration)       

    (v) make any Note payable in money other than that stated in the
Notes;                                                                

       (vi) make any change in the provisions of the Indenture relating to
the right of the Holders to waive past Defaults or the rights of the  
Holders to receive payments of principal of, or premium, if any, or   
interest or Additional Interest, if any, on, the Notes;               

        (vii) following the occurrence of a Change of Control, amend, change
 or modify either Issuer's obligation to make and consummate a Change of
  Control Offer by reason of such a Change of Control or modify any of the
   provisions or definitions with respect thereto in a manner adverse to the
   Holders with respect to such Change of Control, or following the exercise
by the Dutch Issuer of the Change of Control Redemption of Dutch Notes
Right or Tax Redemption, amend, change or modify the Dutch Issuer's   
   obligation to make and consummate a Change of Control Redemption of Dutch
    Notes or Tax Redemption with respect to such exercise or modify any of the
   provisions or definitions with respect thereto in a manner adverse to the
  Holders with respect to such Change of Control Redemption of Dutch Notes
  Right, Change of Control Redemption of Dutch Notes or Tax Redemption, or
     following the occurrence of an Asset Sale or any fiscal year of the Company
ending on or after June 30, 2004, for which Excess Cash Flow was in an
 amount at least equal to $250,000, amend, change or modify the Issuers'
     obligations to make and consummate an Asset Sale Offer with respect to such
     Asset Sale or an Excess Flow Offer with respect to such fiscal year, as the
  case may be, or modify any of the provisions or definitions with respect
    thereto in a manner adverse to the Holders with respect to such Asset Sale
Offer or Excess Cash Flow Offer, as the case may be;                  

        (viii) release any Guarantor that is a Significant Subsidiary or the
U.S. Issuer with respect to the Company Guarantee from any of its     
    obligations under its Guarantee or the Indenture or the Company Guarantee,
     as applicable, other than in accordance with the terms of the Indenture; or

(ix) release all or substantially all of the Collateral.    

Notwithstanding the foregoing, without the consent of any Holder, the 
Issuers and the Trustee may amend or supplement the Indenture or the Notes:     

(i) to cure any ambiguity, defect or inconsistency;         

          (ii) to provide for uncertificated Notes in addition to or in place of
certificated Notes;                                                   

         (iii) to provide for the assumption of either Issuer's Obligations to
     Holders in the event of any Disposition involving such Issuer in which such
Issuer is not the Surviving Person;                                   

       (iv) to make any change that would provide any additional rights or
     benefits to the Holders or that does not adversely affect the rights of any
such Holder;                                                          

        (v) to release any Guarantor from its Guarantee and the Indenture or
the U.S. Issuer with respect to the Company Guarantee from the Company
Guarantee that is permitted to be released under the Indenture in     
accordance with the terms thereof; or                                 

      (vi) to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust 
Indenture Act.                                                        
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TRANSFER AND EXCHANGE                                                           

   The registered Holder of a Note will be treated as the owner of such Note
for all purposes. A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder among other       
things, to furnish appropriate endorsements and transfer documents and the      
applicable Issuer may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. Neither either Issuer nor the Registrar shall be 
required to issue, register the transfer of or exchange any Note (i) during a   
period beginning at the opening of business on the day that the Trustee receives
notice of any redemption from such Issuer and ending at the close of business on
the day the notice of redemption is sent to the Holders, (ii) selected for      
redemption, in whole or in part, except the unredeemed portion of any Note being
redeemed in part may be transferred or exchanged, and (iii) during a Change of  
Control Offer, Change of Control Redemption of Dutch Notes, Tax Redemption or an
Asset Sale Offer if such Note is tendered pursuant to such Change of Control    
Offer, Change of Control Redemption of Dutch Notes, Tax Redemption or Asset Sale
Offer and not withdrawn.                                                        

THE TRUSTEE                                                                     

    HSBC Bank USA, National Association is the Trustee under the Indenture and
has been appointed by the Issuers as Registrar and Paying Agent with regard to  
the Notes.                                                                      

The Indenture (including the provisions of the Trust Indenture Act    
incorporated by reference therein) contains limitations on the rights of the    
Trustee thereunder, should it become a creditor of either Issuer, to obtain     
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is      
permitted to engage in other transactions; provided, however, if it acquires any
conflicting interest (as defined in the Trust Indenture Act) it must eliminate  
such conflict or resign.                                                        

GOVERNING LAW                                                                   

    The Indenture is, and the Notes, the Guarantees, the Company Guarantee and
the U.S. Security Agreement will be, governed by the laws of the State of New   
York, without regard to the principles of conflicts of law.                     

ENFORCEABILITY OF JUDGMENTS                                                     

   Since the operating assets of the Dutch Issuer and the Foreign Guarantors
are outside the United States, any judgment obtained in the United States       
against either the Dutch Issuer or any Foreign Guarantor, including judgments   
with respect to the payment of principal, premium, if any, interest, Additional 
Amounts, if any, Additional Interest, if any, redemption price and any purchase 
price with respect to the Dutch Notes, or any guarantee in respect thereof, may 
not be collectible within the United States.                                    

A judgment obtained in the courts of another EU Member State would be 
enforced by Dutch courts without re-examination of the merits of the case       
subject to and in accordance with the EU Regulation on jurisdiction and         
Recognition and Enforcement of Judgements in Civil and Commercial Matters, as   
amended. In the absence of an applicable treaty between the United States and   
The Netherlands, a judgment rendered by a court in the United States (the       
"Foreign Court") will not be enforced by Dutch courts. In order to obtain a     
judgment which is enforceable in The Netherlands, the claim must be relitigated 
before a competent Dutch court. If and to the extent that the Dutch court finds 
that the jurisdiction of the Foreign Court has been based on grounds which are  
internationally acceptable and that proper legal procedures have been observed, 
the Dutch court would, in principle, give binding effect to the final judgment  
of the Foreign Court unless such judgment contravenes principles of Dutch public
policy.                                                                         

  A final and conclusive judgment rendered in a court in another EU Member
State would be recognized and enforced by the Belgian courts without            
re-examination of the merits, subject to the conditions set out in EU           
legislation (the EU Regulation on Jurisdiction and Enforcement of Judgments in  
Civil and Commercial Matters (44/2001) of 22 December 2001). A final and        
conclusive judgment rendered in a court of a non-EU                             

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Member State would be recognized and enforced by the Belgian courts, provided   
that the procedure set out in Article 570 of the Belgian Judicial Code is       
followed. The foreign judgment would only be recognized and enforced in Belgium 
after review of the merits by a court of first instance, and if the court is    
satisfied that certain conditions have been fulfilled.                          

CERTAIN DEFINITIONS                                                             

    Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other terms used in the      
Indenture.                                                                      

   "Acquired Debt" means, with respect to any specified Person, Indebtedness
of any other Person (the "Acquired Person") existing at the time the Acquired   
Person merges with or into, or becomes a Restricted Subsidiary of, such         
specified Person, including Indebtedness incurred in connection with, or in     
contemplation of, the Acquired Person merging with or into, or becoming a       
Restricted Subsidiary of, such specified Person; provided, however, that        
Indebtedness of such Acquired Person which is redeemed, defeased, retired or    
otherwise repaid at the time of or immediately upon consummation of the         
transactions by which such Acquired Person merges with or into or becomes a     
Restricted Subsidiary of such specified Person shall not be Acquired Debt.      

    "Additional Interest" has the meaning set forth in the Registration Rights
Agreement.                                                                      

   "Administrative Agent" has the meaning set forth in the definition of the
term "Credit Agreement."                                                        

   "Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect 
common control with such specified Person. For purposes of this definition,     
"control" (including, with correlative meanings, the terms "controlling,"       
"controlled by" and "under common control with") of any Person means the        
possession, directly or indirectly, of the power to direct or cause the         
direction of the management and policies of such Person, whether through the    
ownership of voting securities, by agreement or otherwise.                      

    "Asset Sale" means (i) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary of any assets (including by way of a   
sale-and-leaseback) other than in the ordinary course of business or (ii) the   
issuance or sale of Capital Stock of any Restricted Subsidiary, in the case of  
each of (i) and (ii), whether in a single transaction or a series of related    
transactions, to any Person (other than (A) (1) in the case of the Company or   
any Domestic Restricted Subsidiary to the Company or any Guarantor and (2) in   
the case of any Foreign Restricted Subsidiary to the Company or any Wholly Owned
Restricted Subsidiary, (B) directors' qualifying shares and (C) sales or grants 
of licenses to use the patents, trade secrets, know-how and other intellectual  
property of the Company or any of its Restricted Subsidiaries to the extent that
such license does not prohibit the Company and its Restricted Subsidiaries from 
using the intellectual property so licensed or require the Company or any of its
Restricted Subsidiaries to pay any fees for such use) for Net Proceeds in excess
of $250,000.                                                                    

"Belgium Equipment" means all equipment located at the Belgium Plant. 

"Belgium Plant" means the plant owned by Phibro Belgium in Rixensart, 
Belgium.                                                                        

  "Belgium Plant Sale and Virginiamycin Production Transactions" means the
following transactions and payments, including payments required pursuant to the
documents to evidence such transactions, each of which is subject to entering   
into definitive documentation containing customary representations, warranties, 
covenants and indemnities for a transaction of that type, and changes in the    
definitive economic terms which are not, individually or in the aggregate,      
material to the Company: (i) the transfer of substantially all of the land and  
buildings and certain equipment of Phibro Belgium at the Belgium Plant, as well 
as the industrial activities and intellectual property relating to certain      
solvent technology of Phibro Belgium, for a purchase price of EUR 6.2 million,  
payable at closing; (ii) the transfer to GSK of a majority of the employees of  
Phibro Belgium and the corresponding responsibility for statutory severance     
obligations; (iii) GSK agreeing to be responsible for costs of cleaning-up, by  
demolition or otherwise, certain buildings not to be used by it, but for Phibro 
Belgium to reimburse GSK up to a maximum of EUR 0.7 million for such clean-up   
costs; (iv) in                                                                  

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recognition of the benefits to the Company from the proposed transaction, Phibro
Belgium agreeing to pay to GSK EUR 1.5 million within six months from the       
closing date, EUR 1.5 million within eighteen months from the closing date,     
EUR 1.5 million within thirty months from the closing date, and EUR 0.5 million 
within forty-two months from the closing date; (v) Phibro Belgium retaining     
certain excess land (valued at approximately EUR 0.4 million) and being able to 
sell such land for its own account; (vi) Phibro Belgium being responsible for   
certain plant closure costs and legally required severance indemnities in       
connection with workforce reductions, estimated in total to be EUR 7.7 million, 
of which an amount estimated to be approximately EUR 4.1 million would be       
payable at or around the closing and an aggregate amount so estimated to be     
approximately EUR 3.6 million would be payable over periods up to thirteen      
years; and (vii) Phibro Belgium retaining any or all equipment at the Belgium   
Plant, and being able to sell such equipment for the account of Phibro Belgium  
or transfer such equipment, together with other assets and rights related to the
production of virginiamycin, to the Company's Restricted Subsidiary in Brazil   
that owns the facility in Guarulhos or in connection with alternative production
arrangements.                                                                   

"Belgium Purchase Agreement" means a Purchase Agreement between Phibro
Belgium and GSK relating to the Belgium Plant Sale and Virginiamycin Production 
Transactions, and any related or ancillary agreements or instruments entered    
into by Phibro Belgium, GSK, their respective Affiliates and/or other persons in
connection with the Belgium Plant Sale and Virginiamycin Production             
Transactions, in each case, as such agreements may be amended, modified or      
supplemented (so long as such amendments, modifications or supplements are not, 
individually or in the aggregate, materially adverse to the Company or the      
Holders).                                                                       

"Capital Lease Obligation" of any Person means, at the time any       
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be     
required to be capitalized on the balance sheet of such Person in accordance    
with GAAP.                                                                      

   "Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or       
interests in (however designated) corporate stock or other equity               
participations, including partnership interests, whether general or limited, of 
such Person, including any Preferred Stock.                                     

"Cash Equivalents" means:                                             

   (i) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency or
instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of 
acquisition thereof;                                                  

        (ii) marketable direct obligations issued by any state of the United
 States of America or any political subdivision of any such state or any
  public instrumentality thereof maturing within one year from the date of
    acquisition thereof and, at the time of acquisition, having one of the two
     highest ratings obtainable from either Standard & Poor's Rating Services or
Moody's Investors Service, Inc.;                                      

          (iii) commercial paper maturing no more than one year from the date of
 creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Rating Services or at least P-1 from 
Moody's Investors Service, Inc.;                                      

       (iv) certificates of deposit, time deposits or bankers' acceptances
  (or, with respect to foreign banks, similar instruments) maturing within
    one year from the date of acquisition thereof issued by any bank organized
    under the laws of the United States of America or any state thereof or the
     District of Columbia or any member of the European Union or any U.S. branch
of a foreign bank or (with respect to any Restricted Subsidiary) any  
   foreign country in which such Restricted Subsidiary is located, having at
  the date of acquisition thereof combined capital and surplus of not less
 than $250.0 million and a Thompson or Keefe Bank Watch Rating of "B" or
better (including bank accounts in such banks);                       

          (v) repurchase obligations with a term of not more than seven days for
  underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv)
above;                                                                

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       (vi) in the case of any Foreign Restricted Subsidiary, Investments:
(a) in direct obligations of the sovereign nation (or any agency or   
 instrumentality thereof) in which such Foreign Restricted Subsidiary is
organized or is conducting business or in obligations fully and       
unconditionally guaranteed by such sovereign nation (or any agency or 
     instrumentality thereof), (b) of the type and maturity described in clauses
  (i) through (v) above of foreign obligors, which Investments or obligors
     (or the parents of such obligors) have ratings described in such clauses or
  equivalent ratings from comparable foreign rating agencies or (c) of the
 type and maturity described in clauses (i) through (v) above of foreign
   obligors (or the parents of such obligors), which Investments or obligors
(or the parents of such obligors), are not rated as provided in such  
   clauses or in clause (vi)(b) but which are, in the reasonable judgment of
the Company, comparable in investment quality to such Investments and 
obligors (or the parents of such obligors); and                       

          (vii) investments in money market funds which invest substantially all
  their assets in securities of the types described in clauses (i) through
(vi) above.                                                           

    "Cash Flow" means, with respect to any period, Consolidated Net Income for
such period, plus, to the extent deducted in computing such Consolidated Net    
Income: (i) extraordinary net losses, plus (ii) provision for taxes based on    
income or profits and any provision for taxes utilized in computing the         
extraordinary net losses under clause (i) hereof, plus (iii) Consolidated       
Interest Expense, plus (iv) depreciation, amortization and all other non-cash   
charges (including amortization of goodwill and other intangibles but excluding 
any items that will require cash payments in the future for which an accrual or 
reserve is made), plus (v) any non-recurring fees, charges or other expenses    
made or incurred by the Company in connection with the Transactions.            

"Change of Control" means:                                            

 (a) with respect to the Company, the occurrence of any of the
following events after the Issue Date:                                

         (i) any "person" or "group" (as such terms are used in Sections
      13(d) and 14(d) of the Exchange Act) (other than one or more Permitted
        Holders) is or becomes (including by merger, consolidation or otherwise)
     the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
     Exchange Act, except that a Person shall be deemed to have beneficial
  ownership of all shares that such Person has the right to acquire,
       whether such right is exercisable immediately or only after the passage
       of time), directly or indirectly, of 50% or more of the voting power of
the total outstanding Voting Stock of the Company;              

             (ii) during any period of two consecutive years, individuals who at
      the beginning of such period constituted the Board of Directors of the
        Company (together with any new directors whose election to such Board of
      Directors, or whose nomination for election by the stockholders of the
      Company, was approved by a vote of 66 2/3% of the directors then still
      in office who were either directors at the beginning of such period or
     whose election or nomination for election was previously so approved)
        cease for any reason to constitute a majority of such Board of Directors
of the Company then in office;                                  

           (iii) the approval by the holders of Capital Stock of the Company
 of any plan or proposal for the liquidation or dissolution of the
 Company as a whole and not any Restricted Subsidiary or Guarantor
(whether or not otherwise in compliance with the terms of the   
Indenture); or                                                  

            (iv) the sale or other disposition (other than by way of merger or
  consolidation) of all or substantially all of the Capital Stock or
      assets of the Company and its Restricted Subsidiaries taken as a whole
     to any Person or group (as defined in Rule 13d-5 of the Exchange Act)
      (other than to one or more of the Permitted Holders) as an entirety or
      substantially as an entirety in one transaction or a series of related
        transactions, unless the "beneficial owners" of the Voting Stock of such
Person immediately prior to such transaction own, directly or   
  indirectly, more than 50% of the total voting power of such Person
immediately after such transaction; and                         

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       (b) with respect to the Dutch Issuer, the failure of the Company to
 own, directly or indirectly, 100% of the issued and outstanding Capital
Stock of the Dutch Issuer (other than directors' qualifying shares).  

   "Collateral" means, collectively, the Domestic Collateral and the Foreign
Collateral.                                                                     

     "Collateral Agent" means HSBC Bank USA, National Association, as collateral
agent, and any successor thereto in accordance with the terms of the Indenture. 

"Collateral Agreements" means, collectively, the Domestic Collateral  
Agreements and the Foreign Collateral Agreements.                               

   "Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting 
or non-voting) of such Person's common stock, whether outstanding on the Issue  
Date or issued after the Issue Date, and includes, without limitation, all      
series and classes of such common stock.                                        

    "Company Guarantee" means a guarantee by the U.S. Issuer in respect of the
Dutch Notes and all other Obligations of the Dutch Issuer under the Indenture.  

     "Consolidated Cash Flow Coverage Ratio" means, for any period, the ratio of
(i) the aggregate amount of Cash Flow for such period, to (ii) Consolidated     
Interest Expense for such period, determined on a pro forma basis after giving  
pro forma effect to (a) the incurrence of the Indebtedness giving rise to the   
calculation of the Consolidated Cash Flow Coverage Ratio and (if applicable) the
application of the net proceeds therefrom, including to refinance other         
Indebtedness, as if such Indebtedness was incurred, and the application of such 
proceeds occurred, at the beginning of such period; (b) the incurrence,         
repayment or retirement of any other Indebtedness by the Company and its        
Restricted Subsidiaries since the first day of such period as if such           
Indebtedness was incurred, repaid or retired at the beginning of such period    
(except that, in making such computation, the amount of Indebtedness under any  
revolving credit facility shall be computed based upon the average balance of   
such Indebtedness at the end of each month during such period); (c) in the case 
of Acquired Debt, the related acquisition as if such acquisition had occurred at
the beginning of such period; and (d) any acquisition or disposition by the     
Company and its Restricted Subsidiaries of any company or any business or any   
assets out of the ordinary course of business, or any related repayment of      
Indebtedness, in each case since the first day of such period, assuming such    
acquisition or disposition had been consummated on the first day of such period.

    "Consolidated Interest Expense" means, with respect to any period, the sum
of (i) the interest expense of the Company and its Restricted Subsidiaries for  
such period, including, without limitation, (a) amortization of debt discount,  
(b) the net payments, if any, under interest rate contracts (including          
amortization of discounts), (c) the interest portion of any deferred payment    
obligation and (d) accrued interest, plus (ii) the interest component of the    
Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued  
by the Company and its Restricted Subsidiaries during such period, and all      
capitalized interest of the Company and its Restricted Subsidiaries, plus (iii) 
all dividends paid during such period by the Company and its Restricted         
Subsidiaries with respect to any Disqualified Stock (other than by any          
Restricted Subsidiary to the Company or any other Restricted Subsidiary and     
other than any dividend paid in Capital Stock (other than Disqualified Stock)), 
in each case, as determined on a consolidated basis in accordance with GAAP     
consistently applied.                                                           

     "Consolidated Net Income" means, with respect to any period, the net income
(or loss) of the Company and its Restricted Subsidiaries for such period,       
determined on a consolidated basis in accordance with GAAP consistently applied,
adjusted to the extent included in calculating such net income (or loss), by    
excluding, without duplication:                                                 

    (i) all extraordinary gains (less all fees and expenses relating
thereto);                                                             

   (ii) the portion of net income (or loss) of the Company and its
     Restricted Subsidiaries allocable to interests in unconsolidated Persons or
    Unrestricted Subsidiaries, except to the extent of the amount of dividends
or distributions actually paid to the Company or its Restricted       
Subsidiaries by such other Person during such period;                 
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(iii) for purposes of the covenant entitled "-- Certain     
  Covenants -- Limitation on Restricted Payments," net income (or loss) of
    any Person combined with the Company or any of its Restricted Subsidiaries
   on a "pooling-of-interests" basis attributable to any period prior to the
date of combination;                                                  

  (iv) net gains and losses (less all fees and expenses relating
thereto) in respect of disposition of assets (including, without      
    limitation, pursuant to sale and leaseback transactions) other than in the
ordinary course of business;                                          

          (v) the net income of any Restricted Subsidiary to the extent that the
declaration of dividends or similar distributions by that Restricted  
Subsidiary of that income to the Company is not at the time permitted,
 directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or      
 governmental regulation applicable to that Restricted Subsidiary or its
stockholders;                                                         

   (vi) the cumulative non-cash effect of any change in accounting
 principles; provided that any net gain referred to in clause (iv) above
that relates to a Restricted Investment and which is received in or   
   converted into cash by the Company or a Restricted Subsidiary during such
     period shall be included in the consolidated net income of the Company; and

          (vii) the amount of accretions on preferred stock not paid in cash and
    dividends paid in kind on preferred stock reducing Consolidated Net Income
in accordance with FASB 150.                                          

     "Consolidated Net Worth" means, with respect to any Person at any date, the
sum of (i) the consolidated stockholders' equity of such Person less the amount 
of such stockholders' equity attributable to Disqualified Stock of such Person  
and its Restricted Subsidiaries, as determined on a consolidated basis in       
accordance with GAAP consistently applied and (ii) the amount of any Preferred  
Stock of such Person not included in the stockholders' equity of such Person in 
accordance with GAAP, which Preferred Stock does not constitute Disqualified    
Stock.                                                                          

     "Copyright Security Agreement" means a Copyright Security Agreement made by
any of the Company or any Domestic Guarantor in favor of the Collateral Agent,  
as amended or supplemented from time to time in accordance with its terms.      

   "Credit Agreement" means the Loan and Security Agreement, dated as of the
Issue Date, among the Company, each of its Subsidiaries parties thereto, lenders
parties thereto as such (together with their successors and assigns, the        
"Lenders") and Wells Fargo Foothill, Inc., as administrative agent (in such     
capacity, together with its successors and assigns, the "Administrative Agent"),
or any other agreement providing for revolving credit loans, term loans,        
receivables financing or letters of credit, as the same may be further amended, 
modified, renewed, refunded, replaced or refinanced from time to time (including
extending the maturity of, increasing the amount of available borrowings under, 
extending the purpose to include acquisition, working capital and other         
facilities of, changing the conditions and basis of borrowing of, combining the 
seniority of, changing the covenants and other provisions of, and adding        
Subsidiaries of the Company as additional borrowers or guarantors, or otherwise 
restructuring all or any portion of the Indebtedness under such agreement or any
successor or replacement and whether with the same or any other agent, lender or
group of lenders), including (i) any related notes, letters of credit,          
guarantees, collateral documents, instruments and agreements executed in        
connection therewith, and in each case as amended, modified, renewed, refunded, 
replaced or refinanced from time to time, and (ii) any notes, guarantees,       
collateral documents, instruments and agreements executed in connection with any
such amendment, modification, renewal, refunding, replacement or refinancing.   

    "Currency Agreement Obligations" means the obligations of any person under
a foreign exchange contract, currency swap agreement or other similar agreement 
or arrangement to protect such person against fluctuations in currency values.  

     "Default" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.                                  

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    "Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person 
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.          

"Disqualified Stock" means (i) any Preferred Stock of any Restricted  
Subsidiary (other than Preferred Stock owned by the Company or any Wholly Owned 
Restricted Subsidiary) and (ii) that portion of any Capital Stock that, by its  
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is          
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or  
is redeemable at the option of the holder thereof (other than upon a Change of  
Control of the Company in circumstances where the Holders would have similar    
rights), in whole or in part on or prior to the stated maturity of the Notes.   

"Dollars" and "$" means lawful money of the United States of America. 

"Domestic Collateral" shall mean Collateral as defined in the Domestic
Collateral Agreements.                                                          

 "Domestic Collateral Agreements" means, collectively, the U.S. Security
Agreement, the U.S. Pledge Agreement, each Patent Security Agreement, each      
Copyright Security Agreement and each Trademark Security Agreement, in each     
case, as the same may be amended, supplemented or modified from time to time in 
accordance with its terms.                                                      

    "Domestic Guarantee" means a guarantee by a Domestic Restricted Subsidiary
of the U.S. Issuer in respect of the U.S. Notes and all other Obligations of the
U.S. Issuer under the Indenture and the Dutch Notes and all other Obligations of
the Dutch Issuer under the Indenture.                                           

    "Domestic Guarantor" means each Domestic Restricted Subsidiary of the U.S.
Issuer that is designated as such on the signature pages of the Indenture and   
each other Domestic Restricted Subsidiary of the U.S. Issuer that has issued a  
Domestic Guarantee.                                                             

 "Domestic Restricted Subsidiary" means any Restricted Subsidiary of the
Company that is not a Foreign Restricted Subsidiary.                            

 "Domestic Subsidiary" means any Subsidiary of the Company that is not a
Foreign Subsidiary.                                                             

   "Excess Cash Flow" means, for any period, Cash Flow for such period minus
the sum of (i) the lesser of (x) all Capital Expenditures made during such      
period by the Company and its Restricted Subsidiaries and (y) $8.5 million; (ii)
the sum of (x) the cash portion of the Consolidated Interest Expense (net of    
interest income) for such period and (y) the cash portion of any related        
financing fees for such period; (iii) the aggregate amount (without duplication)
of all federal, state and foreign income taxes and franchise taxes actually paid
in cash by the Company and its Restricted Subsidiaries during such period.      

   "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.             

"Existing Notes" shall mean the Company's outstanding 9.875% senior   
subordinated notes due 2008 as the same may be amended, modified, renewed,      
refunded or refinanced from time to time.                                       

    "Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed 
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.                                                     

    "Foreign Collateral" shall mean the assets or property subject to any Lien
under a Foreign Collateral Agreement.                                           

     "Foreign Collateral Agreements" means, collectively, any and all agreements
purporting to grant a Lien on assets and properties of the Dutch Issuers and the
Foreign Guarantors to secure their respective Obligations under the Dutch Notes,
the Indenture and the Foreign Guarantees, which agreements shall be in form and 
substance reasonably satisfactory to the Collateral Agent, in each case as      
amended or supplemented from time to time in accordance with its terms.         

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     "Foreign Guarantee" means a guarantee by Restricted Subsidiary of the Dutch
Issuer in respect of the Dutch Notes and all other Obligations of the Dutch     
Issuer under the Indenture.                                                     

  "Foreign Guarantor" means each Restricted Subsidiary of the Dutch Issuer
that is designated as such on the signature pages of the Indenture and each     
other Restricted Subsidiary of the Dutch Issuer that has issued a Foreign       
Guarantee.                                                                      

"Foreign Restricted Subsidiary" means a Restricted Subsidiary of the  
Company that is a Foreign Subsidiary.                                           

"Foreign Subsidiary" means a Subsidiary of the Company (1) which is   
organized under the laws of any jurisdiction outside of the United States of    
America, (2) which conducts the major portion of its business outside of the    
United States of America and (3) all or substantially all of the property and   
assets of which are located outside of the United States of America.            

    "GAAP" means generally accepted accounting principles in the United States
set forth in the opinions and pronouncements of the Accounting Principles Board 
of the American Institute of Certified Public Accountants and statements and    
pronouncements of the Financial Accounting Standards Board or in such other     
statements by such other entity as may be approved by a significant segment of  
the accounting profession in the United States of America, which are applicable 
as of the Issue Date and consistently applied.                                  

"GSK" means Glaxosmithkline Biologicals SA and/or Affiliates thereof. 

   "Guarantees" means, collectively, the Domestic Guarantees and the Foreign
Guarantees.                                                                     

   "Guarantors" means, collectively, the Domestic Guarantors and the Foreign
Guarantors; provided that any Person constituting a Guarantor as described above
shall cease to constitute a Guarantor when its respective Guarantee is released 
in accordance with the terms of the Indenture.                                  

"guaranty" means a guarantee (other than by endorsement of negotiable 
instruments for collection or deposit in the ordinary course of business),      
direct or indirect, in any manner (including, without limitation, letters of    
credit and reimbursement agreements in respect thereof), of all or any part of  
any Indebtedness.                                                               

  "Holder" means the Person in whose name a Unit or, if a Separation Event
has occurred, a Note, is registered on the Registrar's books.                   

    "Indebtedness" means, with respect to any Person, without duplication, and
whether or not contingent:                                                      

      (i) all indebtedness of such Person for borrowed money or which is
evidenced by a note, bond, debenture or similar instrument;           

     (ii) all obligations of such Person to pay the deferred or unpaid
purchase price of property, which purchase price is due more than six 
months after the date of placing such property in service or taking   
delivery and title thereto;                                           

(iii) all Capital Lease Obligations of such Person;         

          (iv) all obligations of such Person in respect of letters of credit or
bankers' acceptances issued or created for the account of such Person;

        (v) to the extent not otherwise included in this definition, all net
 obligations of such Person under Interest Rate Agreement Obligations or
Currency Agreement Obligations of such Person;                        

         (vi) all liabilities of others of the kind described in the preceding
     clause (i), (ii) or (iii) secured by any Lien on any property owned by such
     Person; provided, however, if the obligations secured by a Lien (other than
  a Permitted Lien not securing any liability that would itself constitute
Indebtedness) on any assets or property have not been assumed by such 
     Person in full or are not such Person's legal liability in full, the amount
  of such Indebtedness for purposes of this definition shall be limited to
    the lesser of the amount of Indebtedness secured by such Lien and the Fair
Market Value of the property subject to such Lien;                    

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        (vii) all Disqualified Stock issued by such Person and all Preferred
    Stock issued by a Subsidiary of such Person (other than Preferred Stock of
   a Restricted Subsidiary owned by the Company or a Wholly Owned Restricted
Subsidiary); and                                                      

     (viii) to the extent not otherwise included, any guaranty by such
     Person of any other Person's indebtedness or other obligations described in
clauses (i) through (vii) above. "Indebtedness" of the Company and the
   Restricted Subsidiaries shall not include current trade payables incurred
  in the ordinary course of business, and non-interest bearing installment
obligations and accrued liabilities incurred in the ordinary course of
    business. The principal amount outstanding of any Indebtedness issued with
original issue discount is the accreted value of such Indebtedness.   

    Notwithstanding the foregoing, Indebtedness shall not include Indebtedness
arising from the honoring by a bank or other financial institution of a check,  
draft or similar instrument inadvertently drawn against insufficient funds in   
the ordinary course of business; provided that such Indebtedness is extinguished
within 3 business days of the incurrence thereof. In addition, Indebtedness     
shall not include a government grant and any guaranty of the Company or a       
Restricted Subsidiary required by such grant which obligates the Company or a   
Restricted Subsidiary to repay such grant at the discretion of such government  
or upon the failure of the conditions of such grant specified therein to be     
fulfilled, but which is forgiven solely by reason of the passage of time or the 
fulfillment of such grant conditions (other than repayment); provided that if   
the conditions for forgiveness of such government grant lapse for whatever      
reason and the Company or a Restricted Subsidiary becomes obligated to repay    
such grant, the grant shall be deemed Indebtedness which is incurred at the time
such obligation to repay is triggered.                                          

  "Indenture Documents" means, collectively, the Indenture, the Notes, the
Guarantees, the Company Guarantee and the Collateral Agreements.                

  "Intercreditor Agreement" means the Intercreditor Agreement, dated as of
the Issue Date, among the Administrative Agent, the Collateral Agent, the       
Company and the Domestic Guarantors, as the same may be amended, supplemented or
modified from time to time.                                                     

  "Interest Rate Agreement Obligations" means, with respect to any Person,
the obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other         
agreements or arrangements designed to protect such Person against fluctuations 
in interest rates.                                                              

     "Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, any guaranty) or   
capital contribution to (by means of any transfer of cash or other property to  
others or any payment for property or services for the account or use of        
others), or any purchase or acquisition by such Person of any Capital Stock,    
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any other Person. "Investment" shall exclude (x) extensions of trade credit 
by the Company and its Restricted Subsidiaries on commercially reasonable terms 
in accordance with normal trade practices of the Company or such Restricted     
Subsidiary, as the case may be, and (y) payments made by the Company and its    
Restricted Subsidiaries in respect of liabilities of the type described in      
clauses (ii)(b) and (e) of the definition of the term "Net Proceeds" in         
connection with (1) any Asset Sales by the Company or any of its Restricted     
Subsidiaries (provided, however, that the aggregate amount of such payments     
relating to any such Asset Sale shall at no time exceed the gross proceeds      
actually received by the Company or such Restricted Subsidiary in connection    
with such Asset Sale) and (2) the disposition of all or substantially all of the
Capital Stock or assets of MRT and PMC. For the purposes of the "Limitation on  
Restricted Payments" covenant, (i) "Investment" shall include and be valued at  
the Fair Market Value of the net assets of any Restricted Subsidiary (to the    
extent of the Company's equity interest in such Restricted Subsidiary) at the   
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary   
and shall exclude the Fair Market Value of the net assets of any Unrestricted   
Subsidiary at the time that such Unrestricted Subsidiary is designated a        
Restricted Subsidiary and (ii) the amount of any Investment shall be the        
original cost of such Investment plus the cost of all additional Investments by 
the Company or any of its Restricted Subsidiaries, without any adjustments for  
increases or decreases in value, or write-ups, write-downs or write-offs with   
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of  
such Investment; provided,                                                      
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however, that no such payment of dividends or distributions or receipt of any   
such other amounts shall reduce the amount of any Investment if such payment of 
dividends or distributions or receipt of any such amounts would be included in  
Consolidated Net Income. If the Company or any Restricted Subsidiary of the     
Company sells or otherwise disposes of any Common Stock of any direct or        
indirect Restricted Subsidiary of the Company such that, after giving effect to 
any such sale or disposition, the Company no longer owns, directly or           
indirectly, greater than 50% of the outstanding Common Stock of such Restricted 
Subsidiary, the Company and/or such Restricted Subsidiary shall be deemed to    
have made an Investment on the date of any such sale or disposition equal to the
Fair Market Value of the Common Stock of such Restricted Subsidiary not sold or 
disposed of.                                                                    

   "Issue Date" means October 21, 2003, the date of the original issuance of
the Units and the underlying Notes.                                             

   "Lenders" has the meaning set forth in the definition of the term "Credit
Agreement."                                                                     

"Lien" means, with respect to any asset, any mortgage, lien, pledge,  
charge, security interest or similar encumbrance of any kind in respect of such 
asset, whether or not filed, recorded or otherwise perfected under applicable   
law (including any conditional sale or other title retention agreement, any     
lease in the nature thereof, any option or other agreement to give a security   
interest in any asset).                                                         

  "MRT" means Mineral Resource Technologies, Inc., a Delaware corporation.

 "Net Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate cash or Cash Equivalent proceeds received by such Person and/or its   
Affiliates in respect of such Asset Sale, which amount is equal to the excess,  
if any, of (i) the cash or Cash Equivalents received by such Person and/or its  
Affiliates (including any cash payments received by way of deferred payment     
pursuant to, or monetization of, a note or installment receivable or otherwise, 
but only as and when received) in connection with such Asset Sale, over (ii) the
sum of (a) the amount of any Indebtedness that is secured by such asset and     
which is required to be (and is in fact) repaid by such Person in connection    
with such Asset Sale, plus (b) all fees, commissions and other expenses incurred
by such Person in connection with such Asset Sale, plus (c) provision for taxes,
including income taxes, directly attributable to the Asset Sale or to           
prepayments or repayments of Indebtedness with the proceeds of such Asset Sale, 
plus (d) if such Person is a Restricted Subsidiary, any dividends or            
distributions payable to holders of minority interests in such Restricted       
Subsidiary from the proceeds of such Asset Sale, plus (e) appropriate amounts to
be provided or established by the Company or any Restricted Subsidiary as a     
reserve against any liabilities associated with such Asset Sale, including,     
without limitation, pension and other post-employment benefit liabilities,      
liabilities related to environmental matters and liabilities under any          
indemnification obligations associated with such Asset Sale; provided that upon 
the release of any such reserves, such amounts shall constitute "Net Proceeds"  
hereunder.                                                                      

    "Obligations" means any principal, premium, interest (including Additional
Interest), Additional Amounts, penalties, fees, indemnifications, reimbursement 
obligations, damages and other liabilities and obligations payable under the    
Indenture, any Note or any other Indenture Document.                            

     "Officers' Certificate" means a certificate signed on behalf of a Person by
two Officers of such Person, one of whom must be the principal executive        
officer, the principal financial officer or the principal accounting officer of 
such Person, that meets the requirements set forth in the Indenture.            

   "Patent Security Agreement" means a Patent Security Agreement made by any
of the Company or any Domestic Guarantor in favor of the Collateral Agent, as   
amended or supplemented from time to time in accordance with its terms.         

"Permitted Holders" means (i) Jack Bendheim; (ii) each of his spouse, 
siblings, ancestors, descendants (whether by blood, marriage or adoption, and   
including stepchildren) and the spouses, siblings, ancestors and descendants    
thereof (whether by blood, marriage or adoption, and including stepchildren) of 
such natural persons, the beneficiaries, estates and legal representatives of   
any of the foregoing, the trustee of any bona fide trust of which any of the    
foregoing, individually or in the aggregate, are the majority in interest       
beneficiaries or grantors, and any corporation, partnership, limited liability  
company or other Person in which any of the                                     

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foregoing, individually or in the aggregate, own or control a majority in       
interest; and (iii) all Affiliates controlled by the individual named in clause 
(i) above.                                                                      

"Permitted Investments" means:                                        

      (i) Investments by the Company or any Restricted Subsidiary of the
 Company (A) in any Person that is or will become immediately after such
    Investment a Domestic Guarantor or that will merge or consolidate into the
   Company or a Domestic Guarantor or (B) in either Issuer or any Guarantor,
to the extent 100% of the net proceeds thereof are used substantially 
     contemporaneously with the receipt of such proceeds to make any redemption,
     repurchase or other retirement for value or payment on or in respect of the
  Dutch Notes or its Guarantee or the Company Guarantee, as applicable, in
respect thereof, as applicable;                                       

(ii) any investment in cash or Cash Equivalents;            

        (iii) Investments in the Company by any Restricted Subsidiary of the
    Company; provided that any Indebtedness evidencing such Investment held by
   a Restricted Subsidiary shall satisfy the requirements of clause (vii) of
the definition of the term "Permitted Indebtedness";                  

     (iv) Investments in accounts and notes receivable acquired in the
ordinary course of business;                                          

         (v) any notes, obligations or other securities received in connection
with an Asset Sale that complies with the covenant described under    
   "Limitations on Asset Sales" or any other disposition not constituting an
Asset Sale;                                                           

   (vi) Interest Rate Agreement Obligations and Currency Agreement
Obligations permitted pursuant to the second paragraph of the covenant
described under "Limitation on Incurrence of Indebtedness" above;     

    (vii) investments in or acquisitions of Capital Stock or similar
     interests in Persons (other than Affiliates of the Company) received in the
   bankruptcy or reorganization of or by such Person or any exchange of such
investment with the issuer thereof or taken in settlement of or other 
resolution of claims or disputes;                                     

        (viii) Investments by any Foreign Subsidiary of the Company that (A)
    is not the Dutch Issuer or a Restricted Subsidiary of the Dutch Issuer, in
    any other Foreign Subsidiary of the Company and (B) is the Dutch Issuer or
a Foreign Guarantor, in either Issuer or any Guarantor;               

    (ix) Investments in any Foreign Subsidiary of the Company by the
Company or any Restricted Subsidiary of the Company to the extent the 
   aggregate amount of such Investments at any one time outstanding does not
exceed $5.0 million;                                                  

          (x) other Investments made after the Issue Date in an aggregate amount
at any one time outstanding not to exceed $2.5 million; and           

 (xi) Investments in Restricted Subsidiaries of the Company in
    connection with the production of virginiamycin in an amount not to exceed
the Fair Market Value of the Belgium Equipment plus $15.0 million.    

"Permitted Liens" means:                                              

     (i) Liens securing Indebtedness under the Credit Agreement to the
  extent such Indebtedness is permitted under clause (i), (xiii), (xiv) or
(xvii) of the definition of the term "Permitted Indebtedness";        

     (ii) Liens securing Acquired Debt incurred in accordance with the
     terms of the Indenture; provided, however, that (A) such Liens secured such
   Acquired Debt at the time of and prior to the incurrence of such Acquired
    Debt by the Company or a Restricted Subsidiary of the Company and were not
   granted in connection with, or in anticipation of, the incurrence of such
    Acquired Debt by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
     Company or of any of its Restricted Subsidiaries other than the property or
assets                                                                

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   that secured the Acquired Debt prior to the time such Indebtedness became
     Acquired Debt of the Company or a Restricted Subsidiary of the Company (and
   property or assets acquired in replacement of any such property or assets
after such time to the extent acquired using the proceeds of any such 
   replaced property or assets) and are not materially more favorable to the
   lienholders than those securing the Acquired Debt prior to the incurrence
of such Acquired Debt by the Company or a Restricted Subsidiary of the
Company;                                                              

   (iii) Liens on property acquired by the Company or a Restricted
   Subsidiary; provided, however, that such Liens were in existence prior to
the contemplation of such acquisition and do not extend to any other  
property of the Company or such Restricted Subsidiary;                

    (iv) Liens in respect of Interest Rate Agreement Obligations and
Currency Agreement Obligations permitted under the Indenture;         

          (v) Liens in favor of the Company or any Restricted Subsidiary so long
as such Liens are subordinated to the Liens described in clause (vii) 
below;                                                                

(vi) Liens existing or created on the Issue Date;           

 (vii) Liens securing the Notes, the Guarantees or the Company
Guarantee;                                                            

      (viii) Liens securing Capital Lease Obligations and Purchase Money
Obligations permitted pursuant to clause (xi) of the definition of    
  "Permitted Indebtedness"; provided, however, that (A) in the case of any
Capital Lease Obligations, such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease 
     Obligations (whether or not such property or assets were the initial leased
     property thereunder) and (B) in the case of any Purchase Money Obligations,
(1) the Indebtedness shall not exceed the cost of the real property   
acquired, together with the cost of the installation and construction 
    thereof and improvements thereto, and shall not be secured by any property
    or assets of the Company or any Restricted Subsidiary of the Company other
than such property and improvements thereto so acquired, installed or 
 constructed (and property or assets acquired in replacement of any such
property or assets after such date of acquisition, installation or    
     construction to the extent acquired using the proceeds of any such replaced
  property or assets) and (2) the Lien securing such Indebtedness shall be
  created within 30 days of such acquisition, installation or construction
  or, in the case of a refinancing of any such Purchase Money Obligations,
within 30 days of such refinancing;                                   

     (ix) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its 
Restricted Subsidiaries;                                              

   (x) Liens arising from filing Uniform Commercial Code financing
statements regarding operating leases;                                

       (xi) Liens in favor of customs and revenue authorities arising as a
  matter of law to secure payment of customs duties in connection with the
importation of goods;                                                 

         (xii) Liens to secure obligations arising from statutory, regulatory,
contractual or warranty requirements of the Company or any of its     
Restricted Subsidiaries, including the performance of statutory       
  obligations, surety or appeal bonds or performance bonds, or landlords',
   carriers', warehousemen's, mechanics', suppliers', materialmen's or other
 like Liens, in any case incurred in the ordinary course of business and
rights to offset and set-off;                                         

         (xiii) Liens for taxes, assessments or governmental charges or claims
  that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded; 
provided that any reserve or other appropriate provision as shall be  
required in conformity with GAAP shall have been made therefor;       

       (xiv) Liens securing Indebtedness incurred to amend, modify, renew,
   refund, replace or refinance Indebtedness that has been secured by a Lien
   permitted under the Indenture; provided that (a) any such Lien not extend
to or cover any assets or property not securing the Indebtedness so   
   refinanced; (b) any such Lien is no less favorable to the Holders and are
not more favorable to the lienholders with respect to                 
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such Lien than the Lien in respect of the Indebtedness being amended, 
    modified, renewed refunded, replaced or refinanced and (c) the Refinancing
    Indebtedness secured by such Lien shall have been permitted to be incurred
under the Indenture;                                                  

          (xv) Liens securing Indebtedness of Foreign Restricted Subsidiaries to
the extent such Indebtedness is permitted under clauses (x), (xv) and 
  (xvii) of the definition of the term "Permitted Indebtedness;" provided,
     however, that no asset of the Company or any Domestic Restricted Subsidiary
shall be subject to any such Lien;                                    

          (xvi) judgment Liens not giving rise to an Event of Default so long as
    such Lien is adequately bonded and any appropriate legal proceedings which
     may have been duly initiated for the review of such judgment shall not have
    been finally terminated or the period within which such proceedings may be
initiated shall not have expired;                                     

(xvii) easements, rights-of-way, zoning restrictions, title 
     irregularities and other similar charges or encumbrances in respect of real
    property not interfering in any material respect with the ordinary conduct
of the business of the Company or any if its Restricted Subsidiaries; 

     (xviii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligation in respect of
   bankers' acceptances issued or created for the account of such Person (to
    the extent the Indebtedness evidenced thereby was permitted to be incurred
   under the terms of the Indenture) to facilitate the purchase, shipment or
storage of such inventory or other goods; and                         

         (xix) Liens arising in connection with the placement by either Issuer
or any Restricted Subsidiary of the Company, as the case may be, of a 
 reasonable amount of cash (as determined in good faith by such Person's
    board of director) in escrow against any obligations permitted pursuant to
clause (xviii) of "Certain Covenants -- Limitation on Incurrence of   
Indebtedness."                                                        

 "Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,             
unincorporated organization or government or any agency or political subdivision
thereof.                                                                        

"Phibro Belgium" means Phibro Animal Health SA (formerly Phibro Animal
Health (Belgium) SPRL).                                                         

"PMC Sale Transactions" means the following transactions and payments,
including payments required pursuant to the documents evidencing such           
transactions: (i) the transfer of ownership to the Palladium Investors of The   
Prince Manufacturing Company ("PMC") which would be valued at approximately $21 
million; (ii) the reduction of the preferred stock of the Palladium Investors to
$15.2 million (as of September 30, 2003); (iii) the termination of any          
obligation of the Company or any Restricted Subsidiary of the Company in respect
of the $2.25 million annual management advisory fee (subject to reinstatement if
these transactions are not consummated on or before December 31, 2003); (iv) a  
separate cash payment to the Palladium Investors of $10 million from the recent 
sale of MRT; (v) payments by PMC to the Company for central support services for
the three years ending June 30, 2006 of $1 million, $0.5 million and $0.2       
million, respectively; (vi) supply arrangements between the Company and PMC with
respect to manganous oxide and red iron oxide; (vii) customary representations, 
warranties and indemnities by the Company, and provisions for closing working   
capital balance adjustments, settlement of intercompany accounts owed to PMC, a 
closing fee payable to Palladium and the agreement of the Company to pay or     
reimburse the Palladium Investors for their reasonable out-of-pocket expenses;  
and (viii) the establishment by the Company of a $1 million escrow or other     
credit support for two years to secure its net working capital and foregoing    
indemnification obligations, and indemnification of the Palladium Investors,    
payable after the maturity of the Notes, for a portion, at the rate of $0.65 for
every dollar, of the amount they receive in respect of the disposition of PMC   
less than $21 million, up to a maximum payment by the Company of $4 million.    

"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the                      

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distribution of assets upon any voluntary or involuntary liquidation or         
dissolution of such Person, over Capital Stock of any other class of such       
Person.                                                                         

   "Purchase Money Obligation" means any Indebtedness (as amended, modified,
renewed, refunded, replaced or refinanced) secured by a Lien on assets related  
to the business of the Company or the Restricted Subsidiaries, and any additions
and accessions thereto, which are purchased, constructed or improved by the     
Company or any Restricted Subsidiary at any time after the Issue Date; provided,
however, that (i) any security agreement or conditional sales or other title    
retention contract pursuant to which the Lien on such assets is created         
(collectively, a "Security Agreement") shall be entered into within 90 days     
after the purchase or substantial completion of the construction or improvement 
of such assets and shall at all times be confined solely to the assets so       
purchased, constructed or improved, any additions and accessions thereto and any
proceeds therefrom, (ii) at no time shall the aggregate principal amount of the 
outstanding Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect of fees  
and other obligations in respect of such Indebtedness and (iii)(A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a   
per asset basis in the case of any additions and accessions) shall not at the   
time such Security Agreement is entered into exceed 100% of the purchase price  
or cost of construction or improvement to the Company or any Restricted         
Subsidiary of the assets subject thereto or (B) the Indebtedness secured thereby
shall be with recourse solely to the assets so purchased, constructed or        
improved, any additions and accessions thereto and any proceeds therefrom.      

"Related Business" means any business that is reasonably related to or
complementary to the businesses conducted by the Company, or the Restricted     
Subsidiaries, on the Issue Date.                                                

"Restricted Investment" means an Investment other than a Permitted    
Investment.                                                                     

    "Restricted Payment" means (i) any dividend or other distribution declared
or paid on any Capital Stock of the Company (other than (A) dividends or        
distributions payable solely in Capital Stock (other than Disqualified Stock) of
the Company or (B) dividends or distributions payable to the Company or any     
Restricted Subsidiary); (ii) any payment to purchase, redeem or otherwise       
acquire or retire for value any Capital Stock of the Company; (iii) any payment 
to purchase, redeem, defease or otherwise acquire or retire for value, prior to 
any scheduled maturity, repayment or sinking fund payment, any Subordinated     
Indebtedness other than a purchase, redemption, defeasance or other acquisition 
or retirement for value that is paid for with the proceeds of Refinancing       
Indebtedness that is permitted under the covenant described under "-- Certain   
Covenants -- Limitation on Incurrence of Indebtedness;" or (iv) any Restricted  
Investment. A Permitted Investment is not a Restricted Payment.                 

 "Restricted Subsidiary" means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.                                  

"Shareholders Agreements" means (i) the Shareholders Agreement dated  
December 29, 1987 by and between Marvin S. Sussman and the Company; (ii) the    
Shareholders Agreement dated February 21, 1995 among Phibro-Tech, Inc., I. David
Paley, Nathan Z. Bistricer and James O. Herlands; (iii) the Severance Agreement 
between Phibro-Tech, Inc. and James O. Herlands, dated February 21, 1995 and    
(iv) the Stockholders Agreement, dated as of November 30, 2000, among, inter    
alia, the Company, Jack C. Bendheim and the Palladium Investors; each as amended
and in effect on the Issue Date, and as thereafter amended, except for any      
amendment subsequent to the Issue Date which causes the terms of such agreement 
to be less favorable to the Company or Phibro-Tech, as the case may be.         

    "Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X promulgated    
pursuant to the Securities Act, as such Regulation S-X is in effect on the Issue
Date.                                                                           

"Subordinated Indebtedness" means Indebtedness of the Company or a    
Guarantor which (A) if incurred by the Company, is subordinated in right of     
payment to the Notes, or (B) if incurred by a Guarantor, is subordinated in     
right of payment to the Guarantee of such Guarantor.                            

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 "Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,   
directly or indirectly, by such Person or by one or more other Subsidiaries of  
such Person, or by such Person and one or more other Subsidiaries thereof, or   
(ii) any limited partnership of which such Person or any Subsidiary of such     
Person is a general partner, or (iii) any other Person (other than a corporation
or limited partnership) in which such Person or one or more other Subsidiaries  
of such Person, or such Person and one or more other Subsidiaries thereof,      
directly or indirectly, has more than 50% of the outstanding partnership or     
similar interests or has the power, by contract or otherwise, to direct or cause
the direction of the policies, management and affairs thereof.                  

  "Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.                                       

     "Trademark Security Agreement" means a Trademark Security Agreement made by
any of the Company or any Domestic Guarantor in favor of the Collateral Agent,  
as amended or supplemented from time to time in accordance with its terms.      

     "Transactions" means, collectively, the Offering, the PMC Sale Transactions
and the solicitation of consents with respect to the Company's Existing Notes to
amendments to the indenture governing the Existing Notes, the Belgium Plant Sale
and Virginiamycin Production Transactions and the offering of the Notes         
described in clause (xx) of the second paragraph under "-- Certain              
Covenants -- Limitation on Incurrence of Indebtedness" to refinance a portion of
the Credit Agreement and the solicitation of consents with respect to the Notes 
to amendments to the indenture to permit the foregoing.                         

   "U.S. Pledge Agreement" means the Pledge Agreement, dated as of the Issue
Date, made by the Company and the Domestic Guarantors parties thereto in favor  
of the Collateral Agent, as amended or supplemented from time to time in        
accordance with its terms.                                                      

 "U.S. Security Agreement" means the Security Agreement, dated as of the
Issue Date, made by the Company and the Domestic Guarantors in favor of the     
Collateral Agent, as amended or supplemented from time to time in accordance    
with its terms.                                                                 

     "Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under            
"-- Limitation on Designation of Unrestricted Subsidiaries" and not redesignated
a Restricted Subsidiary in compliance with such covenant.                       

    "Voting Stock" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power  
under ordinary circumstances to elect at least a majority of the board of       
directors, managers or trustees of such Person (irrespective of whether or not  
at the time stock of any other class or classes shall have or might have voting 
power by reason of the happening of any contingency).                           

     "Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the        
products obtained by multiplying (a) the amount of each then remaining          
installment, sinking fund, serial maturity or other required scheduled payment  
of principal, including payment at final maturity, in respect thereof, with (b) 
the number of years (calculated to the nearest one-twelfth) that will elapse    
between such date and the making of such payment, by (ii) the then outstanding  
aggregate principal amount of such Indebtedness.                                

   "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary with
respect to which all of the outstanding voting securities (other than directors'
qualifying shares or nominee shares held by a third party to comply with local  
law) of which are owned, directly or indirectly, by the Company or a Surviving  
Person of any Disposition involving the Company, as the case may be.            

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BOOK-ENTRY; DELIVERY AND FORM                                                   

    The certificates representing each Unit will be issued in fully registered
form without interest coupons.                                                  

Units sold in reliance on Rule 144A will initially be represented by  
permanent global units (each a "Restricted Global Unit") consisting of U.S.     
Notes and Dutch Notes in fully registered form without interest coupons (each a 
"Restricted Global Note") and will be deposited with the Trustee as a custodian 
for The Depository Trust Company ("DTC") and registered in the name of a nominee
of such depositary.                                                             

   Units sold in offshore transactions in reliance on Regulation S under the
Securities Act will initially be represented by global units (a "Regulation S   
Global Unit") consisting of U.S. Notes and Dutch Notes in fully registered form 
without interest coupons (each a "Regulation S Global Note") and will be        
deposited with the Trustee as custodian for DTC, as depositary, and registered  
in the name of a nominee of such depositary for the account of the operator of  
the Euroclear System or Clearstream Banking. Prior to the expiration of the     
"distribution compliance period" (as defined in Regulation S), a beneficial     
interest in the Regulation S Global Unit may be transferred to a Person who     
takes delivery in the form of an interest in the Restricted Global Unit only    
upon receipt by the Trustee of a written certification from the transferor to   
the effect that such transfer is being made to a Person whom the transferor     
reasonably believes is a QIB in a transaction meeting the requirements of Rule  
144A. Beneficial interests in a Restricted Global Unit may be transferred to a  
Person who takes delivery in the form of an interest in a Regulation S Global   
Unit whether before, on or after such a time, only upon receipt by the Trustee  
of a written certification to the effect that such transfer is being made in    
accordance with Regulation S.                                                   

Any beneficial interest in a Regulation S Global Unit or a Restricted 
Global Unit (each a "Global Unit") that is transferred to a Person who takes    
delivery in the form of an interest in a Restricted Global Unit or a Regulation 
S Global Unit, respectively, will, upon transfer, cease to be an interest in the
type of Global Unit previously held and become an interest in the other type of 
Global Unit and, accordingly, will thereafter be subject to all transfer        
restrictions, if any, and other procedures applicable to beneficial interests in
such other type of Global Unit for as long as it remains an interest.           

The Global Units and Global Notes (and any Units or Notes issued in   
exchange therefore) will be subject to certain restrictions on transfer set     
forth therein and in the indenture and will bear the legend regarding such      
restrictions set forth under the heading "Notice to Investors" herein. Subject  
to such restrictions, QIBs or non-U.S. purchasers may elect to take physical    
delivery of their certificates (each a "Certified Security") instead of holding 
their interests through the Global Units and Global Notes (and which are then   
ineligible to trade through DTC) (collectively referred to herein as the        
"Non-Global Purchasers"). Upon the transfer to a QIB of any Certificated        
Security initially issued to a Non-Global Purchaser, such Certified Security    
will, unless the transferee requests otherwise or the Global Units have         
previously been exchanged in whole for Certificated Securities, be exchanged for
an interest in the Global Units. For a description of the restrictions on       
transfer of Certificated Securities and any interest in the Global Units, see   
"Notice to Investors."                                                          

     Book-entry interests for Restricted Global Units and Permanent Regulation S
Global Units will be shown on, and transfers thereof will be effected only      
through, records maintained by Euroclear or Clearstream and their participants. 
The laws of some jurisdictions, including some states of the United States, may 
require that certain purchasers of securities take physical delivery of those   
securities in definitive form.                                                  

THE GLOBAL UNITS                                                                

We expect that pursuant to procedures established by DTC (i) upon the 
issuance of the Global Units, DTC or its custodian will credit, on its internal 
system, the principal amount at maturity of the individual beneficial interests 
represented by the underlying Global Notes to the respective accounts of Persons
who have accounts with such depositary and (ii) ownership of beneficial         
interests in the Global Units will be shown on, and the transfer of such        
ownership will be effected only through, records maintained by DTC or its       
nominee (with respect to interests of participants) and the records of          
participants (with respect to interests of Persons other than participants).    
Such accounts initially will be designated by or on behalf of the initial       
purchasers and                                                                  

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ownership of beneficial interests in the Global Units will be limited to Persons
who have accounts with DTC ("participants") or Persons who hold interests       
through participants. Holders may hold their interests in the Global Units      
directly through DTC if they are participants in such system, or indirectly     
through organizations that are participants in such system.                     

So long as DTC, Euroclear, Clearstream, or any of their respective    
nominees, is the registered owner or holder of the Units, DTC, Euroclear,       
Clearstream or such nominee, as the case may be, will be considered the sole    
owner or holder of the Notes represented by such Global Units for all purposes  
under the indenture. No beneficial owner of an interest in the Global Units will
be able to transfer that interest except in accordance with DTC's, Euroclear's  
or Clearstream's, as applicable, procedures, in addition to those provided for  
under the indenture with respect to the Units.                                  

    Payments of the principal of, and premium (if any) and interest (including
Additional Interest) on, the Global Notes will be made to DTC, Euroclear,       
Clearstream or their respective nominees, as the case may be, as the registered 
owner thereof. None of us, the Trustee or any paying agent will have any        
responsibility or liability for any aspect of the records relating to or        
payments made on account of beneficial ownership interests in the Global Units  
or for maintaining, supervising or reviewing any records relating to such       
beneficial ownership interest.                                                  

  We expect that DTC, Euroclear, Clearstream or their respective nominees,
upon receipt of any payment of principal, premium, if any, interest (including  
Additional Interest) on the Global Notes, will credit participants' accounts    
with payments in amounts proportionate to their respective beneficial interests 
in the principal amount of the Global Notes as shown on the records of DTC,     
Euroclear, Clearstream or their respective nominees. We also expect that        
payments by participants to owners of beneficial interests in the Global Units  
held through such participants will be governed by standing instructions and    
customary practice, as is now the case with securities held for the accounts of 
customers registered in the names of nominees for such customers. Such payments 
will be the responsibility of such participants.                                

    Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be    
settled in same day funds. If a Holder requires physical delivery of a          
Certificated Security for any reason, including to sell Units to Persons in     
states which require physical delivery of the Units, or to pledge such          
securities, such Holder must transfer its interest in a Global Unit, in         
accordance with the normal procedures of DTC and with the procedures set forth  
in the indenture.                                                               

    Participants in Euroclear and/or Clearstream must rely upon the procedures
of Euroclear and Clearstream in order to transfer their interests in the Global 
Units, and indirect participants must rely on the procedures of the participants
through which they own book-entry interests to transfer their interests or to   
exercise any rights of holders under the indenture.                             

DTC, Euroclear and Clearstream have advised us that they will take any
action permitted to be taken by a Holder of Units and Notes (including the      
presentation of Units and Notes for exchange as described below) only at the    
direction of one or more participants to whose account the DTC, Euroclear or    
Clearstream interests in the Global Units are credited and only in respect of   
such portion of the aggregate principal amount of Notes as to which such        
participant or participants has or have given such direction. However, if there 
is an event of default under the indenture, DTC, Euroclear and Clearstream will 
exchange the Global Units and Global Notes for Certificated Securities, which   
they will distribute to their participants and which will be legended as set    
forth under the heading "Notice to Investors."                                  

DTC has advised us as follows: DTC is a limited purpose trust company 
organized under the laws of the State of New York, a member of the Federal      
Reserve System, a "clearing corporation" within the meaning of the Uniform      
Commercial Code and a "Clearing Agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC was created to hold     
securities for its participants and facilitate the clearance and settlement of  
securities transactions between participants through electronic book-entry      
changes in accounts of its participants, thereby eliminating the need for       
physical movement of certificates. Participants include securities brokers and  
dealers, banks, trust companies and clearing corporations and                   

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certain other organizations. Indirect access to the DTC system is available to  
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or        
indirectly. Although DTC has agreed to the foregoing procedures in order to     
facilitate transfers of interests in the Global Units among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Trustee nor we will have any              
responsibility for the performance by DTC or its participants or indirect       
participants of their respective obligations under the rules and procedures     
governing their operations.                                                     

We understand as follows with respect to Euroclear and Clearstream:   
Euroclear and Clearstream hold securities for participating organizations and   
facilitate the clearance and settlement of securities transactions between their
respective participants through electronic book-entry changes in accounts of    
such participants. Euroclear and Clearstream provide to their participants,     
among other things, services for safekeeping, administration, clearance and     
settlement of internationally traded securities and securities lending and      
borrowing. Euroclear and Clearstream interface with domestic securities markets.
Euroclear and Clearstream participants are financial institutions such as       
underwriters, securities brokers and dealers, banks, trust companies and certain
other organizations. Indirect access to Euroclear or Clearstream is also        
available to others such as banks, brokers, dealers and trust companies that    
clear through or maintain a custodian relationship with Euroclear or Clearstream
participants, either directly or indirectly.                                    

CERTIFICATED SECURITIES                                                         

Certificated Securities shall be issued in exchange for beneficial    
interests in the Global Units and underlying Global Notes (i) for Global Units  
or Global Notes held by DTC, if requested by a Holder of such interests or (ii) 
if DTC, Euroclear or Clearstream is at any time unwilling or unable to continue 
as a depositary for the Global Notes and a successor depositary is not appointed
by us within 90 days.                                                           

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CERTAIN UNITED STATES FEDERAL 
INCOME TAX CONSEQUENCES 

The following is a summary of certain material U.S. federal income tax
consequences of the exchange, ownership and disposition of Notes and Units to   
holders of old units that acquired old units at the initial offering price      
thereof pursuant to the initial offering thereof. Unless the context otherwise  
requires, any reference in this summary to Units refers to both old units and   
Exchange Units and any reference to Notes refers to both old notes and Exchange 
Notes. Unless otherwise stated under the heading "Non-U.S. holders" below, this 
summary deals only with Units (and the notes comprising the components thereof) 
held as capital assets within the meaning of Section 1221 of the Code (as       
defined below) by U.S. holders (as defined below). It does not deal with special
classes of holders such as banks, thrifts and other financial institutions, real
estate investment trusts, regulated investment companies, insurance companies,  
dealers or traders in securities or currency or tax-exempt investors. This      
summary also does not address the tax consequences to U.S. holders that have a  
functional currency other than the U.S. Dollar, U.S. expatriates, partnerships  
or other entities treated as partnerships that hold Units, persons that hold    
Units as part of a straddle, hedging, constructive sale or conversion           
transaction, or shareholders, partners or beneficiaries of a holder of Units. It
also does not include any description of any tax consequences under the tax laws
of any state or local government or of any foreign jurisdiction that may be     
applicable to the Units (and the notes comprising the components thereof) (a    
description of certain Dutch tax consequences follows this summary). This       
summary is based on the Internal Revenue Code of 1986, as amended, which we     
refer to in this prospectus as the Code, Treasury regulations under the Code,   
which we refer to in this prospectus as the Treasury Regulations, and           
administrative and judicial interpretations thereof, as of the date of this     
prospectus, all of which are subject to change, possibly on a retroactive basis.

  IF YOU ARE CONSIDERING EXCHANGING UNITS, YOU SHOULD CONSULT YOUR OWN TAX
ADVISOR TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX           
CONSEQUENCES OF THE EXCHANGE, OWNERSHIP AND DISPOSITION OF THE OLD NOTES AND THE
APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR SITUATION.              

    As used in this section, the term "U.S. holder" means any beneficial owner
of old units (and the old notes comprising the components thereof) that is, for 
United States federal income tax purposes,                                      

- a citizen or resident of the United States,                         

    - a corporation (or other entity taxable as a corporation for U.S. federal
   income tax purposes) created or organized in or under the laws of the
United States or of any state thereof or the District of Columbia,

    - an estate the income of which is subject to United States federal income
taxation regardless of its source, or                             

- a trust if (1) a court within the United States is able to exercise 
      primary supervision over the administration of the trust and one or more
 United States persons have the authority to control all substantial
       decisions of the trust or (2) the trust has in effect a valid election to
 be treated as a domestic trust for United States federal income tax
purposes.                                                         

 As used in this discussion, the term Non-U.S. holder means a beneficial
owner of old units (and the old notes comprising the components thereof) that is
not a U.S. holder and is not an entity organized in or under the laws of the    
United States, any state thereof or the District of Columbia.                   

TAX CONSEQUENCES OF THE EXCHANGE OFFER                                          

    The exchange of old units and underlying old notes for publicly registered
Units ("Exchange Units") and underlying publicly registered notes ("Exchange    
Notes") having substantially identical terms, under current law, will not be    
treated as an "exchange" or other taxable event for federal income tax purposes.
Accordingly,                                                                    

- holders will not recognize taxable gain or loss upon the receipt of 
      Exchange Units (and underlying Exchange Notes) in exchange for old units
(and underlying old notes) in the Exchange Offer,                 

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 - the holding period for an Exchange Unit (or underlying Exchange Note)
       received in the exchange offer will include the holding period of the old
 unit (or underlying old note) surrendered in exchange therefor, and

    - the adjusted tax basis of an Exchange Unit (or underlying Exchange Note)
       immediately after the exchange will be the same as the adjusted tax basis
of the old unit (or underlying old note) surrendered in exchange  
therefor.                                                         

TAX CONSEQUENCES OF OWNERSHIP AND DISPOSITION OF NOTES AND UNITS                

U.S. HOLDERS                                                                

Allocation of Issue Price.  The issue price of a Unit for U.S. federal
income tax purposes will be the first price at which a substantial amount of the
Units are sold to the public. Under Treasury Regulations, we are required to    
allocate the issue price of a Unit between the Notes comprising the components  
of the Unit based on the relative fair market values of each. The portion of the
issue price of a Unit allocated to each Note will constitute the issue price of 
such Note. Such allocation is binding on a U.S. holder unless the holder        
discloses on a statement attached to its U.S. federal income tax return that it 
is using a different allocation. There can be no assurance, however, that the   
IRS will respect our determination of the relative fair market values of the    
Notes. If our determination were successfully challenged by the IRS, the amount,
timing, and character of income on a Note could be different from that resulting
under the allocation determined by us.                                          

    Interest Income.  Stated interest on a Note comprising a portion of a Unit
will be includible in a U.S. holder's gross income as ordinary interest income  
at the time it is accrued or received in accordance with the U.S. holder's      
method of accounting for United States federal income tax purposes.             

 Premium.  The Notes issued pursuant to the 2004 Offering are treated as
issued at a premium. The amount of premium on any such Note will be the         
difference between the portion of the U.S. holder's cost of the related Unit    
that is allocable to the Note and the principal amount of the Note. A U.S.      
holder may elect to amortize such premium (as an offset to interest income),    
using a constant-yield method over the term of the Note. Such election, once    
made, generally applies to all taxable debt instruments held or subsequently    
acquired by the U.S. holder during or after the first taxable year to which the 
election applies and may not be revoked without the consent of the IRS.         

  Sale, Exchange or Retirement of Notes or Units.  Upon sale, exchange, or
retirement of a Note, a U.S. holder generally will recognize gain or loss equal 
to the difference between the U.S. holder's adjusted tax basis in the Note and  
the amount realized on the sale, exchange, or retirement (less any accrued but  
previously unpaid interest, which would be treated as a payment of previously   
accrued interest on the Notes). A U.S. holder's adjusted tax basis in a Note    
will generally equal the cost of the related Unit allocable to such note as     
described above in "-- U.S. Holders -- Allocation of Issue Price" reduced by the
amount of premium previously amortized on the Note. If a U.S. holder does not   
elect to amortize premium on a Note, then the holder's tax basis will include   
amounts representing the premium. Thus, if such U.S. holder holds the Note to   
maturity, the holder would generally be required to treat the premium as a loss 
when the Note matures. The amount realized on disposition of a Unit will be     
treated as an amount realized on disposition of each Note comprising the        
components thereof, such amount to be allocated between the Notes on the basis  
of the relative fair market values of each. Assuming the Unit and related Note  
was held as a capital asset, gain or loss so recognized will be capital gain or 
loss and will be long-term capital gain or loss if, at the time of the sale,    
exchange, or retirement, the Unit and related note was held for more than one   
year. Under current law, net capital gains of non-corporate taxpayers, under    
certain circumstances, are taxed at lower rates than items of ordinary income.  
The deduction of capital losses is subject to certain limitations applicable to 
both corporations and individuals.                                              

NON-U.S. HOLDERS                                                                

Interest Income.  Generally, interest income on a U.S. Note (including
original issue discount) of a Non-U.S. holder that is not effectively connected 
with a United States trade or business will be subject to a                     

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withholding tax at a 30% rate or, if applicable, a lower tax rate specified by a
treaty. However, interest income (including original issue discount) earned on a
U.S. Note by a Non-U.S. holder may qualify for the "portfolio interest"         
exemption and therefore not be subject to United States federal income tax or   
withholding tax, if such interest income is not effectively connected with a    
United States trade or business of the Non-U.S. holder and if:                  

   - the Non-U.S. holder does not actually or constructively own 10% or more
      of the total combined voting power of all classes of the Company's stock
entitled to vote,                                                 

- the Non-U.S. holder is not a controlled foreign corporation that is 
related to the Company through stock ownership,                   

- the Non-U.S. holder certifies to the Company or the Company's agent,
       under penalties of perjury, that it is not a U.S. holder and provides its
name and address or otherwise satisfies applicable identification 
requirements, and                                                 

     - neither the Company nor its paying agent knows or has reason to know that
the conditions of the exemption are, in fact, not satisfied.      

   In the case of U.S. Notes held by foreign partnerships, the certification
described above generally must be provided by the partners, rather than by the  
partnerships, and the partnership must provide certain information, including a 
U.S. taxpayer identification number. A look through rule applies in the case of 
tiered partnerships.                                                            

  Subject to the discussion below, a Non-U.S. holder generally will not be
subject to U.S. federal income or withholding tax on interest income on a Dutch 
Note.                                                                           

A Non-U.S. holder generally will be taxed in the same manner as a U.S.
holder with respect to interest income on U.S. Notes or Dutch Notes that is     
effectively connected with a United States trade or business of the Non-U.S.    
holder unless an applicable treaty provides otherwise. In the case of a Non-U.S.
holder that is eligible for benefits of an income tax treaty with the United    
States, such Non-U.S. holder generally will be taxed on its effectively         
connected interest income in the same manner as a U.S. holder only if such      
income is attributable to a permanent establishment maintained by the Non-U.S.  
holder in the United States. Such effectively connected interest received or    
accrued by a corporate Non-U.S. holder may also, under certain circumstances, be
subject to an additional "branch profits" tax at a 30% rate or, if applicable, a
lower tax rate specified by a treaty. Even though such effectively connected    
interest is subject to U.S. income tax and may be subject to the branch profits 
tax, it is not subject to U.S. withholding tax if the holder delivers a properly
executed IRS Form W-8ECI (or a suitable substitute form) to us or our paying    
agent and neither we nor our paying agent knows or has reason to know that the  
information on the form is incorrect.                                           

Sale, Exchange, or Retirement of Note or Units.  A Non-U.S. holder    
generally will not be subject to United States federal income tax or withholding
tax on any gain realized on the sale, exchange, or retirement of U.S. Notes or  
Dutch Notes or Units unless:                                                    

    - the gain is effectively connected with a United States trade or business
     of the Non-U.S. holder (and, if a treaty applies, the gain is generally
   attributable to a United States permanent establishment maintained by
that Non-U.S. holder), or                                         

 - in the case of a Non-U.S. holder who is an individual, such holder is
       present in the United States for a period or periods aggregating 183 days
 or more during the taxable year of the disposition, and either such
holder has a "tax home" in the United States or the disposition is
      attributable to an office or other fixed place of business maintained by
such holder in the United States.                                 

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INFORMATION REPORTING AND BACKUP WITHHOLDING TAX                                

   In general, information reporting on IRS Form 1099 will apply to payments
to a U.S. Holder of principal, premium (if any) and interest on the Notes       
comprising the Units and the proceeds of the sale of the Units. Backup          
withholding tax may apply to such payments to a non-corporate U.S. holder if:   

- the U.S. holder fails to furnish or certify its correct taxpayer    
     identification number to us or our paying agent in the manner required,

- we are notified by the IRS that the U.S. holder has failed to report
payments of interest or dividends properly, or                    

    - under certain circumstances the U.S. holder fails to certify that it has
       not been notified by the IRS that it is subject to backup withholding for
failure to report interest or dividend payments.                  

     Information reporting on IRS Form 1099 and backup withholding tax generally
will not apply to payments of interest on Notes to a Non-U.S. holder if the     
certification or identification requirements described in "-- Non-U.S.          
holders -- Interest Income" above are satisfied by the holder, unless the payor 
knows or has reason to know that the holder is not entitled to an exemption from
information reporting or backup withholding tax. However, we may report payments
of interest on the U.S. Notes to a Non-U.S. holder on IRS Form 1042-S regardless
of whether a Non-U.S. holder provides the certification or identification       
requirements described above.                                                   

Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of Notes or Units effected     
outside the United States by a foreign office of a "broker" (as defined in      
applicable Treasury Regulations), unless the broker is a United States person or
has certain other connections to the United States. Payment of the proceeds of  
any such sale effected outside the United States by a foreign office of a broker
with such connections to the United States described in the preceding sentence  
will not be subject to backup withholding tax, but will be subject to           
information reporting requirements, unless the broker has documentary evidence  
in its records that the beneficial owner is a Non-U.S. holder and certain other 
conditions are met, or the beneficial owner otherwise establishes an exemption. 
Payment of the proceeds of any such sale to or through the United States office 
of a broker is subject to information reporting and backup withholding          
requirements unless the beneficial owner of the Notes provides the certification
described in "-- Non-U.S. holders -- Interest Income" or otherwise establishes  
an exemption.                                                                   

    Any amounts withheld under the backup withholding rules will be allowed as
a credit against that holder's United States federal income tax liability and   
may entitle the holder to a refund, provided that the required information is   
furnished to the IRS. The current rate for backup withholding tax is 28%.       

The foregoing summary of certain United States federal income tax     
consequences of the exchange, ownership and disposition of Units and Notes is   
intended for general information. You are urged to consult with your own tax    
advisor as the U.S. federal income tax consequences of an investment in the     
Units as well as the consequences under state, local and foreign income tax law.
Non-U.S. holders are urged to consult their own tax advisors as to the effect of
income tax treaties and reporting requirements with regard to the Units.        

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CERTAIN DUTCH TAX CONSEQUENCES

GENERAL                                                                         

     The following summary describes the principal Dutch tax consequences of the
acquisition, holding, redemption and disposal of Dutch notes. This summary does 
not purport to be a comprehensive description of all Dutch tax considerations   
that may be relevant to a decision to acquire, to hold, and to dispose of the   
Dutch notes. Each prospective noteholder should consult a professional adviser  
with respect to the tax consequences of an investment in the Dutch notes. The   
discussion of certain Dutch taxes set forth below is included for general       
information purposes only.                                                      

 This summary is based on the Dutch tax legislation, published case law,
treaties, rules, regulations and similar documentation, in force as of the date 
of this prospectus, without prejudice to any amendments introduced at a later   
date and implemented with retroactive effect.                                   

 This summary does not address the Dutch tax consequences of a holder of
Dutch notes who holds a substantial interest (aanmerkelijk belang) in the Dutch 
issuer, within the meaning of Section 4.3 of the Income Tax Act 2001. Generally 
speaking, a noteholder holds a substantial interest in the Dutch issuer, if such
noteholder, alone or together with his or her partner (statutory defined term)  
or certain other related persons, directly or indirectly, holds (i) an interest 
of 5 percent or more of the total issued capital of the Dutch issuer or of 5    
percent or more of the issued capital of a certain class of shares of the Dutch 
issuer, (ii) rights to acquire, directly or indirectly, such interest or (iii)  
certain profit sharing rights in the Dutch issuer.                              

WITHHOLDING TAX                                                                 

No Dutch withholding tax is due upon payments on the Dutch notes.     

CORPORATE INCOME TAX AND INDIVIDUAL INCOME TAX                                  

   Residents of the Netherlands.  If the holder of Dutch notes is subject to
Dutch corporate income tax and the Dutch notes are attributable to its (deemed) 
business assets, income derived from the Dutch notes and gains realized upon the
redemption and disposal of the Dutch notes are generally taxable in the         
Netherlands.                                                                    

 If the holder of Dutch notes is an individual, resident or deemed to be
resident of the Netherlands for Dutch tax purposes (including the individual    
holder of Dutch notes who has opted to be taxed as a resident of the            
Netherlands), the income derived from the Dutch notes and the gains realized    
upon the redemption and disposal of the Dutch notes are taxable at the          
progressive rates of the Income Tax Act 2001, if:                               

        (i) the holder of Dutch notes has an enterprise or an interest in an
enterprise, to which enterprise the Dutch notes are attributable; or  

   (ii) such income or gains qualify as "income from miscellaneous
 activities" (resultaat uit overige werkzaamheden) within the meaning of
Section 3.4 of the Income Tax Act 2001, which include activities with 
respect to the Dutch notes that exceed "regular, active portfolio     
management" (normaal, actief vermogensbeheer).                        

If neither condition (i) nor condition (ii) applies to the individual 
holder of Dutch notes, the actual income derived from the Dutch notes and the   
actual gains realized with respect to the Dutch notes will not be taxable.      
Instead, such holder of Dutch notes will be taxed at a flat rate of 30% on      
deemed income from "savings and investments" (sparen en beleggen) within the    
meaning of Section 5.1 of the Income Tax Act 2001. This deemed income amounts to
4% of the average of the individual's "yield basis" (rendementsgrondslag) within
the meaning of article 5.3 of the Income Tax Act 2001 at the beginning of the   
calendar year and the individual's yield basis at the end of the calendar year, 
insofar the average exceeds a certain threshold. The fair market value of the   
Dutch notes will be included in the individual's yield basis.                   

  Non-residents of the Netherlands.  A holder of Dutch notes that is not a
resident nor deemed to be a resident of the Netherlands for Dutch tax purposes  
(nor, if he or she is an individual, has opted to be taxed as                   

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a resident of the Netherlands) is not taxable in respect of income derived from 
the Dutch notes and gains realized upon the redemption and disposal of the Dutch
notes, unless:                                                                  

        (i) the holder of Dutch notes has an enterprise or an interest in an
  enterprise, that is, in whole or in part, carried on through a permanent
 establishment or a permanent representative in the Netherlands to which
   Dutch permanent establishment or permanent representative the Dutch notes
are attributable, or                                                  

      (ii) the holder of Dutch notes is an individual and such income or
gains qualify as "income from miscellaneous activities" (resultaat uit
     overige werkzaamheden) in the Netherlands within the meaning of Section 3.4
 of the Income Tax Act 2001, which include activities in the Netherlands
with respect to the Dutch notes that exceed "regular, active portfolio
management" (normaal, actief vermogensbeheer).                        

GIFT AND INHERITANCE TAXES                                                      

   Residents of the Netherlands.  Generally, gift and inheritance taxes will
be due in the Netherlands in respect of the acquisition of the Dutch notes by   
way of a gift by, or on the death of, a holder of Dutch notes who is a resident 
or deemed to be a resident of the Netherlands for the purposes of Dutch gift and
inheritance tax at the time of the gift or his or her death.                    

An individual of Dutch nationality is deemed to be a resident of the  
Netherlands for the purposes of the Dutch gift and inheritance tax, if he or she
has been resident in the Netherlands during the ten years preceding the gift or 
his or her death. An individual of any other nationality is deemed to be a      
resident of the Netherlands for the purposes of the Dutch gift and inheritance  
tax only if he or she has been residing in the Netherlands at any time during   
the twelve months preceding the time of the gift.                               

    Non-residents of the Netherlands.  No gift or inheritance taxes will arise
in the Netherlands in respect of the acquisition of the Dutch notes by way of   
gift by, or as a result of the death of, a holder of Dutch notes who is neither 
a resident nor deemed to be a resident of the Netherlands for the purposes of   
the Dutch gift and inheritance tax, unless:                                     

        (i) such holder of Dutch notes at the time of the gift has or at the
    time of his or her death had an enterprise or an interest in an enterprise
that is or was, in whole or in part, carried on through a permanent   
     establishment or a permanent representative in the Netherlands and to which
   Dutch permanent establishment or permanent representative the Dutch notes
are or were attributable; or                                          

         (ii) in the case of a gift of the Dutch notes by an individual who at
    the date of the gift was neither a resident nor deemed to be a resident of
     the Netherlands, such individual dies within 180 days after the date of the
    gift, while at the time of his or her death, being a resident or deemed to
be a resident of the Netherlands.                                     

Treaties.  Treaties may limit the Dutch sovereignty to levy gift and  
inheritance tax.                                                                

OTHER TAXES AND DUTIES                                                          

   No Dutch VAT, capital duty, registration tax, customs duty, transfer tax,
stamp duty or any other similar documentary tax or duty, will be due in the     
Netherlands by a holder of Dutch notes in respect of or in connection with the  
subscription, issue, placement, allotment or delivery of the Dutch notes.       

EU SAVINGS DIRECTIVE                                                            

  On June 3, 2003, the European Council of Economics and Finance Ministers
adopted a Directive on the taxation of savings income. Under the Directive      
Member States will (if equivalent measures have been introduced by certain      
non-EU countries) be required, from July 1, 2005, to provide to the tax         
authorities of another Member State details of payments of interest (or similar 
income) paid by a person within its jurisdiction to an individual resident in   
that other Member State. However, for a transitional period, Belgium, Luxembourg
and Austria will instead be required (unless during that period they elect      
otherwise) to operate a withholding system in relation to such payments (the    
ending of such transitional period being dependent upon the conclusion of       
certain other agreements relating to information exchange with certain other    
countries).                                                                     
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DUTCH TAX ASPECTS IN RELATION TO THE EXCHANGE                                   

     Considering the fact that, except for the removal of the legend relating to
the SEC registration, the terms and conditions of the old notes are identical to
the terms and conditions of the new notes, it is reasonable to take the view    
that the Exchange should not constitute a taxable event for Dutch tax purposes. 
Since there is no authority or guidance with respect to this issue, it is,      
however, possible that the Dutch tax authorities will assert that the Exchange  
does constitute a taxable event.                                                

In the situation that the Dutch tax authorities take the view that the
Exchange constitutes a taxable event, a gain (if any) realized as a result of   
the Exchange by a Dutch resident corporate noteholder will, in principle, be    
taxable. If certain conditions are met, the gain can be deferred under the      
"like-kind-exchange" case law (ruilarresten).                                   

If any gain would be realized as a result of the Exchange by a Dutch  
resident individual noteholder, such gain would not be taxable when the notes   
are held as a passive investment and as such are part of the "yield basis"      
(rendementsgrondslag) within the meaning of article 5.3 of the Income Tax Act   
2001. Such Dutch resident individual holder will be taxed on deemed income from 
"savings and investments" (sparen en beleggen) within the meaning of Section 5.1
of the Income Tax Act 2001. A possible gain realized by a Dutch resident        
individual holder would only be taxable if:                                     

         (i) the noteholder has an enterprise or an interest in an enterprise,
 to which enterprise the Notes are attributable, with an exception for a
possible deferral for gains realized upon the Exchange under the      
"like-kind-exchange" case law (ruilarresten); or                      

      (ii) such gain qualifies as "income from miscellaneous activities"
    (resultaat uit overige werkzaamheden) within the meaning of Section 3.4 of
    the Dutch Income Tax Act 2001, which include the performance of activities
with respect to the Notes that exceed "regular, active portfolio      
management" (normaal, actief vermogensbeheer).                        

If a non-resident noteholder would realize a gain as a result of the  
Exchange, such gain would only be taxable if:                                   

         (i) the noteholder has an enterprise or an interest in an enterprise,
    that is, in whole or in part, carried on through a permanent establishment
    or a permanent representative in the Netherlands to which enterprise Dutch
permanent establishment or permanent representative the Notes are     
    attributable, with an exception for a possible deferral for gains realized
   upon the Exchange under the "like-kind-exchange" case law (ruilarresten);
or                                                                    

   (ii) the noteholder is an individual and such gain qualifies as
"income from miscellaneous activities" (resultaat uit overige         
    werkzaamheden) in the Netherlands within the meaning of Section 3.4 of the
   Dutch Income Tax Act 2001, which include the performance of activities in
the Netherlands with respect to the Notes that exceed "regular, active
portfolio management" (normaal, actief vermogensbeheer).              

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PLAN OF DISTRIBUTION

   The exchange offer is not being made to, nor will we accept surrenders of
old units for exchange from, holders of old units in any jurisdiction in which  
the exchange offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.                               

This communication is directed solely at persons who are outside the  
Netherlands and Belgium. (all such persons together are referred to as "relevant
persons"). This communication must not be acted on or relied on by persons who  
are not relevant persons. Any investment or investment activity to which this   
communication relates is available only to relevant persons and will be engaged 
in only with relevant persons.                                                  

     The distribution of this prospectus and the offer and sale of the new units
may be restricted by law in certain jurisdictions. Persons who come into        
possession of this prospectus or any of the new units must inform themselves    
about and observe any such restrictions. You must comply with all applicable    
laws and regulations in force in any jurisdiction in which you purchase, offer  
or sell the new units or possess or distribute this prospectus and, in          
connection with any purchase, offer or sale by you of the new units, must obtain
any consent, approval or permission required under the laws and regulations in  
force in any jurisdiction to which you are subject or in which you make such    
purchase, offer or sale.                                                        

Under existing SEC interpretations, the new units will be freely      
transferable by holders other than our affiliates after the exchange offer      
without further registration under the Securities Act if the holder of the new  
units represents that it is acquiring the new units in the ordinary course of   
its business, that it has no arrangement or understanding with any person to    
participate in the distribution of the new units and that it is not an affiliate
of ours, as such terms are interpreted by the SEC; provided that broker-dealers 
receiving new units in the exchange offer will have a prospectus delivery       
requirement with respect to resales of such new units. While the SEC has not    
taken a position with respect to this particular transaction, under existing SEC
interpretations relating to transactions structured substantially like this     
exchange offer, participating broker-dealers may fulfill their prospectus       
delivery requirements with respect to new units (other than a resale of an      
unsold allotment of the new units) with the prospectus contained in the exchange
offer registration statement.                                                   

    Each broker-dealer that receives new units for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in        
connection with any resale of such new units. This prospectus, as it may be     
amended or supplemented from time to time, may be used by a broker-dealer in    
connection with resales of new units received in exchange for old units where   
such old units were acquired as a result of market-making activities or other   
trading activities. We have agreed that, for a period of 90 days after the date 
of this prospectus, we will make this prospectus, as amended or supplemented,   
available to any broker-dealer for use in connection with any such resale. In   
addition, until May 5, 2005 (90 days after the date of this prospectus), all    
dealers effecting transactions in the new units may be required to deliver a    
prospectus.                                                                     

     A broker-dealer intending to use this prospectus in the resale of new units
must so notify us on or prior to the expiration date. This notice may be given  
in the space provided in the letter of transmittal or may be delivered to the   
exchange agent.                                                                 

  We may, in certain cases, issue a notice suspending use of this exchange
offer registration statement. If we do so, the period during which the          
registration statement must remain effective will be extended for a number of   
days equal to the number of days the registration statement was in suspense.    

We will not receive any proceeds from any sale of new units by        
brokers-dealers. New units received by broker-dealers for their own account     
pursuant to the exchange offer may be sold from time to time in one or more     
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new units or a combination of such methods of     
resale, at market prices prevailing at the time of resale, at prices related to 
such prevailing market prices or negotiated prices. Any such resale may be made 
directly to purchasers or to or through brokers or dealers who may receive      
compensation in the form of commissions or concessions from any such            
broker-dealer and/or the purchasers of any such new units. Any broker-dealer    
that resells the new units that were received by it for its own account pursuant
to the exchange offer and any broker or dealer that participates in a           
distribution of such new units may be deemed to be an "underwriter" within the  
meaning of the Securities Act and any profit of any such resale of new units and
any commissions or                                                              
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concessions received by any such persons may be deemed to be underwriting       
compensation under the Securities Act. The letter of transmittal states that by 
acknowledging that it will deliver and by delivering a prospectus, a            
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.                                                  

     For a period of 90 days after the date of this prospectus, we will promptly
send additional copies of this prospectus and any amendment or supplement to    
this prospectus to any broker-dealer that requests such documents in the letter 
of transmittal. We have agreed to pay all expenses incident to the exchange     
offer (including the expenses of one counsel for the holder of the old units)   
other than commissions or concessions of any brokers or dealers and will        
indemnify the holders of the old units (including any broker-dealers) against   
certain liabilities, including liabilities under the Securities Act.            

LEGAL MATTERS 

Certain legal matters with respect to the new units and the guarantees
offered hereby will be passed upon for the Company by Golenbock Eiseman Assor   
Bell & Peskoe LLP, New York, New York. Certain legal matters with respect to    
Philipp Brothers Netherlands III B.V. and Phibro Animal Health SA will be passed
upon for the Company by Allen & Overy LLP.                                      

EXPERTS 

   The consolidated financial statements of Phibro Animal Health Corporation
as of June 30, 2004 and 2003 and for each of the three years in the period ended
June 30, 2004, the consolidated financial statements of Philipp Brothers        
Netherlands I B.V. as of June 30, 2004 and 2003 and for each of the three years 
in the period ended June 30, 2004 and the financial statements of Phibro Animal 
Health SA (Belgium) as of June 30, 2004 and 2003 and for each of the three years
in the period ended June 30, 2004 included in this prospectus, have all been so 
included in reliance on the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of said firm as       
experts in auditing and accounting.                                             

WHERE YOU CAN FIND MORE INFORMATION 

  We have voluntarily filed certain periodic reports and other information
with the SEC. Upon effectiveness of the registration statement, we became       
subject to the informational requirements of the Securities Exchange Act of     
1934, and, in accordance therewith, file reports and other information with the 
SEC. Those reports and other information so filed with the SEC may be inspected 
and copied at the public reference facilities maintained by the SEC at Room     
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
those materials can be obtained from the Public Reference Section of the SEC at 
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. You may call
the SEC at 1-800-SEC-0330 to obtain information on the operation of the public  
reference room. The SEC also maintains a site on the World Wide Web at          
http://www.sec.gov, which contains reports and other information regarding      
registrants that file electronically with the SEC.                              

   We have filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933, covering the new units to be issued in the exchange     
offer (Registration No. 333-122063). This prospectus, which is a part of the    
registration statement, does not contain all of the information included in the 
registration statement. Any statement made in this prospectus concerning the    
contents of any contract, agreement or other document is not necessarily        
complete. For further information regarding us and the new units to be issued in
the exchange offer, please reference the registration statement, including its  
exhibits. If we have filed any contract, agreement or other document as an      
exhibit to the registration statement, you should read the exhibit for a more   
complete understanding of the documents or matter involved.                     

  Copies of the registration statement, including all related exhibits and
schedules, may be inspected without charge at the public reference facilities   
maintained by the SEC, or obtained at prescribed rates from the Public Reference
Section of the SEC. In addition, you may request a copy of any of these filings,
at no                                                                           

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cost, by writing our Chief Financial Officer at our principal executive offices,
which are located at 65 Challenger Road, Ridgefield Park, NJ 07660 telephone    
number (201) 329-7300.                                                          

SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES 

Philipp Brothers Netherlands III B.V. ("PB Netherlands") is a company 
incorporated under the laws of the Netherlands. Certain of its directors and    
executive officers are resident outside of the United States and many of its    
assets are located outside of the United States. Although PB Netherlands has    
agreed, in accordance with the terms of the indenture, to accept service of     
process in the United States by agents designated for such purpose, it may not  
be possible for holders of new notes (a) to effect service of process upon      
certain of its directors or officers or (b) to enforce judgements of courts of  
the United States predicated upon the civil liability of such persons under the 
United States securities law against any such persons in the courts of a foreign
jurisdiction.                                                                   

PHILIPP BROTHERS NETHERLANDS III B.V. 

 Philipp Brothers Netherlands III B.V., the Dutch issuer, is an indirect
wholly-owned subsidiary of the US issuer and is incorporated under the laws of  
the Netherlands as a private company with limited liability. The Dutch issuer is
a holding company formed to finance the operations of Phibro Animal Health SA, a
Belgian company, which owns and operates our Rixensart, Belgium plant. Such     
plant uses fermentation processes to produce the active ingredients semduramycin
and virginiamycin and conducts all of our fermentation development activities.  
On December 16, 2004, we entered into an agreement to sell the Rixensart,       
Belgium plant to Glaxosmithkline Biologicals S.A. (see "Prospectus              
Summary -- The Company -- Recent Developments -- Sale of Belgium Plant").       

 The managing directors of Philipp Brothers Netherlands III B.V. are Mr.
Jack Bendheim and Mr. Joseph Katzenstein (each a managing director, class B) and
Mr. Robbert Elshout and Ms. Liselotte Heine (each a managing director, class A).
Mr. Bendheim has served as a managing director B of Philipp Brothers Netherlands
III B.V., since June 2004. See also "Management" for additional information     
regarding Mr. Bendheim. Mr. Joseph Katzenstein, age 62, has served as a managing
director of Philipp Brothers Netherlands III B.V. since June 2004. Mr.          
Katzenstein, has also served as the secretary of Phibro Animal Health           
Corporation since 1982 and the treasurer of Phibro Animal Health Corporation    
from 1982 through 2002. Mr. Katzenstein served as corporate controller of Phibro
Animal Health Corporation from 1965 to 1985. Mr. Elshout and Ms. Heine have been
managing directors of Philipp Brothers Netherlands III B.V. since June 2004.    

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:                        
Report of Independent Registered Public Accounting Firm.....   F-2
Consolidated Balance Sheets as of June 30, 2004 and 2003....   F-3
Consolidated Statements of Operations and Comprehensive           
  Income (Loss) for the years ended June 30, 2004, 2003 and       
  2002......................................................   F-4
Consolidated Statements of Changes in Stockholders' Deficit       
  for the years ended June 30, 2004, 2003 and 2002..........   F-5
Consolidated Statements of Cash Flows for the years ended         
  June 30, 2004, 2003 and 2002..............................   F-6
Notes to Consolidated Financial Statements..................   F-7
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:            
Condensed Consolidated Balance Sheets as of December 31,          
  2004 and June 30, 2004....................................  F-45
Condensed Consolidated Statements of Operations and               
  Comprehensive Income for the three months and six months        
  ended December 31, 2004 and 2003..........................  F-46
Condensed Consolidated Statements of Changes in                   
  Stockholders' Deficit for the three months and six months       
  ended December 31, 2004...................................  F-47
Condensed Consolidated Statements of Cash Flows for the six       
  months ended December 31, 2004 and 2003...................  F-48
Notes to Unaudited Condensed Consolidated Financial               
  Statements................................................  F-49

OTHER FINANCIAL STATEMENTS OF CERTAIN PHIBRO ANIMAL HEALTH CORPORATION          
SUBSIDIARIES                                                                    

The following financial statements for certain of Phibro Animal Health          
Corporation's indirectly wholly owned subsidiaries are included pursuant to     
Regulation S-X Rule 3-16 of the Exchange Act, "Financial Statements of          
Affiliates Whose Securities Collateralize an Issue Registered or Being          
Registered." See Note 9 to the Phibro Animal Health Corporation consolidated    
financial statements.                                                           

                                                                [Download Table]
                                                                  
PHILIPP BROTHERS NETHERLANDS I B.V                                
Report of Independent Registered Public Accounting Firm.....  F-71
Consolidated Balance Sheets as of June 30, 2004 and 2003....  F-72
Consolidated Statements of Operations and Comprehensive Loss      
  for the years ended June 30, 2004, 2003 and 2002..........  F-73
Consolidated Statements of Changes in Stockholders' Deficit       
  for the years ended June 30, 2004, 2003 and 2002..........  F-74
Consolidated Statements of Cash Flows for the years ended         
  June 30, 2004, 2003 and 2002..............................  F-75
Notes to Consolidated Financial Statements..................  F-76
PHIBRO ANIMAL HEALTH SA                                           
Report of Independent Registered Public Accounting Firm.....  F-87
Balance Sheets as of June 30, 2004 and 2003.................  F-88
Statements of Operations and Comprehensive Income (Loss) for      
  the years ended June 30, 2004, 2003 and 2002..............  F-89
Statements of Changes in Stockholders' Equity for the years       
  ended June 30, 2004, 2003 and 2002........................  F-90
Statements of Cash Flows for the years ended June 30, 2004,       
  2003 and 2002.............................................  F-91
Notes to Financial Statements...............................  F-92

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors of Phibro Animal Health Corporation:                  

In our opinion, the accompanying consolidated balance sheets and the related    
consolidated statements of operations and comprehensive income (loss), changes  
in stockholders' deficit and cash flows present fairly, in all material         
respects, the financial position of Phibro Animal Health Corporation and its    
subsidiaries at June 30, 2004 and 2003, and the results of their operations and 
their cash flows for each of the three years in the period ended June 30, 2004, 
in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's  
management; our responsibility is to express an opinion on these financial      
statements based on our audits. We conducted our audits of these statements in  
accordance with the standards of the Public Company Accounting Oversight Board  
(United States). Those standards require that we plan and perform the audit to  
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements, assessing   
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our    
audits provide a reasonable basis for our opinion.                              

PricewaterhouseCoopers LLP                                                      

Florham Park, New Jersey                                                        
September 27, 2004                                                              

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONSOLIDATED BALANCE SHEETS 

                                                                [Download Table]

                                                                AS OF JUNE 30,    
                                                              ------------------- 
                                                                2004       2003   
                                                              --------   -------- 
                                                                (IN THOUSANDS)    
                                                                                  
                                     ASSETS                                       
Current Assets:                                                                   
  Cash and cash equivalents.................................  $  5,568   $ 11,179 
  Trade receivables, less allowance for doubtful accounts of                      
     $1,358 and $1,437 at June 30, 2004 and 2003,                                 
     respectively...........................................    57,658     52,714 
  Other receivables.........................................     2,766      3,503 
  Inventories...............................................    79,910     87,849 
  Prepaid expenses and other current assets.................     8,688      9,868 
  Current assets from discontinued operations...............        --      9,276 
                                                              --------   -------- 
       Total current assets.................................   154,590    174,389 
Property, plant and equipment, net..........................    58,786     63,905 
Intangibles.................................................    11,695      8,669 
Other assets................................................    16,298     14,059 
Other assets from discontinued operations...................        --     13,325 
                                                              --------   -------- 
                                                              $241,369   $274,347 
                                                              ========   ======== 

                      LIABILITIES AND STOCKHOLDERS' DEFICIT                       
Current liabilities:                                                              
  Cash overdraft............................................  $    891   $  1,686 
  Loans payable to banks....................................    10,996     37,878 
  Current portion of long-term debt.........................     1,351     24,124 
  Accounts payable..........................................    46,972     55,355 
  Accrued expenses and other current liabilities............    40,010     40,699 
  Current liabilities from discontinued operations..........        --      5,557 
                                                              --------   -------- 
       Total current liabilities............................   100,220    165,299 
Long-term debt..............................................   158,018    102,263 
Other liabilities...........................................    22,286     21,241 
Other liabilities from discontinued operations..............        --      1,173 
                                                              --------   -------- 
       Total liabilities....................................   280,524    289,976 
                                                              --------   -------- 
Commitments and contingencies                                                     
Redeemable securities:                                                            
  Series B and C preferred stock............................    24,678     68,881 
                                                              --------   -------- 
Stockholders' deficit:                                                            
  Preferred stock -- $100 par value, 150,543 shares                               
     authorized, none issued at June 30, 2004 and 2003;                           
     Series A preferred stock -- $100 par value, 6% non-                          
     cumulative, 5,207 shares authorized, issued and                              
     outstanding at June 30, 2004 and 2003..................       521        521 
  Common stock -- $0.10 par value, 30,300 authorized and                          
     24,488 shares issued and outstanding at June 30, 2004                        
     and 2003...............................................         2          2 
  Paid-in capital...........................................       860        860 
  Accumulated deficit.......................................   (57,964)   (79,489)
  Accumulated other comprehensive income (loss):                                  
     Gain on derivative instruments.........................         9         81 
     Cumulative currency translation adjustment.............    (7,261)    (6,485)
                                                              --------   -------- 
       Total stockholders' deficit..........................   (63,833)   (84,510)
                                                              --------   -------- 
                                                              $241,369   $274,347 
                                                              ========   ======== 

The accompanying notes are an integral part of the Consolidated Financial 
Statements. 
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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) 

                                                        [Enlarge/Download Table]

                                                              FOR THE YEARS ENDED JUNE 30,  
                                                             ------------------------------ 
                                                               2004       2003       2002   
                                                             --------   --------   -------- 
                                                                     (IN THOUSANDS)         
                                                                                            
Net sales................................................... $358,274   $341,746   $328,676 
Cost of goods sold..........................................  267,871    251,200    247,411 
                                                             --------   --------   -------- 
  Gross profit..............................................   90,403     90,546     81,265 
Selling, general and administrative expenses (includes                                      
  litigation income of $3,040 in 2003 and $742 in 2002).....   66,128     65,050     70,636 
Costs of non-completed transaction..........................    5,261         --         -- 
                                                             --------   --------   -------- 
  Operating income..........................................   19,014     25,496     10,629 
Other:                                                                                      
  Interest expense..........................................   18,618     16,281     18,070 
  Interest (income).........................................     (130)       (85)      (346)
  Other (income) expense, net...............................     (781)     1,539      3,349 
  Net (gain) on extinguishment of debt......................  (23,226)        --         -- 
                                                             --------   --------   -------- 
  Income from continuing operations before income taxes.....   24,533      7,761    (10,444)
Provision for income taxes..................................    7,969     10,060     14,767 
                                                             --------   --------   -------- 
  Income (loss) from continuing operations..................   16,564     (2,299)   (25,211)
Discontinued operations:                                                                    
  (Loss) from discontinued operations (net of income                                        
     taxes).................................................   (1,625)   (14,577)   (26,559)
  (Loss) on disposal of discontinued operations (net of                                     
     income taxes)..........................................   (2,089)      (683)        -- 
                                                             --------   --------   -------- 
  Net income (loss).........................................   12,850    (17,559)   (51,770)
Other comprehensive income (loss):                                                          
  Change in derivative instruments, net of tax..............      (72)      (981)     1,062 
  Change in currency translation adjustment.................     (776)     7,377     (6,125)
                                                             --------   --------   -------- 
  Comprehensive income...................................... $ 12,002   $(11,163)  $(56,833)
                                                             ========   ========   ======== 
  Net income (loss).........................................   12,850    (17,559)   (51,770)
Excess of the reduction of redeemable preferred stock over                                  
  total assets divested and costs and liabilities incurred                                  
  on the Prince Transactions................................   20,138         --         -- 
Dividends and equity value accreted on Series B and C                                       
  redeemable preferred stock................................  (11,463)   (12,278)    (7,623)
                                                             --------   --------   -------- 
  Net income (loss) available to common shareholders........ $ 21,525   $(29,837)  $(59,393)
                                                             ========   ========   ======== 

The accompanying notes are an integral part of the Consolidated Financial 
Statements. 
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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT 

                                                        [Enlarge/Download Table]

                                              FOR THE YEARS ENDED JUNE 30, 2004, 2003 AND 2002                  
                              --------------------------------------------------------------------------------- 
                                                                                        ACCUMULATED             
                                                                          RETAINED         OTHER                
                              PREFERRED     COMMON STOCK                  EARNINGS     COMPREHENSIVE            
                                STOCK     -----------------   PAID-IN   (ACCUMULATED      (LOSS)                
                              SERIES A    CLASS A   CLASS B   CAPITAL     DEFICIT)        INCOME        TOTAL   
                              ---------   -------   -------   -------   ------------   -------------   -------- 
                                                          (IN THOUSANDS)                                        
                                                                                                                
Balance, June 30, 2001......    $521        $1        $1       $ 878      $  9,741       $ (7,737)     $  3,405 
  Dividends on Series B and                                                                                     
     C redeemable preferred                                                                                     
     stock..................                                                (7,623)                      (7,623)
  Change in derivative                                                                                          
     instruments, net of                                                                                        
     tax....................                                                                1,062         1,062 
  Foreign currency                                                                                              
     translation                                                                                                
     adjustment.............                                                               (6,125)       (6,125)
  Receivable from principal                                                                                     
     shareholder............                                    (138)                                      (138)
  Net (loss)................                                               (51,770)                     (51,770)
                                ----        --        --       -----      --------       --------      -------- 
Balance, June 30, 2002......    $521        $1        $1       $ 740      $(49,652)      $(12,800)     $(61,189)
                                ====        ==        ==       =====      ========       ========      ======== 
  Dividends on Series B and                                                                                     
     C redeemable preferred                                                                                     
     stock..................                                                (8,808)                      (8,808)
  Equity value accreted on                                                                                      
     Series B and C                                                                                             
     redeemable preferred                                                                                       
     stock..................                                                (3,470)                      (3,470)
  Change in derivative                                                                                          
     instruments, net of                                                                                        
     tax....................                                                                 (981)         (981)
  Foreign currency                                                                                              
     translation                                                                                                
     adjustment.............                                                                7,377         7,377 
  Payable to principal                                                                                          
     shareholder............                                     120                                        120 
  Net (loss)................                                               (17,559)                     (17,559)
                                ----        --        --       -----      --------       --------      -------- 
Balance, June 30, 2003......    $521        $1        $1       $ 860      $(79,489)      $ (6,404)     $(84,510)
                                ====        ==        ==       =====      ========       ========      ======== 
  Excess of the reduction in                                                                                    
     redeemable preferred                                                                                       
     stock over total assets                                                                                    
     divested and costs and                                                                                     
     liabilities incurred on                                                                                    
     the Prince                                                                                                 
     Transactions...........                                                20,138                       20,138 
  Dividends on Series B and                                                                                     
     C redeemable preferred                                                                                     
     stock..................                                                (6,042)                      (6,042)
  Equity value accreted on                                                                                      
     Series B and C                                                                                             
     redeemable preferred                                                                                       
     stock..................                                                (5,421)                      (5,421)
  Change in derivative                                                                                          
     instruments, net of                                                                                        
     tax....................                                                                  (72)          (72)
  Foreign currency                                                                                              
     translation                                                                                                
     adjustment.............                                                                 (776)         (776)
  Net (loss)................                                                12,850                       12,850 
                                ----        --        --       -----      --------       --------      -------- 
Balance, June 30, 2004......    $521        $1        $1       $ 860      $(57,964)      $ (7,252)     $(63,833)
                                ====        ==        ==       =====      ========       ========      ======== 

The accompanying notes are an integral part of the Consolidated Financial 
Statements. 
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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                              FOR THE YEARS ENDED JUNE 30,  
                                                             ------------------------------ 
                                                               2004       2003       2002   
                                                             --------   --------   -------- 
                                                                     (IN THOUSANDS)         
                                                                                            
OPERATING ACTIVITIES:                                                                       
  Net income (loss)......................................... $ 12,850   $(17,559)  $(51,770)
  Adjustment for discontinued operations....................    3,714     15,260     26,559 
                                                             --------   --------   -------- 
  Income (loss) from continuing operations..................   16,564     (2,299)   (25,211)
  Adjustments to reconcile income (loss) from continuing                                    
    operations to net cash provided (used) by operating                                     
    activities:                                                                             
    Depreciation and amortization...........................   13,183     12,524     12,355 
    Deferred income taxes...................................      326      6,460     11,238 
    Net gain from sales of assets...........................     (692)      (127)        (5)
    Net gain on extinguishment of debt......................  (23,226)        --         -- 
    Change in redemption amount of redeemable common                                        
      stock.................................................       --         --       (378)
    Effects of changes in foreign currency..................     (548)       390      2,120 
    Other...................................................    1,114        387      2,416 
    Changes in operating assets and liabilities:                                            
      Accounts receivable...................................   (7,222)     3,810      6,046 
      Inventories...........................................    3,660     (1,598)   (13,991)
      Prepaid expenses and other current assets.............     (314)    (3,122)    (2,819)
      Other assets..........................................   (3,079)    (2,632)     2,667 
      Accounts payable......................................   (5,650)    20,503     (6,606)
      Accrued expenses and other liabilities................    6,965       (355)     8,511 
      Accrued costs of non-completed transaction............    3,970         --         -- 
  Cash provided (used) by discontinued operations...........   (2,189)       716     (1,088)
                                                             --------   --------   -------- 
      Net cash provided (used) by operating activities......    2,862     34,657     (4,745)
                                                             --------   --------   -------- 
INVESTING ACTIVITIES:                                                                       
  Capital expenditures......................................   (6,244)    (8,636)    (8,518)
  Acquisition of a business, net of cash acquired...........       --         --     (7,182)
  Proceeds from property damage claim.......................       --         --        411 
  Proceeds from sale of assets..............................    1,094      2,565         19 
  Other investing...........................................     (655)       737        580 
  Discontinued operations...................................   14,875      1,363     (2,671)
                                                             --------   --------   -------- 
      Net cash provided (used) by investing activities......    9,070     (3,971)   (17,361)
                                                             --------   --------   -------- 
FINANCING ACTIVITIES:                                                                       
  Net increase (decrease) in cash overdraft.................     (795)    (6,081)     3,438 
  Net increase (decrease) in short-term debt................  (26,954)    (6,660)    14,237 
  Proceeds from long-term debt..............................  109,661      2,000      2,322 
  Payments of long-term debt................................  (35,453)   (16,014)    (4,730)
  Payment of Pfizer obligations.............................  (28,300)        --         -- 
  Payments relating to the Prince Transactions and related                                  
    costs...................................................  (21,393)        --         -- 
  Debt refinancing costs....................................  (15,548)        --         -- 
  Discontinued operations...................................    1,005        377     (1,590)
                                                             --------   --------   -------- 
      Net cash provided (used) by financing activities......  (17,777)   (26,378)    13,677 
                                                             --------   --------   -------- 
Effect of exchange rate changes on cash.....................      234        452          3 
                                                             --------   --------   -------- 
      Net increase (decrease) in cash and cash                                              
         equivalents........................................   (5,611)     4,760     (8,426)
Cash and cash equivalents at beginning of period............   11,179      6,419     14,845 
                                                             --------   --------   -------- 
Cash and cash equivalents at end of period.................. $  5,568   $ 11,179   $  6,419 
                                                             ========   ========   ======== 
Supplemental Cash Flow Information:                                                         
  Interest paid............................................. $ 17,578   $ 16,104   $ 17,003 
  Income taxes paid.........................................    4,755      3,046      2,629 

The accompanying notes are an integral part of the Consolidated Financial 
Statements. 
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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)

1.  DESCRIPTION OF BUSINESS                                                     

 Phibro Animal Health Corporation (the "Company" or "PAHC") is a leading
diversified global manufacturer and marketer of a broad range of animal health  
and nutrition products, specifically medicated feed additives ("MFA") and       
nutritional feed additives ("NFA"), which the Company sells throughout the world
predominately to the poultry, swine and cattle markets. The Company is also a   
specialty chemicals manufacturer and marketer, serving numerous markets.        

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:                      

   The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany accounts and  
transactions have been eliminated in the consolidated financial statements.     

  The Company consolidates the financial statements of Koffolk (1949) Ltd.
(Israel) ("Koffolk") and Planalquimica Industrial Ltda. (Brazil)                
("Planalquimica") on the basis of their March 31 fiscal year-ends to facilitate 
the timely inclusion of such entities in the Company's consolidated financial   
reporting.                                                                      

    The Company's Odda Smelteverk (Norway) ("Odda"), Carbide Industries (U.K.)
("Carbide"), Mineral Resource Technologies, Inc. ("MRT"), and La Cornubia S.A.  
(France) ("La Cornubia") businesses have been classified as discontinued        
operations as discussed in Note 5. The Company's consolidated financial         
statements have been reclassified to report separately the operating results,   
financial position and cash flows of the discontinued operations. These         
footnotes present information only for continuing operations, unless otherwise  
indicated.                                                                      

    The Company presents its consolidated financial statements on the basis of
its fiscal year ending June 30. All references to years 2004, 2003, and 2002 in 
these financial statements refer to the fiscal year ended June 30 of that year. 

RISKS, UNCERTAINTIES AND LIQUIDITY:                                         

    The Company's ability to fund its operating plan relies upon the continued
availability of borrowing under the domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under   
the amended domestic senior credit facility based on its forecasted operating   
plan. In the event of adverse operating results and/or violation of covenants   
under this facility, there can be no assurance that the Company would be able to
obtain waivers or amendments on favorable terms, if at all. The Company's 2005  
operating plan projects adequate liquidity throughout the year, with periods of 
reduced availability around the dates of the semi-annual interest payments due  
December 1, 2004 and June 1, 2005. The Company is pursuing additional cost      
reduction activities, working capital improvement plans, and sales of           
non-strategic assets to ensure additional liquidity. The Company also has       
availability under foreign credit lines that would be available as needed. The  
Company has also undertaken a strategic review of its manufacturing             
capabilities, and is currently increasing inventory levels of certain products  
to enhance future flexibility and reduce costs. There can be no assurance the   
Company will be successful in any of the above-noted actions.                   

The use of antibiotics in medicated feed additives is a subject of    
legislative and regulatory interest. The issue of potential for increased       
bacterial resistance to certain antibiotics used in certain food-producing      
animals is the subject of discussions on a worldwide basis and, in certain      
instances, has led to government restrictions on the use of antibiotics in      
food-producing animals. The sale of feed additives containing antibiotics is a  
material portion of the Company's business. Should regulatory or other          
developments result in                                                          

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

further restrictions on the sale of such products, it could have a material     
adverse impact on the Company's financial position, results of operations and   
cash flows.                                                                     

   The testing, manufacturing, and marketing of certain products are subject
to extensive regulation by numerous government authorities in the United States 
and other countries.                                                            

  The Company has significant assets located outside of the United States,
and a significant portion of the Company's sales and earnings are attributable  
to operations conducted abroad.                                                 

 The Company has assets located in Israel and a portion of its sales and
earnings are attributable to operations conducted in Israel. The Company is     
affected by social, political and economic conditions affecting Israel, and any 
major hostilities involving Israel as well as the Middle East or curtailment of 
trade between Israel and its current trading partners, either as a result of    
hostilities or otherwise, could have a material adverse effect on the Company.  

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,     
generation, treatment, emission, release, discharge and disposal of certain     
materials and wastes, the remediation of contaminated soil and groundwater, the 
manufacture, sale and use of pesticides and the health and safety of employees. 
As such, the nature of the Company's current and former operations and those of 
its subsidiaries exposes the Company and its subsidiaries to the risk of claims 
with respect to such matters.                                                   

USE OF ESTIMATES:                                                           

Preparation of the Company's financial statements in conformity with  
accounting principles generally accepted in the United States of America        
requires management to make certain estimates and assumptions that affect the   
reported amounts of assets, liabilities, revenues, expenses and related         
disclosures. Actual results could differ from these estimates. Significant      
estimates include reserves for bad debts, inventory obsolescence, environmental 
matters, depreciation and amortization periods of long-lived assets,            
recoverability of long-lived assets, realizability of deferred tax assets and   
actuarial assumptions related to the Company's pension plans.                   

REVENUE RECOGNITION:                                                        

   Revenue is recognized upon transfer of title and when risk of loss passes
to the customer, generally at the time of shipment. Net sales reflect total     
sales billed, less reductions for goods returned, trade discounts and customer  
allowances.                                                                     

CASH AND CASH EQUIVALENTS:                                                  

     Cash equivalents include highly liquid investments with maturities of three
months or less when purchased.                                                  

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:                    

  Trade accounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for doubtful accounts is the Company's best        
estimate of the probable credit losses in its existing accounts receivable. The 
allowance is based on historical write-off experience and is reviewed           
periodically. Past due balances are reviewed individually for collectibility.   
Account balances are charged against the allowance when                         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

the Company feels that it is probable that the receivable will not be recovered.
Receivables consist of the following:                                           

                                                        [Enlarge/Download Table]

                                                                         AS OF            
                                                             -----------------------------
                                                             JUNE 30, 2004   JUNE 30, 2003
                                                             -------------   -------------
                                                                                          
Trade receivables...........................................    $57,658         $52,714   
Employee receivables........................................        256             267   
Other receivables...........................................      2,510           3,236   
                                                                -------         -------   
Total receivables...........................................    $60,424         $56,217   
                                                                =======         =======   

The allowance for doubtful accounts was:                              

                                                        [Enlarge/Download Table]

                                                            2004     2003     2002   
                                                           ------   ------   ------- 
                                                                                     
Balance at beginning of period............................ $1,437   $1,461   $ 1,760 
Provision for bad debts...................................    565      347       979 
Bad debt write-offs.......................................   (644)    (371)   (1,278)
                                                           ------   ------   ------- 
Balance at end of period.................................. $1,358   $1,437   $ 1,461 
                                                           ======   ======   ======= 

INVENTORIES:                                                                

   Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) and average methods; cost for  
certain inventories is determined under the last-in, first-out (LIFO) method.   
Inventories valued at LIFO amounted to $0 and $3,805 at June 30, 2004 and 2003, 
respectively. Obsolete and unsaleable inventories are reflected at estimated net
realizable value. Inventory costs include materials, direct labor and           
manufacturing overhead. Inventories are comprised of:                           

                                                        [Enlarge/Download Table]

                                                                         AS OF            
                                                             -----------------------------
                                                             JUNE 30, 2004   JUNE 30, 2003
                                                             -------------   -------------
                                                                                          
Raw materials...............................................    $16,313         $21,668   
Work-in-process.............................................      1,764           1,565   
Finished goods..............................................     61,833          65,248   
Excess of FIFO cost over LIFO cost..........................         --            (632)  
                                                                -------         -------   
Total inventory.............................................    $79,910         $87,849   
                                                                =======         =======   

PROPERTY, PLANT AND EQUIPMENT:                                              

   Property, plant and equipment are stated at cost. The Company capitalizes
interest expense as part of the cost of construction of facilities and          
equipment. Interest expense capitalized was $0, $0 and $106 in 2004, 2003 and   
2002, respectively.                                                             

  Depreciation is charged to results of operations using the straight-line
method based upon the assets' estimated useful lives ranging from 8 to 20 years 
for buildings and improvements and 3 to 10 years for machinery and equipment.   

 The Company capitalizes costs that extend the useful life or productive
capacity of an asset. Repair and maintenance costs are expensed as incurred. In 
the case of disposals, the assets and related accumulated depreciation are      
removed from the accounts, and the net amounts, less proceeds from disposal, are
included in the statements of operations and comprehensive income (loss).       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

DEFERRED FINANCING COSTS:                                                   

 Deferred financing costs related to the senior secured notes and senior
subordinated notes are amortized over the respective lives of the notes.        
Deferred financing costs related to the domestic senior credit facility are     
amortized over the life of the agreement.                                       

INTANGIBLES:                                                                

   Product intangibles cost arising from the MFA acquisition was $10,673 and
$10,449 at June 30, 2004 and 2003, respectively, and accumulated amortization of
$3,230 and $1,780 at June 30, 2004 and 2003, respectively. Amortization expense 
was $1,229, $964 and $816 for 2004, 2003 and 2002, respectively. Amortization   
expense from the MFA acquisition for each of the next five years from 2005 to   
2009 is expected to be $1,145 per year.                                         

In May 2004 the Company acquired the rights to sell amprolium, an     
anticoccidial MFA, in most international markets. In payment for the acquired   
rights, the Company relinquished its claims against the seller for certain      
purchase order commitments, and will make $2,100 of cash payments to the seller 
over the next five years. The present value of these payments is $1,898 and was 
recorded as a liability. The $2,354 value of the purchase order commitments was 
recorded as a reduction in cost of goods sold and inventory, and an intangible  
asset of $4,252 was recorded representing the fair value of the acquired rights 
and is included on the Company's balance sheet at June 30, 2004. The Company    
will amortize this intangible over a ten year period. No amortization was       
recorded in 2004. Amortization expense for each of the next five years from 2005
to 2009 is expected to be $425 per year.                                        

FOREIGN CURRENCY TRANSLATION:                                               

     Financial position and results of operations of the Company's international
subsidiaries generally are measured using local currencies as the functional    
currency. Assets and liabilities of these operations are translated at the      
exchange rates in effect at each fiscal year end. The translation adjustments   
related to assets and liabilities that arise from the use of differing exchange 
rates from period to period are included in accumulated other comprehensive loss
in stockholders' deficit. Income statement accounts are translated at the       
average rates of exchange prevailing during the year.                           

  A business unit of Koffolk and all of Planalquimica operate primarily in
U.S. dollars. The U.S. dollar is designated as the functional currency for these
businesses and translation gains and losses are included in determining net     
income or loss.                                                                 

Foreign currency transaction gains and losses primarily arise from    
short-term intercompany balances. Net foreign currency transaction and          
translation (gains) losses were $(116), $789 and $3,385 for 2004, 2003 and 2002,
respectively, and were included in other expense, net in the consolidated       
statements of operations and comprehensive income (loss).                       

DERIVATIVE FINANCIAL INSTRUMENTS:                                           

The Company records all derivative financial instruments on the       
consolidated balance sheet at fair value. Changes in the fair value of          
derivatives are recorded in results of operations or accumulated other          
comprehensive income (loss), depending on whether a derivative is designated and
effective as part of a hedge transaction and, if it is, the type of hedge       
transaction. Gains and losses on derivative instruments reported in accumulated 
other comprehensive income (loss) are included in operations in the periods in  
which operations are affected by the hedged item.                               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

RECOVERABILITY OF LONG-LIVED ASSETS:                                        

  The Company evaluates the recoverability of long-lived assets, including
intangible assets, when events or circumstances indicate that a diminution in   
value may have occurred, using financial indicators such as historical and      
future ability to generate cash flows from operations. The Company's policy is  
to record an impairment loss in the period it is determined the carrying amount 
of the asset may not be recoverable. This determination is based on an          
evaluation of such factors as the occurrence of a significant event, a          
significant change in the environment in which the business operates, or if the 
expected future net cash flows (undiscounted and without interest or income     
taxes) are less than the carrying amount of the assets.                         

ENVIRONMENTAL LIABILITIES:                                                  

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

INCOME TAXES:                                                               

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

RESEARCH AND DEVELOPMENT EXPENDITURES:                                      

     Research and development expenditures are expensed as incurred, recorded in
selling, general and administrative expenses and were $5,076, $4,634 and $4,251 
for 2004, 2003 and 2002, respectively.                                          

NEW ACCOUNTING PRONOUNCEMENTS:                                              

     The Company adopted the following new and revised accounting pronouncements
in fiscal 2004:                                                                 

     Statement of Financial Accounting Standards No. 149, "Amendment of SFAS No.
133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No.
149 amends and clarifies accounting and reporting for derivative instruments,   
including certain derivative instruments embedded in other contracts, and for   
hedging activities under SFAS No. 133. The adoption of SFAS No. 149 did not     
result in a material impact on the Company's financial statements.              

Statement of Financial Accounting Standards No. 150, "Accounting for  
Certain Financial Instruments with Characteristics of both Liabilities and      
Equity" ("SFAS No. 150"). SFAS No. 150 requires that an issuer classify a       
financial instrument, that is within its scope, as a liability (or an asset in  
some circumstances). SFAS No. 150 also revises the definition of liabilities to 
encompass certain obligations that can, or must, be                             
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

settled by issuing equity shares, depending on the nature of the relationship   
established between the holder and the issuer. The adoption of SFAS No. 150 did 
not result in a material impact on the Company's financial statements.          

Statement of Financial Accounting Standards No. 132, "Employers'      
Disclosures about Pensions and Other Postretirement Benefits, an amendment to   
FASB Statements No. 87, 88, and 106 (revised 2003)" ("SFAS No. 132"). This      
revision to SFAS No. 132 relates to employers' disclosures about pension plans  
and other postretirement benefit plans. SFAS No. 132 now requires additional    
disclosures to describe the types of plan assets, investment strategy,          
measurement date(s), plan obligations, cash flows, and components of net        
periodic benefit cost recognized during interim periods of defined pension plans
and other defined postretirement plans. The additional disclosures required by  
this revision to SFAS No. 132 have been provided in the notes to consolidated   
financial statements.                                                           

  FASB Interpretation No. 46, "Consolidation of Variable Interest Entities
(revised December 2003)" ("FIN No. 46"). This revision to FIN No. 46 clarifies  
the application of Accounting Research Bulletin No. 51, "Consolidated Financial 
Statements", to certain entities in which equity investors do not have the      
characteristics of a controlling financial interest or do not have sufficient   
equity at risk for the entity to finance its activities without additional      
subordinated financial support. The adoption of FIN No. 46 did not result in a  
material impact on the Company's financial statements.                          

3.  REFINANCING                                                                 

     On October 21, 2003, the Company issued 105,000 units consisting of $85,000
of 13% Senior Secured Notes due 2007 (the "US Senior Secured Notes") and $20,000
13% Senior Secured Notes due 2007 of Philipp Brothers Netherlands III B.V. (the 
"Dutch Senior Secured Notes" and, together with the US Senior Secured Notes, the
"Senior Secured Notes"), an indirect wholly-owned subsidiary of the Company (the
"Dutch issuer"). The Company used the proceeds from the issuance to: (i)        
repurchase $51,971 of its 9 7/8% Senior Subordinated Notes due 2008 at a price  
equal to 60% of the principal amount thereof, plus accrued and unpaid interest; 
(ii) repay its domestic senior credit facility of $34,888 outstanding at the    
repayment date; (iii) satisfy, for a payment of approximately $29,315, certain  
of its outstanding obligations to Pfizer Inc., including: (a) $20,075 aggregate 
principal amount of its promissory note plus accrued and unpaid interest, (b)   
$9,748 of accounts payable, (c) $9,040 of accrued expenses, and (d) future      
contingent purchase price obligations under its agreements with Pfizer Inc. by  
which the Company acquired Pfizer's medicated feed additive business; and (iv)  
pay fees and expenses relating to the above transactions.                       

     A net gain on extinguishment of debt is included in the Company's condensed
consolidated statement of operations, calculated as follows:                    

                                                                [Download Table]
                                                                       
NET GAIN ON REPURCHASE OF 9 7/8% SENIOR SUBORDINATED NOTES             
  DUE 2008:                                                            
  Principal amount of repurchased notes.....................  $ 51,971 
  Repurchased at 60% of principal amount....................   (31,183)
  Transaction costs.........................................    (4,107)
                                                              -------- 
NET GAIN ON REPURCHASE OF NOTES.............................    16,681 
                                                              -------- 
LOSS ON REPAYMENT OF SENIOR CREDIT FACILITY.................    (1,018)
                                                              -------- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

                                                                [Download Table]
                                                                       
NET GAIN ON PAYMENT OF PFIZER OBLIGATIONS:                             
  Obligations paid:                                                    
  -- promissory note........................................    20,075 
  -- accrued interest on promissory note....................     1,015 
  -- accounts payable and accrued expenses..................    18,788 
                                                              -------- 
  Total obligations paid....................................    39,878 
  Cash payment to Pfizer....................................   (29,315)
  Transaction costs.........................................    (3,000)
                                                              -------- 
NET GAIN ON PAYMENT OF PFIZER OBLIGATIONS...................     7,563 
                                                              -------- 
NET GAIN ON EXTINGUISHMENT OF DEBT..........................  $ 23,226 
                                                              ======== 

   The US Senior Secured Notes and the Dutch Senior Secured Notes are senior
secured obligations of each of the Company (the "US Issuer") and the Dutch      
issuer, respectively. The US Senior Secured Notes and the Dutch Senior Secured  
Notes are guaranteed on a senior secured basis by all the US Issuer's domestic  
restricted subsidiaries, and the Dutch Senior Secured Notes are guaranteed on a 
senior secured basis by the US Issuer and by the restricted subsidiaries of the 
Dutch issuer, presently consisting of Phibro Animal Health SA. The US Senior    
Secured Notes and related guarantees are collateralized by substantially all of 
the US Issuer's assets and the assets of its domestic restricted subsidiaries,  
other than real property and interests therein, including a pledge of all the   
capital stock of such domestic restricted subsidiaries. The Dutch Senior Secured
Notes and related guarantees are collateralized by a pledge of all the accounts 
receivable, a security interest or floating charge on the inventory to the      
extent permitted by applicable law, and a mortgage on substantially all of the  
real property of the Dutch issuer and each of its restricted subsidiaries, a    
pledge of 100% of the capital stock of each subsidiary of the Dutch issuer, a   
pledge of the intercompany loans made by the Dutch issuer to its restricted     
subsidiaries and substantially all of the assets of the U.S. guarantors, other  
than real property and interests therein. The indenture governing the Senior    
Secured Notes provides for optional make-whole redemptions at any time prior to 
June 1, 2005, optional redemption on or after June 1, 2005, and requires the    
Company to make certain offers to purchase Senior Secured Notes upon a change of
control, upon certain asset sales and from fifty percent (50%) of excess cash   
flow (as such terms are defined in the indenture).                              

Also, on October 21, 2003, the Company entered into a new replacement 
domestic senior credit facility ("domestic senior facility") with Wells Fargo   
Foothill, Inc., providing for a working capital facility plus a letter of credit
facility. The aggregate amount of borrowings under such working capital and     
letter of credit facilities initially could not exceed $25,000, including       
aggregate borrowings under the working capital facility up to $15,000. On April 
29, 2004, the Company amended the domestic senior facility to increase the      
aggregate amount of borrowings available under such working capital and letter  
of credit facilities from $25,000 to $27,500 and to increase the amount of      
aggregate borrowings available under the working capital facility from $15,000  
to $17,500. As of September 24, 2004, the Company amended the domestic senior   
credit facility to: (i) increase the aggregate amount of borrowings available   
under such working capital and letter of credit facilities from $27,500 to      
$32,500; the amount of aggregate borrowings available under the working capital 
facility remained unchanged at $17,500; (ii) amend the EBITDA definition to     
exclude charges and expenses related to unsuccessful acquisitions and related   
financings in an aggregate amount not to exceed $5,300 for the period beginning 
January 1, 2004 and ending June 30, 2004; (iii) amend the definition of         
Additional Indebtedness to exclude advances under the working capital facility; 
(iv) amend the definition of Permitted Investments to allow other investments   
made during the period from January 1, 2004 through June 30, 2004 in an         
aggregate amount not to exceed $336; and (v) establish covenant EBITDA levels   
for the periods ending                                                          

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

after June 30, 2004. The amendment was effective June 30, 2004 for items (i),   
(ii) and (iii); effective January 1, 2004 for item (iv); and effective September
24, 2004 for all other items.                                                   

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

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

4.  PRINCE TRANSACTIONS                                                         

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

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

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

earlier to occur of July 1, 2008 or six months after the redemption date of all 
of the Company's Senior Secured Notes due 2007 if such a disposition closes     
prior to such redemption and six months after the closing of any such           
disposition if the disposition closes after any such redemption. The Company's  
obligations with respect to the Backstop Indemnification Amount will cease if   
the Palladium Investors do not close the disposition of Buyer by January 1,     
2009. The definition of "Equity Value" in the Company's Certificate of          
Incorporation was amended to reduce the multiple of trailing EBITDA payable in  
connection with any future redemption of Series C Preferred to 6.0 from 7.5     

     The excess of the reduction in redeemable preferred stock over total assets
divested and costs and liabilities incurred on the Prince Transactions was      
recorded as a decrease to accumulated deficit on the Company's consolidated     
balance sheet at December 31, 2003, and was calculated as follows:              

                                                                [Download Table]
                                                                     
SERIES B & C REDEEMABLE PREFERRED STOCK:                             
Accreted value pre-transaction..............................  $72,184
Accreted value post-transaction.............................   16,517
                                                              -------
REDUCTION IN REDEEMABLE PREFERRED STOCK.....................   55,667
                                                              -------
ASSETS DIVESTED AND COSTS INCURRED:                                  
PMC net assets divested.....................................    7,430
Cash paid to Palladium Investors for:                                
  -- reduction of redeemable preferred stock................   10,000
  -- settlement of PMC intercompany debt....................    3,958
  -- working capital adjustment.............................    1,331
  -- closing fee............................................      500
Transaction costs...........................................    8,310
Contingent Backstop Indemnification Amount accrued..........    4,000
                                                              -------
TOTAL ASSETS DIVESTED AND COSTS AND LIABILITIES INCURRED....   35,529
                                                              -------
EXCESS AMOUNT RECORDED AS A DECREASE TO ACCUMULATED                  
  DEFICIT...................................................  $20,138
                                                              =======

    PMC is included in the Company's Industrial Chemicals segment. The results
of operations of PMC were:                                                      

                                                        [Enlarge/Download Table]

                                                          FOR THE YEARS ENDED JUNE 30, 
                                                         ------------------------------
                                                           2004       2003       2002  
                                                         --------   --------   --------
                                                                                       
Net sales............................................... $11,118    $22,332    $21,451 
Operating income........................................   2,278      3,579      3,640 
Depreciation and amortization...........................     487        956        966 

   The divestiture of PMC has not been reflected as a discontinued operation
due to the existence of the Backstop Indemnification and continuing supply and  
service agreements.                                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

5.  DISCONTINUED OPERATIONS                                                     

  The Company shutdown Odda and divested Carbide during 2003, and sold MRT
and shutdown La Cornubia during 2004. These businesses have been classified as  
discontinued operations.                                                        

ODDA AND CARBIDE                                                            

Operating results and loss on disposal of Odda and Carbide were:      

                                                                [Download Table]

                                                             FOR THE YEARS ENDED 
                                                                  JUNE 30,       
                                                             ------------------- 
                                                               2003       2002   
                                                             --------   -------- 
                                                                                 
OPERATING RESULTS:                                                               
Net sales................................................... $ 11,217   $ 31,219 
Cost of goods sold..........................................   13,723     46,116 
Selling, general and administrative expenses................    3,175     12,812 
Asset writedowns............................................    7,781         -- 
Other income................................................    2,327      3,699 
                                                             --------   -------- 
(Loss) before income taxes..................................  (11,135)   (24,010)
(Benefit) for income taxes..................................      (58)    (1,170)
                                                             --------   -------- 
(Loss) from operations...................................... $(11,077)  $(22,840)
                                                             ========   ======== 
Depreciation and amortization............................... $    894   $ 17,676 
                                                             ========   ======== 
LOSS ON DISPOSAL:                                                                
Assets...................................................... $ (3,359)           
Liabilities.................................................    6,432            
Unsecured debt..............................................    2,488            
Currency translation adjustment.............................   (6,244)           
                                                             --------            
(Loss) on disposal.......................................... $   (683)           
                                                             ========            

MINERAL RESOURCE TECHNOLOGIES, INC.                                         

  The Company sold MRT on August 28, 2003. Net proceeds, after transaction
costs, were approximately $13,836. Operating results, gain on sale and balance  
sheet items of MRT were:                                                        

                                                        [Enlarge/Download Table]

                                                        FOR THE YEARS ENDED JUNE 30,  
                                                        ----------------------------- 
                                                          2004       2003      2002   
                                                        --------   --------   ------- 
                                                                                      
OPERATING RESULTS:                                                                    
Net sales.............................................. $  3,327   $18,671    $17,045 
Cost of goods sold.....................................    3,135    19,943     17,676 
Selling, general and administrative expenses...........      316     2,182      2,299 
                                                        --------   -------    ------- 
(Loss) before income taxes.............................     (124)   (3,454)    (2,930)
Provision for income taxes.............................       --        --         -- 
                                                        --------   -------    ------- 
(Loss) from operations................................. $   (124)  $(3,454)   $(2,930)
                                                        ========   =======    ======= 
Depreciation and amortization.......................... $     --   $ 1,309    $ 1,192 
                                                        ========   =======    ======= 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

                                                                [Download Table]

                                                               FOR THE YEAR 
                                                              ENDED JUNE 30,
                                                                   2003     
                                                              --------------
                                                                            
GAIN ON SALE:                                                               
Current assets..............................................     $ (5,813)  
Property, plant & equipment -- net and other assets.........      (10,703)  
Liabilities.................................................        2,911   
Net proceeds of sale........................................       13,836   
                                                                 --------   
Gain on sale................................................     $    231   
                                                                 ========   

                                                                [Download Table]

                                                                  AS OF  
                                                                 JUNE 30,
                                                                   2003  
                                                                 --------
                                                                         
BALANCE SHEET:                                                           
Trade receivables...........................................     $ 2,633 
Other receivables...........................................         304 
Inventories.................................................       1,643 
Prepaid expenses and other current assets...................         362 
                                                                 ------- 
Current assets from discontinued operations.................     $ 4,942 
                                                                 ======= 
Property, plant and equipment, net..........................     $ 9,999 
Intangibles.................................................         196 
Other assets................................................         455 
                                                                 ------- 
Other assets from discontinued operations...................     $10,650 
                                                                 ======= 
Accounts payable............................................     $ 1,466 
Accrued expenses and other current liabilities..............         585 
                                                                 ------- 
Current liabilities from discontinued operations............     $ 2,051 
                                                                 ======= 
Other liabilities...........................................     $   198 
                                                                 ------- 
Other liabilities from discontinued operations..............     $   198 
                                                                 ======= 

LA CORNUBIA, S.A.                                                           

  During June 2004 the Company determined that it would no longer fund the
operations of La Cornubia. On June 30, 2004, La Cornubia filed for bankruptcy in
France. The bankruptcy is proceeding in accordance with French law. The Company 
has been advised that, as a result of the bankruptcy, the creditors of La       
Cornubia have recourse only to the assets of La Cornubia. The Company removed   
all assets, liabilities, and cumulative translation adjustments related to La   
Cornubia from the Company's consolidated balance sheet as of June 30, 2004, and 
recorded a loss on disposal of discontinued operations. The Company obtained the
consent of a majority of the holders of its senior secured notes due 2007 and   
its senior subordinated notes due 2008 to amend the indentures governing these  
notes in such a manner that the bankruptcy of La Cornubia would not create an   
event of default thereunder. The Company also obtained a waiver under its       
domestic senior credit facility so that the bankruptcy of La Cornubia would not 
constitute an event of default under the terms of the domestic senior credit    
facility.                                                                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

    Operating results, loss on disposal and balance sheet items of La Cornubia
were:                                                                           

                                                        [Enlarge/Download Table]

                                                          FOR THE YEARS ENDED JUNE 30, 
                                                         ------------------------------
                                                           2004       2003       2002  
                                                         --------   --------   --------
                                                                                       
OPERATING RESULTS:                                                                     
Net sales............................................... $13,918    $13,479    $11,873 
Cost of goods sold......................................  13,723     12,528     11,144 
Selling, general and administrative expenses............   1,686      1,310      1,641 
Other income............................................     102        389        263 
Interest (expense) -- net...............................     (94)       (60)       (78)
                                                         -------    -------    ------- 
(Loss) before income taxes..............................  (1,483)       (30)      (727)
Provision for income taxes..............................      18         16         62 
                                                         -------    -------    ------- 
(Loss) from operations.................................. $(1,501)   $   (46)   $  (789)
                                                         =======    =======    ======= 
Depreciation and amortization........................... $   400    $   359    $   325 
                                                         =======    =======    ======= 
LOSS ON DISPOSAL:                                                                      
Current Assets.......................................... $(5,085)                      
Property, plant & equipment -- net and other assets.....  (2,557)                      
Liabilities.............................................   3,614                       
Unsecured debt..........................................   2,167                       
Currency translation adjustment.........................    (459)                      
                                                         -------                       
(Loss) on disposal...................................... $(2,320)                      
                                                         =======                       

                                                                [Download Table]

                                                          AS OF    
                                                         JUNE 30,  
                                                           2003    
                                                         --------  
                                                                   
BALANCE SHEET:                                                     
Trade receivables....................................... $ 2,957   
Other receivables.......................................     139   
Inventories.............................................     918   
Prepaid expenses and other current assets...............     348   
                                                         -------   
Current assets from discontinued operations............. $ 4,362   
                                                         =======   
Property, plant and equipment, net...................... $ 2,535   
Other assets............................................     140   
                                                         -------   
Other assets from discontinued operations............... $ 2,675   
                                                         =======   
Accounts payable........................................ $ 1,560   
Accrued expenses and other current liabilities..........     910   
Unsecured debt..........................................   1,036   
                                                         -------   
Current liabilities from discontinued operations........ $ 3,506   
                                                         =======   
Other liabilities....................................... $   975   
                                                         -------   
Other liabilities from discontinued operations.......... $   975   
                                                         =======   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

6.  PROPERTY, PLANT AND EQUIPMENT                                               

Property, plant and equipment was:                                    

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                             -------------------
                                                               2004       2003  
                                                             --------   --------
                                                                                
Land........................................................ $  5,657   $  5,816
Buildings and improvements..................................   27,925     29,841
Machinery and equipment.....................................  105,308    106,026
                                                             --------   --------
                                                              138,890    141,683
Less: accumulated depreciation..............................   80,104     77,778
                                                             --------   --------
                                                             $ 58,786   $ 63,905
                                                             ========   ========

     Certain of the buildings of Koffolk are on land leased for a nominal amount
from the Israel Land Authority. The lease expires on July 9, 2027.              

Depreciation expense was $9,122, $9,202 and $10,235 for 2004, 2003 and
2002, respectively.                                                             

7.  RELATED PARTY TRANSACTIONS                                                  

 The Company owns approximately $2,300 par value of preferred stock of a
pharmaceutical company. The principal common stockholder of the Company owns    
approximately 15% voting common stock interest in the pharmaceutical company,   
acquired for approximately $500. The preferred stock investment, included in    
other assets, has a net carrying value of $1,610 at June 30, 2004.              

 A subsidiary of the Company leases the property underlying its Santa Fe
Springs, California plant from a limited partnership controlled by common       
shareholders of the Company. The lease requires annual base rent of $250 and    
terminates on December 31, 2008. The Company is responsible under the lease     
agreement to pay all real property taxes.                                       

    In accordance with the terms of the Prince Transactions (Note 4) the Buyer
paid the Company advisory fees of $500 for the year ended June 30, 2004. The    
Buyer also supplied manganous oxide and red iron oxide products, and provided   
certain mineral blending services to the Company's Prince Agriproducts          
subsidiary ("Prince Agri") for which Prince Agri paid $2,149 during the year    
ended June 30, 2004. Prince Agri provided the Buyer with certain laboratory, MIS
and telephone services, and leased to Buyer office space in Quincy, Illinois for
which the buyer paid Prince Agri $421 during the year ended June 30, 2004. The  
Company also has an agreement to receive certain treasury services from the     
Palladium Investors for $100 per year. Prior to the Prince Transactions an      
annual management advisory fee of $2,250 was payable to the Palladium Investors.
Payments were due quarterly in advance and were charged to selling, general and 
administrative expenses. The management fee was $1,125, $2,250 and $2,250 for   
2004, 2003 and 2002, respectively.                                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

8.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES                              

Accrued expenses and other current liabilities were:                  

                                                                [Download Table]

                                                               AS OF JUNE 30,  
                                                              -----------------
                                                               2004      2003  
                                                              -------   -------
                                                                               
Employee related expenses...................................  $11,444   $10,003
Payments due to Pfizer......................................       --     9,040
Interest and tax accruals...................................    4,836     9,249
Other accrued liabilities...................................   23,730    12,407
                                                              -------   -------
                                                              $40,010   $40,699
                                                              =======   =======

9.  DEBT                                                                        

LOANS PAYABLE TO BANKS                                                      

At June 30, 2004, loans payable to banks included $10,996 under the   
domestic senior credit facility with Wells Fargo Foothill, Inc. The weighted    
average interest rate under the domestic senior credit facility from its        
inception at October 21, 2003 through June 30, 2004 was 8.0%. At June 30, 2004, 
the Company had $6,504 of borrowings available under the borrowing base formula 
in effect for the domestic senior credit facility that is provided under the    
domestic senior credit facility.                                                

    On October 21, 2003, the Company entered into a new domestic senior credit
facility with Wells Fargo Foothill, Inc., providing for a working capital       
facility plus a letter of credit facility. The aggregate amount of borrowings   
under such working capital and letter of credit facilities may not exceed       
$25,000, including aggregate borrowings under the working capital facility of up
to $15,000. On April 29, 2004, the Company amended the domestic senior credit   
facility to increase the aggregate amount of borrowings available under such    
working capital and letter of credit facilities from $25,000 to $27,500 and to  
increase the amount of aggregate borrowings available under the working capital 
facility from $15,000 to $17,500. As of September 24, 2004, the Company amended 
the domestic senior credit facility to: (i) increase the aggregate amount of    
borrowings available under such working capital and letter of credit facilities 
from $27,500 to $32,500; the amount of aggregate borrowings available under the 
working capital facility remained unchanged at $17,500; (ii) amend the EBITDA   
definition to exclude charges and expenses related to unsuccessful acquisitions 
and related financings in an aggregate amount not to exceed $5,300 for the      
period beginning January 1, 2004 and ending June 30, 2004; (iii) amend the      
definition of Additional Indebtedness to exclude advances under the working     
capital facility; (iv) amend the definition of Permitted Investments to allow   
other investments made during the period from January 1, 2004 through June 30,  
2004 in an aggregate amount not to exceed $336; and (v) establish covenant      
EBITDA levels for the periods after June 30, 2004. The amendment was effective  
June 30, 2004 for items (i), (ii) and (iii); effective January 1, 2004 for item 
(iv); and effective September 24, 2004 for all other items.                     

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

As of June 30, 2004, the Company was in compliance with the financial 
covenants of the amended domestic senior credit facility. The domestic senior   
credit facility requires, among other things, the maintenance of certain levels 
of trailing consolidated and domestic EBITDA (earnings before interest, taxes,  
depreciation and amortization) calculated on a monthly basis, and an            
acceleration clause should an event of default (as defined in the agreement)    
occur. In addition, there are certain restrictions on additional borrowings,    
additional liens on the Company's assets, guarantees, dividend payments,        
redemption or purchase of the Company's stock, sale of subsidiaries' stock,     
disposition of assets, investments, and mergers and acquisitions.               

   The domestic senior credit facility contains a lock-box requirement and a
material adverse change clause should an event of default (as defined in the    
agreement) occur. Accordingly, the amounts outstanding have been classified as  
short-term and are included in loans payable to banks in the consolidated       
balance sheet.                                                                  

LONG-TERM DEBT                                                              

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                             -------------------
                                                               2004       2003  
                                                             --------   --------
                                                                                
Senior secured notes due December 1, 2007................... $105,000   $     --
Senior subordinated notes due June 1, 2008..................   48,029    100,000
Foreign bank loans..........................................    6,237      3,906
Pfizer promissory note......................................       --     20,075
Bank capital expenditure facility...........................       --      1,496
Capitalized lease obligations and other.....................      103        910
                                                             --------   --------
                                                              159,369    126,387
Less: current maturities....................................    1,351     24,124
                                                             --------   --------
                                                             $158,018   $102,263
                                                             ========   ========

Senior Secured Notes due 2007                                               

    In October 2003 the Company issued 105,000 units, consisting of $85,000 of
13% Senior Secured Notes due 2007 (the "US Senior Secured Notes") and $20,000 of
13% Senior Secured Notes due 2007 of Philipp Brothers Netherlands III B.V. (the 
"Dutch Senior Secured Notes" and, together with the US Senior Secured Notes, the
"Senior Secured Notes"), an indirect wholly-owned subsidiary of the Company (the
"Dutch issuer").                                                                

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

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

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

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

Senior Subordinated Notes due 2008                                          

 The Company issued $100,000 aggregate principal amount of 9 7/8% Senior
Subordinated Notes due 2008 ("Senior Subordinated Notes") of which $51,971      
principal amount was repurchased with proceeds of the Senior Secured Notes. The 
Senior Subordinated Notes are general unsecured obligations of the Company and  
are subordinated in right of payment to all existing and future senior debt (as 
defined in the indenture agreement of the Company) and rank pari passu in right 
of payment with all other existing and future senior subordinated indebtedness  
of the Company. The Senior Subordinated Notes are unconditionally guaranteed on 
a senior subordinated basis by the domestic restricted subsidiaries of the      
Company. Additional future domestic subsidiaries may become guarantors under    
certain circumstances.                                                          

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

Foreign Bank Loans                                                          

The bank loans of the Company's Koffolk Ltd. (Israel) subsidiary are  
collateralized by its receivables and inventory, accrue interest at LIBOR plus  
1.25%, and are repayable in equal quarterly payments through 2005. The LIBOR    
rate was 1.15% at June 30, 2004.                                                

    The Company's foreign subsidiaries have aggregate credit lines of $11,044.
At June 30, 2004, the Company had $4,807 of borrowings available under these    
credit lines.                                                                   

Aggregate Maturities of Long-Term Debt                                      

The aggregate maturities of long-term debt as of June 30, 2004 were:  

                                                                [Download Table]

YEAR ENDED JUNE 30,                                                   
-------------------                                                   
                                                                      
2005........................................................  $  1,351
2006........................................................     4,127
2007........................................................        --
2008........................................................   153,891
2009........................................................        --
                                                              --------
  Total.....................................................  $159,369
                                                              ========

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

10.  REDEEMABLE COMMON STOCK OF SUBSIDIARY                                      

    A key executive of the Company has a 2.1% ownership interest in the common
stock of a subsidiary. The subsidiary's shares are redeemable at fair market    
value, based on independent appraisal, upon the death, disability or termination
of the key executive. The Company and its subsidiary have entered into a        
severance agreement with the executive for payments based on a multiple of      
pre-tax earnings (as defined). The payments are subject to certain restrictions 
pursuant to terms of the domestic senior credit facility. At June 30, 2004 no   
severance payments would have been due upon termination.                        

11.  REDEEMABLE PREFERRED STOCK                                                 

    Effective December 26, 2003 (the "Closing Date"), the Company entered into
the Prince Transactions with the Palladium Investors (Note 4). Pursuant to      
definitive purchase and other agreements executed on and effective as of the    
Closing Date, the Prince Transactions included the following elements which     
relate to the Company's Redeemable Preferred Stock: the reduction of the value  
of the Company's Preferred Stock owned by the Palladium Investors from $72,184  
(25,000 Series B shares and 20,000 Series C shares) to $16,517 (accreted through
the Closing Date) (10,591 Series C shares) by means of the redemption of all of 
its shares of Series B Preferred Stock and a portion of its Series C Preferred  
Stock; the termination of $2,250 in annual management advisory fees payable by  
the Company to Palladium; a cash payment of $10,000 to the Palladium Investors  
in respect of the portion of the Company's Preferred Stock not exchanged in     
consideration of the business and assets of PMC; and the agreement of the       
Palladium Investors to pay the Company for advisory fees for the next three     
years of $1,000, $500, and $200, respectively (which were pre-paid at closing by
the Palladium Investors and satisfied for $1,300, the net present value of such 
payments). The Company has an agreement to receive certain treasury services    
from the Palladium Investors for $100 per year.                                 

  The redeemable preferred stock is entitled to cumulative cash dividends,
payable semi-annually, at 15% per annum of 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 earnings before  
interest, taxes, depreciation and amortization ("EBITDA") of the Company's      
business ("Equity Value").                                                      

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 June 2008), Palladium
Investors shall have the right to require the Company to redeem, for cash, the  
Preferred C at the Liquidation Value plus the Equity Value payment.             

   Dividends of $6,042, $8,808 and $7,623 for the years ended June 30, 2004,
2003 and 2002, respectively, were accrued on the preferred shares and charged to
retained earnings. Equity Value of $5,421, $3,470 and $0 for the years ended    
June 30, 2004, 2003 and 2002, respectively, was accrued and charged to retained 
earnings.                                                                       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

Redeemable preferred stock is comprised of:                           

                                                        [Enlarge/Download Table]

                                                                         AS OF            
                                                             -----------------------------
                                                             JUNE 30, 2004   JUNE 30, 2003
                                                             -------------   -------------
                                                                                          
Series B                                                                                  
  Value at issuance.........................................    $    --         $25,000   
  Accrued dividends.........................................         --          11,339   
Series C                                                                                  
  Value at issuance.........................................     10,591          20,000   
  Accrued dividends.........................................      7,200           9,072   
  Accreted equity value.....................................      6,887           3,470   
                                                                -------         -------   
Total redeemable preferred stock............................    $24,678         $68,881   
                                                                =======         =======   

The agreement with the Palladium Investors contains covenants which   
restrict, without the consent of at least one director designated by the        
Palladium Investors (or if no such director is then serving on the Board, at    
least one of the Palladium Investors), certain (a) issuances of equity          
securities, (b) sales of assets in excess of $10,000, (c) purchases of business 
and other investments in excess of $10,000, (d) incurrence of indebtedness for  
borrowed money in excess of $12,500, (e) redemptions, acquisitions or other     
purchases of equity securities, (f) transactions with officers, directors,      
stockholders or employees or any family member or affiliate thereof in excess of
$500, (g) compensation and benefits of certain officers, and (h) transactions   
involving a change of control.                                                  

12.  COMMON STOCK AND PAID-IN CAPITAL                                           

COMMON STOCK:                                                               

Common stock at June 30, 2004 and 2003 was:                           

                                                                [Download Table]

                                                          AUTHORIZED  ISSUED  AMOUNT
                                                            SHARES    SHARES  AT PAR
                                                          ----------  ------  ------
                                                                                    
Class A common stock.....................................   16,200    12,600   $.10 
Class B common stock.....................................   14,100    11,888   $.10 
                                                            ------    ------        
                                                            30,300    24,488        

   The entire voting power is vested in the holders of Class A common stock,
except the holders of Class A common stock are entitled to elect all but four of
the directors. The holders of Class B common stock are entitled to elect one    
director, and the purchasers of the Preferred B and Preferred C are entitled by 
contract to elect two directors. No dividends may be paid to common stockholders
until all dividends have been paid to preferred stockholders. Thereafter,       
holders of Class A common stock shall receive dividends, when and as declared by
the directors, at the rate of 5.5% of the par value of such stock               
(non-cumulative). After all declared dividends have been paid to Class A common 
stockholders, dividends may be declared and paid to the holders of Class B      
common stock. In the event of any complete liquidation, dissolution, winding-up 
of the business, or sale of all the assets of the Company, and after the        
redemption of the preferred stock, the Class A common stockholders are entitled 
to a distribution equal to the par value of the stock plus declared and unpaid  
dividends. Thereafter, the remaining assets of the Company shall be distributed 
to the holders of Class B common stock.                                         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

REDEEMABLE COMMON STOCK:                                                    

    Pursuant to terms of an agreement with a minority shareholder, who is also
an officer of the Company, the Company is required to purchase at book value,   
the Class B shares of such shareholder upon his retirement, death, disability,  
or the termination of his employment. Should such shareholder elect to sell his 
shares, the Company has a right of first offer and an option to purchase the    
shares. The Company records a liability for the redemption amount as calculated 
at each balance sheet date. No liability was recorded as of June 30, 2004 and   
2003. Income of $378 was recorded during 2002 to adjust the shares to redeemable
value.                                                                          

13.  EMPLOYEE BENEFIT PLANS                                                     

    The Company and its domestic subsidiaries maintain noncontributory defined
benefit pension plans for all eligible domestic nonunion employees who meet     
certain requirements of age, length of service and hours worked per year. The   
Company's Belgium subsidiary maintains a defined contribution and defined       
benefit plan for eligible employees. The benefits provided by the plans are     
based upon years of service and the employees' average compensation, as defined.
The measurement date for the domestic and international pension plans was June  
30, 2004 and 2003, respectively.                                                

    Reconciliations of changes in benefit obligations, plan assets, and funded
status of the plans were:                                                       

                                                        [Enlarge/Download Table]

                                                      DOMESTIC         INTERNATIONAL  
                                                  -----------------   --------------- 
                                                   2004      2003      2004     2003  
                                                  -------   -------   ------   ------ 
                                                                                      
CHANGE IN BENEFIT OBLIGATION                                                          
Benefit obligation at beginning of year.......... $15,846   $11,821   $6,595   $4,251 
Service cost.....................................   1,260     1,056      467      310 
Employee contributions...........................      --        --       27      100 
Interest cost....................................     891       784      374      259 
Benefits paid....................................    (595)     (243)      (3)     (29)
Actuarial (gain) or loss.........................    (251)     (663)    (475)     879 
Curtailment......................................    (922)       --       --       -- 
Change in Discount Rate..........................    (786)    3,091       --       -- 
Exchange rate impact.............................      --        --      338      825 
                                                  -------   -------   ------   ------ 
Benefit obligation at end of year................ $15,443   $15,846   $7,323   $6,595 
                                                  =======   =======   ======   ====== 

At June 30, 2004 and 2003, the accumulated benefit obligation was $13,075 and   
$12,458, respectively, for domestic pension plans and $4,383 and $4,248,        
respectively, for international pension plans.                                  

                                                        [Enlarge/Download Table]
                                                                                      
CHANGE IN PLAN ASSETS                                                                 
Fair value of plan assets at beginning of                                             
  year......................................... $10,387   $ 9,717   $ 4,566   $ 2,882 
Actual return on plan assets...................   1,068       537       435       204 
Employer contributions.........................     935       376       558       841 
Employee contributions.........................      --        --        27       100 
Benefits paid..................................    (595)     (243)       (3)      (29)
Exchange rate impact...........................      --        --       245       568 
                                                -------   -------   -------   ------- 
Fair value of plan assets at end of year....... $11,795   $10,387   $ 5,828   $ 4,566 
                                                =======   =======   =======   ======= 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

                                                        [Enlarge/Download Table]
                                                                                      
FUNDED STATUS                                                                         
Funded status of the plan...................... $(3,648)  $(5,459)  $(1,495)  $(2,029)
Unrecognized net actuarial (gain) or loss......     152     2,358       368       961 
Unrecognized prior service cost................    (338)     (553)       --        -- 
Unrecognized transition obligation/(asset).....      (8)      (12)       --        -- 
                                                -------   -------   -------   ------- 
(Accrued) pension cost......................... $(3,842)  $(3,666)  $(1,127)  $(1,068)
                                                =======   =======   =======   ======= 

The Company expects to contribute $990 and $602 to its Domestic and   
International plans, respectively, during fiscal 2005. The Company's policy is  
to fund the pension plans in amounts which comply with contribution limits      
imposed by law.                                                                 

Components of net periodic pension expense were:                      

                                                        [Enlarge/Download Table]

                                                              2004     2003    2002  
                                                             ------   ------   ----- 
                                                                                     
DOMESTIC PENSION EXPENSE                                                             
Service cost -- benefits earned during the year............. $1,260   $1,056   $ 879 
Interest cost on benefit obligation.........................    891      784     714 
Expected return on plan assets..............................   (846)    (756)   (709)
Amortization of initial unrecognized net transition                                  
  (asset)...................................................     (3)      (3)     (3)
Amortization of prior service costs.........................   (153)    (162)   (165)
Amortization of net actuarial loss (gain)...................     25      (57)    (31)
Curtailment benefit.........................................    (64)      --      -- 
                                                             ------   ------   ----- 
Net periodic pension cost -- domestic....................... $1,110   $  862   $ 685 
                                                             ======   ======   ===== 
INTERNATIONAL PENSION EXPENSE                                                        
Service cost -- benefits earned during the year............. $  467   $  310   $ 217 
Interest cost on benefit obligation.........................    374      259     164 
Expected return on plan assets..............................   (300)    (203)   (123)
Amortization of net actuarial loss..........................     22       --      -- 
                                                             ------   ------   ----- 
Net periodic pension cost -- international.................. $  563   $  366   $ 258 
                                                             ======   ======   ===== 

Significant actuarial assumptions for the plans were:                 

                                                        [Enlarge/Download Table]

                                                         2004       2003       2002   
                                                       --------   --------   -------- 
                                                                                      
DOMESTIC ACTUARIAL ASSUMPTIONS                                                        
Discount rate for service and interest................     5.8%       7.1%       7.5% 
Expected rate of return on plan assets................     7.5%       7.5%       7.5% 
Rate of compensation increase......................... 3.0%-4.5%  3.0%-4.5%  3.0%-4.5%
Discount rate for year-end benefit obligation.........     6.1%       5.8%       7.1% 
INTERNATIONAL ACTUARIAL ASSUMPTIONS                                                   
Discount rate for service and interest................     5.5%       5.8%       5.8% 
Expected rate of return on plan assets................     6.0%       6.0%       6.0% 
Rate of compensation increase.........................     3.0%       3.0%       3.0% 
Discount rate for year-end benefit obligation.........     5.5%       5.5%       5.8% 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

Estimated future benefit payments, including benefits attributable to 
future service, are as follows:                                                 

                                                                [Download Table]

                                                             DOMESTIC  INTERNATIONAL
                                                             --------  -------------
                                                                                    
2005........................................................  $  295      $   37    
2006........................................................     301          38    
2007........................................................     311          40    
2008........................................................     451          41    
2009........................................................     508          42    
2010-2014...................................................   4,500       1,817    

The Company's domestic plan target allocations for fiscal 2005 and the
weighted asset allocation of plan assets as of June 30, 2004 and 2003 are as    
follows:                                                                        

                                                                [Download Table]

                                                              2005    2004  2003
                                                             -------  ----  ----
                                                                                
DOMESTIC PLAN ASSET ALLOCATIONS                                                 
Debt Securities............................................. 45%-55%   50%   59%
Equity Securities........................................... 15%-25%   19%    9%
Other....................................................... 25%-35%   31%   32%

    The expected long-term rate of return for the plan's total assets is based
on the expected return of each of the above categories, weighted based on the   
median of the target allocation of each class. Equity securities are expected to
return 8% to 10% over the long-term, while debt securities are expected to      
return 4% to 6%. Based on historical experience, the Committee expects that the 
Plan's asset managers will provide a modest (1/2% to 1% per annum) premium to   
their respective market benchmark indices.                                      

     The investment policy and strategy is to earn a long-term investment return
sufficient to meet the obligations of the Plan, while assuming a moderate amount
of risk in order to maximize investment return. In order to achieve this goal,  
assets are invested in a diversified portfolio consisting of equity securities, 
debt securities, limited partnerships and other investments in a manner         
consistent with ERISA's fiduciary requirements.                                 

     The Company's international plan target allocations for fiscal 2005 and the
weighted asset allocation of plan assets as of June 30, 2004 and 2003 are as    
follows:                                                                        

                                                                [Download Table]

                                                              2005   2004   2003
                                                              ----   ----   ----
                                                                                
INTERNATIONAL PLAN ASSET ALLOCATIONS                                            
Debt Securities.............................................   59%    62%    79%
Equity Securities...........................................   25%    21%    20%
Other.......................................................   16%    17%     1%

    The expected long-term rate of return for the plan's total assets is based
on the expected return of each of the above categories, weighted based on the   
target allocation for each class. Equity securities are expected to return 7.5% 
over the long-term, while debt securities are expected to return 5.5%.          

     The Company assumed the liability for the International pension plan during
2002 as part of the MFA acquisition.                                            

 In addition to Belgium, most of the Company's foreign subsidiaries have
retirement plans covering substantially all employees. Contributions to these   
plans are generally deposited under fiduciary-type arrangements. Benefits under 
these plans primarily are based on compensation levels. Funding policies are    
based on legal requirements and local practices. Expense under these plans was  
$585, $522 and $534 for 2004, 2003 and 2002, respectively.                      

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

  The Company and its domestic subsidiaries provide a 401(k) savings plan,
under which an employee may make a pre-tax contribution of up to 60% of base    
compensation. The Company makes a non-matching contribution equal to 1% of the  
employee's base compensation and a matching contribution equal to 50% of the    
employee's contribution up to the first 3% of base compensation and 25% of the  
employee's contribution from 3% to 6% of base compensation. All employee        
contributions are subject to the maximum amounts permitted for federal income   
tax purposes. Employees vest in the Company's matching contributions over 5     
years. The Company's contribution was $502, $528 and $539 in 2004, 2003 and     
2002, respectively.                                                             

  The Company has a deferred compensation and supplemental retirement plan
for certain senior executives. The benefits provided by the plan are based upon 
years of service and the executives' average compensation, subject to certain   
limits. The plan also provides for death benefits before retirement. Expense    
under this plan was $259, $249, and $204 in 2004, 2003 and 2002, respectively.  
The aggregate liability under this plan amounted to $2,018 and $1,678 at June   
30, 2004 and 2003, respectively. To assist in funding the benefits of the plan, 
the Company invested in corporate-owned life insurance policies, through a      
trust, which at June 30, 2004 and 2003 had cash surrender values of $1,481 and  
$1,299, respectively, and are included in other assets.                         

 The Company has an executive income program to provide a pre-retirement
death benefit and a supplemental retirement benefit for certain senior          
executives. The aggregate liability under this plan amounted to $416 and $385 at
June 30, 2004 and 2003, respectively. To assist in funding the benefits of the  
plan, the Company invested in split-dollar life insurance policies, which at    
June 30, 2004 and 2003 had cash surrender values to the Company of $1,529 and   
$1,392, respectively, and are included in other assets.                         

14.  INCOME TAXES                                                               

Income (loss) from continuing operations before income taxes was:     

                                                                [Download Table]

                                                          2004      2003     2002   
                                                         -------   ------  -------- 
                                                                                    
Domestic................................................ $27,587   $3,855  $ (5,507)
Foreign.................................................  (3,054)   3,906    (4,937)
                                                         -------   ------  -------- 
Income (loss) from continuing operations before income                              
  taxes................................................. $24,533   $7,761  $(10,444)
                                                         =======   ======  ======== 

Components of the provision for income taxes were:                    

                                                        [Enlarge/Download Table]

                                                          2004      2003      2002   
                                                         -------   -------   ------- 
                                                                                     
Current tax provision (benefit):                                                     
  Federal............................................... $   563   $    --   $    -- 
  State and local.......................................   1,333       516      (256)
  Foreign...............................................   5,747     3,084     3,785 
                                                         -------   -------   ------- 
  Total current tax provision...........................   7,643     3,600     3,529 
                                                         -------   -------   ------- 
Deferred tax provision (benefit):                                                    
  Federal...............................................  10,150     1,705    (1,225)
  State and local.......................................  (1,396)     (345)     (590)
  Foreign...............................................  (1,671)      850    (1,673)
  Change in valuation allowance -- domestic.............  (8,754)   (1,360)   14,726 
                                  -- foreign............   1,997     5,610        -- 
                                                         -------   -------   ------- 
  Total deferred tax provision..........................     326     6,460    11,238 
                                                         -------   -------   ------- 
Provision for income taxes.............................. $ 7,969   $10,060   $14,767 
                                                         =======   =======   ======= 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

  Reconciliations of the Federal statutory rate to the Company's effective
tax rate are:                                                                   

                                                        [Enlarge/Download Table]

                                                              2004    2003    2002   
                                                              -----   -----   -----  
                                                                                     
Federal income tax rate.....................................   35.0%   35.0%  (35.0)%
State and local taxes, net of federal income tax effect.....    3.5     1.4    (4.9) 
Foreign tax rate differences and taxes in certain profitable                         
  foreign jurisdictions.....................................   22.9    33.2    50.8  
Change in valuation allowance...............................  (41.4)   55.0   131.8  
Gain not taxable for book purposes..........................   10.4      --      --  
Expenses with no tax benefit................................    1.7     4.4     1.0  
Other.......................................................    0.3     0.6    (2.3) 
                                                              -----   -----   -----  
Effective tax rate..........................................   32.4%  129.6%  141.4% 
                                                              =====   =====   =====  

     Most of the investments in fixed assets of the Company's Israeli subsidiary
have been granted "approved enterprise" status under Israeli law. The subsidiary
is also a "foreign investors' company" as defined by Israeli law. This status   
entitles the subsidiary to reduced tax rates. The entitlement of the reduced tax
rates is conditional upon the subsidiary fulfilling the conditions stipulated by
Israeli law, regulations published there-under and the instruments of approval  
for the specific investments in approved enterprises. In the event of failure to
comply with these conditions, the benefits may be canceled and the subsidiary   
may be required to refund the amount of the benefits, in whole or in part, with 
the addition of interest. The periods of benefits expire in various years       
through 2010.                                                                   

   Provision has not been made for United States or additional foreign taxes
on undistributed earnings of foreign subsidiaries of approximately $39,200,     
whose earnings have been or are intended to be reinvested. It is not practicable
at this time to determine the amount of income tax liability that would result  
should such earnings be repatriated.                                            

     The tax effects of significant temporary differences that comprise deferred
tax assets and liabilities at June 30, 2004 and 2003 were:                      

                                                                [Download Table]

                                                               AS OF JUNE 30,    
                                                             ------------------- 
                                                               2004       2003   
                                                             --------   -------- 
                                                                                 
Deferred tax assets:                                                             
  Employee benefits......................................... $  3,274   $  3,194 
  Property, plant and equipment.............................      475        686 
  Insurance.................................................      350        341 
  Receivables allowances....................................      724        770 
  Inventory.................................................    3,441      4,588 
  Environmental remediation.................................    1,322      1,232 
  Alternative minimum tax...................................      701        163 
  Net operating loss carry forwards -- domestic.............   11,645     20,186 
                                     -- foreign.............   10,432      1,290 
  Other.....................................................    1,333      2,059 
                                                             --------   -------- 
                                                               33,697     34,509 
  Valuation allowance.......................................  (30,045)   (32,954)
                                                             --------   -------- 
                                                                3,652      1,555 
                                                             --------   -------- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

                                                                [Download Table]

                                                               AS OF JUNE 30,    
                                                             ------------------- 
                                                               2004       2003   
                                                             --------   -------- 
                                                                                 
Deferred tax liabilities                                                         
  Property, plant and equipment.............................   (2,727)    (2,354)
  Other.....................................................   (2,649)        -- 
                                                             --------   -------- 
                                                               (5,376)    (2,354)
                                                             --------   -------- 
Net deferred tax liability.................................. $ (1,724)  $   (799)
                                                             ========   ======== 

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

                                                                [Download Table]

                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Prepaid expenses and other current assets...................  $   502   $   543 
Accrued expenses and other current liabilities..............     (138)     (111)
Other assets................................................      669       624 
Other liabilities...........................................   (2,757)   (1,855)
                                                              -------   ------- 
                                                              $(1,724)  $  (799)
                                                              =======   ======= 

  The Company has incurred domestic and foreign losses in recent years and
has reassessed the likelihood of recovering net deferred tax assets, resulting  
in the recording of valuation allowances due to the uncertainty of future       
profitability. The Company recorded income tax expense and increased the        
valuation allowances by $5,610 and $11,594 during the fourth quarters of 2003   
and 2002, respectively. The Company will continue to evaluate the likelihood of 
recoverability of these deferred tax assets based upon actual and expected      
operating performance.                                                          

The valuation allowance for deferred tax assets was:                  

                                                                [Download Table]

                                                          2004      2003     2002  
                                                         -------   -------  -------
                                                                                   
Balance at beginning of period.......................... $32,954   $18,495  $ 1,434
Change in valuation allowance...........................  (6,757)    4,250   14,726
Other adjustments.......................................   3,848    10,209    2,335
                                                         -------   -------  -------
Balance at end of period................................ $30,045   $32,954  $18,495
                                                         =======   =======  =======

The other adjustments in the valuation allowance consist primarily of 
changes in the valuation allowance attributable to discontinued operations.     

The Company has domestic federal net operating loss carry forwards of 
approximately $25,000 that expire in 2019 through 2024, state net operating loss
carry forwards of approximately $55,000 that expire over various periods        
beginning in 2005 and foreign net operating loss carry forwards of approximately
$30,000 that expire over various periods beginning in 2010.                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

15.  COMMITMENTS AND CONTINGENCIES                                              

LEASES:                                                                     

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

                                                                [Download Table]

                                                               NON-CANCELABLE   
                                                             -------------------
                                                             CAPITAL   OPERATING
YEAR ENDED JUNE 30                                           LEASES     LEASES  
------------------                                           -------   ---------
                                                                                
2005........................................................  $103      $1,524  
2006........................................................     2         778  
2007........................................................    --         568  
2008........................................................    --         456  
2009........................................................    --         167  
Thereafter..................................................    --          72  
                                                              ----      ------  
Total minimum lease payments................................  $105      $3,565  
                                                                        ======  
Amounts representing interest...............................     2              
                                                              ----              
Present value of minimum lease payments.....................  $103              
                                                              ====              

 Equipment under capitalized leases included in the consolidated balance
sheet at June 30, 2004 was $1,027, net of accumulated depreciation of $440.     

    Operating lease commitments include $1,125 with a related party controlled
by shareholders of the Company, as described in Related Party Transactions.     

 Rent expense under operating leases for 2004, 2003 and 2002 was $2,441,
$2,221 and $2,015, respectively.                                                

LITIGATION:                                                                 

     On or about April 17, 1997, CP Chemicals, Inc. (a subsidiary, "CP") and the
Company were served with a complaint filed by Chevron U.S.A. Inc. ("Chevron") in
the United States District Court for the District of New Jersey, alleging that  
the operations of CP at its Sewaren plant affected adjoining property owned by  
Chevron and alleging that the Company, as the parent of CP, is also responsible 
to Chevron. In July 2002, a phased settlement agreement was reached and a       
Consent Order entered by the Court. That settlement is in the process of being  
implemented. The Company's and CP's portion of the settlement for past costs and
expenses through the entry of the Consent Order was $495 and was included in    
selling, general and administrative expenses in fiscal 2002 and was paid in     
fiscal 2003. The Consent Order then provides for a period of due diligence      
investigation of the property owned by Chevron. The investigation has been      
conducted and the results are under review. The investigation costs are being   
split with one other defendant, Vulcan Materials Company. Upon completion of the
review of the results of the investigation, a decision will be made whether to  
opt out of the settlement or proceed. If no party opts out of the settlement,   
the Company and CP will take title to the adjoining Chevron property, probably  
through the use of a three-member New Jersey limited liability company. In      
preparation to move forward, a limited liability company has been formed, with  
Vulcan Materials Company as the third member. The Company also has commenced    
negotiations with Chevron regarding its allocation of responsibility and        
associated costs under the Consent Order. While the costs cannot be estimated   
with any degree of certainty at this time, the Company believes that insurance  
recoveries will be available to offset some of those costs.                     

 The Company's Phibro-Tech subsidiary was named in 1993 as a potentially
responsible party ("PRP") in connection with an action commenced under the      
Federal Comprehensive Environmental Response, Compen-                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

sation, and Liability Act ("CERCLA") by the United States Environmental         
Protection Agency ("the EPA"), involving a former third-party fertilizer        
manufacturing site in Jericho, South Carolina. An agreement has been reached    
under which such subsidiary agreed to contribute up to $900 of which $635 has   
been paid as of June 30, 2004. Some recovery from insurance and other sources is
expected but has not been recorded. The Company also has accrued its best       
estimate of any future costs.                                                   

    Phibro-Tech, Inc. has resolved certain alleged technical permit violations
with the California Department of Toxic Substances Control and has reached an   
agreement to pay $425 over a six year period ending October 2008.               

    In February 2000, the EPA notified numerous parties of potential liability
for waste disposal at a licensed Casmalia, California disposal site, including a
business, assets of which were originally acquired by a subsidiary in 1984. A   
settlement has been reached in this matter and the Company has paid $171 in full
settlement.                                                                     

On or about April 5, 2002, the Company was served, as a potentially   
responsible party, with an information request from the EPA relating to a       
third-party superfund site in Rhode Island. The Company is investigating the    
matter, which relates to events in the 1950's and 1960's, but management does   
not believe that the Company has any liability in this matter.                  

On or about August 13, 2004 the Company was served with a Request for 
Information pursuant to Section 104 of CERCLA and Section 3007 of RCRA relating 
to possible discharges into Turkey Creek in Sumter, South Carolina. The Company 
is preparing its response to the Request for Information and believes that,     
because its Sumter, South Carolina facility is distant from Turkey Creek and    
does not discharge into Turkey Creek, there is a low probability of liability   
associated with this matter.                                                    

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

ENVIRONMENTAL REMEDIATION:                                                  

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,     
generation, treatment, emission, release, discharge and disposal of certain     
materials and wastes, the remediation of contaminated soil and groundwater, the 
manufacture, sale and use of pesticides and the health and safety of employees. 
As such, the nature of the Company's current and former operations and those of 
its subsidiaries exposes the Company and its subsidiaries to the risk of claims 
with respect to such matters. Under certain circumstances, the Company or any of
its subsidiaries might be required to curtail operations until a particular     
problem is remedied. Known costs and expenses under environmental laws          
incidental to ongoing operations are generally included within operating        
results. Potential costs and expenses may also be incurred in connection with   
the repair or upgrade of facilities to meet existing or new requirements under  
environmental laws or to investigate or remediate potential or actual           
contamination and from time to time the Company establishes reserves for such   
contemplated investigation and remediation costs. In many instances, the        
ultimate costs under environmental laws and the time period during which such   
costs are likely to be incurred are difficult to predict.                       

    The Company's subsidiaries have, from time to time, implemented procedures
at their facilities designed to respond to obligations to comply with           
environmental laws. The Company believes that its operations are currently in   
material compliance with such environmental laws, although at various sites its 
subsidiaries are                                                                

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engaged in continuing investigation, remediation and/or monitoring efforts to   
address contamination associated with their historic operations.                

The nature of the Company's and its subsidiaries' current and former  
operations exposes the Company and its subsidiaries to the risk of claims with  
respect to environmental matters and the Company cannot assure it will not incur
material costs and liabilities in connection with such claims. Based upon its   
experience to date, the Company believes that the future cost of compliance with
existing environmental laws, and liability for known environmental claims       
pursuant to such environmental laws, will not have a material adverse effect on 
the Company's financial position.                                               

Based upon information available, the Company estimates the cost of   
litigation proceedings described above and the cost of further investigation and
remediation of identified soil and groundwater problems at operating sites,     
closed sites and third-party sites, and closure costs for closed sites to be    
approximately $2,933, which is included in current and long-term liabilities in 
the June 30, 2004 consolidated balance sheet (approximately $2,652 at June 30,  
2003). Environmental provisions were $1,511, $1,610 and $2,148 for 2004, 2003   
and 2002, respectively, and were included in selling, general and administrative
expenses in the consolidated statements of operations.                          

16.  GUARANTEES                                                                 

As part of the Prince Transactions (Note 4), as is normal for such    
transactions, the Company has agreed to indemnify the Palladium Investors for   
losses arising out of breach of representations, warranties and covenants. The  
Company's maximum liability under such indemnifications is limited to $15,000.  

   The Company agreed to indemnify the Palladium Investors for a portion, at
the rate of $0.65 for every dollar, of the amount they receive in respect of the
disposition of Buyer for less than $21,000, up to a maximum payment by the      
Company of $4,000 (the "Backstop Indemnification Amount"). The Backstop         
Indemnification Amount would be payable on the earlier to occur of July 1, 2008 
or six months after the redemption date of all of the Company's Senior Secured  
Notes due 2007 if such a disposition closes prior to such redemption and six    
months after the closing of any such disposition if the disposition closes after
any such redemption. The Company's obligations with respect to the Backstop     
Indemnification Amount will cease if the Palladium Investors do not close the   
disposition of Buyer by January 1, 2009. The maximum potential Backstop         
Indemnification Amount is included in other liabilities on the Company's        
consolidated balance sheet at June 30, 2004.                                    

   The Company established a $1,000 letter of credit escrow for two years to
collateralize its working capital adjustment and certain other indemnification  
obligations relating to the Prince Transactions.                                

17.  FINANCIAL INSTRUMENTS                                                      

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

     The carrying amounts of cash and cash equivalents, trade receivables, trade
payables and short-term debt is considered to be representative of their fair   
value because of their short maturities. The fair values of the Company's Senior
Secured Notes and Senior Subordinated Notes are estimated based on quoted market
prices. At June 30, 2004 the fair values of the Company's Senior Secured Notes  
and Senior Subordinated Notes were $114,450 and $43,706, respectively, and the  
related carrying amounts were $105,000 and $48,029,                             
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

respectively. At June 30, 2003 the fair value of the Company's Senior           
Subordinated Notes was $40,000 and the related carrying amount was $100,000. The
fair value of the Company's other long-term debt does not differ materially from
its carrying amount based on the variable interest rate structure of these      
obligations.                                                                    

The Company obtains third-party letters of credit in connection with  
certain inventory purchases and insurance obligations. The contract values of   
the letters of credit at June 30, 2004 and 2003 were $9,263 and $2,593,         
respectively. The difference between the carrying values and fair values of     
these letters of credit was not material.                                       

The Company operates internationally, with manufacturing and sales    
facilities in various locations around the world and utilizes certain financial 
instruments to manage its foreign currency and commodity exposures, primarily   
related to forecasted transactions. To qualify a derivative as a hedge at       
inception and throughout the hedge period, the Company formally documents the   
nature and relationships between hedging instruments and hedged items, as well  
as its risk-management objectives, strategies for undertaking the various hedge 
transactions and method of assessing hedge effectiveness. Additionally, for     
hedges of forecasted transactions, the significant characteristics and expected 
terms of a forecasted transaction must be specifically identified, and it must  
be probable that each forecasted transaction would occur. If it were deemed     
probable that the forecasted transaction would not occur, the gain or loss would
be recognized in operations currently. Financial instruments qualifying for     
hedge accounting must maintain a specified level of effectiveness between the   
hedging instrument and the item being hedged, both at inception and throughout  
the hedged period. The Company hedges forecasted transactions for periods not   
exceeding the next twelve months. The Company does not engage in trading or     
other speculative uses of financial instruments.                                

From time to time, the Company uses forward contracts and options to  
mitigate its exposure to changes in foreign currency exchange rates and as a    
means of hedging forecasted operating costs. When using options as a hedging    
instrument, the Company excludes the time value from the assessment of          
effectiveness. Pursuant to SFAS No. 133, all cumulative changes in a foreign    
currency option's fair value are deferred as a component of accumulated other   
comprehensive income until the underlying hedged transactions are reported on   
the Company's consolidated statement of operations and comprehensive income. The
Company also utilizes, on a limited basis, certain commodity derivatives,       
primarily on copper used in its manufacturing process, to hedge the cost of its 
anticipated production requirements. The Company's foreign currency options and 
forward contracts and commodity futures contracts were designated as cash flow  
hedges and qualified for hedge accounting treatment. The Company deferred $9 and
$81 of cumulative gains (net of losses) on various copper futures contracts     
designated as cash flow hedges as of June 30, 2004 and 2003, respectively.      

     The fair value of commodity contracts is estimated based on quotes from the
market makers of these instruments and represents the estimated amounts that the
Company would expect to receive or pay to terminate the agreements as of the    
reporting date.                                                                 

18.  BUSINESS SEGMENTS                                                          

The Company's reportable segments are Animal Health and Nutrition,    
Industrial Chemicals, Distribution and All Other. Reportable segments have been 
determined primarily on the basis of the nature of products and services and    
certain similar operating units have been aggregated. The Company's Animal      
Health and Nutrition segment manufactures and markets more than 500 formulations
and concentrations of medicated feed additives and nutritional feed additives   
including antibiotics, antibacterials, anticoccidials, anthelmintics, trace     
minerals, vitamins, vitamin premixes and other animal health and nutrition      
products. The Industrial Chemicals segment manufactures and markets a number of 
chemicals for use in the pressure-treated wood, chemical catalyst,              
semiconductor, automotive, and aerospace industries. The Distribution segment   
markets and distributes a variety of industrial, specialty and fine organic     
chemicals and intermediates produced primarily by third parties. The All Other  
segment manufactures and markets a variety of specialty                         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

custom chemicals and copper-based fungicides. Intersegment sales and transfers  
were not significant. The following segment data includes information only for  
continuing operations.                                                          

                                                        [Enlarge/Download Table]

                               ANIMAL                                          CORPORATE           
                              HEALTH &   INDUSTRIAL                           EXPENSES &           
2004 SEGMENT DETAIL           NUTRITION  CHEMICALS   DISTRIBUTION  ALL OTHER  ADJUSTMENTS   TOTAL  
-------------------           ---------  ----------  ------------  ---------  -----------  --------
                                                                                                   
Net Sales.................... $265,421    $42,253      $30,861      $19,739    $     --    $358,274
Operating income/(loss)......   33,307      2,899        2,900        2,301     (22,393)     19,014
Depreciation and                                                                                   
  amortization...............    8,263      2,123           11          419       2,367      13,183
Identifiable assets..........  185,601     26,146        7,715        5,696      16,211     241,369
Capital expenditures.........    3,850      2,216            6          115          57       6,244

                                                        [Enlarge/Download Table]

                               ANIMAL                                          CORPORATE           
                              HEALTH &   INDUSTRIAL                           EXPENSES &           
2003 SEGMENT DETAIL           NUTRITION  CHEMICALS   DISTRIBUTION  ALL OTHER  ADJUSTMENTS   TOTAL  
-------------------           ---------  ----------  ------------  ---------  -----------  --------
                                                                                                   
Net Sales.................... $250,706    $48,797      $30,072      $12,171    $     --    $341,746
Operating income/(loss)......   38,472     (1,855)       3,207          620     (14,948)     25,496
Depreciation and                                                                                   
  amortization...............    7,690      2,904           12          364       1,554      12,524
Identifiable assets..........  190,864     33,191        9,154        5,726      12,811     251,746
Capital expenditures.........    5,669      2,836           --          129           2       8,636

                                                        [Enlarge/Download Table]

                               ANIMAL                                          CORPORATE           
                              HEALTH &   INDUSTRIAL                           EXPENSES &           
2002 SEGMENT DETAIL           NUTRITION  CHEMICALS   DISTRIBUTION  ALL OTHER  ADJUSTMENTS   TOTAL  
-------------------           ---------  ----------  ------------  ---------  -----------  --------
                                                                                                   
Net Sales.................... $239,602    $50,854      $27,852      $10,368    $     --    $328,676
Operating income/(loss)......   28,298     (7,324)       2,345        1,164     (13,854)     10,629
Depreciation and                                                                                   
  amortization...............    7,438      3,535           12          321       1,049      12,355
Identifiable assets..........  186,118     38,985        8,059        8,097      10,393     251,652
Capital expenditures.........    5,915      2,328           12          144         119       8,518

19.  GEOGRAPHIC INFORMATION                                                     

 The following is information about the Company's geographic operations.
Information is attributed to the geographic areas based on the location of the  
Company's subsidiaries.                                                         

                                                                [Download Table]

                                                        2004      2003      2002  
                                                      --------  --------  --------
                                                                                  
NET SALES:                                                                        
  United States...................................... $248,577  $233,942  $219,981
  Europe.............................................   18,605    16,643    12,004
  Israel.............................................   43,170    44,383    45,266
  Latin America......................................   26,800    25,235    28,970
  Asia/Pacific.......................................   21,122    21,543    22,455
                                                      --------  --------  --------
  Total.............................................. $358,274  $341,746  $328,676
                                                      ========  ========  ========

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

                                                                [Download Table]

                                                        2004      2003      2002  
                                                      --------  --------  --------
                                                                                  
PROPERTY, PLANT AND EQUIPMENT, NET:                                               
  United States...................................... $ 13,836  $ 16,719  $ 19,370
  Europe.............................................   20,732    20,463    17,451
  Israel.............................................    9,157    10,990    12,647
  Latin America......................................   14,783    15,396    13,772
  Asia/Pacific.......................................      278       337       258
                                                      --------  --------  --------
  Total.............................................. $ 58,786  $ 63,905  $ 63,498
                                                      ========  ========  ========

20.  CONSOLIDATING FINANCIAL STATEMENTS                                         

     The units of Senior Secured Notes due 2007, consisting of US Senior Secured
Notes issued by the Company (the "Parent Issuer") and Dutch Senior Secured Notes
issued by Philipp Brothers Netherlands III B.V. (the "Dutch Issuer"), are       
guaranteed by certain subsidiaries. The Company and its U.S. subsidiaries ("U.S.
Guarantor Subsidiaries"), excluding The Prince Manufacturing Company, Prince    
MFG, LLC and Mineral Resource Technologies, Inc. (until divested) (the          
"Unrestricted Subsidiaries", as defined in the indenture), fully and            
unconditionally guarantee all of the Senior Secured Notes on a joint and several
basis. In addition, the Dutch Issuer's subsidiaries, presently consisting of    
Phibro Animal Health SA (the "Belgium Guarantor"), fully and unconditionally    
guarantee the Dutch Senior Secured Notes. The Dutch issuer and the Belgium      
Guarantor do not guarantee the US Senior Secured Notes. Other foreign           
subsidiaries ("Non-Guarantor Subsidiaries") do not presently guarantee the      
Senior Secured Notes. The U.S. Guarantor Subsidiaries include all domestic      
subsidiaries of the Company other than the Unrestricted Subsidiaries and        
include: CP Chemicals, Inc., Phibro-Tech, Inc., Prince Agriproducts, Inc,       
Phibrochem, Inc., Phibro Chemicals, Inc., Western Magnesium Corp., Phibro Animal
Health Holdings, Inc., and Phibro Animal Health U.S., Inc.                      

  The Senior Subordinated Notes due 2008, issued by the Parent Issuer, are
guaranteed by certain subsidiaries. The Company's U.S. subsidiaries, including  
the U.S. Guarantor Subsidiaries and the Unrestricted Subsidiaries, fully and    
unconditionally guarantee the Senior Subordinated Notes on a joint and several  
basis. The Dutch Issuer, Belgium Guarantor and Non-Guarantor Subsidiaries do not
presently guarantee the Senior Subordinated Notes. The U.S. Guarantor           
Subsidiaries and Unrestricted Subsidiaries include all domestic subsidiaries of 
the Company including: CP Chemicals, Inc., Phibro-Tech, Inc., Prince            
Agriproducts, Inc., The Prince Manufacturing Company, Prince MFG, LLC, Mineral  
Resource Technologies, Inc. (until divested), Phibrochem, Inc., Phibro          
Chemicals, Inc., Western Magnesium Corp., Phibro Animal Health Holdings, Inc.,  
and Phibro Animal Health U.S., Inc.                                             

The following consolidating financial data summarizes the assets,     
liabilities and results of operations and cash flows of the Parent Issuer,      
Unrestricted Subsidiaries, U.S. Guarantor Subsidiaries, Dutch Issuer, Belgium   
Guarantor and Non-Guarantor Subsidiaries. The Unrestricted Subsidiaries, U.S.   
Guarantor Subsidiaries, Dutch Issuer, Belgium Guarantor and Non-Guarantor       
Subsidiaries are directly or indirectly wholly owned as to voting stock by the  
Company.                                                                        

  Investments in subsidiaries are accounted for by the Parent Issuer 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.                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING BALANCE SHEET 

                                                        [Enlarge/Download Table]

                                                         AS OF JUNE 30, 2004                              
                            ------------------------------------------------------------------------------
                             PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM    NON-GUARANTOR
                             ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR   SUBSIDIARIES 
                            --------   ------------   --------------   -------   ---------   -------------
                                                            (IN THOUSANDS)                                
                                                                                                          
                                                 ASSETS                                                   
Current Assets:                                                                                           
  Cash and cash                                                                                           
    equivalents............ $    136     $    --         $    801      $    17    $   212      $  4,402   
  Trade receivables........    2,670          --           26,996           --      2,592        25,400   
  Other receivables........      317         414            1,195           --         72           768   
  Inventory................    1,994          --           37,890           --     23,159        16,867   
  Prepaid expenses and                                                                                    
    other..................    3,195         110              565           --      1,018         3,800   
                            --------     -------         --------      -------    -------      --------   
    Total current assets...    8,312         524           67,447           17     27,053        51,237   
                            --------     -------         --------      -------    -------      --------   
Property, plant &                                                                                         
  equipment, net...........      105          --           13,730           --     17,321        27,630   
Intangibles................       --          --            4,252           --      1,569         5,874   
Investment in                                                                                             
  subsidiaries.............  125,355          --            3,619        1,604         --            --   
Intercompany...............  (14,995)     20,995           60,030       20,181      1,630       (12,497)  
Other assets...............   14,506          --            1,056           --         --           736   
                            --------     -------         --------      -------    -------      --------   
                            $133,283     $21,519         $150,134      $21,802    $47,573      $ 72,980   
                            ========     =======         ========      =======    =======      ========   

                             LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                               
Current Liabilities:                                                                                      
  Cash overdraft........... $     --     $    10         $    881      $    --    $    --      $     --   
  Loan payable to banks....   10,996          --               --           --         --            --   
  Current portion of                                                                                      
    long-term debt.........       --          --              101           --         --         1,250   
  Accounts payable.........    4,734           9           28,434           --      2,258        11,537   
  Accrued expenses and                                                                                    
    other..................   11,857         159            8,306          216     12,022         7,450   
                            --------     -------         --------      -------    -------      --------   
    Total current                                                                                         
      liabilities..........   27,587         178           37,722          216     14,280        20,237   
                            --------     -------         --------      -------    -------      --------   
Long-term debt.............  133,029          --                2       20,000         --         4,987   
Intercompany debt..........       --          --               --           --     30,553        44,791   
Other liabilities..........   11,822          --            4,897           --      1,136         4,431   
                            --------     -------         --------      -------    -------      --------   
    Total liabilities......  172,438         178           42,621       20,216     45,969        74,446   
                            --------     -------         --------      -------    -------      --------   
Redeemable Securities:                                                                                    
  Series C preferred                                                                                      
    stock..................   24,678          --               --           --         --            --   
                            --------     -------         --------      -------    -------      --------   
Stockholders' Equity                                                                                      
  (Deficit):                                                                                              
  Series A preferred                                                                                      
    stock..................      521          --               --           --         --            --   
  Common stock.............        2           1               31           --         --            --   
  Paid-in capital..........      860          --          112,004           21         52         1,537   
  Retained earnings                                                                                       
    (accumulated                                                                                          
    deficit)...............  (57,964)     21,340           (4,339)      (2,744)    (2,757)        8,374   
  Accumulated other                                                                                       
    comprehensive income                                                                                  
    (loss):                                                                                               
    Gain on derivative                                                                                    
      instruments..........        9          --                9           --         --            --   
    Cumulative currency                                                                                   
      translation                                                                                         
      adjustment...........   (7,261)         --             (192)       4,309      4,309       (11,377)  
                            --------     -------         --------      -------    -------      --------   
    Total stockholders'                                                                                   
      equity (deficit).....  (63,833)     21,341          107,513        1,586      1,604        (1,466)  
                            --------     -------         --------      -------    -------      --------   
                            $133,283     $21,519         $150,134      $21,802    $47,573      $ 72,980   
                            ========     =======         ========      =======    =======      ========   


                                AS OF JUNE 30, 2004                                                       
                            ----------------------------                                                  
                            CONSOLIDATION   CONSOLIDATED                                                  
                             ADJUSTMENTS      BALANCE                                                     
                            -------------   ------------                                                  
                                   (IN THOUSANDS)                                                         
                                                                                                          
                                       ASSETS                                                             
Current Assets:                                                                                           
  Cash and cash                                                                                           
    equivalents............   $      --       $  5,568                                                    
  Trade receivables........          --         57,658                                                    
  Other receivables........          --          2,766                                                    
  Inventory................                     79,910                                                    
  Prepaid expenses and                                                                                    
    other..................          --          8,688                                                    
                              ---------       --------                                                    
    Total current assets...          --        154,590                                                    
                              ---------       --------                                                    
Property, plant &                                                                                         
  equipment, net...........          --         58,786                                                    
Intangibles................          --         11,695                                                    
Investment in                                                                                             
  subsidiaries.............    (130,578)            --                                                    
Intercompany...............     (75,344)            --                                                    
Other assets...............          --         16,298                                                    
                              ---------       --------                                                    
                              $(205,922)      $241,369                                                    
                              =========       ========                                                    

                                  LIABILITIES AND                                                         
                                 STOCKHOLDERS' EQUITY                                                     
                                      (DEFICIT)                                                           
Current Liabilities:                                                                                      
  Cash overdraft...........   $      --       $    891                                                    
  Loan payable to banks....          --         10,996                                                    
  Current portion of                                                                                      
    long-term debt.........          --          1,351                                                    
  Accounts payable.........          --         46,972                                                    
  Accrued expenses and                                                                                    
    other..................                     40,010                                                    
                              ---------       --------                                                    
    Total current                                                                                         
      liabilities..........          --        100,220                                                    
                              ---------       --------                                                    
Long-term debt.............          --        158,018                                                    
Intercompany debt..........     (75,344)            --                                                    
Other liabilities..........          --         22,286                                                    
                              ---------       --------                                                    
    Total liabilities......     (75,344)       280,524                                                    
                              ---------       --------                                                    
Redeemable Securities:                                                                                    
  Series C preferred                                                                                      
    stock..................          --         24,678                                                    
                              ---------       --------                                                    
Stockholders' Equity                                                                                      
  (Deficit):                                                                                              
  Series A preferred                                                                                      
    stock..................          --            521                                                    
  Common stock.............         (32)             2                                                    
  Paid-in capital..........    (113,614)           860                                                    
  Retained earnings                                                                                       
    (accumulated                                                                                          
    deficit)...............     (19,874)       (57,964)                                                   
  Accumulated other                                                                                       
    comprehensive income                                                                                  
    (loss):                                         --                                                    
    Gain on derivative                                                                                    
      instruments..........          (9)             9                                                    
    Cumulative currency                                                                                   
      translation                                                                                         
      adjustment...........       2,951         (7,261)                                                   
                              ---------       --------                                                    
    Total stockholders'                                                                                   
      equity (deficit).....    (130,578)       (63,833)                                                   
                              ---------       --------                                                    
                              $(205,922)      $241,369                                                    
                              =========       ========                                                    

  F-37

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                             FOR THE YEAR ENDED JUNE 30, 2004                                       
                       -------------------------------------------------------------------------------------------------------------
                        PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM    NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                        ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR   SUBSIDIARIES     ADJUSTMENTS      BALANCE   
                       --------   ------------   --------------   -------   ---------   -------------   -------------   ------------
                                                                      (IN THOUSANDS)                                                
                                                                                                                                    
Net sales............  $ 21,868     $11,118         $215,591      $    --    $ 5,742      $103,955        $     --        $358,274  
Net sales --                                                                                                                        
  intercompany.......       150       2,598              468           --     28,970         4,375         (36,561)             --  
Cost of goods sold...    17,318      10,139          160,136           --     25,293        91,546         (36,561)        267,871  
                       --------     -------         --------      -------    -------      --------        --------        --------  
  Gross profit.......     4,700       3,577           55,923           --      9,419        16,784              --          90,403  
Selling, general and                                                                                                                
  administrative                                                                                                                    
  expenses...........    20,238       1,299           25,317            4      2,676        16,594              --          66,128  
Costs of                                                                                                                            
  non-completed                                                                                                                     
  transaction........     5,261          --               --           --         --            --              --           5,261  
                       --------     -------         --------      -------    -------      --------        --------        --------  
  Operating income                                                                                                                  
    (loss)...........   (20,799)      2,278           30,606           (4)     6,743           190              --          19,014  
Other:                                                                                                                              
  Interest expense...    16,208          18               --        1,806         95           491              --          18,618  
  Interest                                                                                                                          
    (income).........        (4)         --               --           --         --          (126)             --            (130) 
  Other (income)                                                                                                                    
    expense, net.....       578          --             (605)          --       (265)         (489)             --            (781) 
  Net (gain) on                                                                                                                     
    extinguishment of                                                                                                               
    debt.............   (23,226)         --               --           --         --            --              --         (23,226) 
  Intercompany                                                                                                                      
    interest and                                                                                                                    
    other............   (26,755)      1,892           16,392       (1,823)     3,335         6,959              --              --  
  (Profit) loss                                                                                                                     
    relating to                                                                                                                     
    subsidiaries.....    (5,349)         --               --       (2,124)        --            --           7,473              --  
                       --------     -------         --------      -------    -------      --------        --------        --------  
  Income (loss) from                                                                                                                
    continuing                                                                                                                      
    operations before                                                                                                               
    income taxes.....    17,749         368           14,819        2,137      3,578        (6,645)         (7,473)         24,533  
Provision for income                                                                                                                
  taxes..............     1,185         221            1,294           --      1,454         3,815              --           7,969  
                       --------     -------         --------      -------    -------      --------        --------        --------  
  Income (loss) from                                                                                                                
    continuing                                                                                                                      
    operations.......    16,564         147           13,525        2,137      2,124       (10,460)         (7,473)         16,564  
Discontinued                                                                                                                        
  operations:                                                                                                                       
  Profit (loss)                                                                                                                     
    relating to                                                                                                                     
    discontinued                                                                                                                    
    operations.......      (517)         --               --           --         --            --             517              --  
  (Loss) from                                                                                                                       
    discontinued                                                                                                                    
    operations (net                                                                                                                 
    of income                                                                                                                       
    taxes)...........        --        (124)              --           --         --        (1,501)             --          (1,625) 
  Gain (loss) from                                                                                                                  
    disposal of                                                                                                                     
    discontinued                                                                                                                    
    operations (net                                                                                                                 
    of income                                                                                                                       
    taxes)...........    (3,197)         --           (2,735)          --         --         3,843              --          (2,089) 
                       --------     -------         --------      -------    -------      --------        --------        --------  
  Net income                                                                                                                        
    (loss)...........  $ 12,850     $    23         $ 10,790      $ 2,137    $ 2,124      $ (8,118)       $ (6,956)       $ 12,850  
                       ========     =======         ========      =======    =======      ========        ========        ========  

  F-38

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                 FOR THE YEAR ENDED JUNE 30, 2004                
                                  ---------------------------------------------------------------
                                   PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH      BELGIUM 
                                   ISSUER    SUBSIDIARIES    SUBSIDIARIES     ISSUER    GUARANTOR
                                  --------   ------------   --------------   --------   ---------
                                                          (IN THOUSANDS)                         
                                                                                                 
Operating Activities:                                                                            
 Net income (loss)............... $ 12,850     $     23        $10,790       $  2,137    $2,124  
 Adjustment for discontinued                                                                     
   operations....................    3,714          124          2,735             --        --  
                                  --------     --------        -------       --------    ------  
 Income (loss) from continuing                                                                   
   operations....................   16,564          147         13,525          2,137     2,124  
 Adjustments to reconcile income                                                                 
   (loss) from continuing                                                                        
   operations to net cash                                                                        
   provided (used) by operating                                                                  
   activities:                                                                                   
   Depreciation and                                                                              
     amortization................    2,367          487          2,542             --     2,669  
   Deferred income taxes.........      733           --             --             --        --  
   Net gain from sales of                                                                        
     assets......................       --           --           (689)            --        --  
   Net gain on extinguishment of                                                                 
     debt........................  (23,226)          --             --             --        --  
   Effects of changes in foreign                                                                 
     currency....................       --           --             84             --      (264) 
   Other.........................      525           --            395             --        --  
   Changes in operating assets                                                                   
     and liabilities:                                                                            
     Accounts receivable.........       79          336         (4,826)            --      (945) 
     Inventory...................      618         (543)         4,143             --    (8,762) 
     Prepaid expenses and                                                                        
       other.....................     (268)         188           (479)            --     1,369  
     Other assets................    1,997           --         (4,548)            --        --  
     Intercompany................     (981)      17,331         (8,706)       (22,336)   13,316  
     Accounts payable............     (370)        (328)        (2,368)            --    (2,395) 
     Accrued expenses and                                                                        
       other.....................    2,803          (89)         5,089            216     2,742  
     Accrued costs of non-                                                                       
       completed transaction.....    3,970           --             --             --        --  
 Cash provided (used) by                                                                         
   discontinued operations.......   (3,197)        (652)        (2,735)            --        --  
                                  --------     --------        -------       --------    ------  
   Net cash provided (used) by                                                                   
     operating activities........    1,614       16,877          1,427        (19,983)    9,854  
                                  --------     --------        -------       --------    ------  
Investing Activities:                                                                            
 Capital expenditures............      (57)         (62)        (2,506)            --    (1,613) 
 Proceeds from sale of assets....       --           --          1,057             --        --  
 Other investing.................     (654)          --             --             --        --  
 Discontinued operations.........   14,343           --             --             --        --  
                                  --------     --------        -------       --------    ------  
   Net cash provided (used) by                                                                   
     investing activities........   13,632          (62)        (1,449)            --    (1,613) 
                                  --------     --------        -------       --------    ------  
Financing Activities:                                                                            
 Net (decrease) in cash                                                                          
   overdraft.....................     (350)        (276)          (160)            --        --  
 Net (decrease) in short-term                                                                    
   debt..........................  (26,882)          --             --             --        --  
 Proceeds from long-term debt....   85,000           --             --         20,000        --  
 Payments of long-term debt......  (32,679)         (13)        (1,055)            --        --  
 Payments of Pfizer                                                                              
   obligations...................  (20,075)          --             --             --    (8,225) 
   Transactions and transaction                                                                  
     costs.......................   (4,619)     (16,645)          (129)            --        --  
 Debt refinancing costs..........  (15,548)          --             --             --        --  
 Discontinued operations.........       --           --             --             --        --  
                                  --------     --------        -------       --------    ------  
   Net cash provided (used) by                                                                   
     financing activities........  (15,153)     (16,934)        (1,344)        20,000    (8,225) 
                                  --------     --------        -------       --------    ------  
Effect of exchange rate changes                                                                  
 on cash.........................       --           --             --             --        11  
                                  --------     --------        -------       --------    ------  
Net increase (decrease) in cash                                                                  
 and cash equivalents............       93         (119)        (1,366)            17        27  
Cash and cash equivalents at                                                                     
 beginning of period.............       43          119          2,167             --       185  
                                  --------     --------        -------       --------    ------  
Cash and cash equivalents at end                                                                 
 of period....................... $    136     $     --        $   801       $     17    $  212  
                                  ========     ========        =======       ========    ======  


                                        FOR THE YEAR ENDED JUNE 30, 2004                         
                                  --------------------------------------------                   
                                  NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED                   
                                  SUBSIDIARIES     ADJUSTMENTS      BALANCE                      
                                  -------------   -------------   ------------                   
                                                 (IN THOUSANDS)                                  
                                                                                                 
Operating Activities:                                                                            
 Net income (loss)...............   $ (8,118)        $(6,956)       $ 12,850                     
 Adjustment for discontinued                                                                     
   operations....................     (2,342)           (517)          3,714                     
                                    --------         -------        --------                     
 Income (loss) from continuing                                                                   
   operations....................    (10,460)         (7,473)         16,564                     
 Adjustments to reconcile income                                                                 
   (loss) from continuing                                                                        
   operations to net cash                                                                        
   provided (used) by operating                                                                  
   activities:                                                                                   
   Depreciation and                                                                              
     amortization................      5,118              --          13,183                     
   Deferred income taxes.........       (407)             --             326                     
   Net gain from sales of                                                                        
     assets......................         (3)             --            (692)                    
   Net gain on extinguishment of                                                                 
     debt........................         --              --         (23,226)                    
   Effects of changes in foreign                                                                 
     currency....................       (368)             --            (548)                    
   Other.........................        194              --           1,114                     
   Changes in operating assets                                                                   
     and liabilities:                                                     --                     
     Accounts receivable.........     (1,866)             --          (7,222)                    
     Inventory...................      8,204              --           3,660                     
     Prepaid expenses and                                                                        
       other.....................     (1,124)             --            (314)                    
     Other assets................       (528)             --          (3,079)                    
     Intercompany................     (6,097)          7,473              --                     
     Accounts payable............       (189)             --          (5,650)                    
     Accrued expenses and                                                                        
       other.....................     (3,796)             --           6,965                     
     Accrued costs of non-                                                                       
       completed transaction.....         --              --           3,970                     
 Cash provided (used) by                                                                         
   discontinued operations.......      4,395              --          (2,189)                    
                                    --------         -------        --------                     
   Net cash provided (used) by                                                                   
     operating activities........     (6,927)             --           2,862                     
                                    --------         -------        --------                     
Investing Activities:                                                                            
 Capital expenditures............     (2,006)             --          (6,244)                    
 Proceeds from sale of assets....         37              --           1,094                     
 Other investing.................         (1)             --            (655)                    
 Discontinued operations.........        532              --          14,875                     
                                    --------         -------        --------                     
   Net cash provided (used) by                                                                   
     investing activities........     (1,438)             --           9,070                     
                                    --------         -------        --------                     
Financing Activities:                                                                            
 Net (decrease) in cash                                                                          
   overdraft.....................         (9)             --            (795)                    
 Net (decrease) in short-term                                                                    
   debt..........................        (72)             --         (26,954)                    
 Proceeds from long-term debt....      4,661              --         109,661                     
 Payments of long-term debt......     (1,706)             --         (35,453)                    
 Payments of Pfizer                                                                              
   obligations...................         --              --         (28,300)                    
   Transactions and transaction                                                                  
     costs.......................         --              --         (21,393)                    
 Debt refinancing costs..........         --              --         (15,548)                    
 Discontinued operations.........      1,005              --           1,005                     
                                    --------         -------        --------                     
   Net cash provided (used) by                                                                   
     financing activities........      3,879              --         (17,777)                    
                                    --------         -------        --------                     
Effect of exchange rate changes                                                                  
 on cash.........................        223                             234                     
                                    --------         -------        --------                     
Net increase (decrease) in cash                                                                  
 and cash equivalents............     (4,263)             --          (5,611)                    
Cash and cash equivalents at                                                                     
 beginning of period.............      8,665                          11,179                     
                                    --------         -------        --------                     
Cash and cash equivalents at end                                                                 
 of period.......................   $  4,402         $    --        $  5,568                     
                                    ========         =======        ========                     

  F-39

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING BALANCE SHEET 

                                                        [Enlarge/Download Table]

                                                            AS OF JUNE 30, 2003                            
                                 --------------------------------------------------------------------------
                                                               U.S.                                NON-    
                                  PARENT    UNRESTRICTED    GUARANTOR     DUTCH     BELGIUM     GUARANTOR  
                                  ISSUER    SUBSIDIARIES   SUBSIDIARIES   ISSUER   GUARANTOR   SUBSIDIARIES
                                 --------   ------------   ------------   ------   ---------   ------------
                                                               (IN THOUSANDS)                              
                                                                                                           
                                                  ASSETS                                                   
Current Assets:                                                                                            
  Cash and cash equivalents....  $     43     $    119       $  2,167     $  --     $   185      $  8,665  
  Trade receivables............     2,759        2,452         22,071        --       1,542        23,890  
  Other receivables............       957            3            733        --         518         1,292  
  Inventory....................     2,612        4,278         41,266        --      13,460        26,233  
  Prepaid expenses and other...     3,267          458            981        --       1,866         3,296  
  Current assets from                                                                                      
    discontinued operations....        --        4,942             --        --          --         4,334  
                                 --------     --------       --------     ------    -------      --------  
    Total Current Assets.......     9,638       12,252         67,218        --      17,571        67,710  
                                 --------     --------       --------     ------    -------      --------  
Property, plant & equipment,                                                                               
  net..........................       153        3,269         13,297        --      17,049        30,137  
Intangibles....................        --           --             --        --       1,818         6,851  
Investment in subsidiaries.....   103,574           --          3,619        --          --            --  
Intercompany...................    35,034      (19,431)        59,765        --       6,731        (9,116) 
Other assets...................    11,516          710          1,122        --          --           711  
Other assets from discontinued                                                                             
  operations...................        --       10,650             --        --          --         2,675  
                                 --------     --------       --------     ------    -------      --------  
                                 $159,915     $  7,450       $145,021     $  --     $43,169      $ 98,968  
                                 ========     ========       ========     ======    =======      ========  

                                         )                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT
                                         )                                                                 
Current Liabilities:                                                                                       
  Cash overdraft...............  $    350     $    286       $  1,041     $  --     $    --      $      9  
  Loan payable to banks........    37,878           --             --        --          --            --  
  Current portion of long-term                                                                             
    debt.......................    21,599           66            381        --          --         2,078  
  Accounts payable.............     3,304        2,350         25,926        --      12,115        11,660  
  Accrued expenses and other...     7,943        1,151          9,931        --       8,583        13,091  
  Current liabilities from                                                                                 
    discontinued operations....        --        2,051             --        --          --         3,506  
                                 --------     --------       --------     ------    -------      --------  
    Total Current                                                                                          
      Liabilities..............    71,074        5,904         37,279        --      20,698        30,344  
                                 --------     --------       --------     ------    -------      --------  
Long-term debt.................   100,073          213            149        --          --         1,828  
Intercompany debt..............        --           --             --        --      22,319        50,664  
Other liabilities..............     4,397          114         13,289        --       1,256         2,185  
Other liabilities from                                                                                     
  discontinued operations......        --          198             --        --          --           975  
                                 --------     --------       --------     ------    -------      --------  
Total Liabilities..............   175,544        6,429         50,717        --      44,273        85,996  
                                 --------     --------       --------     ------    -------      --------  
Redeemable Securities:                                                                                     
  Series B and C preferred                                                                                 
    stock......................    68,881           --             --        --          --            --  
                                 --------     --------       --------     ------    -------      --------  
Stockholders' Equity (Deficit):                                                                            
  Series A preferred stock.....       521           --             --        --          --            --  
  Common stock.................         2            1             31        --          --            --  
  Paid-in capital..............       860           --        110,883        --          --         5,179  
  Retained earnings                                                                                        
    (accumulated deficit)......   (79,489)       1,020        (16,499)       --      (4,881)       17,862  
  Accumulated other                                                                                        
    comprehensive income                                                                                   
    (loss):....................                                                                            
    Gain on derivative                                                                                     
      instruments..............        81           --             81        --          --            --  
    Cumulative foreign currency                                                                            
      translation adjustment...    (6,485)          --           (192)       --       3,777       (10,069) 
                                 --------     --------       --------     ------    -------      --------  
      Total Stockholders'                                                                                  
        Equity (Deficit).......   (84,510)       1,021         94,304        --      (1,104)       12,972  
                                 --------     --------       --------     ------    -------      --------  
                                 $159,915     $  7,450       $145,021     $  --     $43,169      $ 98,968  
                                 ========     ========       ========     ======    =======      ========  


                                     AS OF JUNE 30, 2003                                                   
                                 ----------------------------                                              

                                 CONSOLIDATION   CONSOLIDATED                                              
                                  ADJUSTMENTS      BALANCE                                                 
                                 -------------   ------------                                              
                                        (IN THOUSANDS)                                                     
                                                                                                           
                                            ASSETS                                                         
Current Assets:                                                                                            
  Cash and cash equivalents....                    $ 11,179                                                
  Trade receivables............                      52,714                                                
  Other receivables............                       3,503                                                
  Inventory....................                      87,849                                                
  Prepaid expenses and other...                       9,868                                                
  Current assets from                                                                                      
    discontinued operations....                       9,276                                                
                                   ---------       --------                                                
    Total Current Assets.......           --        174,389                                                
                                   ---------       --------                                                
Property, plant & equipment,                                                                               
  net..........................                      63,905                                                
Intangibles....................                       8,669                                                
Investment in subsidiaries.....     (107,193)            --                                                
Intercompany...................      (72,983)            --                                                
Other assets...................                      14,059                                                
Other assets from discontinued                                                                             
  operations...................                      13,325                                                
                                   ---------       --------                                                
                                   $(180,176)      $274,347                                                
                                   =========       ========                                                

                                              LIABILITIES AND                                              
                                         STOCKHOLDERS' EQUITY                                              
                                                     (DEFICIT                                              
Current Liabilities:                                                                                       
  Cash overdraft...............                    $  1,686                                                
  Loan payable to banks........                      37,878                                                
  Current portion of long-term                                                                             
    debt.......................                      24,124                                                
  Accounts payable.............                      55,355                                                
  Accrued expenses and other...                      40,699                                                
  Current liabilities from                                                                                 
    discontinued operations....                       5,557                                                
                                   ---------       --------                                                
    Total Current                                                                                          
      Liabilities..............           --        165,299                                                
                                   ---------       --------                                                
Long-term debt.................                     102,263                                                
Intercompany debt..............      (72,983)            --                                                
Other liabilities..............                      21,241                                                
Other liabilities from                                                                                     
  discontinued operations......                       1,173                                                
                                   ---------       --------                                                
Total Liabilities..............      (72,983)       289,976                                                
                                   ---------       --------                                                
Redeemable Securities:                                                                                     
  Series B and C preferred                                                                                 
    stock......................                      68,881                                                
                                   ---------       --------                                                
Stockholders' Equity (Deficit):                                                                            
  Series A preferred stock.....                         521                                                
  Common stock.................          (32)             2                                                
  Paid-in capital..............     (116,062)           860                                                
  Retained earnings                                                                                        
    (accumulated deficit)......        2,498        (79,489)                                               
  Accumulated other                                                                                        
    comprehensive income                                                                                   
    (loss):....................                                                                            
    Gain on derivative                                                                                     
      instruments..............          (81)            81                                                
    Cumulative foreign currency                                                                            
      translation adjustment...        6,484         (6,485)                                               
                                   ---------       --------                                                
      Total Stockholders'                                                                                  
        Equity (Deficit).......     (107,193)       (84,510)                                               
                                   ---------       --------                                                
                                   $(180,176)      $274,347                                                
                                   =========       ========                                                

  F-40

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                              FOR THE YEAR ENDED JUNE 30, 2003              
                                 -----------------------------------------------------------
                                                               U.S.                         
                                  PARENT    UNRESTRICTED    GUARANTOR     DUTCH     BELGIUM 
                                  ISSUER    SUBSIDIARIES   SUBSIDIARIES   ISSUER   GUARANTOR
                                 --------   ------------   ------------   ------   ---------
                                                       (IN THOUSANDS)                       
                                                                                            
Net sales......................  $ 23,982     $22,332        $187,628     $  --     $ 6,625 
Net sales -- intercompany......     1,338       4,244             775        --      26,994 
Cost of goods sold.............    20,083      20,422         144,543        --      31,435 
                                 --------     -------        --------     ------    ------- 
  Gross profit.................     5,237       6,154          43,860        --       2,184 
Selling, general and                                                                        
  administrative expenses......    18,064       2,575          26,632        --       1,868 
                                 --------     -------        --------     ------    ------- 
Operating income (loss)........   (12,827)      3,579          17,228        --         316 
Other:                                                                                      
  Interest expense.............    15,050          86               1        --          62 
  Interest (income)............        (2)         --              --        --          -- 
  Other (income) expense,                                                                   
    net........................     3,283          --          (3,481)       --       1,283 
  Intercompany interest and                                                                 
    other......................   (33,819)      4,952          18,997        --       2,849 
  (Profit) loss relating to                                                                 
    subsidiaries...............     4,036          --              --        --          -- 
                                 --------     -------        --------     ------    ------- 
  Income (loss) from continuing                                                             
    operations before income                                                                
    taxes......................    (1,375)     (1,459)          1,711        --      (3,878)
Provision for income taxes.....       924          52             570        --         572 
                                 --------     -------        --------     ------    ------- 
  Income (loss) from continuing                                                             
    operations.................    (2,299)     (1,511)          1,141        --      (4,450)
Discontinued operations:                                                                    
  Profit (loss) relating to                                                                 
    discontinued operations....    14,759          --              --        --          -- 
  (Loss) from discontinued                                                                  
    operations (net of income                                                               
    taxes).....................        --      (3,454)             --        --          -- 
  Gain (loss) from disposal of                                                              
    discontinued operations                                                                 
    (net of income taxes)......   (30,019)         --              --        --          -- 
                                 --------     -------        --------     ------    ------- 
    Net income (loss)..........  $(17,559)    $(4,965)       $  1,141     $  --     $(4,450)
                                 ========     =======        ========     ======    ======= 


                                      FOR THE YEAR ENDED JUNE 30, 2003                      
                                 -------------------------------------------                
                                     NON-                                                   
                                  GUARANTOR     CONSOLIDATION   CONSOLIDATED                
                                 SUBSIDIARIES    ADJUSTMENTS      BALANCE                   
                                 ------------   -------------   ------------                
                                               (IN THOUSANDS)                               
                                                                                            
Net sales......................    $101,179       $     --        $341,746                  
Net sales -- intercompany......       6,812        (40,163)             --                  
Cost of goods sold.............      74,880        (40,163)        251,200                  
                                   --------       --------        --------                  
  Gross profit.................      33,111             --          90,546                  
Selling, general and                                                                        
  administrative expenses......      15,911                         65,050                  
                                   --------       --------        --------                  
Operating income (loss)........      17,200             --          25,496                  
Other:                                                                                      
  Interest expense.............       1,082                         16,281                  
  Interest (income)............         (83)                           (85)                 
  Other (income) expense,                                                                   
    net........................         454                          1,539                  
  Intercompany interest and                                                                 
    other......................       7,021                             --                  
  (Profit) loss relating to                                                                 
    subsidiaries...............          --         (4,036)             --                  
                                   --------       --------        --------                  
  Income (loss) from continuing                                                             
    operations before income                                                                
    taxes......................       8,726          4,036           7,761                  
Provision for income taxes.....       7,942                         10,060                  
                                   --------       --------        --------                  
  Income (loss) from continuing                                                             
    operations.................         784          4,036          (2,299)                 
Discontinued operations:                                                                    
  Profit (loss) relating to                                                                 
    discontinued operations....          --        (14,759)             --                  
  (Loss) from discontinued                                                                  
    operations (net of income                                                               
    taxes).....................     (11,123)                       (14,577)                 
  Gain (loss) from disposal of                                                              
    discontinued operations                                                                 
    (net of income taxes)......      29,336                           (683)                 
                                   --------       --------        --------                  
    Net income (loss)..........    $ 18,997       $(10,723)       $(17,559)                 
                                   ========       ========        ========                  

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                              FOR THE YEAR ENDED JUNE 30, 2003              
                                 -----------------------------------------------------------
                                                               U.S.                         
                                  PARENT    UNRESTRICTED    GUARANTOR     DUTCH     BELGIUM 
                                  ISSUER    SUBSIDIARIES   SUBSIDIARIES   ISSUER   GUARANTOR
                                 --------   ------------   ------------   ------   ---------
                                                       (IN THOUSANDS)                       
                                                                                            
Operating Activities:                                                                       
  Net income (loss)............  $(17,559)    $(4,965)       $  1,141     $  --     $(4,450)
  Adjustment for discontinued                                                               
    operations.................    15,260       3,454              --        --          -- 
                                 --------     -------        --------     ------    ------- 
  Income (loss) from continuing                                                             
    operations.................    (2,299)     (1,511)          1,141        --      (4,450)
  Adjustments to reconcile                                                                  
    income (loss) from                                                                      
    continuing operations to                                                                
    net cash provided (used) by                                                             
    operating activities:                                                                   
    Depreciation and                                                                        
      amortization.............     1,554         956           2,900        --       2,019 
    Deferred income taxes......        --          --              --        --          -- 
    Net gain from sales of                                                                  
      assets...................        --          --            (118)       --          -- 
    Effects of changes in                                                                   
      foreign currency.........        --          --            (399)       --       1,268 
    Other......................       218          13             540        --          -- 
    Changes in operating assets                                                             
      and liabilities:                                                                      
      Accounts receivable......       301         245           1,489        --        (322)
      Inventory................        95         (61)         (3,658)       --       2,270 
      Prepaid expenses and                                                                  
        other..................      (702)       (195)            558        --      (1,191)
      Other assets.............    (3,171)         --           1,131        --          -- 
      Intercompany.............    12,780       2,717         (12,285)       --       4,989 
      Accounts payable.........     2,280         714          12,542        --       3,523 
      Accrued expenses and                                                                  
        other..................     1,415          95           2,326        --      (6,444)
  Cash provided (used) by                                                                   
    discontinued operations....        --      (1,928)             --        --          -- 
                                 --------     -------        --------     ------    ------- 
    Net cash provided (used) by                                                             
      operating activities.....    12,471       1,045           6,167        --       1,662 
                                 --------     -------        --------     ------    ------- 
Investing Activities:                                                                       
  Capital expenditures.........        (2)       (350)         (2,573)       --      (2,149)
  Proceeds from sale of                                                                     
    assets.....................        --          --           2,530        --          -- 
  Other investing..............        --          --              --        --          -- 
  Discontinued operations......        --        (493)             --        --          -- 
                                 --------     -------        --------     ------    ------- 
    Net cash provided (used) by                                                             
      Investing Activities.....        (2)       (843)            (43)       --      (2,149)
                                 --------     -------        --------     ------    ------- 
Financing Activities:                                                                       
  Net (decrease) in cash                                                                    
    overdraft..................      (226)        (24)         (4,151)       --          -- 
  Net (decrease) in short-term                                                              
    debt.......................    (5,844)         --              --        --          -- 
  Proceeds from long-term                                                                   
    debt.......................        --          --              --        --          -- 
  Payments of long-term debt...    (6,813)       (111)           (415)       --          -- 
  Discontinued operations......        --          --              --        --          -- 
                                 --------     -------        --------     ------    ------- 
    Net cash provided (used) by                                                             
      financing activities.....   (12,883)       (135)         (4,566)       --          -- 
                                 --------     -------        --------     ------    ------- 
Effect of exchange rate changes                                                             
  on cash......................        --          --               9        --          54 
                                 --------     -------        --------     ------    ------- 
Net increase (decrease) in cash                                                             
  and cash equivalents.........      (414)         67           1,567        --        (433)
Cash and cash equivalents at                                                                
  beginning of period..........       457          52             600        --         618 
                                 --------     -------        --------     ------    ------- 
Cash and cash equivalents at                                                                
  end of period................  $     43     $   119        $  2,167     $  --     $   185 
                                 ========     =======        ========     ======    ======= 


                                      FOR THE YEAR ENDED JUNE 30, 2003                      
                                 -------------------------------------------                
                                     NON-                                                   
                                  GUARANTOR     CONSOLIDATION   CONSOLIDATED                
                                 SUBSIDIARIES    ADJUSTMENTS      BALANCE                   
                                 ------------   -------------   ------------                
                                               (IN THOUSANDS)                               
                                                                                            
Operating Activities:                                                                       
  Net income (loss)............    $ 18,997       $(10,723)       $(17,559)                 
  Adjustment for discontinued                                                               
    operations.................     (18,213)        14,759          15,260                  
                                   --------       --------        --------                  
  Income (loss) from continuing                                                             
    operations.................         784          4,036          (2,299)                 
  Adjustments to reconcile                                                                  
    income (loss) from                                                                      
    continuing operations to                                                                
    net cash provided (used) by                                                             
    operating activities:                                                                   
    Depreciation and                                                                        
      amortization.............       5,095                         12,524                  
    Deferred income taxes......       6,460                          6,460                  
    Net gain from sales of                                                                  
      assets...................          (9)                          (127)                 
    Effects of changes in                                                                   
      foreign currency.........        (479)                           390                  
    Other......................        (384)                           387                  
    Changes in operating assets                                                             
      and liabilities:                                                                      
      Accounts receivable......       2,097                          3,810                  
      Inventory................        (244)                        (1,598)                 
      Prepaid expenses and                                                                  
        other..................      (1,592)                        (3,122)                 
      Other assets.............        (592)                        (2,632)                 
      Intercompany.............      (4,165)        (4,036)             --                  
      Accounts payable.........       1,444                         20,503                  
      Accrued expenses and                                                                  
        other..................       2,253                           (355)                 
  Cash provided (used) by                                                                   
    discontinued operations....       2,644                            716                  
                                   --------       --------        --------                  
    Net cash provided (used) by                                                             
      operating activities.....      13,312             --          34,657                  
                                   --------       --------        --------                  
Investing Activities:                                                                       
  Capital expenditures.........      (3,562)                        (8,636)                 
  Proceeds from sale of                                                                     
    assets.....................          35                          2,565                  
  Other investing..............         737                            737                  
  Discontinued operations......       1,856                          1,363                  
                                   --------       --------        --------                  
    Net cash provided (used) by                                                             
      Investing Activities.....        (934)            --          (3,971)                 
                                   --------       --------        --------                  
Financing Activities:                                                                       
  Net (decrease) in cash                                                                    
    overdraft..................      (1,680)                        (6,081)                 
  Net (decrease) in short-term                                                              
    debt.......................        (816)                        (6,660)                 
  Proceeds from long-term                                                                   
    debt.......................       2,000                          2,000                  
  Payments of long-term debt...      (8,675)                       (16,014)                 
  Discontinued operations......         377                            377                  
                                   --------       --------        --------                  
    Net cash provided (used) by                                                             
      financing activities.....      (8,794)            --         (26,378)                 
                                   --------       --------        --------                  
Effect of exchange rate changes                                                             
  on cash......................         389                            452                  
                                   --------       --------        --------                  
Net increase (decrease) in cash                                                             
  and cash equivalents.........       3,973             --           4,760                  
Cash and cash equivalents at                                                                
  beginning of period..........       4,692                          6,419                  
                                   --------       --------        --------                  
Cash and cash equivalents at                                                                
  end of period................    $  8,665       $     --        $ 11,179                  
                                   ========       ========        ========                  

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                               FOR THE YEAR ENDED JUNE 30, 2002                
                               ----------------------------------------------------------------
                                                                  U.S.                         
                                               UNRESTRICTED    GUARANTOR     DUTCH     BELGIUM 
                               PARENT ISSUER   SUBSIDIARIES   SUBSIDIARIES   ISSUER   GUARANTOR
                               -------------   ------------   ------------   ------   ---------
                                                        (IN THOUSANDS)                         
                                                                                               
Net sales....................    $ 24,578        $21,451        $173,952     $  --     $ 4,196 
Net sales -- intercompany....       1,114          4,212             924        --      21,509 
Cost of goods sold...........      20,837         19,400         135,378        --      21,631 
                                 --------        -------        --------     ------    ------- 
  Gross profit...............       4,855          6,263          39,498        --       4,074 
Selling, general and                                                                           
  administrative expenses....      16,786          2,623          32,959        --       1,559 
                                 --------        -------        --------     ------    ------- 
  Operating income (loss)....     (11,931)         3,640           6,539        --       2,515 
Other:                                                                                         
  Interest expense...........      15,858            (29)           (172)       --         365 
  Interest (income)..........         (15)            --              --        --          -- 
  Other (income) expense,                                                                      
    net......................      (2,001)            --            (839)       --       2,294 
  Intercompany interest and                                                                    
    other....................     (28,534)         5,210          12,467        --       2,486 
  (Profit) loss relating to                                                                    
    subsidiaries.............      17,913             --              --        --          -- 
                                 --------        -------        --------     ------    ------- 
  Income (loss) from                                                                           
    continuing operations                                                                      
    before income taxes......     (15,152)        (1,541)         (4,917)       --      (2,630)
Provision (benefit) for                                                                        
  income taxes...............      10,059           (407)          4,636        --        (626)
                                 --------        -------        --------     ------    ------- 
  Income (Loss) from                                                                           
    continuing operations....     (25,211)        (1,134)         (9,553)       --      (2,004)
Discontinued Operations:                                                                       
  Profit (loss) relating to                                                                    
    discontinued                                                                               
    operations...............     (26,559)            --              --        --          -- 
  (Loss) from discontinued                                                                     
    operations (net of income                                                                  
    taxes)...................          --         (2,930)             --        --          -- 
                                 --------        -------        --------     ------    ------- 
    Net income (loss)........    $(51,770)       $(4,064)       $ (9,553)    $  --     $(2,004)
                                 ========        =======        ========     ======    ======= 


                                    FOR THE YEAR ENDED JUNE 30, 2002                           
                               -------------------------------------------                     
                                   NON-                                                        
                                GUARANTOR     CONSOLIDATION   CONSOLIDATED                     
                               SUBSIDIARIES    ADJUSTMENTS      BALANCE                        
                               ------------   -------------   ------------                     
                                             (IN THOUSANDS)                                    
                                                                                               
Net sales....................    $104,499       $     --        $328,676                       
Net sales -- intercompany....       9,607        (37,366)             --                       
Cost of goods sold...........      87,531        (37,366)        247,411                       
                                 --------       --------        --------                       
  Gross profit...............      26,575             --          81,265                       
Selling, general and                                                                           
  administrative expenses....      16,709                         70,636                       
                                 --------       --------        --------                       
  Operating income (loss)....       9,866             --          10,629                       
Other:                                                                                         
  Interest expense...........       2,048                         18,070                       
  Interest (income)..........        (331)                          (346)                      
  Other (income) expense,                                                                      
    net......................       3,895                          3,349                       
  Intercompany interest and                                                                    
    other....................       8,371                             --                       
  (Profit) loss relating to                                                                    
    subsidiaries.............          --        (17,913)             --                       
                                 --------       --------        --------                       
  Income (loss) from                                                                           
    continuing operations                                                                      
    before income taxes......      (4,117)        17,913         (10,444)                      
Provision (benefit) for                                                                        
  income taxes...............       1,105                         14,767                       
                                 --------       --------        --------                       
  Income (Loss) from                                                                           
    continuing operations....      (5,222)        17,913         (25,211)                      
Discontinued Operations:                                                                       
  Profit (loss) relating to                                                                    
    discontinued                                                                               
    operations...............          --         26,559              --                       
  (Loss) from discontinued                                                                     
    operations (net of income                                                                  
    taxes)...................     (23,629)                       (26,559)                      
                                 --------       --------        --------                       
    Net income (loss)........    $(28,851)      $ 44,472        $(51,770)                      
                                 ========       ========        ========                       

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PHIBRO ANIMAL HEALTH CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

CONSOLIDATING STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                     FOR THE YEAR ENDED JUNE 30, 2002              
                                        -----------------------------------------------------------
                                                                      U.S.                         
                                         PARENT    UNRESTRICTED    GUARANTOR     DUTCH     BELGIUM 
                                         ISSUER    SUBSIDIARIES   SUBSIDIARIES   ISSUER   GUARANTOR
                                        --------   ------------   ------------   ------   ---------
                                                              (IN THOUSANDS)                       
                                                                                                   
Operating Activities:                                                                              
  Net income (loss).................... $(51,770)    $(4,064)       $(9,553)     $  --    $ (2,004)
  Adjustment for discontinued                                                                      
    operations.........................   26,559       2,930             --         --          -- 
                                        --------     -------        -------      -----    -------- 
  Income (loss) from continuing                                                                    
    operations.........................  (25,211)     (1,134)        (9,553)        --      (2,004)
  Adjustments to reconcile income                                                                  
    (loss) from continuing operations                                                              
    to net cash provided (used) by                                                                 
    operating activities:                                                                          
    Depreciation and amortization......    1,049         966          3,434         --       2,252 
    Deferred income taxes..............    9,297        (466)         5,356         --          -- 
    Net gain from sales of assets......       --          --             --         --          -- 
    Change in redemption amount of                                                                 
      redeemable common stock..........     (378)         --             --         --          -- 
    Effects of changes in foreign                                                                  
      currency.........................       --          --           (100)        --       1,912 
    Other..............................      (43)         12            985         --          -- 
    Changes in operating assets and                                                                
      liabilities:                                                                                 
      Accounts receivable..............    1,299         278          1,932         --         886 
      Inventory........................      606       1,165         (2,915)        --     (10,325)
      Prepaid expenses and other.......      210        (157)        (1,550)        --         273 
      Other assets.....................   (1,335)          1          2,519         --          66 
      Intercompany.....................      473       4,753          2,164         --       7,562 
      Accounts payable.................     (719)       (844)         1,460         --       1,472 
      Accrued expenses and other.......     (119)       (225)        (3,248)        --       3,487 
  Cash provided (used) by discontinued                                                             
    operations.........................       --      (2,437)            --         --          -- 
                                        --------     -------        -------      -----    -------- 
    Net cash provided (used) by                                                                    
      operating activities.............  (14,871)      1,912            484         --       5,581 
                                        --------     -------        -------      -----    -------- 
Investing Activities:                                                                              
  Capital expenditures.................     (119)       (192)        (3,022)        --      (1,939)
  Acquisition of a business............       --          --             --         --      (4,421)
  Proceeds from property damage                                                                    
    claim..............................       --          --            411         --          -- 
  Proceeds from sale of assets.........       --          --             --         --          -- 
  Other investing......................      613          --             --         --          -- 
  Discontinued operations..............       --      (1,832)            --         --          -- 
                                        --------     -------        -------      -----    -------- 
    Net cash provided (used) by                                                                    
      investing activities.............      494      (2,024)        (2,611)        --      (6,360)
                                        --------     -------        -------      -----    -------- 
Financing Activities:                                                                              
  Net increase (decrease) in cash                                                                  
    overdraft..........................      563        (116)         1,447         --          -- 
  Net increase in short-term debt......   13,520          --             --         --          -- 
  Proceeds from long-term debt.........    2,000         322             --         --          -- 
  Payments of long-term debt...........   (2,541)        (98)          (396)        --          -- 
  Discontinued operations..............       --          --             --         --          -- 
                                        --------     -------        -------      -----    -------- 
    Net cash provided (used) by                                                                    
      financing activities.............   13,542         108          1,051         --          -- 
                                        --------     -------        -------      -----    -------- 
Effect of exchange rate changes on                                                                 
  cash.................................       --          --             --         --         128 
                                        --------     -------        -------      -----    -------- 
Net increase (decrease) in cash and                                                                
  cash equivalents.....................     (835)         (4)        (1,076)        --        (651)
Cash and cash equivalents at beginning                                                             
  of period............................    1,292          56          1,676         --       1,269 
                                        --------     -------        -------      -----    -------- 
Cash and cash equivalents at end of                                                                
  period............................... $    457     $    52        $   600      $  --    $    618 
                                        ========     =======        =======      =====    ======== 


                                             FOR THE YEAR ENDED JUNE 30, 2002                      
                                        -------------------------------------------                
                                            NON-                                                   
                                         GUARANTOR     CONSOLIDATION   CONSOLIDATED                
                                        SUBSIDIARIES    ADJUSTMENTS      BALANCE                   
                                        ------------   -------------   ------------                
                                                      (IN THOUSANDS)                               
                                                                                                   
Operating Activities:                                                                              
  Net income (loss)....................   $(28,851)      $ 44,472        $(51,770)                 
  Adjustment for discontinued                                                                      
    operations.........................     23,629        (26,559)         26,559                  
                                          --------       --------        --------                  
  Income (loss) from continuing                                                                    
    operations.........................     (5,222)        17,913         (25,211)                 
  Adjustments to reconcile income                                                                  
    (loss) from continuing operations                                                              
    to net cash provided (used) by                                                                 
    operating activities:                                                                          
    Depreciation and amortization......      4,654                         12,355                  
    Deferred income taxes..............     (2,949)                        11,238                  
    Net gain from sales of assets......         (5)                            (5)                 
    Change in redemption amount of                                                                 
      redeemable common stock..........         --                           (378)                 
    Effects of changes in foreign                                                                  
      currency.........................        308                          2,120                  
    Other..............................      1,462                          2,416                  
    Changes in operating assets and                                                                
      liabilities:                                                                                 
      Accounts receivable..............      1,651                          6,046                  
      Inventory........................     (2,522)                       (13,991)                 
      Prepaid expenses and other.......     (1,595)                        (2,819)                 
      Other assets.....................      1,416                          2,667                  
      Intercompany.....................      2,961        (17,913)             --                  
      Accounts payable.................     (7,975)                        (6,606)                 
      Accrued expenses and other.......      8,616                          8,511                  
  Cash provided (used) by discontinued                                                             
    operations.........................      1,349                         (1,088)                 
                                          --------       --------        --------                  
    Net cash provided (used) by                                                                    
      operating activities.............      2,149             --          (4,745)                 
                                          --------       --------        --------                  
Investing Activities:                                                                              
  Capital expenditures.................     (3,246)                        (8,518)                 
  Acquisition of a business............     (2,761)                        (7,182)                 
  Proceeds from property damage                                                                    
    claim..............................         --                            411                  
  Proceeds from sale of assets.........         19                             19                  
  Other investing......................        (33)                           580                  
  Discontinued operations..............       (839)                        (2,671)                 
                                          --------       --------        --------                  
    Net cash provided (used) by                                                                    
      investing activities.............     (6,860)            --         (17,361)                 
                                          --------       --------        --------                  
Financing Activities:                                                                              
  Net increase (decrease) in cash                                                                  
    overdraft..........................      1,544                          3,438                  
  Net increase in short-term debt......        717                         14,237                  
  Proceeds from long-term debt.........         --                          2,322                  
  Payments of long-term debt...........     (1,695)                        (4,730)                 
  Discontinued operations..............     (1,590)                        (1,590)                 
                                          --------       --------        --------                  
    Net cash provided (used) by                                                                    
      financing activities.............     (1,024)            --          13,677                  
                                          --------       --------        --------                  
Effect of exchange rate changes on                                                                 
  cash.................................       (125)                             3                  
                                          --------       --------        --------                  
Net increase (decrease) in cash and                                                                
  cash equivalents.....................     (5,860)            --          (8,426)                 
Cash and cash equivalents at beginning                                                             
  of period............................     10,552                         14,845                  
                                          --------       --------        --------                  
Cash and cash equivalents at end of                                                                
  period...............................   $  4,692       $     --        $  6,419                  
                                          ========       ========        ========                  

  F-44

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                              DECEMBER 31,   JUNE 30, 
                                                                  2004         2004   
                                                              ------------   -------- 
                                                                  (IN THOUSANDS)      
                                                                                      
                                       ASSETS                                         
Current Assets:                                                                       
  Cash and cash equivalents.................................    $ 10,170     $  5,568 
  Trade receivables, less allowance for doubtful accounts of                          
     $1,307 at December 31, 2004 and $1,358 at June 30,                               
     2004...................................................      56,875       57,658 
  Other receivables.........................................       4,470        2,766 
  Inventories...............................................      97,604       79,910 
  Prepaid expenses and other current assets.................       6,914        8,688 
                                                                --------     -------- 
     Total current assets...................................     176,033      154,590 
Property, plant and equipment, net..........................      61,111       58,786 
Intangibles.................................................      11,116       11,695 
Other assets................................................      16,790       16,298 
                                                                --------     -------- 
                                                                $265,050     $241,369 
                                                                ========     ======== 

                        LIABILITIES AND STOCKHOLDERS' DEFICIT                         
Current Liabilities:                                                                  
Cash overdraft..............................................    $  1,787     $    891 
Loans payable to banks......................................         297       10,996 
Current portion of long-term debt...........................       4,082        1,351 
Accounts payable............................................      46,368       46,972 
Accrued expenses and other current liabilities..............      47,809       40,010 
                                                                --------     -------- 
     Total current liabilities..............................     100,343      100,220 
Long-term debt..............................................     178,630      158,018 
Other liabilities...........................................      23,340       22,286 
                                                                --------     -------- 
     Total liabilities......................................     302,313      280,524 
                                                                --------     -------- 
Commitments and Contingencies                                                         
Redeemable securities:                                                                
     Series C preferred stock...............................      22,817       24,678 
                                                                --------     -------- 
Stockholders' Deficit:                                                                
  Series A preferred stock..................................         521          521 
  Common stock..............................................           2            2 
  Paid-in capital...........................................         860          860 
  Accumulated deficit.......................................     (62,844)     (57,964)
  Accumulated other comprehensive income (loss):                                      
     Gain on derivative instruments.........................         331            9 
     Cumulative currency translation adjustment.............       1,050       (7,261)
                                                                --------     -------- 
     Total stockholders' deficit............................     (60,080)     (63,833)
                                                                --------     -------- 
                                                                $265,050     $241,369 
                                                                ========     ======== 

See notes to unaudited condensed consolidated financial statements. 

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND 

COMPREHENSIVE INCOME (LOSS) (UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                       THREE MONTHS ENDED     SIX MONTHS ENDED   
                                                          DECEMBER 31,          DECEMBER 31,     
                                                       -------------------   ------------------- 
                                                         2004       2003       2004       2003   
                                                       --------   --------   --------   -------- 
                                                                    (IN THOUSANDS)               
                                                                                                 
Net Sales............................................  $93,060    $92,540    $181,335   $177,490 
Cost of goods sold (includes Belgium Plant                                                       
  Transactions costs of $9,536 for the three months                                              
  and six months ended December 31, 2004)............   79,191     69,991     144,844    133,781 
                                                       -------    -------    --------   -------- 
  Gross profit.......................................   13,869     22,549      36,491     43,709 
Selling, general and administrative expenses.........   17,759     16,824      34,353     32,609 
                                                       -------    -------    --------   -------- 
  Operating income (loss)............................   (3,890)     5,725       2,138     11,100 
Other:                                                                                           
  Interest expense...................................    5,389      4,549      10,635      8,482 
  Interest (income)..................................      (33)       168         (58)       (74)
  Other (income) expense, net........................     (791)       127        (767)      (458)
  Net (gain) on extinguishment of debt...............       --    (23,226)         --    (23,226)
                                                       -------    -------    --------   -------- 
  Income (loss) from continuing operations before                                                
     income taxes....................................   (8,455)    24,107      (7,672)    26,376 
Provision (benefit) for income taxes.................     (884)     2,880          40      3,663 
                                                       -------    -------    --------   -------- 
  Income (loss) from continuing operations...........   (7,571)    21,227      (7,712)    22,713 
DISCONTINUED OPERATIONS:                                                                         
  Gain (loss) from discontinued operations (net of                                               
     income taxes)...................................       --         59          --       (403)
  Gain on disposal of discontinued operations (net of                                            
     income taxes)...................................       --         --          --        231 
                                                       -------    -------    --------   -------- 
Net income (loss)....................................   (7,571)    21,286      (7,712)    22,541 
Other comprehensive income:                                                                      
  Change in derivative instruments, net of tax.......      247        102         322        419 
  Change in currency translation adjustment..........    5,304      3,031       8,311      2,172 
                                                       -------    -------    --------   -------- 
  Comprehensive income (loss)........................  $(2,020)   $24,419    $    921   $ 25,132 
                                                       =======    =======    ========   ======== 
  Net income (loss)..................................   (7,571)    21,286      (7,712)    22,541 
Excess of the reduction of redeemable preferred stock                                            
  over total assets divested and costs and                                                       
  liabilities incurred on the Prince Transactions....      973     20,138         973     20,138 
Dividends and equity value accreted on Series B and C                                            
  redeemable preferred stock.........................    2,541     (2,864)      1,859     (3,851)
                                                       -------    -------    --------   -------- 
  Net income (loss) available to common                                                          
     shareholders....................................  $(4,057)   $38,560    $ (4,880)  $ 38,828 
                                                       =======    =======    ========   ======== 

See notes to unaudited condensed consolidated financial statements. 

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                           FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2004                 
                           ------------------------------------------------------------------------------------------- 
                           PREFERRED        COMMON STOCK                                  ACCUMULATED OTHER            
                             STOCK     -----------------------   PAID-IN   ACCUMULATED      COMPREHENSIVE              
                           SERIES A     CLASS A      CLASS B     CAPITAL     DEFICIT        INCOME (LOSS)      TOTAL   
                           ---------   ----------   ----------   -------   ------------   -----------------   -------- 
                                                                 (IN THOUSANDS)                                        
                                                                                                                       
Balance, June 30, 2004...    $521          $1           $1        $860       $(57,964)         $(7,252)       $(63,833)
  Dividends on Series C                                                                                                
     redeemable preferred                                                                                              
     stock...............                                                        (668)                            (668)
  Equity value accreted                                                                                                
     on Series C                                                                                                       
     redeemable preferred                                                                                              
     stock...............                                                         (14)                             (14)
  Change in derivative                                                                                                 
     instruments, net of                                                                                               
     tax.................                                                                           75              75 
  Foreign currency                                                                                                     
     translation                                                                                                       
     adjustment..........                                                                        3,007           3,007 
  Net (loss).............                                                        (141)                            (141)
                             ----          --           --        ----       --------          -------        -------- 
Balance, September 30,                                                                                                 
  2004...................    $521          $1           $1        $860       $(58,787)         $(4,170)       $(61,574)
                             ====          ==           ==        ====       ========          =======        ======== 
  Excess of the reduction                                                                                              
     in redeemable                                                                                                     
     preferred stock over                                                                                              
     total assets                                                                                                      
     divested and costs                                                                                                
     and liabilities                                                                                                   
     incurred on the                                                                                                   
     Prince                                                                                                            
     Transactions........                                                         973                              973 
  Dividends on Series C                                                                                                
     redeemable preferred                                                                                              
     stock...............                                                        (667)                            (667)
  Equity value accreted                                                                                                
     on Series C                                                                                                       
     redeemable preferred                                                                                              
     stock...............                                                       3,208                            3,208 
  Change in derivative                                                                                                 
     instruments, net of                                                                                               
     tax.................                                                                          247             247 
  Foreign currency                                                                                                     
     translation                                                                                                       
     adjustment..........                                                                        5,304           5,304 
  Net (loss).............                                                      (7,571)                          (7,571)
                             ----          --           --        ----       --------          -------        -------- 
Balance, December 31,                                                                                                  
  2004...................    $521          $1           $1        $860       $(62,844)         $ 1,381        $(60,080)
                             ====          ==           ==        ====       ========          =======        ======== 

See notes to unaudited condensed consolidated financial statements. 

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 

                                                                [Download Table]

                                                              SIX MONTHS ENDED   
                                                                DECEMBER 31,     
                                                             ------------------- 
                                                              2004        2003   
                                                             -------     ------- 
                                                               (IN THOUSANDS)    
                                                                                 
Operating activities:                                                            
  Net income (loss)......................................... $(7,712)    $22,541 
  Adjustment for discontinued operations....................      --         172 
                                                             -------     ------- 
  Income (loss) from continuing operations..................  (7,712)     22,713 
  Adjustments to reconcile income (loss) from continuing                         
    operations to net cash used by operating activities:                         
    Depreciation and amortization (includes accelerated                          
     depreciation from the Belgium Plant Transactions of                         
     $533 for the six months ended December 31, 2004).......   7,308       6,544 
    Deferred income taxes...................................    (172)         93 
    Net gain on extinguishment of debt......................      --     (23,226)
    Effects of changes in foreign currency..................  (1,174)     (1,166)
    Other...................................................     366         589 
    Changes in operating assets and liabilities:                                 
      Accounts receivable...................................   1,518      (2,132)
      Inventories........................................... (11,641)     (1,499)
      Prepaid expenses and other current assets.............   1,456         705 
      Other assets..........................................     316         605 
      Accounts payable......................................  (1,600)     (6,749)
      Accrued expenses and other liabilities................    (913)      4,516 
      Accrued costs of non-completed transaction............  (1,893)         -- 
      Accrued costs of the Belgium Plant Transactions.......   9,003          -- 
Cash used by discontinued operations........................      --      (1,665)
                                                             -------     ------- 
  Net cash used by operating activities.....................  (5,138)       (672)
                                                             -------     ------- 
Investing activities:                                                            
  Capital expenditures......................................  (3,676)     (2,280)
  Proceeds from sale of assets..............................      40          23 
  Discontinued operations...................................      --      14,397 
                                                             -------     ------- 
    Net cash provided (used) by investing activities........  (3,636)     12,140 
                                                             -------     ------- 
Financing activities:                                                            
  Net increase in cash overdraft............................     896       2,204 
  Net decrease in short-term debt........................... (10,699)    (31,453)
  Proceeds from long-term debt..............................  26,100     107,500 
  Payments of long-term debt................................  (1,862)    (34,020)
  Payment of Pfizer obligations.............................      --     (28,300)
  Payments relating to the Prince Transactions and                               
    transaction costs.......................................      --     (19,979)
  Debt refinancing costs....................................  (1,550)    (11,496)
  Discontinued operations...................................      --       1,391 
                                                             -------     ------- 
    Net cash provided (used) by financing activities........  12,885     (14,153)
                                                             -------     ------- 
Effect of exchange rate changes on cash.....................     491         188 
                                                             -------     ------- 
    Net increase (decrease) in cash and cash equivalents....   4,602      (2,497)
Cash and cash equivalents at beginning of period............   5,568      11,179 
                                                             -------     ------- 
Cash and cash equivalents at end of period.................. $10,170     $ 8,682 
                                                             =======     ======= 

See notes to unaudited condensed consolidated financial statements. 

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)

1.  GENERAL                                                                     

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:                      

In the opinion of Phibro Animal Health Corporation (the "Company" or  
"PAHC"), the accompanying unaudited condensed consolidated financial statements 
contain all adjustments (consisting only of normal recurring adjustments)       
necessary to present fairly its financial position as of December 31, 2004 and  
its results of operations and cash flows for the three months and six months    
ended December 31, 2004 and 2003.                                               

  The condensed consolidated balance sheet as of June 30, 2004 was derived
from audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States. Additionally  
it should be noted 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 the    
disclosures presented are adequate to make the information contained herein not 
misleading, these financial statements should be read in conjunction with the   
Company's audited consolidated financial statements as found in the Company's   
annual report filed on Form 10-K for the year ended June 30, 2004.              

   The Company's Mineral Resource Technologies, Inc. ("MRT") and La Cornubia
S.A. (France) ("La Cornubia") businesses have been classified as discontinued   
operations as discussed in these notes to condensed consolidated financial      
statements. The Company's condensed consolidated financial statements have been 
reclassified to report separately the financial position, operating results and 
cash flows of the discontinued operations. These footnotes present information  
only for continuing operations, unless otherwise noted.                         

The results of operations for all interim periods presented may not be
indicative of results for the full year.                                        

NEW ACCOUNTING PRONOUNCEMENTS:                                              

   The Company will adopt the following new accounting pronouncements during
2005:                                                                           

          Statement of Financial Accounting Standards No. 151, "Inventory Costs,
    an amendment to Accounting Research Bulletin No. 43, Chapter 4" ("SFAS No.
151"). SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4,     
    "Inventory Pricing" to clarify the accounting for abnormal amounts of idle
    facility expense, freight, handling costs, and wasted material (spoilage).
  Paragraph 5 of ARB No. 43, Chapter 4, previously stated ". . .under some
 circumstances, items such as idle facility expense, excessive spoilage,
double freight, and rehandling costs may be so abnormal as to require 
     treatment as current period charges. . .". SFAS No. 151 requires that those
  items be recognized as current period charges regardless of whether they
 meet the criterion of "so abnormal". In addition, SFAS No. 151 requires
     that allocation of fixed production overheads to the costs of conversion be
    based on the normal capacity of the production facilities. SFAS No. 151 is
    effective for inventory costs incurred during fiscal years beginning after
June 30, 2005 and the provisions of this statement shall be applied   
prospectively. The Company is currently assessing the impact of this  
statement.                                                            

      Statement of Financial Accounting Standards No. 153, "Exchanges of
   Nonmonetary Assets, an amendment of APB Opinion No. 29" ("SFAS No. 153").
SFAS No. 153 amends APB Opinion No. 29 to eliminate the exception for 
   nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
  commercial substance. A nonmonetary exchange has commercial substance if
     the future cash flows of the entity are expected to change significantly as
   a result of the exchange. SFAS No. 153 is effective for nonmonetary asset
  exchanges occurring in fiscal periods beginning after December 2004. The
     provisions of this statement shall be applied prospectively. The Company is
currently assessing the impact of this statement.                     

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

     Statement of Financial Accounting Standards No. 123, "Share-Based
   Payment (revised 2004)" ("SFAS No. 123"). This Statement is a revision of
Statement of Financial Accounting Standards No. 123, "Accounting for  
Stock-Based Compensation" and supercedes Accounting Principles Board  
     Opinion No. 25, "Accounting for Stock Issued to Employees", and its related
implementation guidance. This Statement establishes standards for the 
accounting for transactions in which an entity exchanges its equity   
    instruments for goods or services. It also addresses transactions in which
 an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or may be  
     settled by the issuance of those equity instruments. This Statement focuses
primarily on accounting for transactions in which an entity obtains   
    employee services in share-based payment transactions. This Statement does
 not change the accounting guidance for share-based payment transactions
  with parties other than employees provided in SFAS No. 123 as originally
     issued, and it does not address the accounting for employee share ownership
 plans. This Statement applies to all awards granted after the effective
     date and to awards modified, repurchased, or cancelled after that date. The
cumulative effect of initially applying this Statement, if any, is    
    recognized as of the required effective date. SFAS No. 123, as revised, is
effective as of the beginning of the first interim or annual reporting
    period that begins after June 15, 2005. The Company is currently assessing
the impact of this statement.                                         

2.  RISKS, UNCERTAINTIES, AND LIQUIDITY                                         

     The Company's ability to fund its operating plan depends upon the continued
availability of borrowing under its domestic senior credit facility. The Company
believes that it will be able to comply with the terms of its covenants under   
the domestic senior credit facility based on its forecasted operating plan. In  
the event of adverse operating results and/or violation of covenants under this 
facility, there can be no assurance that the Company would be able to obtain    
waivers or amendments on favorable terms, if at all. The Company expects        
adequate liquidity throughout 2005, with periods of reduced availability around 
the dates of the semi-annual interest payments due June 1 and December 1 related
to its Senior Secured Notes and Senior Subordinated Notes. The Company is       
pursuing additional cost reduction activities, working capital improvement      
plans, and sales of non-strategic assets to ensure additional liquidity. The    
Company also has availability under foreign credit lines that likely would be   
available. There can be no assurance the Company will be successful in any of   
the above-noted actions.                                                        

The use of antibiotics in medicated feed additives is a subject of    
legislative and regulatory interest. The issue of potential for increased       
bacterial resistance to certain antibiotics used in certain food-producing      
animals is the subject of discussions on a worldwide basis and, in certain      
instances, has led to government restrictions on the use of antibiotics in      
food-producing animals. The sale of feed additives containing antibiotics is a  
material portion of the Company's business. Should regulatory or other          
developments result in further restrictions on the sale of such products, it    
could have a material adverse impact on the Company's financial position,       
results of operations and cash flows.                                           

The testing, manufacturing, and marketing of certain of the Company's 
products are subject to extensive regulation by numerous government authorities 
in the United States and other countries.                                       

  The Company has significant assets located outside of the United States,
and a significant portion of the Company's sales and earnings are attributable  
to operations conducted abroad.                                                 

 The Company has assets located in Israel and a portion of its sales and
earnings are attributable to operations conducted in Israel. The Company is     
affected by social, political and economic conditions affecting Israel, and any 
major hostilities involving Israel as well as the Middle East or curtailment of 
trade between Israel and its current trading partners, either as a result of    
hostilities or otherwise, could have a material adverse effect on the Company.  

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,     
generation, treatment, emission, release, discharge and disposal of certain     
materials and wastes, the remediation of contaminated soil and groundwater, the 
manufacture, sale and use of pesticides and the health and safety of employees. 
As such, the nature of the Company's current and former operations and those of 
its subsidiaries exposes the Company and its subsidiaries to the risk of claims 
with respect to such matters.                                                   

3.  REFINANCING                                                                 

ISSUANCE OF ADDITIONAL 13% SENIOR SECURED NOTES:                            

     On December 21, 2004, the Company completed a private placement pursuant to
which the Company and Philipp Brothers Netherlands III B.V., an indirect        
wholly-owned subsidiary of the Company (the "Dutch Issuer" and together with the
Company, the "Issuers") issued and sold 22,491 additional units consisting of   
$18,207 13% Senior Secured Notes due 2007 of the Company (the "U.S. Notes") and 
$4,284 13% Senior Secured Notes due 2007 of the Dutch Issuer (the "Dutch Notes" 
and together with the U.S. Notes, the "Additional Notes"), from which they      
received gross proceeds of $23,391. The proceeds were used to refinance         
indebtedness outstanding under the Company's domestic senior credit facility.   
The Company incurred financing costs of $2,275 in connection with the issuance  
of the Additional Notes. The Additional Notes were issued under the Indenture   
dated October 21, 2003, as amended and supplemented (the "Indenture") under     
which the Issuers previously issued 105,000 units consisting of $85,000         
aggregate principal amount of U.S. Notes and $20,000 aggregate principal amount 
of Dutch Notes.                                                                 

On January 14, 2005, the Company and its domestic subsidiaries filed a
registration statement with the Securities and Exchange Commission (the "SEC")  
on Form S-4 with respect to an exchange offer for all its senior secured notes, 
comprised of 105,000 units sold on October 21, 2003 and 22,491 additional units 
sold on December 21, 2004. On February 4, 2005, such registration statement was 
declared effective.                                                             

AMENDMENT TO THE DOMESTIC SENIOR CREDIT FACILITY:                           

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended its domestic senior credit facility to:   
(i) amend the EBITDA definition to exclude charges and expenses related to the  
sale of the Belgium Plant in an aggregate amount not to exceed $26,800 for      
purposes of calculating a certain financial covenant; (ii) amend the Indenture  
reserve definition to include scheduled payments of interest due on the         
Additional Notes; (iii) amend the maximum aggregate amount of borrowing         
available under the working capital facility to permit a temporary increase to  
$22,500 and for its reduction to $17,500 on such borrowings being refinanced by 
the proceeds of the Additional Notes; (iv) amend the Permitted Investments      
definition to include investments in connection with the sale of the Belgium    
Plant and transfer of certain equipment, together with other assets and rights  
related to the production of virginiamycin, to Philipp Brothers Brasil Holdings 
Ltda, ("PAH Brazil") or in connection with alternative production arrangements; 
and (v) provide for the issuance of the Additional Notes and the sale of the    
Belgium Plant and related transactions.                                         

4. BELGIUM PLANT TRANSACTIONS                                                   

     On December 16, 2004, Phibro Animal Health SA, ("PAH Belgium") entered into
an agreement with GlaxoSmithKline Biologicals ("GSK") to sell to GSK            
substantially all of PAH Belgium's facilities in Rixensart, Belgium (the        
"Belgium Plant"). Such sale, when completed (the "Belgium Plant Transactions"), 
will include the following elements (U.S. dollar amounts at the December 31,    
2004 exchange rate): (i) the transfer of substantially all of the land and      
buildings and certain equipment of PAH Belgium at the Belgium Plant, as well as 
the industrial activities and intellectual property relating to certain solvent 
technology of PAH                                                               

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

Belgium for a purchase price of EUR 6,200 ($8,394), payable at closing; (ii) the
transfer to GSK of a majority of the employees of the Belgium Plant and the     
corresponding responsibility for statutory severance obligations; (iii) GSK     
agreeing to be responsible cleaning-up, by demolition or otherwise, certain     
buildings not to be used by it, but for PAH Belgium to reimburse GSK up to a    
maximum of EUR 700 ($948) for such cleaning-up costs; (iv) in recognition of the
benefits to PAHC from the proposed transaction, PAH Belgium agreeing to pay to  
GSK EUR 1,500 ($2,031) within six months from the closing date, EUR 1,500       
($2,031) within eighteen months from the closing date, EUR 1,500 ($2,031) within
thirty months from the closing date, and EUR 500 ($677) within forty-two months 
from the closing date; (v) PAH Belgium retaining certain excess land (valued at 
approximately EUR 400 ($542)) and being able to sell such land for its own      
account; (vi) PAH Belgium being responsible for certain plant closure costs and 
legally required severance indemnities in connection with workforce reductions, 
estimated in total to be EUR 9,100 ($12,320), of which an amount estimated to be
approximately EUR 4,600 ($6,227) would be payable at or around the closing and  
an aggregate amount so estimated to be approximately EUR 4,500 ($6,092) would be
payable over periods up to thirteen years; and (vii) PAH Belgium retaining any  
or all equipment at the Belgium Plant, and being able to sell such equipment for
the account of PAH Belgium or transfer such equipment, together with other      
assets and rights related to the production of virginiamycin, to PAH Brazil     
which owns a facility in Guarulhos, Brazil or in connection with alternative    
production arrangements.                                                        

    The foregoing transactions and agreements are subject to a closing that is
expected to occur on November 30, 2005, but in no event earlier than July 1,    
2005 or later than June 30, 2006.                                               

    The Dutch Notes and related guarantees are collateralized by a mortgage on
the Belgium Plant which will be released in connection with the closing of the  
sale of the Belgium Plant to GSK.                                               

     As a result of the above agreement, the Company will depreciate the Belgium
plant to its estimated salvage value of EUR 2,470 ($3,344) as of the projected  
closing date of November 30, 2005. The Company recorded incremental depreciation
expense of EUR 394 ($533) in December 2004 and will record an additional EUR    
8,662 ($11,727) of incremental depreciation expense ratably through November    
2005. The Company recorded severance expense of EUR 6,650 ($9,003) in December  
2004 for the estimated minimum severance amounts indicated by law, contract,    
and/or past practice. The Company estimates it will record additional expense of
EUR 2,450 ($3,317) ratably through November 2005 for severance, retention       
agreements and other costs. The incremental depreciation expense of $533 and    
severance expense of $9,003 recorded in December 2004 are included in cost of   
goods sold on the Company's condensed consolidated statements of operations and 
comprehensive income (loss).                                                    

     The Company has determined that the carrying amount of the Belgium Plant at
December 31, 2004 is recoverable based on the estimated future cash flows       
arising from the use of the assets.                                             

In anticipation of transferring production of virginiamycin from the  
Belgium plant to an alternative production location, the Company has been       
increasing inventory levels of virginiamycin to ensure adequate supplies during 
the transfer period. At December 31, 2004, worldwide virginiamycin inventories  
were approximately $40,000 and are expected to continue to increase through     
November 2005, based on current production rates.                               

5.  HOLDING COMPANY AND HOLDCO NOTES                                            

During February 2005, PAHC Holdings Corporation ("PAHC Holdings") was 
formed to hold the capital stock of the Company, except for its Series C        
Preferred Stock. On February 10, 2005, PAHC Holdings issued $29,000 of its 15%  
Senior Secured Notes due 2010 (the "HoldCo Notes") in a private placement.      
Interest is payable at the option of PAHC Holdings in cash or pay-in-kind HoldCo
Notes. The Company is not obligated for the HoldCo Notes. The Company's ability 
to make payments to PAHC Holdings is subject                                    

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

to the terms of the Company's Senior Secured Notes, its Senior Subordinated     
Notes, and its domestic senior credit facility, and to applicable law.          

   The proceeds from the sale of the HoldCo Notes, upon release from escrow,
will be used, directly or indirectly, to redeem the Company's Series C Preferred
Stock either by PAHC Holdings (i) making a capital contribution to the Company  
to contemporaneously finance the redemption of the Company's Series C Preferred 
Stock, or (ii) purchasing a new series of the Company's preferred stock,        
referred to as Series D Preferred Stock, that may be issued by the Company to   
finance the redemption of the Company's Series C Preferred Stock. It is         
contemplated that such redemption will occur on or before February 28, 2005. On 
March 1, 2005, the applicable percentage for determining the equity value       
component of the redemption price increases, as currently provided in the       
Company's certificate of incorporation, from 18% to 22%. If on March 1, 2005,   
the Company has not redeemed its Series C Preferred Stock from escrow, PAHC     
Holdings will be required to redeem the HoldCo Notes, primarily with the        
proceeds of the HoldCo Notes placed in escrow.                                  

 PAHC Holdings was formed by the holders of all of the Company's capital
stock, other than the holders of Series C Preferred Stock. In particular, Jack  
Bendheim, Marvin Sussman and trusts for the benefit of Mr. Bendheim and his     
family exchanged all of their shares of Series A Preferred Stock and Class B    
Common Stock and Mr. Bendheim exchanged fifty percent (50%) of his shares of    
Class A Common Stock, for the same number and class of shares of PAHC Holdings, 
having the same designations, relative rights, privileges and limitations as the
Company's shares of such class (except to the extent that PAHC Holdings is a    
Delaware corporation and the Company is a New York corporation).                

 The HoldCo Notes are to be secured by all of PAHC Holdings' assets (now
consisting solely of the Company's capital stock and, until disbursed, the      
proceeds of the HoldCo Notes in escrow). Currently, such pledge covers all of   
the Company's Series A Preferred Stock and Class B Common Stock, the Company's  
non-voting classes of stock. In connection with the release of the proceeds of  
the HoldCo Notes from escrow and following the redemption of the Company's      
Series C Preferred Stock, Mr. Bendheim will contribute to PAHC Holdings the     
balance of the Company's outstanding Class A Common Stock, and all of the       
Company's outstanding Class A Common Stock, the Company's voting stock, will be 
pledged as security for the HoldCo Notes.                                       

6.  PRINCE TRANSACTIONS                                                         

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

   The divestiture of PMC has not been reflected as a discontinued operation
due to the existence of the Backstop Indemnification Amount and continuing      
supply and service agreements.                                                  

     On December 29, 2004, the Company and the Buyer reached agreement regarding
the post-closing working capital adjustment, which resulted in a final $227     
payment to the Company from the Buyer. The Company reassessed the accruals      
relating to the Prince Transactions and adjusted the accruals accordingly. The  
adjustments resulted in a net gain of $973 which was recorded as a decrease to  
accumulated deficit on the Company's condensed consolidated balance sheet as of 
December 31, 2004.                                                              

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

    PMC is included in the Company's Industrial Chemicals segment. The results
of operations of PMC were:                                                      

                                                        [Enlarge/Download Table]

                                                    THREE MONTHS ENDED  SIX MONTHS ENDED 
                                                    DECEMBER 31, 2003   DECEMBER 31, 2003
                                                    ------------------  -----------------
                                                                                         
Net sales..........................................       $5,435             $11,118     
Operating income...................................        1,065               2,278     
Depreciation and amortization......................          244                 487     

7. INVENTORIES                                                                  

   Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) and average methods. Obsolete  
and unsaleable inventories are reflected at estimated net realizable value.     
Inventory costs include materials, direct labor and manufacturing overhead.     
Inventories are comprised of:                                                   

                                                        [Enlarge/Download Table]

                                                                       AS OF              
                                                         ---------------------------------
                                                         DECEMBER 31, 2004   JUNE 30, 2004
                                                         -----------------   -------------
                                                                                          
Raw materials...........................................      $21,349           $16,313   
Work-in-process.........................................        1,782             1,764   
Finished goods..........................................       74,473            61,833   
                                                              -------           -------   
Total inventory.........................................      $97,604           $79,910   
                                                              =======           =======   

8. INTANGIBLES                                                                  

    Product intangible cost arising from the acquisition of the medicated feed
additive business of Pfizer, Inc. and the acquisition of the rights to sell     
amprolium was $15,033 and $14,925 at December 31, 2004 and June 30, 2004,       
respectively, with related accumulated amortization of $3,917 and $3,230 at     
December 31, 2004 and June 30, 2004, respectively. Amortization expense was $375
and $304 for the three months ended December 31, 2004 and 2003, respectively,   
and $746 and $608 for the six months ended December 31, 2004 and 2003,          
respectively.                                                                   

9.  DISCONTINUED OPERATIONS                                                     

     The Company divested MRT and shutdown La Cornubia during fiscal 2004. These
businesses have been classified as discontinued operations.                     

Operating results and gain on sale of MRT were:                       

                                                                [Download Table]

                                                               SIX MONTHS ENDED 
                                                               DECEMBER 31, 2003
                                                               -----------------
                                                                                
OPERATING RESULTS:                                                              
Net sales...................................................       $  3,327     
Cost of goods sold..........................................          3,135     
Selling, general and administrative expenses................            316     
                                                                   --------     
Loss before income taxes....................................           (124)    
Provision for income taxes..................................             --     
                                                                   --------     
Loss from operations........................................       $   (124)    
                                                                   ========     

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                                                                [Download Table]

                                                               SIX MONTHS ENDED 
                                                               DECEMBER 31, 2003
                                                               -----------------
                                                                                
GAIN ON SALE:                                                                   
Current assets..............................................       $ (5,813)    
Property, plant & equipment -- net and other assets.........        (10,703)    
Current liabilities.........................................          2,911     
Net proceeds of sale........................................         13,836     
                                                                   --------     
Gain on sale................................................       $    231     
                                                                   ========     

Operating results of La Cornubia were:                                

                                                        [Enlarge/Download Table]

                                                    THREE MONTHS ENDED  SIX MONTHS ENDED 
                                                    DECEMBER 31, 2003   DECEMBER 31, 2003
                                                    ------------------  -----------------
                                                                                         
OPERATING RESULTS:                                                                       
Net sales..........................................       $3,503             $5,723      
Cost of goods sold.................................        3,199              5,415      
Selling, general and administrative expenses.......          412                788      
Other (income).....................................         (193)              (243)     
Interest expense...................................           26                 42      
                                                          ------             ------      
Income (loss) before income taxes..................           59               (279)     
Provision for income taxes.........................           --                 --      
Income (loss) from operations                                                            
                                                          ------             ------      
                                                          $   59             $ (279)     
                                                          ======             ======      
Depreciation and amortization......................       $  101             $  201      
                                                          ======             ======      

10. DEBT                                                                        

LOANS PAYABLE TO BANKS                                                      

At December 31, 2004, loans payable to banks included $297 under the  
domestic senior credit facility with Wells Fargo Foothill, Inc. The weighted    
average interest rate at December 31, 2004 was 5.75%. At December 31, 2004, the 
Company had $17,203 of borrowings available under the working capital facility  
that is provided under the domestic senior credit facility.                     

  As of September 24, 2004, the Company amended its domestic senior credit
facility to: (i) increase the aggregate amount of borrowings available under    
such working capital and letter of credit facilities from $27,500 to $32,500;   
the amount of aggregate borrowings available under the working capital facility 
remained unchanged at $17,500; (ii) amend the EBITDA definition to exclude      
charges and expenses related to unsuccessful acquisitions and related financings
in an aggregate amount not to exceed $5,300 for the period beginning January 1, 
2004 and ending June 30, 2004; (iii) amend the definition of Additional         
Indebtedness to exclude advances under the working capital facility; (iv) amend 
the definition of Permitted Investments to allow other investments made during  
the period from January 1, 2004 through June 30, 2004 in an aggregate amount not
to exceed $336; and (v) establish EBITDA covenant levels for the periods after  
June 30, 2004. The amendment was effective June 30, 2004 for items (i), (ii) and
(iii); effective January 1, 2004 for item (iv); and effective September 24, 2004
for item (v).                                                                   

     On December 21, 2004, concurrent with the completion of the offering of the
Additional Notes, the Company amended its domestic senior credit facility to:   
(i) amend the EBITDA definition to exclude charges                              

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and expenses related to the sale of the Belgium Plant in an aggregate amount not
to exceed $26,800 for purposes of calculating a certain financial covenant; (ii)
amend the Indenture reserve definition to include scheduled payments of interest
due on the Additional Notes; (iii) amend the maximum aggregate amount of        
borrowing available under the working capital facility to permit a temporary    
increase to $22,500 and for its reduction to $17,500 on such borrowings being   
refinanced by the proceeds of the Additional Notes; (iv) amend the Permitted    
Investments definition to include investments in connection with the sale of the
Belgium Plant and transfer of certain equipment, together with other assets and 
rights related to the production of virginiamycin, to Philipp Brothers Brasil   
Holdings Ltda, ("PAH Brazil") or in connection with alternative production      
arrangements; and (v) provide for the issuance of the Additional Notes and the  
sale of the Belgium Plant and related transactions.                             

   As of December 31, 2004, the Company was in compliance with the financial
covenants of its domestic senior credit facility. The domestic senior credit    
facility requires, among other things, the maintenance of certain levels of     
trailing consolidated and domestic EBITDA (earnings before interest, taxes,     
depreciation and amortization) calculated on a monthly basis, and an            
acceleration clause should an event of default (as defined in the agreement)    
occur. In addition, there are certain restrictions on additional borrowings,    
additional liens on the Company's assets, guarantees, dividend payments,        
redemption or purchase of the Company's stock, sale of subsidiaries' stock,     
disposition of assets, investments, and mergers and acquisitions.               

   The domestic senior credit facility contains a lock-box requirement and a
material adverse change clause should an event of default (as defined in the    
agreement) occur. Accordingly, the amounts outstanding have been classified as  
short-term and are included in loans payable to banks in the consolidated       
balance sheet.                                                                  

LONG-TERM DEBT                                                              

                                                                [Download Table]

                                                                      AS OF         
                                                             -----------------------
                                                             DECEMBER 31,   JUNE 30,
                                                                 2004         2004  
                                                             ------------   --------
                                                                                    
Senior secured notes due December 1, 2007...................   $127,491     $105,000
Senior subordinated notes due June 1, 2008..................     48,029       48,029
Foreign bank loans..........................................      7,192        6,237
Capitalized lease obligations and other.....................         --          103
                                                               --------     --------
                                                                182,712      159,369
Less: current maturities....................................      4,082        1,351
                                                               --------     --------
                                                               $178,630     $158,018
                                                               ========     ========

    The Company's foreign subsidiaries have aggregate credit lines of $11,075.
At December 31, 2004, the Company had $3,883 of borrowings available under these
credit lines.                                                                   

11.  EMPLOYEE BENEFIT PLANS                                                     

    The Company and its domestic subsidiaries maintain noncontributory defined
benefit pension plans for all eligible domestic nonunion employees who meet     
certain requirements of age, length of service and hours worked per year. The   
Company's Belgium subsidiary maintains a defined contribution and defined       
benefit plan for eligible employees.                                            

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

Components of net periodic pension expense were:                      

                                                                [Download Table]

                                                      THREE MONTHS     SIX MONTHS   
                                                          ENDED           ENDED     
                                                      DECEMBER 31,    DECEMBER 31,  
                                                      -------------   ------------- 
DOMESTIC PENSION EXPENSE                              2004    2003    2004    2003  
------------------------                              -----   -----   -----   ----- 
                                                                                    
Service cost -- benefits earned during the year...... $ 337   $ 321   $ 624   $ 683 
Interest cost on benefit obligation..................   315     226     479     456 
Expected return on plan assets.......................  (308)   (210)   (458)   (420)
Amortization of initial unrecognized net transition                                 
  (asset)............................................    (2)     (1)     (2)     (2)
Amortization of prior service costs..................   (55)    (41)    (72)    (82)
Amortization of net actuarial loss (gain)............    (2)      5      --      21 
Curtailment Benefit..................................    --     (64)     --     (64)
                                                      -----   -----   -----   ----- 
NET PERIODIC PENSION COST -- DOMESTIC................ $ 285   $ 236   $ 571   $ 592 
                                                      =====   =====   =====   ===== 

                                                                [Download Table]

                                                      THREE MONTHS     SIX MONTHS   
                                                          ENDED           ENDED     
                                                      DECEMBER 31,    DECEMBER 31,  
                                                      -------------   ------------- 
INTERNATIONAL PENSION EXPENSE                         2004    2003    2004    2003  
-----------------------------                         -----   -----   -----   ----- 
                                                                                    
Service cost -- benefits earned during the year...... $ 114   $ 117   $ 236   $ 227 
Interest cost on benefit obligation..................   111      94     209     182 
Expected return on plan assets.......................  (100)    (75)   (179)   (146)
Amortization of net actuarial loss (gain)............    (5)      5       1      11 
                                                      -----   -----   -----   ----- 
NET PERIODIC PENSION COST -- INTERNATIONAL........... $ 120   $ 141   $ 267   $ 274 
                                                      =====   =====   =====   ===== 

12.  CONTINGENCIES                                                              

LITIGATION:                                                                 

     On or about April 17, 1997, CP Chemicals, Inc. (a subsidiary, "CP") and the
Company were served with a complaint filed by Chevron U.S.A. Inc. ("Chevron") in
the United States District Court for the District of New Jersey, alleging that  
the operations of CP at its Sewaren plant affected adjoining property owned by  
Chevron and alleging that the Company, as the parent of CP, is also responsible 
to Chevron. In July 2002, a phased settlement agreement was reached and a       
Consent Order entered by the Court. That settlement is in the process of being  
implemented. The Company's and CP's portion of the settlement for past costs and
expenses through the entry of the Consent Order was $495 and was included in    
selling, general and administrative expenses in fiscal 2002 and was paid in     
fiscal 2003. The Consent Order then provides for a period of due diligence      
investigation of the property owned by Chevron. The investigation has been      
conducted and the results are under review. The investigation costs are being   
split with one other defendant, Vulcan Materials Company. Upon completion of the
review of the results of the investigation, a decision will be made whether to  
opt out of the settlement or proceed. If no party opts out of the settlement,   
the Company and CP will take title to the adjoining Chevron property, probably  
through the use of a three-member New Jersey limited liability company. In      
preparation to move forward, a limited liability company has been formed, with  
Vulcan Materials Company as the third member. The Company also has commenced    
negotiations with Chevron regarding its allocation of responsibility and        
associated costs under the Consent Order. While the costs cannot be estimated   
with any degree of certainty at this time, the Company believes that insurance  
recoveries will be available to offset some of those costs.                     

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 The Company's Phibro-Tech subsidiary was named in 1993 as a potentially
responsible party ("PRP") in connection with an action commenced under the      
Federal Comprehensive Environmental Response, Compensation, and Liability Act   
("CERCLA") by the United States Environmental Protection Agency ("the EPA"),    
involving a former third-party fertilizer manufacturing site in Jericho, South  
Carolina. An agreement has been reached under which such subsidiary agreed to   
contribute up to $900 of which $635 has been paid as of December 31, 2004. Some 
recovery from insurance and other sources is expected but has not been recorded.
The Company also has accrued its best estimate of any future costs.             

    Phibro-Tech, Inc. has resolved certain alleged technical permit violations
with the California Department of Toxic Substances Control ("DTSC") and has     
reached an agreement to pay $425 over a six year period ending October 2008. The
annual payments required under this agreement are not expected to have any      
material adverse impact on the Company.                                         

    Phibro-Tech, Inc. and the DTSC are currently negotiating the settlement of
certain alleged technical permit violations from 2003. Phibro-Tech, Inc.        
believes most, if not all, of the alleged violations will be withdrawn. In the  
event penalties are assessed, they are not expected to exceed $50.              

    In February 2000, the EPA notified numerous parties of potential liability
for waste disposal at a licensed Casmalia, California disposal site, including a
business, assets of which were originally acquired by a subsidiary in 1984. A   
settlement has been reached in this matter and the Company has paid $171 in full
settlement.                                                                     

On or about April 5, 2002, the Company was served, as a potentially   
responsible party, with an information request from the EPA relating to a       
third-party superfund site in Rhode Island. The Company has investigated the    
matter, which relates to events in the 1950's and 1960's, and management does   
not believe that the Company has any liability in this matter.                  

On or about August 13, 2004 the Company was served with a Request for 
Information pursuant to Section 104 of CERCLA and Section 3007 of RCRA relating 
to possible discharges into Turkey Creek in Sumter, South Carolina. The Company 
is preparing its response to the Request for Information and believes that,     
because its Sumter, South Carolina facility is distant from Turkey Creek and    
does not discharge into Turkey Creek, the likelihood of liability associated    
with this matter is remote.                                                     

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

ENVIRONMENTAL REMEDIATION:                                                  

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and regulations, including those governing the use, storage, handling,     
generation, treatment, emission, release, discharge and disposal of certain     
materials and wastes, the remediation of contaminated soil and groundwater, the 
manufacture, sale and use of pesticides and the health and safety of employees. 
As such, the nature of the Company's current and former operations and those of 
its subsidiaries exposes the Company and its subsidiaries to the risk of claims 
with respect to such matters. Under certain circumstances, the Company or any of
its subsidiaries might be required to curtail operations until a particular     
problem is remedied. Known costs and expenses under environmental laws          
incidental to ongoing operations are generally included within operating        
results. Potential costs and expenses may also be incurred in connection with   
the repair or upgrade of facilities to meet existing or new requirements under  
environmental laws or to investigate or remediate potential or actual           
contamination and from time to time the Company establishes reserves for such   
contemplated investigation and remediation                                      

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costs. In many instances, the ultimate costs under environmental laws and the   
time period during which such costs are likely to be incurred are difficult to  
predict.                                                                        

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

The nature of the Company's and its subsidiaries' current and former  
operations exposes the Company and its subsidiaries to the risk of claims with  
respect to environmental matters and the Company cannot assure it will not incur
material costs and liabilities in connection with such claims. Based upon its   
experience to date, the Company believes that the future cost of compliance with
existing environmental laws, and liability for known environmental claims       
pursuant to such environmental laws, will not have a material adverse effect on 
the Company's financial position.                                               

Based upon information available, the Company estimates the cost of   
litigation proceedings described above and the cost of further investigation and
remediation of identified soil and groundwater problems at operating sites,     
closed sites and third-party sites, and closure costs for closed sites to be    
approximately $2,777, which is included in current and long-term liabilities in 
the December 31, 2004 condensed consolidated balance sheet (approximately $2,933
at June 30, 2004).                                                              

13.  GUARANTEES                                                                 

As part of the Prince Transactions (as discussed in these notes to    
condensed consolidated financial statements), as is normal for such             
transactions, the Company has agreed to indemnify the Palladium Investors for   
losses arising out of breach of representations, warranties and covenants. The  
Company's maximum liability under such indemnification is limited to $15,000.   

   The Company agreed to indemnify the Palladium Investors for a portion, at
the rate of $0.65 for every dollar, of the amount they receive in respect of the
disposition of the Buyer for less than $21,000, up to a maximum payment by the  
Company of $4,000 (the "Backstop Indemnification Amount"). The Backstop         
Indemnification Amount would be payable on the earlier to occur of July 1, 2008 
or six months after the redemption date of all of the Company's Senior Secured  
Notes due 2007 if such a disposition closes prior to such redemption and six    
months after the closing of any such disposition if the disposition closes after
any such redemption. The Company's obligations with respect to the Backstop     
Indemnification Amount will cease if the Palladium Investors do not close the   
disposition of the Buyer by January 1, 2009. The maximum potential Backstop     
Indemnification Amount is included in other liabilities on the Company's        
condensed consolidated balance sheet.                                           

   The Company established a $1,000 letter of credit escrow for two years to
collateralize certain indemnification obligations relating to the Prince        
Transactions.                                                                   

14.  BUSINESS SEGMENTS                                                          

The Company's reportable segments are Animal Health and Nutrition,    
Industrial Chemicals, Distribution and All Other. Reportable segments have been 
determined primarily on the basis of the nature of products and services and    
certain similar operating units have been aggregated. The Company's Animal      
Health and Nutrition segment manufactures and markets more than 500 formulations
and concentrations of medicated feed additives and nutritional feed additives   
including antibiotics, antibacterials, anticoccidials, anthelmintics, trace     
minerals, vitamins, vitamin premixes and other animal health and nutrition      
products. The Industrial Chemicals segment manufactures and markets a number of 
chemicals for use in the pressure-treated wood, chemical catalyst,              
semiconductor, automotive, and aerospace industries. The Distribution           

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segment markets and distributes a variety of industrial, specialty and fine     
organic chemicals and intermediates produced primarily by third parties. The All
Other segment manufactures and markets a variety of specialty custom chemicals  
and copper-based fungicides. Intersegment sales and transfers were not          
significant. The following segment data includes information only for continuing
operations.                                                                     

                                                        [Enlarge/Download Table]

                                         ANIMAL                                                         
                                        HEALTH &   INDUSTRIAL                 ALL    CORPORATE          
THREE MONTHS ENDED DECEMBER 31, 2004    NUTRITION  CHEMICALS   DISTRIBUTION  OTHER    & OTHER    TOTAL  
------------------------------------    ---------  ----------  ------------  ------  ---------  ------- 
                                                                                                        
Net sales..............................  $70,708     $7,686       $8,104     $6,562   $    --   $93,060 
Operating income (loss)................   (1,520)       655          796        455    (4,276)   (3,890)
Depreciation and amortization..........    2,705        413            6        104       725     3,953 

     The Animal Health and Nutrition segment includes Belgium Plant Transactions
costs of $9,003 of severance expense and $533 of depreciation expense.          

                                                        [Enlarge/Download Table]

                                         ANIMAL                                                        
                                        HEALTH &   INDUSTRIAL                 ALL    CORPORATE         
THREE MONTHS ENDED DECEMBER 31, 2003    NUTRITION  CHEMICALS   DISTRIBUTION  OTHER    & OTHER    TOTAL 
------------------------------------    ---------  ----------  ------------  ------  ---------  -------
                                                                                                       
Net sales..............................  $68,687    $11,679       $7,656     $4,518   $    --   $92,540
Operating income (loss)................    7,655        778          692        657    (4,057)    5,725
Depreciation and amortization..........    2,059        639            4         98       576     3,376

                                                        [Enlarge/Download Table]

                                         ANIMAL                                                            
                                        HEALTH &   INDUSTRIAL                           CORPORATE          
SIX MONTHS ENDED DECEMBER 31, 2004      NUTRITION  CHEMICALS   DISTRIBUTION  ALL OTHER   & OTHER    TOTAL  
----------------------------------      ---------  ----------  ------------  ---------  ---------  --------
                                                                                                           
Net sales.............................. $136,514    $16,079      $15,765      $12,977    $    --   $181,335
Operating income/(loss)................    6,295      1,428        1,660        1,160     (8,405)     2,138
Depreciation and amortization..........    4,900        816            8          204      1,380      7,308

     The Animal Health and Nutrition segment includes Belgium Plant Transactions
costs of $9,003 of severance expense and $533 of depreciation expense.          

                                                        [Enlarge/Download Table]

                                         ANIMAL                                                         
                                        HEALTH &   INDUSTRIAL                 ALL    CORPORATE          
SIX MONTHS ENDED DECEMBER 31, 2003      NUTRITION  CHEMICALS   DISTRIBUTION  OTHER    & OTHER    TOTAL  
----------------------------------      ---------  ----------  ------------  ------  ---------  --------
                                                                                                        
Net sales.............................. $128,528    $23,661      $15,595     $9,706       $--   $177,490
Operating income/(loss)................   14,555      1,600        1,533      1,326    (7,914)    11,100
Depreciation and amortization..........    4,088      1,288            7        213       948      6,544

                                                        [Enlarge/Download Table]

                                               ANIMAL                                                         
                                              HEALTH &   INDUSTRIAL                 ALL    CORPORATE          
IDENTIFIABLE ASSETS OF CONTINUING OPERATIONS  NUTRITION  CHEMICALS   DISTRIBUTION  OTHER    & OTHER    TOTAL  
--------------------------------------------  ---------  ----------  ------------  ------  ---------  --------
                                                                                                              
At December 31, 2004.....................     $209,126    $26,123       $7,775     $5,946   $16,080   $265,050
At June 30, 2004.........................      185,601     26,146        7,715      5,696    16,211    241,369

15.  CONSOLIDATING FINANCIAL STATEMENTS                                         

   The units of Senior Secured Notes due 2007, consisting of US Senior Notes
issued by the Company (the "Parent Issuer") and Dutch Senior Notes issued by    
Philipp Brothers Netherlands III B.V. (the "Dutch Issuer"), are guaranteed by   
certain subsidiaries. The Company and its U.S. subsidiaries ("U.S. Guarantor    
Subsidiaries"), excluding PMC, Prince MFG, LLC and MRT (until divested) (the    
"Unrestricted Subsidiaries", as defined in the indenture), fully and            
unconditionally guarantee all of the Senior Secured Notes on a joint and several
basis. In addition, the Dutch Issuer's subsidiaries, presently consisting of    
Phibro Animal Health SA (the "Belgium Guarantor"), fully and unconditionally    
guarantee the Dutch Senior Notes. The                                           

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

Dutch issuer and the Belgium Guarantor do not guarantee the US Senior Notes.    
Other foreign subsidiaries ("Non-Guarantor Subsidiaries") do not presently      
guarantee the Senior Secured Notes. The U.S. Guarantor Subsidiaries include all 
domestic subsidiaries of the Company other than the Unrestricted Subsidiaries   
and include: CP Chemicals, Inc.; Phibro-Tech, Inc.; Prince Agriproducts, Inc.;  
Phibrochem, Inc.; Phibro Chemicals, Inc.; Western Magnesium Corp.; Phibro Animal
Health Holdings, Inc.; and Phibro Animal Health U.S., Inc.                      

  The Senior Subordinated Notes due 2008, issued by the Parent Issuer, are
guaranteed by certain subsidiaries. The Company's U.S. subsidiaries, including  
the U.S. Guarantor Subsidiaries and the Unrestricted Subsidiaries, fully and    
unconditionally guarantee the Senior Subordinated Notes on a joint and several  
basis. The Dutch Issuer, Belgium Guarantor and Non-Guarantor Subsidiaries do not
presently guarantee the Senior Subordinated Notes. The U.S. Guarantor           
Subsidiaries and Unrestricted Subsidiaries include all domestic subsidiaries of 
the Company including: CP Chemicals, Inc.; Phibro-Tech, Inc.; Prince            
Agriproducts, Inc.; PMC; Prince MFG, LLC; MRT (until divested); Phibrochem,     
Inc.; Phibro Chemicals, Inc.; Western Magnesium Corp.; Phibro Animal Health     
Holdings, Inc.; and Phibro Animal Health U.S., Inc.                             

The following consolidating financial data summarizes the assets,     
liabilities and results of operations and cash flows of the Parent Issuer,      
Unrestricted Subsidiaries, U.S. Guarantor Subsidiaries, Dutch Issuer, Belgium   
Guarantor and Non-Guarantor Subsidiaries. The Unrestricted Subsidiaries, U.S.   
Guarantor Subsidiaries, Dutch Issuer, Belgium Guarantor and Non-Guarantor       
Subsidiaries are directly or indirectly wholly owned as to voting stock by the  
Company.                                                                        

  Investments in subsidiaries are accounted for by the Parent Issuer 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.                     

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONDENSED CONSOLIDATING BALANCE SHEET 

                                                        [Enlarge/Download Table]

                                                       AS OF DECEMBER 31, 2004                            
                            ------------------------------------------------------------------------------
                             PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM    NON-GUARANTOR
                             ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR   SUBSIDIARIES 
                            --------   ------------   --------------   -------   ---------   -------------
                                                            (IN THOUSANDS)                                
                                                                                                          
                                                  ASSETS                                                  
Current Assets:                                                                                           
  Cash and cash                                                                                           
    equivalents...........  $     13     $     --        $    968      $     2    $ 5,369      $  3,818   
  Trade receivables.......     2,821           --          28,004           --      2,170        23,880   
  Other receivables.......       693           --           2,066           --        766           945   
  Inventory...............     2,867           --          35,276           --     34,888        24,573   
  Prepaid expenses and                                                                                    
    other.................     1,360           --              64           --      1,516         3,974   
                            --------     --------        --------      -------    -------      --------   
    Total current                                                                                         
      assets..............     7,754           --          66,378            2     44,709        57,190   
                            --------     --------        --------      -------    -------      --------   
Property, plant &                                                                                         
  equipment, net..........       743           --          13,821           --     17,743        28,804   
Intangibles...............        --           --           4,039           --      1,621         5,456   
Investment in                                                                                             
  subsidiaries............   108,057           --              --       (3,728)        --            --   
Intercompany..............     9,366           --          68,136       26,903     (5,194)      (11,407)  
Other assets..............    15,191           --           1,142           --         --           457   
                            --------     --------        --------      -------    -------      --------   
                            $141,111     $     --        $153,516      $23,177    $58,879      $ 80,500   
                            ========     ========        ========      =======    =======      ========   

                              LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                              
Current Liabilities:                                                                                      
  Cash overdraft..........  $     --     $     --        $  1,787      $    --    $    --      $     --   
  Loan payable to banks...       297           --              --           --         --            --   
  Current portion of long-                                                                                
    term debt.............        --           --              --           --         --         4,082   
  Accounts payable........     4,011           --          28,077           --      2,561        11,719   
  Accrued expenses and                                                                                    
    other.................     9,397           --           9,071          217     21,734         7,390   
                            --------     --------        --------      -------    -------      --------   
    Total current                                                                                         
      liabilities.........    13,705           --          38,935          217     24,295        23,191   
                            --------     --------        --------      -------    -------      --------   
Long-term debt............   151,236           --              --       24,284         --         3,110   
Intercompany debt.........        --           --              --        2,411     37,881        47,512   
Other liabilities.........    13,433           --           5,522           --        431         3,954   
                            --------     --------        --------      -------    -------      --------   
    Total liabilities.....   178,374           --          44,457       26,912     62,607        77,767   
                            --------     --------        --------      -------    -------      --------   
Redeemable Securities:                                                                                    
  Series C preferred                                                                                      
    stock.................    22,817           --              --           --         --            --   
                            --------     --------        --------      -------    -------      --------   
Stockholders' Equity                                                                                      
  (Deficit):                                                                                              
  Series A preferred                                                                                      
    stock.................       521           --              --           --         --            --   
  Common stock............         2           --              33           --         --            --   
  Paid-in capital.........       860           --         108,383           21         52         1,537   
  Retained earnings                                                                                       
    (accumulated                                                                                          
    deficit)..............   (62,844)          --             610      (10,906)   (10,930)        6,997   
  Accumulated other                                                                                       
    comprehensive.........                                                                                
    income (loss):                                                                                        
    Gain on derivative                                                                                    
      instruments.........       331           --             331           --         --            --   
    Cumulative currency                                                                                   
      translation                                                                                         
      adjustment..........     1,050           --            (298)       7,150      7,150        (5,801)  
                            --------     --------        --------      -------    -------      --------   
    Total stockholders'                                                                                   
      equity (deficit)....   (60,080)          --         109,059       (3,735)    (3,728)        2,733   
                            --------     --------        --------      -------    -------      --------   
                            $141,111     $     --        $153,516      $23,177    $58,879      $ 80,500   
                            ========     ========        ========      =======    =======      ========   


                              AS OF DECEMBER 31, 2004                                                     
                            ----------------------------                                                  
                            CONSOLIDATION   CONSOLIDATED                                                  
                             ADJUSTMENTS      BALANCE                                                     
                            -------------   ------------                                                  
                                   (IN THOUSANDS)                                                         
                                                                                                          
                                       ASSETS                                                             
Current Assets:                                                                                           
  Cash and cash                                                                                           
    equivalents...........    $      --       $ 10,170                                                    
  Trade receivables.......           --         56,875                                                    
  Other receivables.......           --          4,470                                                    
  Inventory...............                      97,604                                                    
  Prepaid expenses and                                                                                    
    other.................           --          6,914                                                    
                              ---------       --------                                                    
    Total current                                                                                         
      assets..............           --        176,033                                                    
                              ---------       --------                                                    
Property, plant &                                                                                         
  equipment, net..........           --         61,111                                                    
Intangibles...............           --         11,116                                                    
Investment in                                                                                             
  subsidiaries............     (104,329)            --                                                    
Intercompany..............      (87,804)            --                                                    
Other assets..............           --         16,790                                                    
                              ---------       --------                                                    
                              $(192,133)      $265,050                                                    
                              =========       ========                                                    

                                  LIABILITIES AND                                                         
                                STOCKHOLDERS' EQUITY                                                      
                                     (DEFICIT)                                                            
Current Liabilities:                                                                                      
  Cash overdraft..........    $      --       $  1,787                                                    
  Loan payable to banks...           --            297                                                    
  Current portion of long-                                                                                
    term debt.............           --          4,082                                                    
  Accounts payable........           --         46,368                                                    
  Accrued expenses and                                                                                    
    other.................                      47,809                                                    
                              ---------       --------                                                    
    Total current                                                                                         
      liabilities.........           --        100,343                                                    
                              ---------       --------                                                    
Long-term debt............           --        178,630                                                    
Intercompany debt.........      (87,804)            --                                                    
Other liabilities.........           --         23,340                                                    
                              ---------       --------                                                    
    Total liabilities.....      (87,804)       302,313                                                    
                              ---------       --------                                                    
Redeemable Securities:                                                                                    
  Series C preferred                                                                                      
    stock.................           --         22,817                                                    
                              ---------       --------                                                    
Stockholders' Equity                                                                                      
  (Deficit):                                                                                              
  Series A preferred                                                                                      
    stock.................           --            521                                                    
  Common stock............          (33)             2                                                    
  Paid-in capital.........     (109,993)           860                                                    
  Retained earnings                                                                                       
    (accumulated                                                                                          
    deficit)..............       14,229        (62,844)                                                   
  Accumulated other                                                                                       
    comprehensive.........                          --                                                    
    income (loss):                                                                                        
    Gain on derivative                                                                                    
      instruments.........         (331)           331                                                    
    Cumulative currency                                                                                   
      translation                                                                                         
      adjustment..........       (8,201)         1,050                                                    
                              ---------       --------                                                    
    Total stockholders'                                                                                   
      equity (deficit)....     (104,329)       (60,080)                                                   
                              ---------       --------                                                    
                              $(192,133)      $265,050                                                    
                              =========       ========                                                    

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                                [Download Table]

                            FOR THE THREE MONTHS ENDED DECEMBER 31, 2004          
                          -------------------------------------------------       
                          PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH        
                          ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER        
                          -------   ------------   --------------   -------       
                                           (IN THOUSANDS)                         
                                                                                  
Net sales...............  $ 6,247     $     --        $57,791       $    --       
Net                                                                               
 sales -- intercompany..       37           --             38            --       
Cost of goods sold                                                                
  (includes Belgium                                                               
  Plant Transactions                                                              
  costs of $9,536)......    5,034           --         43,358            --       
                          -------     --------        -------       -------       
Gross profit............    1,250           --         14,471            --       
Selling, general and                                                              
  administrative                                                                  
  expenses..............    5,315           --          7,393            --       
                          -------     --------        -------       -------       
Operating income                                                                  
  (loss)................   (4,065)          --          7,078            --       
Other:                                                                            
  Interest expense......    4,585           --              2           649       
  Interest (income).....       (1)          --             (4)           --       
  Other (income)                                                                  
    expense, net........        3           --           (146)           --       
  Intercompany interest                                                           
    and other...........   (6,407)          --          4,937          (656)      
  (Profit) loss relating                                                          
    to subsidiaries.....    5,122           --             --         9,071       
                          -------     --------        -------       -------       
  Income (loss) from                                                              
    continuing                                                                    
    operations before                                                             
    income taxes........   (7,367)          --          2,289        (9,064)      
Provision (benefit) for                                                           
  income taxes..........      204           --            195            --       
                          -------     --------        -------       -------       
Income (loss) from                                                                
  continuing                                                                      
  operations............   (7,571)          --          2,094        (9,064)      
Discontinued operations:                                                          
  Profit (loss) relating                                                          
    to discontinued                                                               
    operations..........       --           --             --            --       
  (Loss) from                                                                     
    discontinued                                                                  
    operations (net of                                                            
    income taxes).......       --           --             --            --       
  Gain (loss) from                                                                
    disposal of                                                                   
    discontinued                                                                  
    operations (net of                                                            
    income taxes).......       --           --             --            --       
                          -------     --------        -------       -------       
  Net income (loss).....  $(7,571)    $     --        $ 2,094       $(9,064)      
                          =======     ========        =======       =======       


                                FOR THE THREE MONTHS ENDED DECEMBER 31, 2004      
                          --------------------------------------------------------
                           BELGIUM    NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED
                          GUARANTOR   SUBSIDIARIES     ADJUSTMENTS      BALANCE   
                          ---------   -------------   -------------   ------------
                                               (IN THOUSANDS)                     
                                                                                  
Net sales...............  $  2,560       $26,462        $     --        $93,060   
Net                                                                               
 sales -- intercompany..     4,456         2,342          (6,873)            --   
Cost of goods sold                                                                
  (includes Belgium                                                               
  Plant Transactions                                                              
  costs of $9,536)......    16,085        21,587          (6,873)        79,191   
                          --------       -------        --------        -------   
Gross profit............    (9,069)        7,217              --         13,869   
Selling, general and                                                              
  administrative                                                                  
  expenses..............       813         4,238              --         17,759   
                          --------       -------        --------        -------   
Operating income                                                                  
  (loss)................    (9,882)        2,979              --         (3,890)  
Other:                                                                            
  Interest expense......        12           141              --          5,389   
  Interest (income).....        --           (28)             --            (33)  
  Other (income)                                                                  
    expense, net........      (152)         (496)             --           (791)  
  Intercompany interest                                                           
    and other...........       942         1,184              --             --   
  (Profit) loss relating                                                          
    to subsidiaries.....        --            --         (14,193)            --   
                          --------       -------        --------        -------   
  Income (loss) from                                                              
    continuing                                                                    
    operations before                                                             
    income taxes........   (10,684)        2,178          14,193         (8,455)  
Provision (benefit) for                                                           
  income taxes..........    (1,613)          330              --           (884)  
                          --------       -------        --------        -------   
Income (loss) from                                                                
  continuing                                                                      
  operations............    (9,071)        1,848          14,193         (7,571)  
Discontinued operations:                                                          
  Profit (loss) relating                                                          
    to discontinued                                                               
    operations..........        --            --              --             --   
  (Loss) from                                                                     
    discontinued                                                                  
    operations (net of                                                            
    income taxes).......        --            --              --             --   
  Gain (loss) from                                                                
    disposal of                                                                   
    discontinued                                                                  
    operations (net of                                                            
    income taxes).......        --            --              --             --   
                          --------       -------        --------        -------   
  Net income (loss).....  $ (9,071)      $ 1,848        $ 14,193        $(7,571)  
                          ========       =======        ========        =======   

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                    FOR THE SIX MONTHS ENDED DECEMBER 31, 2004          
                           -------------------------------------------------------------
                           PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM 
                           ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR
                           -------   ------------   --------------   -------   ---------
                                                  (IN THOUSANDS)                        
                                                                                        
Net sales................  $12,176     $     --        $114,466      $    --    $ 4,228 
Net                                                                                     
 sales -- intercompany...       93           --             131           --     10,660 
Cost of goods sold                                                                      
  (includes Belgium Plant                                                               
  Transactions costs of                                                                 
  $8,287)................    9,654           --          84,992           --     20,784 
                           -------     --------        --------      -------    ------- 
Gross profit.............    2,615           --          29,605           --     (5,896)
Selling, general and                                                                    
  administrative                                                                        
  expenses...............   10,218           --          14,349            6      1,366 
                           -------     --------        --------      -------    ------- 
Operating income                                                                        
  (loss).................   (7,603)          --          15,256           (6)    (7,262)
Other:                                                                                  
  Interest expense.......    8,937           --              --        1,299         23 
  Interest (income)......       (2)          --              (4)          --         -- 
  Other (income) expense,                                                               
    net..................        4           --            (374)          --       (211)
  Intercompany interest                                                                 
    and other............  (13,934)          --          10,386       (1,316)     1,881 
  (Profit) loss relating                                                                
    to subsidiaries......    4,590           --              --        7,504         -- 
                           -------     --------        --------      -------    ------- 
  Income (loss) from                                                                    
    continuing operations                                                               
    before income                                                                       
    taxes................   (7,198)          --           5,248       (7,493)    (8,955)
Provision (benefit) for                                                                 
  income taxes...........      514           --             299           --     (1,451)
                           -------     --------        --------      -------    ------- 
Income (loss) from                                                                      
  continuing                                                                            
  operations.............   (7,712)          --           4,949       (7,493)    (7,504)
Discontinued operations:                                                                
  Profit (loss) relating                                                                
    to discontinued                                                                     
    operations...........       --           --              --           --         -- 
  (Loss) from                                                                           
    discontinued                                                                        
    operations (net of                                                                  
    income taxes)........       --           --              --           --         -- 
  Gain (loss) from                                                                      
    disposal of                                                                         
    discontinued                                                                        
    operations (net of                                                                  
    income taxes)........       --           --              --           --         -- 
                           -------     --------        --------      -------    ------- 
  Net income (loss)......  $(7,712)    $     --        $  4,949      $(7,493)   $(7,504)
                           =======     ========        ========      =======    ======= 


                            FOR THE SIX MONTHS ENDED DECEMBER 31, 2004                  
                           --------------------------------------------                 
                           NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED                 
                           SUBSIDIARIES     ADJUSTMENTS      BALANCE                    
                           -------------   -------------   ------------                 
                                          (IN THOUSANDS)                                
                                                                                        
Net sales................     $50,465        $     --        $181,335                   
Net                                                                                     
 sales -- intercompany...       3,417         (14,301)             --                   
Cost of goods sold                                                                      
  (includes Belgium Plant                                                               
  Transactions costs of                                                                 
  $8,287)................      43,715         (14,301)        144,844                   
                              -------        --------        --------                   
Gross profit.............      10,167              --          36,491                   
Selling, general and                                                                    
  administrative                                                                        
  expenses...............       8,414              --          34,353                   
                              -------        --------        --------                   
Operating income                                                                        
  (loss).................       1,753              --           2,138                   
Other:                                                                                  
  Interest expense.......         376              --          10,635                   
  Interest (income)......         (52)             --             (58)                  
  Other (income) expense,                                                               
    net..................        (186)             --            (767)                  
  Intercompany interest                                                                 
    and other............       2,983              --              --                   
  (Profit) loss relating                                                                
    to subsidiaries......          --         (12,094)             --                   
                              -------        --------        --------                   
  Income (loss) from                                                                    
    continuing operations                                                               
    before income                                                                       
    taxes................      (1,368)         12,094          (7,672)                  
Provision (benefit) for                                                                 
  income taxes...........         678              --              40                   
                              -------        --------        --------                   
Income (loss) from                                                                      
  continuing                                                                            
  operations.............      (2,046)         12,094          (7,712)                  
Discontinued operations:                                                                
  Profit (loss) relating                                                                
    to discontinued                                                                     
    operations...........          --              --              --                   
  (Loss) from                                                                           
    discontinued                                                                        
    operations (net of                                                                  
    income taxes)........          --              --              --                   
  Gain (loss) from                                                                      
    disposal of                                                                         
    discontinued                                                                        
    operations (net of                                                                  
    income taxes)........          --              --              --                   
                              -------        --------        --------                   
  Net income (loss)......     $(2,046)       $ 12,094        $ (7,712)                  
                              =======        ========        ========                   

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONSOLIDATING STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                            FOR THE SIX MONTHS ENDED DECEMBER 31, 2004          
                                  --------------------------------------------------------------
                                   PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM 
                                   ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR
                                  --------   ------------   --------------   -------   ---------
                                                          (IN THOUSANDS)                        
                                                                                                
Operating Activities:                                                                           
  Net income (loss).............  $ (7,712)      $ --          $ 4,949       $(7,493)   $(7,504)
  Adjustment for discontinued                                                                   
    operations..................        --         --               --            --         -- 
                                  --------       ----          -------       -------    ------- 
  Income (loss) from continuing                                                                 
    operations..................    (7,712)        --            4,949        (7,493)    (7,504)
  Adjustments to reconcile                                                                      
    income (loss) from                                                                          
    continuing operations to net                                                                
    cash provided (used) by                                                                     
    operating activities:                                                                       
    Depreciation and                                                                            
      amortization (includes                                                                    
      accelerated depreciation                                                                  
      from the Belgium Plant                                                                    
      Transactions of $533).....     1,380         --            1,435            --      2,008 
    Deferred income taxes.......        --         --               --            --         -- 
    Effects of changes in                                                                       
      foreign currency..........        --         --             (411)           --       (211)
    Other.......................       286         --               85            --         -- 
    Changes in operating assets                                                                 
      and liabilities:..........        --                                                      
      Accounts receivable.......      (156)        --             (857)           --        660 
      Inventory.................      (873)        --            3,580            --     (8,513)
      Prepaid expenses and                                                                      
        other...................     1,512         --              233            --     (1,029)
      Other assets..............       255         --             (189)           --         -- 
      Intercompany..............     1,276          5           (9,084)        3,193     11,918 
      Accounts payable..........    (1,171)         6             (386)           --         47 
      Accrued expenses and                                                                      
        other...................       801         (1)           1,170             1       (965)
      Accrued costs of non-                                                                     
        completed transaction...    (1,893)        --               --            --         -- 
      Accrued costs of the                                                                      
        Belgium Plant                                                                           
        Transactions............        --         --               --            --      9,003 
                                  --------       ----          -------       -------    ------- 
    Net cash provided (used) by                                                                 
      operating activities......    (6,295)        10              525        (4,299)     5,414 
                                  --------       ----          -------       -------    ------- 
Investing Activities:                                                                           
  Capital expenditures..........      (686)        --           (1,184)           --       (459)
  Proceeds from sale of                                                                         
    assets......................        --         --               16            --         -- 
  Other investing...............        --         --               --            --       (182)
                                  --------       ----          -------       -------    ------- 
    Net cash provided (used) by                                                                 
      investing activities......      (686)        --           (1,168)           --       (641)
                                  --------       ----          -------       -------    ------- 
Financing Activities:                                                                           
  Net increase (decrease) in                                                                    
    cash overdraft..............        --        (10)             906            --         -- 
  Net (decrease) in short-term                                                                  
    debt........................   (10,699)        --               --            --         -- 
  Proceeds from long-term                                                                       
    debt........................    19,107         --               --         4,284         -- 
  Payments of long-term debt....        --         --             (103)           --         -- 
  Debt refinancing costs........    (1,550)        --               --            --         -- 
                                  --------       ----          -------       -------    ------- 
    Net cash provided (used) by                                                                 
      financing activities......     6,858        (10)             803         4,284         -- 
                                  --------       ----          -------       -------    ------- 
Effect of exchange rate changes                                                                 
  on cash.......................        --         --                7            --        384 
                                  --------       ----          -------       -------    ------- 
Net increase (decrease) in cash                                                                 
  and cash equivalents..........      (123)        --              167           (15)     5,157 


                                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2004                   
                                  --------------------------------------------                  
                                  NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED                  
                                  SUBSIDIARIES     ADJUSTMENTS      BALANCE                     
                                  -------------   -------------   ------------                  
                                                 (IN THOUSANDS)                                 
                                                                                                
Operating Activities:                                                                           
  Net income (loss).............     $(2,046)       $ 12,094        $ (7,712)                   
  Adjustment for discontinued                                                                   
    operations..................          --              --              --                    
                                     -------        --------        --------                    
  Income (loss) from continuing                                                                 
    operations..................      (2,046)         12,094          (7,712)                   
  Adjustments to reconcile                                                                      
    income (loss) from                                                                          
    continuing operations to net                                                                
    cash provided (used) by                                                                     
    operating activities:                                                                       
    Depreciation and                                                                            
      amortization (includes                                                                    
      accelerated depreciation                                                                  
      from the Belgium Plant                                                                    
      Transactions of $533).....       2,485              --           7,308                    
    Deferred income taxes.......        (172)             --            (172)                   
    Effects of changes in                                                                       
      foreign currency..........        (552)             --          (1,174)                   
    Other.......................          (5)             --             366                    
    Changes in operating assets                                                                 
      and liabilities:..........                                                                
      Accounts receivable.......       1,871              --           1,518                    
      Inventory.................      (5,835)             --         (11,641)                   
      Prepaid expenses and                                                                      
        other...................         740              --           1,456                    
      Other assets..............         250              --             316                    
      Intercompany..............       4,786         (12,094)             --                    
      Accounts payable..........         (96)             --          (1,600)                   
      Accrued expenses and                                                                      
        other...................      (1,919)             --            (913)                   
      Accrued costs of non-                                                                     
        completed transaction...          --              --          (1,893)                   
      Accrued costs of the                                                                      
        Belgium Plant                                                                           
        Transactions............          --              --           9,003                    
                                     -------        --------        --------                    
    Net cash provided (used) by                                                                 
      operating activities......        (493)             --          (5,138)                   
                                     -------        --------        --------                    
Investing Activities:                                                                           
  Capital expenditures..........      (1,347)             --          (3,676)                   
  Proceeds from sale of                                                                         
    assets......................          24              --              40                    
  Other investing...............         182              --              --                    
                                     -------        --------        --------                    
    Net cash provided (used) by                                                                 
      investing activities......      (1,141)             --          (3,636)                   
                                     -------        --------        --------                    
Financing Activities:                                                                           
  Net increase (decrease) in                                                                    
    cash overdraft..............          --              --             896                    
  Net (decrease) in short-term                                                                  
    debt........................          --              --         (10,699)                   
  Proceeds from long-term                                                                       
    debt........................       2,709              --          26,100                    
  Payments of long-term debt....      (1,759)             --          (1,862)                   
  Debt refinancing costs........          --              --          (1,550)                   
                                     -------        --------        --------                    
    Net cash provided (used) by                                                                 
      financing activities......         950              --          12,885                    
                                     -------        --------        --------                    
Effect of exchange rate changes                                                                 
  on cash.......................         100                             491                    
                                     -------        --------        --------                    
Net increase (decrease) in cash                                                                 
  and cash equivalents..........        (584)             --           4,602                    

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

                                                        [Enlarge/Download Table]

                                            FOR THE SIX MONTHS ENDED DECEMBER 31, 2004          
                                  --------------------------------------------------------------
                                   PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM 
                                   ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR
                                  --------   ------------   --------------   -------   ---------
                                                          (IN THOUSANDS)                        
                                                                                                
Cash and cash equivalents at                                                                    
  beginning of period...........       136         --              801            17        212 
                                  --------       ----          -------       -------    ------- 
Cash and cash equivalents at end                                                                
  of period.....................  $     13       $ --          $   968       $     2    $ 5,369 
                                  ========       ====          =======       =======    ======= 


                                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2004                   
                                  --------------------------------------------                  
                                  NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED                  
                                  SUBSIDIARIES     ADJUSTMENTS      BALANCE                     
                                  -------------   -------------   ------------                  
                                                 (IN THOUSANDS)                                 
                                                                                                
Cash and cash equivalents at                                                                    
  beginning of period...........       4,402                           5,568                    
                                     -------        --------        --------                    
Cash and cash equivalents at end                                                                
  of period.....................     $ 3,818        $     --        $ 10,170                    
                                     =======        ========        ========                    

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONDENSED CONSOLIDATING BALANCE SHEET 

                                                        [Enlarge/Download Table]

                                                        AS OF JUNE 30, 2004                              
                           ------------------------------------------------------------------------------
                            PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM    NON-GUARANTOR
                            ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR   SUBSIDIARIES 
                           --------   ------------   --------------   -------   ---------   -------------
                                                           (IN THOUSANDS)                                
                                                                                                         
                                                 ASSETS                                                  
Current Assets:                                                                                          
 Cash and cash                                                                                           
   equivalents............ $    136     $    --         $    801      $    17    $   212      $  4,402   
 Trade receivables........    2,670          --           26,996           --      2,592        25,400   
 Other receivables........      317         414            1,195           --         72           768   
 Inventory................    1,994          --           37,890           --     23,159        16,867   
 Prepaid expenses and                                                                                    
   other..................    3,195         110              565           --      1,018         3,800   
                           --------     -------         --------      -------    -------      --------   
   Total Current Assets...    8,312         524           67,447           17     27,053        51,237   
                           --------     -------         --------      -------    -------      --------   
Property, plant &                                                                                        
 equipment, net...........      105          --           13,730           --     17,321        27,630   
Intangibles...............       --          --            4,252           --      1,569         5,874   
Investment in                                                                                            
 subsidiaries.............  125,355          --               --        1,604         --            --   
Intercompany..............  (14,995)     20,995           60,030       20,181      1,630       (12,497)  
Other assets..............   14,506          --            1,056           --         --           736   
                           --------     -------         --------      -------    -------      --------   
                           $133,283     $21,519         $146,515      $21,802    $47,573      $ 72,980   
                           ========     =======         ========      =======    =======      ========   
                             LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                              
Current Liabilities:                                                                                     
 Cash overdraft........... $     --     $    10         $    881      $    --    $    --      $     --   
 Loan payable to banks....   10,996          --               --           --         --            --   
 Current portion of long-                                                                                
   term debt..............       --          --              101           --         --         1,250   
 Accounts payable.........    4,734           9           28,434           --      2,258        11,537   
 Accrued expenses and                                                                                    
   other..................   11,857         159            8,306          216     12,022         7,450   
                           --------     -------         --------      -------    -------      --------   
   Total Current                                                                                         
     Liabilities..........   27,587         178           37,722          216     14,280        20,237   
                           --------     -------         --------      -------    -------      --------   
Long-term debt............  133,029          --                2       20,000         --         4,987   
Intercompany debt.........       --          --               --           --     30,553        44,791   
Other liabilities.........   11,822          --            4,897           --      1,136         4,431   
                           --------     -------         --------      -------    -------      --------   
   Total Liabilities......  172,438         178           42,621       20,216     45,969        74,446   
                           --------     -------         --------      -------    -------      --------   
Redeemable Securities:                                                                                   
 Series C preferred                                                                                      
   stock..................   24,678          --               --           --         --            --   
                           --------     -------         --------      -------    -------      --------   
Stockholders' Equity                                                                                     
 (Deficit):                                                                                              
 Series A preferred                                                                                      
   stock..................      521          --               --           --         --            --   
 Common stock.............        2           1               33           --         --            --   
 Paid-in capital..........      860          --          108,383           21         52         1,537   
 Retained earnings                                                                                       
   (accumulated                                                                                          
   deficit)...............  (57,964)     21,340           (4,339)      (2,744)    (2,757)        8,374   
 Accumulated other                                                                                       
   comprehensive income                                                                                  
   (loss):                                                                                               
Gain on derivative                                                                                       
 instruments..............        9          --                9           --         --            --   
Cumulative currency                                                                                      
 translation adjustment...   (7,261)         --             (192)       4,309      4,309       (11,377)  
                           --------     -------         --------      -------    -------      --------   
   Total Stockholders'                                                                                   
     Equity (Deficit).....  (63,833)     21,341          103,894        1,586      1,604        (1,466)  
                           --------     -------         --------      -------    -------      --------   
                           $133,283     $21,519         $146,515      $21,802    $47,573      $ 72,980   
                           ========     =======         ========      =======    =======      ========   


                               AS OF JUNE 30, 2004                                                       
                           ----------------------------                                                  
                           CONSOLIDATION   CONSOLIDATED                                                  
                            ADJUSTMENTS      BALANCE                                                     
                           -------------   ------------                                                  
                                  (IN THOUSANDS)                                                         
                                                                                                         
                                      ASSETS                                                             
Current Assets:                                                                                          
 Cash and cash                                                                                           
   equivalents............   $      --       $  5,568                                                    
 Trade receivables........          --         57,658                                                    
 Other receivables........          --          2,766                                                    
 Inventory................                     79,910                                                    
 Prepaid expenses and                                                                                    
   other..................          --          8,688                                                    
                             ---------       --------                                                    
   Total Current Assets...          --        154,590                                                    
                             ---------       --------                                                    
Property, plant &                                                                                        
 equipment, net...........          --         58,786                                                    
Intangibles...............          --         11,695                                                    
Investment in                                                                                            
 subsidiaries.............    (126,959)            --                                                    
Intercompany..............     (75,344)            --                                                    
Other assets..............          --         16,298                                                    
                             ---------       --------                                                    
                             $(202,303)      $241,369                                                    
                             =========       ========                                                    
                                 LIABILITIES AND                                                         
                               STOCKHOLDERS' EQUITY                                                      
                                     (DEFICIT)                                                           
Current Liabilities:                                                                                     
 Cash overdraft...........   $      --       $    891                                                    
 Loan payable to banks....          --         10,996                                                    
 Current portion of long-                                                                                
   term debt..............          --          1,351                                                    
 Accounts payable.........          --         46,972                                                    
 Accrued expenses and                                                                                    
   other..................                     40,010                                                    
                             ---------       --------                                                    
   Total Current                                                                                         
     Liabilities..........          --        100,220                                                    
                             ---------       --------                                                    
Long-term debt............          --        158,018                                                    
Intercompany debt.........     (75,344)            --                                                    
Other liabilities.........          --         22,286                                                    
                             ---------       --------                                                    
   Total Liabilities......     (75,344)       280,524                                                    
                             ---------       --------                                                    
Redeemable Securities:                                                                                   
 Series C preferred                                                                                      
   stock..................          --         24,678                                                    
                             ---------       --------                                                    
Stockholders' Equity                                                                                     
 (Deficit):                                                                                              
 Series A preferred                                                                                      
   stock..................          --            521                                                    
 Common stock.............         (34)             2                                                    
 Paid-in capital..........    (109,993)           860                                                    
 Retained earnings                                                                                       
   (accumulated                                                                                          
   deficit)...............     (19,874)       (57,964)                                                   
 Accumulated other                                                                                       
   comprehensive income                                                                                  
   (loss):                                         --                                                    
Gain on derivative                                                                                       
 instruments..............          (9)             9                                                    
Cumulative currency                                                                                      
 translation adjustment...       2,951         (7,261)                                                   
                             ---------       --------                                                    
   Total Stockholders'                                                                                   
     Equity (Deficit).....    (126,959)       (63,833)                                                   
                             ---------       --------                                                    
                             $(202,303)      $241,369                                                    
                             =========       ========                                                    

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                    FOR THE THREE MONTHS ENDED DECEMBER 31, 2003         
                           --------------------------------------------------------------
                            PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH     BELGIUM 
                            ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER    GUARANTOR
                           --------   ------------   --------------   -------   ---------
                                                   (IN THOUSANDS)                        
                                                                                         
Net sales................  $  5,425      $5,435         $54,601       $    --    $ 1,248 
Net                                                                                      
  sales -- intercompany..        52       1,259             184            --      3,727 
Cost of goods sold.......     4,311       5,005          41,326            --      4,774 
                           --------      ------         -------       -------    ------- 
  Gross profit...........     1,166       1,689          13,459            --        201 
Selling, general and                                                                     
  administrative                                                                         
  expenses...............     5,395         624           6,154             2        561 
                           --------      ------         -------       -------    ------- 
  Operating income                                                                       
    (loss)...............    (4,229)      1,065           7,305            (2)      (360)
Other:                                                                                   
  Interest expense.......     4,029           7              --           506         19 
  Interest (income)......        (3)         --              --            --         30 
  Other (income) expense,                                                                
    net..................       300          --             (34)           --        566 
  Net (gain) on                                                                          
    extinguishment of                                                                    
    debt.................   (23,226)         --              --            --         -- 
  Intercompany interest                                                                  
    and other............    (5,753)        810           2,949          (510)       750 
  (Profit) loss relating                                                                 
    to subsidiaries......    (2,753)         --              --         1,052         -- 
                           --------      ------         -------       -------    ------- 
  Income (loss) from                                                                     
    continuing operations                                                                
    before income                                                                        
    taxes................    23,177         248           4,390        (1,050)    (1,725)
Provision (benefit) for                                                                  
  income taxes...........     1,950          80             454            --       (673)
                           --------      ------         -------       -------    ------- 
  Income (loss) from                                                                     
    continuing                                                                           
    operations...........    21,227         168           3,936        (1,050)    (1,052)
Discontinued operations:                                                                 
  Profit (loss) relating                                                                 
    to discontinued                                                                      
    operations...........        59          --              --            --         -- 
  Profit from                                                                            
    discontinued                                                                         
    operations (net of                                                                   
    income taxes)........        --          --              --            --         -- 
  Gain from disposal of                                                                  
    discontinued                                                                         
    operations (net of                                                                   
    income taxes)........        --          --              --            --         -- 
                           --------      ------         -------       -------    ------- 
    Net income (loss)....  $ 21,286      $  168         $ 3,936       $(1,050)   $(1,052)
                           ========      ======         =======       =======    ======= 


                           FOR THE THREE MONTHS ENDED DECEMBER 31, 2003                  
                           ---------------------------------------------                 
                           NON-GUARANTORS   CONSOLIDATION   CONSOLIDATED                 
                            SUBSIDIARIES     ADJUSTMENTS      BALANCE                    
                           --------------   -------------   ------------                 
                                          (IN THOUSANDS)                                 
                                                                                         
Net sales................     $25,831          $    --        $ 92,540                   
Net                                                                                      
  sales -- intercompany..       1,405           (6,627)             --                   
Cost of goods sold.......      21,202           (6,627)         69,991                   
                              -------          -------        --------                   
  Gross profit...........       6,034               --          22,549                   
Selling, general and                                                                     
  administrative                                                                         
  expenses...............       4,088                           16,824                   
                              -------          -------        --------                   
  Operating income                                                                       
    (loss)...............       1,946               --           5,725                   
Other:                                                                                   
  Interest expense.......         (12)                           4,549                   
  Interest (income)......         141                              168                   
  Other (income) expense,                                                                
    net..................        (705)                             127                   
  Net (gain) on                                                                          
    extinguishment of                                                                    
    debt.................          --                          (23,226)                  
  Intercompany interest                                                                  
    and other............       1,754               --                                   
  (Profit) loss relating                                                                 
    to subsidiaries......          --            1,701              --                   
                              -------          -------        --------                   
  Income (loss) from                                                                     
    continuing operations                                                                
    before income                                                                        
    taxes................         768           (1,701)         24,107                   
Provision (benefit) for                                                                  
  income taxes...........       1,069                            2,880                   
                              -------          -------        --------                   
  Income (loss) from                                                                     
    continuing                                                                           
    operations...........        (301)          (1,701)         21,227                   
Discontinued operations:                                                                 
  Profit (loss) relating                                                                 
    to discontinued                                                                      
    operations...........          --              (59)             --                   
  Profit from                                                                            
    discontinued                                                                         
    operations (net of                                                                   
    income taxes)........          59                               59                   
  Gain from disposal of                                                                  
    discontinued                                                                         
    operations (net of                                                                   
    income taxes)........          --                               --                   
                              -------          -------        --------                   
    Net income (loss)....     $  (242)         $(1,760)       $ 21,286                   
                              =======          =======        ========                   

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONSOLIDATING STATEMENT OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                     FOR THE SIX MONTHS ENDED DECEMBER 31, 2003          
                            -------------------------------------------------------------
                             PARENT    UNRESTRICTED   U.S. GUARANTOR   DUTCH     BELGIUM 
                             ISSUER    SUBSIDIARIES    SUBSIDIARIES    ISSUER   GUARANTOR
                            --------   ------------   --------------   ------   ---------
                                                   (IN THOUSANDS)                        
                                                                                         
Net sales.................  $ 11,122     $11,118         $102,696      $  --     $ 2,240 
Net                                                                                      
  sales -- intercompany...        97       2,598              393         --      12,996 
Cost of goods sold........     8,819      10,139           77,219         --      13,971 
                            --------     -------         --------      -----     ------- 
  Gross profit............     2,400       3,577           25,870         --       1,265 
Selling, general and                                                                     
  administrative                                                                         
  expenses................    10,068       1,299           12,375          2       1,084 
                            --------     -------         --------      -----     ------- 
  Operating income                                                                       
    (loss)................    (7,668)      2,278           13,495         (2)        181 
Other:                                                                                   
  Interest expense........     7,741          18               --        506          19 
  Interest (income).......        (3)         --               --         --          -- 
  Other (income) expense,                                                                
    net...................       528          --             (276)        --        (412)
  Net (gain) on                                                                          
    extinguishment of                                                                    
    debt..................   (23,226)         --               --         --          -- 
  Intercompany interest                                                                  
    and other.............   (11,745)      1,892            5,488       (510)      1,446 
  (Profit) loss relating                                                                 
    to subsidiaries.......    (5,627)         --               --        532          -- 
                            --------     -------         --------      -----     ------- 
  Income (loss) from                                                                     
    continuing operations                                                                
    before income taxes...    24,664         368            8,283       (530)       (872)
Provision (benefit) for                                                                  
  income taxes............     1,951          96              672         --        (340)
                            --------     -------         --------      -----     ------- 
  Income (loss) from                                                                     
    continuing                                                                           
    operations............    22,713         272            7,611       (530)       (532)
Discontinued operations:                                                                 
  Profit (loss) relating                                                                 
    to discontinued                                                                      
    operations............      (403)         --               --         --          -- 
  (Loss) from discontinued                                                               
    operations (net of                                                                   
    income taxes).........        --        (124)              --         --          -- 
  Gain from disposal of                                                                  
    discontinued                                                                         
    operations (net of                                                                   
    income taxes).........       231          --               --         --          -- 
                            --------     -------         --------      -----     ------- 
    Net income (loss).....  $ 22,541     $   148         $  7,611      $(530)    $  (532)
                            ========     =======         ========      =====     ======= 


                             FOR THE SIX MONTHS ENDED DECEMBER 31, 2003                  
                            ---------------------------------------------                
                            NON-GUARANTORS   CONSOLIDATION   CONSOLIDATED                
                             SUBSIDIARIES     ADJUSTMENTS      BALANCE                   
                            --------------   -------------   ------------                
                                           (IN THOUSANDS)                                
                                                                                         
Net sales.................     $50,314         $     --        $177,490                  
Net                                                                                      
  sales -- intercompany...       2,175          (18,259)             --                  
Cost of goods sold........      41,892          (18,259)        133,781                  
                               -------         --------        --------                  
  Gross profit............      10,597               --          43,709                  
Selling, general and                                                                     
  administrative                                                                         
  expenses................       7,781                           32,609                  
                               -------         --------        --------                  
  Operating income                                                                       
    (loss)................       2,816               --          11,100                  
Other:                                                                                   
  Interest expense........         198                            8,482                  
  Interest (income).......         (71)                             (74)                 
  Other (income) expense,                                                                
    net...................        (298)                            (458)                 
  Net (gain) on                                                                          
    extinguishment of                                                                    
    debt..................          --                          (23,226)                 
  Intercompany interest                                                                  
    and other.............       3,429                               --                  
  (Profit) loss relating                                                                 
    to subsidiaries.......          --            5,095              --                  
                               -------         --------        --------                  
  Income (loss) from                                                                     
    continuing operations                                                                
    before income taxes...        (442)          (5,095)         26,376                  
Provision (benefit) for                                                                  
  income taxes............       1,284                            3,663                  
                               -------         --------        --------                  
  Income (loss) from                                                                     
    continuing                                                                           
    operations............      (1,726)          (5,095)         22,713                  
Discontinued operations:                                                                 
  Profit (loss) relating                                                                 
    to discontinued                                                                      
    operations............          --              403              --                  
  (Loss) from discontinued                                                               
    operations (net of                                                                   
    income taxes).........        (279)                            (403)                 
  Gain from disposal of                                                                  
    discontinued                                                                         
    operations (net of                                                                   
    income taxes).........          --                              231                  
                               -------         --------        --------                  
    Net income (loss).....     $(2,005)        $ (4,692)       $ 22,541                  
                               =======         ========        ========                  

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED) 

CONSOLIDATING STATEMENT OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                               FOR THE SIX MONTHS ENDED DECEMBER 31, 2003          
                                     --------------------------------------------------------------
                                     PARENT    UNRESTRICTED   U.S. GUARANTOR    DUTCH      BELGIUM 
                                     ISSUER    SUBSIDIARIES    SUBSIDIARIES     ISSUER    GUARANTOR
                                     -------   ------------   --------------   --------   ---------
                                                             (IN THOUSANDS)                        
                                                                                                   
Operating Activities:                                                                              
 Net income (loss).................  $22,541     $    148        $  7,611      $   (530)   $  (532)
 Adjustment for discontinued                                                                       
   operations......................      172          124              --            --         -- 
                                     -------     --------        --------      --------    ------- 
 Income (loss) from continuing                                                                     
   operations......................   22,713          272           7,611          (530)      (532)
 Adjustments to reconcile income                                                                   
   (loss) from continuing                                                                          
   operations to net cash provided                                                                 
   (used) by operating activities:                                                                 
   Depreciation and amortization...      948          487           1,248            --      1,857 
   Deferred income taxes...........       --           --              --            --         -- 
   Net gain on extinguishment of                                                                   
     debt..........................  (23,226)          --              --            --         -- 
   Effects of changes in foreign                                                                   
     currency......................       --           --            (198)           --     (1,380)
   Other...........................      259           --             423            --         -- 
   Changes in operating assets and                                                                 
     liabilities:                                                                                  
     Accounts receivable...........      185          329          (3,590)           --        308 
     Inventory.....................     (330)        (543)             25            --     (2,250)
     Prepaid expenses and other....    1,340          273            (892)           --        289 
     Other assets..................      605           --              (4)           --         -- 
     Intercompany..................    2,179       16,879         (13,879)      (19,955)     9,912 
     Accounts payable..............   (2,414)        (337)            366            --     (2,647)
     Accrued expenses and other....    2,076         (128)          5,515           506      3,647 
 Cash provided (used) by                                                                           
   discontinued operations.........      231         (652)             --            --         -- 
                                     -------     --------        --------      --------    ------- 
   Net cash provided (used) by                                                                     
     operating activities..........    4,566       16,580          (3,375)      (19,979)     9,204 
                                     -------     --------        --------      --------    ------- 
Investing Activities:                                                                              
 Capital expenditures..............       --          (62)           (648)           --       (659)
 Proceeds from sale of assets......       --           --              --            --         -- 
 Discontinued operations...........   13,849           --              --            --         -- 
                                     -------     --------        --------      --------    ------- 
   Net cash provided (used) by                                                                     
     investing activities..........   13,849          (62)           (648)           --       (659)
                                     -------     --------        --------      --------    ------- 
Financing Activities:                                                                              
 Net increase (decrease) in cash                                                                   
   overdraft.......................     (350)        (286)          2,849            --         -- 
 Net increase (decrease) in                                                                        
   short-term debt.................  (32,194)          --              --            --         -- 
 Proceeds from long-term debt......   85,000           --              --        20,000         -- 
 Payments of long-term debt........  (32,679)         (13)           (867)           --         -- 
 Payment of Pfizer obligations.....  (20,075)          --              --            --     (8,225)
 Payments relating to the Prince                                                                   
   Transactions and transaction                                                                    
   costs...........................   (3,667)     (16,312)             --            --         -- 
 Debt refinancing costs............  (11,496)          --              --            --         -- 
 Discontinued operations...........       --           --              --            --         -- 
                                     -------     --------        --------      --------    ------- 
   Net cash provided (used) by                                                                     
     financing activities..........  (15,461)     (16,611)          1,982        20,000     (8,225)
                                     -------     --------        --------      --------    ------- 
Effect of exchange rate changes on                                                                 
 cash..............................       --           --              --            --         42 
                                     -------     --------        --------      --------    ------- 
Net increase (decrease) in cash and                                                                
 cash equivalents..................    2,954          (93)         (2,041)           21        362 
Cash and cash equivalents at                                                                       
 beginning of period...............       43          119           2,167            --        185 
                                     -------     --------        --------      --------    ------- 
Cash and cash equivalents at end of                                                                
 period............................  $ 2,997     $     26        $    126      $     21    $   547 
                                     =======     ========        ========      ========    ======= 


                                      FOR THE SIX MONTHS ENDED DECEMBER 31, 2003                   
                                     --------------------------------------------                  
                                     NON-GUARANTOR   CONSOLIDATION   CONSOLIDATED                  
                                     SUBSIDIARIES     ADJUSTMENTS      BALANCE                     
                                     -------------   -------------   ------------                  
                                                    (IN THOUSANDS)                                 
                                                                                                   
Operating Activities:                                                                              
 Net income (loss).................     $(2,005)        $(4,692)       $22,541                     
 Adjustment for discontinued                                                                       
   operations......................         279            (403)           172                     
                                        -------         -------        -------                     
 Income (loss) from continuing                                                                     
   operations......................      (1,726)         (5,095)        22,713                     
 Adjustments to reconcile income                                                                   
   (loss) from continuing                                                                          
   operations to net cash provided                                                                 
   (used) by operating activities:                                                                 
   Depreciation and amortization...       2,004                          6,544                     
   Deferred income taxes...........          93                             93                     
   Net gain on extinguishment of                                                                   
     debt..........................          --                        (23,226)                    
   Effects of changes in foreign                                                                   
     currency......................         412                         (1,166)                    
   Other...........................         (93)                           589                     
   Changes in operating assets and                                                                 
     liabilities:                                                                                  
     Accounts receivable...........         636                         (2,132)                    
     Inventory.....................       1,599                         (1,499)                    
     Prepaid expenses and other....        (305)                           705                     
     Other assets..................           4                            605                     
     Intercompany..................        (231)          5,095             --                     
     Accounts payable..............      (1,717)                        (6,749)                    
     Accrued expenses and other....      (7,100)                         4,516                     
 Cash provided (used) by                                                                           
   discontinued operations.........      (1,244)                        (1,665)                    
                                        -------         -------        -------                     
   Net cash provided (used) by                                                                     
     operating activities..........      (7,668)             --           (672)                    
                                        -------         -------        -------                     
Investing Activities:                                                                              
 Capital expenditures..............        (911)                        (2,280)                    
 Proceeds from sale of assets......          23                             23                     
 Discontinued operations...........         548                         14,397                     
                                        -------         -------        -------                     
   Net cash provided (used) by                                                                     
     investing activities..........        (340)             --         12,140                     
                                        -------         -------        -------                     
Financing Activities:                                                                              
 Net increase (decrease) in cash                                                                   
   overdraft.......................          (9)                         2,204                     
 Net increase (decrease) in                                                                        
   short-term debt.................         741                        (31,453)                    
 Proceeds from long-term debt......       2,500                        107,500                     
 Payments of long-term debt........        (461)                       (34,020)                    
 Payment of Pfizer obligations.....          --                        (28,300)                    
 Payments relating to the Prince                                                                   
   Transactions and transaction                                                                    
   costs...........................          --                        (19,979)                    
 Debt refinancing costs............          --                        (11,496)                    
 Discontinued operations...........       1,391                          1,391                     
                                        -------         -------        -------                     
   Net cash provided (used) by                                                                     
     financing activities..........       4,162              --        (14,153)                    
                                        -------         -------        -------                     
Effect of exchange rate changes on                                                                 
 cash..............................         146                            188                     
                                        -------         -------        -------                     
Net increase (decrease) in cash and                                                                
 cash equivalents..................      (3,700)             --         (2,497)                    
Cash and cash equivalents at                                                                       
 beginning of period...............       8,665                         11,179                     
                                        -------         -------        -------                     
Cash and cash equivalents at end of                                                                
 period............................     $ 4,965         $    --        $ 8,682                     
                                        =======         =======        =======                     

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors of Philipp Brothers Netherlands I B.V.:               

In our opinion, the accompanying consolidated balance sheets and the  
related consolidated statements of operations and comprehensive loss, changes in
stockholders' deficit and cash flows present fairly, in all material respects,  
the financial position of Philipp Brothers Netherlands I B.V. and its           
subsidiaries at June 30, 2004 and June 30, 2003, and the results of their       
operations and their cash flows for each of the three years in the period ended 
June 30, 2004, in conformity with accounting principles generally accepted in   
the United States of America. These financial statements are the responsibility 
of the Company's management; our responsibility is to express an opinion on     
these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting    
Oversight Board (United States). Those standards require that we plan and       
perform the audit to obtain reasonable assurance about whether the financial    
statements are free of material misstatement. An audit includes examining, on a 
test basis, evidence supporting the amounts and disclosures in the financial    
statements, assessing the accounting principles used and significant estimates  
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.          

PricewaterhouseCoopers LLP                                                      
Florham Park, New Jersey                                                        
January 10, 2005                                                                

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

                                                                [Download Table]

                                                                 AS OF JUNE 30,    
                                                              ---------------------
                                                                2004        2003   
                                                              ---------   ---------
                                                              (U.S.$ IN THOUSANDS) 
                                                                                   
                                      ASSETS                                       
CURRENT ASSETS:                                                                    
  Cash, including restricted balance of $175 at June 30,                           
     2004 and 2003..........................................  $    422    $    689 
  Trade receivables, less allowance for doubtful accounts of                       
     $39 and $58 at June 30, 2004 and 2003, respectively....     4,344       3,090 
  Other receivables.........................................       304         711 
  Inventories...............................................    32,611      22,768 
  Prepaid expenses and other current assets.................     4,020       4,429 
  Trade receivables -- related parties......................     7,917      11,116 
                                                              --------    -------- 
     TOTAL CURRENT ASSETS...................................    49,618      42,803 
PROPERTY, PLANT AND EQUIPMENT, net..........................    30,588      30,732 
INTANGIBLES.................................................     1,569       1,818 
OTHER ASSETS................................................     1,084          -- 
                                                              --------    -------- 
                                                              $ 82,859    $ 75,353 
                                                              ========    ======== 

                       LIABILITIES AND STOCKHOLDERS' DEFICIT                       
CURRENT LIABILITIES:                                                               
  Accounts payable..........................................  $  3,223    $ 12,928 
  Accrued expenses and other current liabilities............    13,438       9,160 
  Trade payables -- related parties.........................     1,687         922 
                                                              --------    -------- 
     TOTAL CURRENT LIABILITIES..............................    18,348      23,010 
LONG-TERM DEBT..............................................    20,000          -- 
OTHER LIABILITIES...........................................     2,897       2,905 
NOTES PAYABLE -- RELATED PARTIES............................    55,124      60,034 
                                                              --------    -------- 
     TOTAL LIABILITIES......................................    96,369      85,949 
                                                              --------    -------- 
STOCKHOLDERS' DEFICIT:                                                             
  Paid-in capital...........................................     7,405       3,877 
  Accumulated deficit.......................................   (14,860)    (10,258)
  Cumulative foreign currency translation adjustment........    (6,055)     (4,215)
                                                              --------    -------- 
     TOTAL STOCKHOLDERS' DEFICIT............................   (13,510)    (10,596)
                                                              --------    -------- 
                                                              $ 82,859    $ 75,353 
                                                              ========    ======== 

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

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

                                                        [Enlarge/Download Table]

                                                              FOR THE YEARS ENDED JUNE 30, 
                                                             ------------------------------
                                                               2004       2003       2002  
                                                             --------   --------   --------
                                                                  (U.S.$ IN THOUSANDS)     
                                                                                           
NET SALES................................................... $15,601    $15,467    $14,639 
NET SALES -- RELATED PARTIES................................  34,357     31,216     32,261 
                                                             -------    -------    ------- 
  TOTAL SALES...............................................  49,958     46,683     46,900 
COST OF GOODS SOLD..........................................  37,940     38,744     35,856 
                                                             -------    -------    ------- 
  GROSS PROFIT..............................................  12,018      7,939     11,044 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................   6,966      5,205      5,071 
                                                             -------    -------    ------- 
  OPERATING INCOME..........................................   5,052      2,734      5,973 
OTHER:                                                                                     
  Interest expense..........................................   2,097        251        185 
  Interest expense -- related parties.......................   6,624      7,336      6,397 
  Other (income) expense, net...............................    (681)     1,650        231 
  Other (income) expense, net -- related parties............      --      2,880         -- 
                                                             -------    -------    ------- 
  (LOSS) BEFORE INCOME TAXES................................  (2,988)    (9,383)      (840)
PROVISION FOR INCOME TAXES..................................   1,614        359        (10)
                                                             -------    -------    ------- 
  NET LOSS..................................................  (4,602)    (9,742)      (830)
OTHER COMPREHENSIVE INCOME (LOSS):                                                         
  Change in currency translation adjustment.................  (1,840)     2,669     (3,612)
                                                             -------    -------    ------- 
  COMPREHENSIVE LOSS........................................ $(6,442)   $(7,073)   $(4,442)
                                                             =======    =======    ======= 

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

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT 

                                                        [Enlarge/Download Table]

                                                   FOR THE YEARS ENDED JUNE 30, 2004 AND 2003 AND 2002
                                                   ---------------------------------------------------
                                                                                FOREIGN               
                                                                                CURRENCY              
                                                   PAID-IN    (ACCUMULATED    TRANSLATION             
                                                   CAPITAL      DEFICIT)       ADJUSTMENT      TOTAL  
                                                   --------   -------------   ------------   ---------
                                                                  (U.S.$ IN THOUSANDS)                
                                                                                                      
BALANCE, JUNE 30, 2001............................  $   25      $    314        $(3,272)     $ (2,933)
  Contribution from parent........................   1,922                                      1,922 
  Net (loss)......................................                  (830)                        (830)
  Foreign currency translation adjustment.........                               (3,612)       (3,612)
                                                    ------      --------        -------      -------- 
BALANCE, JUNE 30, 2002............................  $1,947      $   (516)       $(6,884)     $ (5,453)
                                                    ======      ========        =======      ======== 
  Contribution from parent........................   1,930                                      1,930 
  Net (loss)......................................                (9,742)                      (9,742)
  Foreign currency translation adjustment.........                                2,669         2,669 
                                                    ------      --------        -------      -------- 
BALANCE, JUNE 30, 2003............................  $3,877      $(10,258)       $(4,215)     $(10,596)
                                                    ======      ========        =======      ======== 
  Contribution from parent........................   3,528                                      3,528 
  Net (loss)......................................                (4,602)                      (4,602)
  Foreign currency translation adjustment.........                               (1,840)       (1,840)
                                                    ------      --------        -------      -------- 
BALANCE, JUNE 30, 2004............................  $7,405      $(14,860)       $(6,055)     $(13,510)
                                                    ======      ========        =======      ======== 

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

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                             FOR THE YEARS ENDED JUNE 30, 
                                                             ---------------------------- 
                                                              2004      2003       2002   
                                                             -------   -------   -------- 
                                                                 (U.S.$ IN THOUSANDS)     
                                                                                          
OPERATING ACTIVITIES:                                                                     
  Net (loss)................................................ $(4,602)  $(9,742)  $   (830)
  Adjustments to reconcile net (loss) to net cash used by                                 
     operating activities:                                                                
     Depreciation and amortization..........................   3,558     2,449      2,889 
     Deferred taxes.........................................     112     1,376        862 
     Allocated selling, general and administrative expenses                               
       from parent..........................................   2,217     1,930      1,922 
     Effects of changes in foreign currency and other.......    (378)    1,419       (474)
     Changes in operating assets and liabilities:                                         
       Accounts receivable..................................  (1,287)     (572)     1,469 
       Inventories..........................................  (9,699)   (1,398)   (13,181)
       Prepaid expenses and other current assets............     354    (2,534)      (791)
       Other assets.........................................      --        --         66 
       Related party receivables and payables...............   6,227     6,611      1,466 
       Accounts payable.....................................  (2,169)    3,540        971 
       Accrued expenses and other liabilities...............   4,022    (6,611)     5,021 
                                                             -------   -------   -------- 
          NET CASH USED BY OPERATING ACTIVITIES.............  (1,645)   (3,532)      (610)
                                                             -------   -------   -------- 
INVESTING ACTIVITIES:                                                                     
  Capital expenditures......................................  (3,024)   (4,260)    (2,657)
  Acquisition of a business.................................      --        --     (4,422)
  Other investing...........................................    (189)       --         -- 
                                                             -------   -------   -------- 
          NET CASH USED BY INVESTING ACTIVITIES.............  (3,213)   (4,260)    (7,079)
                                                             -------   -------   -------- 
FINANCING ACTIVITIES:                                                                     
  Net increase (decrease) in intercompany debt..............  (7,176)    7,578        809 
  Proceeds from long-term debt..............................  20,000        --         -- 
  Payment of Pfizer obligations.............................  (8,225)       --         -- 
                                                             -------   -------   -------- 
          NET CASH PROVIDED BY FINANCING ACTIVITIES.........   4,599     7,578        809 
                                                             -------   -------   -------- 
EFFECT OF EXCHANGE RATE CHANGES ON CASH.....................      (8)       78         86 
                                                             -------   -------   -------- 
          NET DECREASE IN CASH AND CASH EQUIVALENTS.........    (267)     (136)    (6,794)
CASH AND CASH EQUIVALENTS at beginning of period............     689       825      7,619 
                                                             -------   -------   -------- 
CASH AND CASH EQUIVALENTS at end of period.................. $   422   $   689   $    825 
                                                             =======   =======   ======== 
Supplemental Cash Flow Information:                                                       
  Interest paid............................................. $    89   $    88   $     -- 
  Income taxes paid.........................................      63       956        358 

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

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. $ IN THOUSANDS) 

1.  DESCRIPTION OF BUSINESS                                                     

    Philipp Brothers Netherlands I B.V., a company organized under the laws of
The Netherlands, (the "Company") is a global manufacturer and marketer of a     
broad range of animal health and nutrition products, specifically medicated feed
additives ("MFA"), which the Company sells throughout the world predominately to
the poultry, swine and cattle markets.                                          

 The Company is a direct wholly-owned subsidiary of Phibro Animal Health
Holdings, Inc ("PAH Holdings") and an indirect wholly-owned subsidiary of Phibro
Animal Health Corporation ("PAHC"). PAHC has agreed to fund the Company's cash  
flows to the extent required through January 31, 2006.                          

  On November 30, 2000, PAHC purchased the medicated feed additive ("MFA")
business of Pfizer, Inc. The Company, the Company's subsidiaries and PAH        
Holdings were part of that acquisition. In connection with the MFA acquisition  
additional purchase price of $4,422, was earned and paid in 2002. All earn-out  
requirements have been satisfied and no further payments are necessary.         

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:                      

   The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries, including Phibro Animal Health SA ("PAH    
Belgium") and Philipp Brothers Brasil Holdings Ltda. ("PAH Brazil"). All        
significant intercompany accounts and transactions have been eliminated in the  
consolidated financial statements.                                              

    The Company presents its consolidated financial statements on the basis of
its fiscal year ending June 30. All references to years 2004, 2003, and 2002 in 
these financial statements refer to the fiscal year ended June 30 of that year. 

RISKS AND UNCERTAINTIES:                                                    

The use of antibiotics in medicated feed additives is a subject of    
legislative and regulatory interest. The issue of potential for increased       
bacterial resistance to certain antibiotics used in certain food-producing      
animals is the subject of discussions on a worldwide basis and, in certain      
instances, has led to government restrictions on the use of antibiotics in      
food-producing animals. The sale of feed additives containing antibiotics is a  
material portion of the Company's business. Should regulatory or other          
developments result in further restrictions on the sale of such products, it    
could have a material adverse impact on the Company's financial position,       
results of operations and cash flows.                                           

   The testing, manufacturing, and marketing of certain products are subject
to extensive regulation by numerous government authorities in the United States 
and other countries.                                                            

    A significant portion of the Company's sales and earnings are attributable
to transactions with related parties.                                           

USE OF ESTIMATES:                                                           

Preparation of the Company's financial statements in conformity with  
accounting principles generally accepted in the United States of America        
requires management to make certain estimates and assumptions that affect the   
reported amounts of assets, liabilities, revenues, expenses and related         
disclosures. Actual results could differ from these estimates. Significant      
estimates include reserves for bad debts, inventory obsolescence, environmental 
matters, depreciation and amortization periods of long-lived assets,            
recoverability of long-lived assets and realizability of deferred tax assets and
actuarial assumptions related to the Company's pension plan.                    

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

REVENUE RECOGNITION:                                                        

   Revenue is recognized upon transfer of title and when risk of loss passes
to the customer, generally at time of shipment. Net sales reflect total sales   
billed, less reductions for goods returned and trade discounts.                 

CASH:                                                                       

  Cash includes cash in banks. Cash also includes cash, of a subsidiary of
the Company, which is on deposit in a restricted bank account under a           
contractual obligation with a customer, in the amount of $175 at June 30, 2004  
and 2003. This cash was subsequently released during December 2004.             

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:                    

  Trade accounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for doubtful accounts is the Company's best        
estimate of the probable credit losses in its existing accounts receivable. The 
allowance is based on historical write-off experience and is reviewed           
periodically. Past due balances are reviewed individually for collectibility.   
Account balances are charged against the allowance when the Company feels that  
it is probable that the receivable will not be recovered.                       

The allowance for doubtful accounts was:                              

                                                                [Download Table]

                                                              2004   2003   2002
                                                              ----   ----   ----
                                                                                
Balance at beginning of period..............................  $ 58   $20    $25 
Provision for bad debts.....................................    --    38     -- 
Bad debt write-offs.........................................   (19)   --     (5)
                                                              ----   ---    --- 
Balance at end of period....................................  $ 39   $58    $20 
                                                              ====   ===    === 

INVENTORIES:                                                                

   Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) method. Obsolete and unsaleable
inventories are reflected at estimated net realizable value. Inventory costs    
include materials, direct labor and manufacturing overhead. Inventories are     
comprised of:                                                                   

                                                                [Download Table]

                                                               AS OF JUNE 30,  
                                                              -----------------
                                                               2004      2003  
                                                              -------   -------
                                                                               
Raw materials...............................................  $ 1,454   $ 2,016
Work-in-process.............................................      585       220
Finished goods..............................................   30,572    20,532
                                                              -------   -------
Total inventory.............................................  $32,611   $22,768
                                                              =======   =======

PROPERTY, PLANT AND EQUIPMENT:                                              

Property, plant and equipment are stated at cost.                     

  Depreciation is charged to results of operations using the straight-line
method based upon the assets' estimated useful lives ranging from 8 to 20 years 
for buildings and improvements and 3 to 10 years for machinery and equipment.   

 The Company capitalizes costs that extend the useful life or productive
capacity of an asset. Repair and maintenance costs are expensed as incurred. In 
the case of disposals, the assets and related accumulated depreciation are      
removed from the accounts, and the net amounts, less proceeds from disposal, are
included in the statements of operations and comprehensive loss.                

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PHILIPP BROTHERS NETHERLANDS I B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

DEFERRED FINANCING COSTS:                                                   

   Deferred financing costs related to the 13% Senior Secured Notes due 2007
were allocated to the Company from PAHC and were $1,311 net of accumulated      
amortization of $227 at June 30, 2004. These deferred financing costs are being 
amortized over the life of the notes. Amortization expense was $227 for 2004.   

INTANGIBLES:                                                                

  Product intangibles cost arising from the MFA acquisition was $2,191 and
$2,069 at June 30, 2004 and 2003, respectively, and accumulated amortization of 
$622 and $251 at June 30, 2004 and 2003, respectively. Amortization expense was 
$252, $156 and $201 for 2004, 2003 and 2002, respectively. Amortization expense 
from the MFA acquisition for each of the next five years from 2005 to 2009 is   
expected to be approximately $250 per year. These product intangible costs are  
being amortized on a straight-line basis over ten years with 6 1/2 years        
remaining at June 30, 2004.                                                     

FOREIGN CURRENCY TRANSLATION:                                               

  Financial position and results of operations of the Company are measured
using the Euro as the functional currency. Assets and liabilities are translated
at the exchange rates in effect at each fiscal year end. The translation        
adjustments related to assets and liabilities that arise from the use of        
differing exchange rates from period to period are included in cumulative       
foreign currency translation adjustment on the Company's balance sheet. Income  
statement accounts are translated at the average rates of exchange prevailing   
during the year.                                                                

Foreign currency transaction gains and losses primarily arise from    
short-term intercompany balances. Net foreign currency transaction (gains)      
losses were $(378), $1,419 and $(474) for 2004, 2003 and 2002, respectively, and
were included in other (income) expense, net in the consolidated statements of  
operations and comprehensive loss.                                              

    PAHC considers long-term notes payable with related parties to be balances
for which settlement is not planned or anticipated in the foreseeable future.   
PAHC considers these balances to be part of the net investment and, accordingly,
foreign currency transaction (gains) losses from such items are recorded in     
cumulative foreign currency translation adjustment on the Company's balance     
sheet.                                                                          

RECOVERABILITY OF LONG-LIVED ASSETS:                                        

  The Company evaluates the recoverability of long-lived assets, including
intangible assets, when events or circumstances indicate that a diminution in   
value may have occurred, using financial indicators such as historical and      
future ability to generate cash flows from operations. The Company's policy is  
to record an impairment loss in the period it is determined the carrying amount 
of the asset may not be recoverable. This determination is based on an          
evaluation of such factors as the occurrence of a significant event, a          
significant change in the environment in which the business operates, or if the 
expected future net cash flows (undiscounted and without interest or income     
taxes) are less than the carrying amount of the assets.                         

INCOME TAXES:                                                               

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

RESEARCH AND DEVELOPMENT EXPENDITURES:                                      

     Research and development expenditures are expensed as incurred, recorded in
selling, general and administrative expenses and were $520, $273 and $273 for   
2004, 2003 and 2002, respectively.                                              

NEW ACCOUNTING PRONOUNCEMENTS:                                              

     The Company adopted the following new and revised accounting pronouncements
in fiscal 2004:                                                                 

Statement of Financial Accounting Standards No. 132, "Employers'      
Disclosures about Pensions and Other Postretirement Benefits, an amendment to   
FASB Statements No. 87, 88, and 106 (revised 2003)" ("SFAS No. 132"). This      
revision to SFAS No. 132 relates to employers' disclosures about pension plans  
and other postretirement benefit plans. SFAS No. 132 now requires additional    
disclosures to describe the types of plan assets, investment strategy,          
measurement date(s), plan obligations, cash flows, and components of net        
periodic benefit cost recognized during interim periods of defined pension plans
and other defined postretirement plans. The additional disclosures required by  
this revision to SFAS No. 132 have been provided.                               

  FASB Interpretation No. 46, "Consolidation of Variable Interest Entities
(revised December 2003)" ("FIN No. 46"). This revision to FIN No. 46 clarifies  
the application of Accounting Research Bulletin No. 51, "Consolidated Financial 
Statements", to certain entities in which equity investors do not have the      
characteristics of a controlling financial interest or do not have sufficient   
equity at risk for the entity to finance its activities without additional      
subordinated financial support. The adoption of FIN No. 46 did not result in a  
material impact on the Company's financial statements.                          

   The Company will adopt the following new accounting pronouncements during
2005:                                                                           

   Statement of Financial Accounting Standards No. 151, "Inventory Costs, an
amendment to Accounting Research Bulletin No. 43, Chapter 4" ("SFAS No. 151").  
SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing"  
to clarify the accounting for abnormal amounts of idle facility expense,        
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB No. 
43, Chapter 4, previously stated that "...under some circumstances, items such  
as idle facility expense, excessive spoilage, double freight, and rehandling    
costs may be so abnormal as to require treatment as current period charges...." 
SFAS No. 151 requires that those items be recognized as current period charges  
regardless of whether they meet the criterion of "so abnormal". In addition,    
SFAS No. 151 requires that allocation of fixed production overheads to the costs
of conversion be based on the normal capacity of the production facilities. SFAS
No. 151 is effective for inventory costs incurred during fiscal years beginning 
after June 30, 2005 and the provisions of this statement shall be applied       
prospectively. The Company is currently assessing the impact of this statement. 

Statement of Financial Accounting Standards No. 153, "Exchanges of    
Nonmonetary Assets, an amendment of APB Opinion No. 29" ("SFAS No. 153"). SFAS  
No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary    
exchanges of similar productive assets and replaces it with a general exception 
for exchanges of nonmonetary assets that do not have commercial substance. A    
nonmonetary exchange has commercial substance if the future cash flows of the   
entity are expected to change significantly as a result of the exchange. SFAS   
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after December 2004. The provisions of this statement shall be applied
prospectively. The Company is currently assessing the impact of this statement. 

3.  REFINANCING                                                                 

     On October 21, 2003, PAHC issued 105,000 units consisting of $85,000 of 13%
Senior Secured Notes due 2007 of PAHC and $20,000 13% Senior Secured Notes due  
2007 of Philipp Brothers Netherlands III                                        

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

B.V., an indirect wholly-owned subsidiary of the Company. Certain proceeds from 
the issuance were to satisfy its outstanding obligations to Pfizer Inc.,        
including $8,225 of accounts payable.                                           

4.  PROPERTY, PLANT AND EQUIPMENT                                               

Property, plant and equipment is comprised of:                        

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                              ----------------- 
                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Land........................................................  $ 4,199   $ 4,287 
Buildings and improvements..................................   10,267     8,820 
Machinery and equipment.....................................   25,321    23,859 
                                                              -------   ------- 
                                                               39,787    36,966 
Less: accumulated depreciation..............................   (9,199)   (6,234)
                                                              -------   ------- 
                                                              $30,588   $30,732 
                                                              =======   ======= 

     Depreciation expense was $3,079, $2,293 and $2,688 for 2004, 2003 and 2002,
respectively.                                                                   

5.  RELATED PARTY TRANSACTIONS                                                  

   The Company transacts business with PAHC and certain of its subsidiaries.
The amounts of these transactions, and the related receivables and payables,    
reflected in the Company's financial statements are as follows:                 

                                                                [Download Table]

                                                          2004     2003     2002  
                                                         -------  -------  -------
                                                                                  
Product sales........................................... $34,357  $31,216  $32,261
Product purchases.......................................     913    3,086    4,028
Receivables at June 30..................................   7,917   11,116   16,730
Payables at June 30.....................................   1,687      922    1,989

     The Company has notes payable to related parties. These notes bear interest
at 6%, 9%, 13% and 13.125% per annum and interest is payable annually on        
December 31. The Company's related interest obligations to related parties will 
be payable only to the extent that the Company's cash flows are sufficient to   
service such obligations. These notes mature on June 23, 2006, September 22,    
2006, December 1, 2007 and July 2, 2011. These notes payable are included in    
notes payable -- related parties on the Company's consolidated balance sheet.   

 During August and September 2001, Odda, a Norwegian subsidiary of PAHC,
issued $2,000 of 9 7/8% promissory notes, with a 5-year maturity, to PAH Brazil.
During 2003 PAHC determined it would permanently shutdown and no longer fund the
operations of Odda, and on February 28, 2003 Odda filed for bankruptcy in       
Norway. As a result of the bankruptcy, during 2003, the Company recorded a      
reserve of $2,280 for the principal amount of the promissory notes plus accrued 
interest. This reserve was included in other (income) expense, net -- related   
parties on the Company's consolidated statements of operations and comprehensive
loss.                                                                           

   Cost allocations from PAHC and certain other related parties are included
in selling, general and administrative expenses on the Company's consolidated   
statements of operations and comprehensive loss. These allocations are based    
upon the ratio of the Company's third party sales to the third party sales of   
PAHC and certain other related parties, and represent administrative costs      
incurred by these entities in support of the operations of the Company. These   
cost allocations amounted to $2,217, $1,930 and $1,922 for 2004, 2003 and       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

2002, respectively. PAHC and the certain other related parties have decided not 
to seek repayment for these amounts from the Company and contributed these      
amounts as additional capital to the Company.                                   

6.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES                              

Accrued expenses and other current liabilities are comprised of:      

                                                                [Download Table]

                                                               AS OF JUNE 30,  
                                                              -----------------
                                                               2004      2003  
                                                              -------   -------
                                                                               
Employee related expenses...................................  $ 3,264   $ 2,876
Tax accruals................................................    8,167     5,188
Interest accruals...........................................      217        --
Other accrued liabilities...................................    1,790     1,096
                                                              -------   -------
                                                              $13,438   $ 9,160
                                                              =======   =======

7.  DEBT                                                                        

 In October 2003 PAHC issued 105,000 units, consisting of $85,000 of 13%
Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and $20,000 of 13%
Senior Secured Notes due 2007 of Philipp Brothers Netherlands III B.V. (the     
"Dutch Senior Notes" and together with the US Senior notes, the "Senior Secured 
Notes"), (the "Dutch issuer"), an indirect wholly-owned subsidiary of the       
Company.                                                                        

   The Dutch Senior Notes are senior secured obligations of the Dutch issuer
and are guaranteed on a senior secured basis by PAHC and by the restricted      
subsidiaries of the Dutch issuer, presently consisting of Phibro Animal Health  
SA. The Dutch Senior Notes and related guarantees are secured by a pledge of all
the accounts receivable, a security interest or floating charge on the inventory
to the extent permitted by applicable law, and a mortgage on substantially all  
of the real property of the Dutch issuer and each of its restricted             
subsidiaries, a pledge of 100% of the capital stock of each subsidiary of the   
Dutch issuer, and a pledge of the intercompany loans made by the Dutch issuer to
its restricted subsidiaries.                                                    

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

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

8.  EMPLOYEE BENEFIT PLANS                                                      

The Company's Belgium subsidiary maintains a defined benefit plan for 
eligible employees. The benefits provided by the plan are based upon years of   
service and the employees' average compensation, as defined. The measurement    
date for the plan was June 30, 2004 and 2003, respectively.                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

    Reconciliations of changes in benefit obligations, plan assets, and funded
status of the plans were:                                                       

                                                                [Download Table]

                                                             JUNE 2004  JUNE 2003
                                                             ---------  ---------
                                                                                 
CHANGE IN BENEFIT OBLIGATION                                                     
Benefit obligation at beginning of year.....................  $6,595     $4,251  
Service cost................................................     467        310  
Employee contributions......................................      27        100  
Interest cost...............................................     374        259  
Benefits paid...............................................      (3)       (29) 
Actuarial (gain) or loss....................................    (475)       879  
Exchange rate impact........................................     338        825  
                                                              ------     ------  
Benefit obligation at end of year...........................  $7,323     $6,595  
                                                              ======     ======  

    At June 30, 2004 and 2003, the accumulated benefit obligations were $4,383
and $4,248, respectively.                                                       

                                                                [Download Table]

                                                             JUNE 2004  JUNE 2003
                                                             ---------  ---------
                                                                                 
CHANGE IN PLAN ASSETS                                                            
Fair value of plan assets at beginning of year..............  $4,566     $2,882  
Actual return on plan assets................................     435        204  
Employer contributions......................................     558        841  
Employee contributions......................................      27        100  
Benefits paid...............................................      (3)       (29) 
Exchange rate impact........................................     245        568  
                                                              ------     ------  
Fair value of plan assets at end of year....................  $5,828     $4,566  
                                                              ======     ======  

                                                                [Download Table]

                                                             JUNE 2004  JUNE 2003
                                                             ---------  ---------
                                                                                 
FUNDED STATUS                                                                    
Funded status of the plan...................................  $(1,495)   $(2,029)
Unrecognized net actuarial (gain) or loss...................      368        961 
                                                              -------    ------- 
(Accrued) pension cost......................................  $(1,127)   $(1,068)
                                                              =======    ======= 

    The Company expects to contribute $602 to the plan during fiscal 2005. The
Company's policy is to fund the plan in amounts which comply with contribution  
limits imposed by law.                                                          

Components of net periodic pension expense were:                      

                                                                [Download Table]

                                                             2004    2003    2002  
                                                             -----   -----   ----- 
                                                                                   
Service cost -- benefits earned during the year............. $ 467   $ 310   $ 217 
Interest cost on benefit obligation.........................   374     259     164 
Expected return on plan assets..............................  (300)   (203)   (123)
Amortization of net actuarial loss..........................    22      --      -- 
                                                             -----   -----   ----- 
Net periodic pension cost................................... $ 563   $ 366   $ 258 
                                                             =====   =====   ===== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

Significant actuarial assumptions for the plan were:                  

                                                                [Download Table]

                                                              2004   2003   2002
                                                              ----   ----   ----
                                                                                
Discount rate for service and interest......................  5.5%   5.8%   5.8%
Expected rate of return on plan assets......................  6.0%   6.0%   6.0%
Rate of compensation increase...............................  3.0%   3.0%   3.0%
Discount rate for year-end benefit obligation...............  5.5%   5.5%   5.8%

Estimated future benefit payments, including benefits attributable to 
future service, are as follows:                                                 

                                                                [Download Table]
                                                                    
2005........................................................  $   37
2006........................................................      38
2007........................................................      40
2008........................................................      41
2009........................................................      42
2010-2014...................................................   1,817

The Company's plan target allocations for fiscal 2005 and the weighted
asset allocation of plan assets as of June 30, 2004 and 2003 are as follows:    

                                                                [Download Table]

                                                              2005   2004   2003
                                                              ----   ----   ----
                                                                                
Debt securities.............................................  59%    62%    79% 
Equity securities...........................................  25%    21%    20% 
Other.......................................................  16%    17%     1% 

    The expected long-term rate of return for the plan's total assets is based
on the expected return of each of the above categories, weighted based on the   
target allocation for each class. Equity securities are expected to return 7.5% 
over the long-term, while debt securities are expected to return 5.5%.          

   The Company assumed the liability for the plan during 2002 as part of the
MFA acquisition from Pfizer.                                                    

The Company's Brazil subsidiary provides a savings plan, under which  
eligible employees may make a pre-tax contribution of up to 12% of base         
compensation. The Company makes a matching contribution equal to the employee's 
contribution up to the first 6% of base compensation. All employee contributions
are subject to the maximum amounts permitted under statutory income tax         
guidelines. Expense related to the Company's contribution under this plan was   
$58, $41 and $39 for 2004, 2003 and 2002, respectively.                         

     In addition the Company's Brazil subsidiary makes a supplemental retirement
contribution on behalf of certain eligible employees transferred to the Company 
in December 2000. Expense related to the Company's contribution was $30, $24 and
$30 in 2004, 2003 and 2002, respectively.                                       

9.  INCOME TAXES                                                                

                                                        [Enlarge/Download Table]

                                                            2004      2003     2002  
                                                           -------   -------   ----- 
                                                                                     
Loss before income taxes.................................. $(2,988)  $(9,383)  $(840)
                                                           =======   =======   ===== 
Current tax provision (benefit)........................... $ 1,502   $(1,017)  $(872)
Deferred tax provision....................................     112     1,376     862 
                                                           -------   -------   ----- 
Provision (benefit) for income taxes...................... $ 1,614   $   359   $ (10)
                                                           =======   =======   ===== 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

Reconciliations of the statutory income tax rate and the Company's    
effective income tax rate are:                                                  

                                                                [Download Table]

                                                             2004    2003    2002  
                                                             -----   -----   ----- 
                                                               %       %       %   
                                                                                   
Statutory income tax rate................................... (34.0)  (34.0)  (34.0)
Foreign tax rate differences................................   9.3     1.5   (36.4)
Expenses with no tax benefit................................  34.2     6.4    72.4 
Changes in valuation allowance..............................  33.8    27.2      -- 
Other.......................................................  10.7     2.7    (3.2)
                                                             -----   -----   ----- 
Effective income tax rate...................................  54.0     3.8    (1.2)
                                                             =====   =====   ===== 

     The tax effects of significant temporary differences that comprise deferred
tax assets and deferred tax liabilities at June 30, 2004 and 2003 were:         

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                              ----------------- 
                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Deferred tax assets:                                                            
  Depreciation..............................................  $     7   $     7 
  Inventory.................................................      615       615 
  Net operating loss carry forwards.........................    3,686     1,849 
  Other.....................................................       97        11 
                                                              -------   ------- 
                                                                4,405     2,482 
  Less: valuation allowance.................................   (3,686)   (1,849)
                                                              -------   ------- 
                                                                  719       633 
                                                              -------   ------- 
Deferred tax liabilities:                                                       
  Depreciation..............................................   (1,022)     (990)
  Other.....................................................   (1,143)     (977)
                                                              -------   ------- 
                                                               (2,165)   (1,967)
                                                              -------   ------- 
Net deferred tax liability..................................  $(1,446)  $(1,334)
                                                              =======   ======= 

  Deferred taxes are included in the following line items on the Company's
consolidated balance sheets:                                                    

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                              ----------------- 
                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Prepaid expenses and other current assets...................  $   315   $   315 
Other liabilities...........................................   (1,761)   (1,649)
                                                              -------   ------- 
                                                              $(1,446)  $(1,334)
                                                              =======   ======= 

The Company has incurred losses in recent years and has reassessed the
likelihood of recovering net deferred tax assets, resulting in the recording of 
valuation allowances due to the uncertainty of future profitability. The Company
will continue to evaluate the likelihood of recoverability of these deferred tax
assets based upon actual and expected operating performance.                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

10.  SUBSEQUENT EVENTS                                                          

ISSUANCE OF ADDITIONAL 13% SENIOR SECURED NOTES:                            

On December 21, 2004, PAHC completed a private offering of 22,491     
additional units consisting of $18,207 13% Senior Secured Notes due 2007 of PAHC
(the "U.S. Notes") and $4,284 13% Senior Secured Notes due 2007 (the "Dutch     
Notes" and together with the U.S. Notes, the "Additional Notes") of Philipp     
Brothers Netherlands III B.V., an indirect wholly-owned subsidiary of the       
Company (the "Dutch Issuer" and together with PAHC, the "Issuers"). The         
Additional Notes were issued under the Indenture dated October 21, 2003, as     
amended and supplemented (the "Indenture") under which the Issuers previously   
issued 105,000 units consisting of $85,000 aggregate principal amount of U.S.   
Notes and $20,000 aggregate principal amount of Dutch Notes. The proceeds from  
the sale of the Additional Notes will be used to refinance a portion of PAHC's  
indebtedness under its domestic senior credit facility.                         

SALE OF BELGIUM PLANT:                                                      

On December 16, 2004 PAH Belgium entered into an agreement with       
GlaxoSmithKline Biologicals ("GSK") to sell to GSK substantially all of PAH     
Belgium's facilities in Rixensart, Belgium ("the Belgium Plant") as follows     
(U.S. dollar amounts at the December 16, 2004 exchange rate): (i) the transfer  
of substantially all of the land and buildings and certain equipment of PAH     
Belgium at the Belgium Plant, as well as the industrial activities and          
intellectual property relating to certain solvent technology of PAH Belgium for 
a purchase price of EUR 6,200 ($8,238), payable at closing; (ii) the transfer to
GSK of a majority of the employees of the Belgium Plant and the corresponding   
responsibility for statutory severance obligations; (iii) GSK agreeing to be    
responsible for costs of removal, by demolition or otherwise, certain buildings 
not to be used by it, but for PAH Belgium to reimburse GSK up to a maximum of   
EUR 700 ($930) for such removal costs; (iv) in recognition of the benefits to   
PAHC from the proposed transaction, PAH Belgium agreeing to pay to GSK EUR 1,500
($1,993) within six months from the closing date, EUR 1,500 ($1,993) within     
eighteen months from the closing date, EUR 1,500 ($1,993) within thirty months  
from the closing date, and EUR 500 ($664) within forty-two months from the      
closing date; (v) PAH Belgium retaining certain excess land (valued at          
approximately EUR 400 ($531)) and being able to sell such land for its own      
account; (vi) PAH Belgium being responsible for certain plant closure costs and 
legally required severance indemnities in connection with workforce reductions, 
estimated in total to be EUR 7,700 ($10,231), of which an amount estimated to be
approximately EUR 4,100 ($5,448) would be payable at or around the closing and  
an aggregate amount so estimated to be approximately EUR 3,600 ($4,783) would be
payable over periods up to thirteen years; and (vii) PAH Belgium retaining any  
or all equipment at the Belgium Plant, and being able to sell such equipment for
the account of PAH Belgium or transfer such equipment, together with other      
assets and rights related to the production of virginiamycin, to PAH Brazil     
which owns a facility in Guarulhos, Brazil or in connection with alternative    
production arrangements.                                                        

    The foregoing transactions and agreements are subject to a closing that is
expected to occur no earlier than July 1, 2005 nor later than June 30, 2006.    

 The Dutch Notes and related guarantees are secured by a mortgage on the
Belgium Plant which will be released in connection with the closing of the sale 
of the Belgium Plant to GSK.                                                    

     The carrying value of the Belgium Plant and related assets at September 30,
2004 is EUR 13,098 ($18,480). The Company is in the process of evaluating the   
accounting for this transaction and will record an impairment loss, if required 
in the second quarter ended December 31, 2004. In addition, the Company will    
expense severance, plant closure and other related costs in the period in which 
such liabilities are incurred in accordance with Statement of Financial         
Accounting Standards No. 146, "Accounting for Costs Associated with Exit or     
Disposal Activities". As of the date of this filing, estimates of such costs are
in process of being determined.                                                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 

11.  FINANCIAL INSTRUMENTS                                                      

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

The carrying amounts of cash, trade receivables and trade payables is 
considered to be representative of their fair value because of their short      
maturities. The fair value of the Company's Dutch Senior Notes is estimated     
based on quoted market prices. At June 30, 2004 the fair value of the Company's 
Dutch Senior Notes was $21,800 and the related carrying amount was $20,000.     

12.  BUSINESS SEGMENTS                                                          

The Company has determined that it operates only in one segment. The  
Company manufactures and markets numerous formulations and concentrations of    
medicated feed additives including antibiotics, antibacterials, anticoccidials, 
anthelmintics, and other animal health and nutrition products.                  

13.  GEOGRAPHIC INFORMATION                                                     

 The following is information about the Company's geographic operations.
Information is attributed to the geographic areas based on the location of the  
Company's subsidiaries.                                                         

                                                                [Download Table]

                                                          2004     2003     2002  
                                                         -------  -------  -------
                                                                                  
TOTAL SALES                                                                       
  Europe................................................ $34,713  $33,619  $25,705
  South America.........................................  15,245   13,064   21,195
                                                         -------  -------  -------
  Total................................................. $49,958  $46,683  $46,900
                                                         =======  =======  =======

                                                                [Download Table]

                                                          2004     2003     2002  
                                                         -------  -------  -------
                                                                                  
PROPERTY, PLANT AND EQUIPMENT, NET                                                
  Europe................................................ $17,320  $17,049  $14,399
  South America.........................................  13,268   13,683   11,799
                                                         -------  -------  -------
  Total................................................. $30,588  $30,732  $26,198
                                                         =======  =======  =======

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 

To the Board of Directors of Phibro Animal Health SA (Belgium):                 

    In our opinion, the accompanying balance sheets and the related statements
of operations and comprehensive (loss), changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of Phibro
Animal Health SA (Belgium) at June 30, 2004 and June 30, 2003, and the results  
of its operations and its cash flows for each of the three years in the period  
ended June 30, 2004, in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the             
responsibility of the Company's management; our responsibility is to express an 
opinion on these financial statements based on our audits. We conducted our     
audits of these statements in accordance with the standards of the Public       
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the  
financial statements are free of material misstatement. An audit includes       
examining, on a test basis, evidence supporting the amounts and disclosures in  
the financial statements, assessing the accounting principles used and          
significant estimates made by management, and evaluating the overall financial  
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

PricewaterhouseCoopers LLP                                                      
Florham Park, New Jersey                                                        
January 10, 2005                                                                

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

BALANCE SHEETS

                                                                [Download Table]

                                                                 AS OF JUNE 30,    
                                                              ---------------------
                                                                2004        2003   
                                                              ---------   ---------
                                                              (U.S.$ IN THOUSANDS) 
                                                                                   
                                      ASSETS                                       
CURRENT ASSETS:                                                                    
  Cash, including restricted balance of $175 at June 30,                           
     2004 and 2003..........................................   $   212     $   185 
  Trade receivables, less allowance for doubtful accounts of                       
     $13 and $22 at June 30, 2004 and 2003, respectively....     2,592       1,542 
  Other receivables.........................................        72         518 
  Inventories...............................................    23,159      13,460 
  Prepaid expenses and other current assets.................     1,018       1,866 
  Trade receivables -- related parties......................     4,527       8,553 
                                                               -------     ------- 
     TOTAL CURRENT ASSETS...................................    31,580      26,124 
PROPERTY, PLANT AND EQUIPMENT, net..........................    17,321      17,049 
INTANGIBLES.................................................     1,569       1,818 
                                                               -------     ------- 
                                                               $50,470     $44,991 
                                                               =======     ======= 

                       LIABILITIES AND STOCKHOLDERS' EQUITY                        
CURRENT LIABILITIES:                                                               
  Accounts payable..........................................   $ 2,258     $12,115 
  Accrued expenses and other current liabilities............     8,291       4,804 
  Trade payables -- related parties.........................     2,879       1,835 
                                                               -------     ------- 
     TOTAL CURRENT LIABILITIES..............................    13,428      18,754 
OTHER LIABILITIES...........................................     2,897       2,905 
NOTES PAYABLE -- RELATED PARTIES............................    30,571      22,306 
                                                               -------     ------- 
     TOTAL LIABILITIES......................................    46,896      43,965 
                                                               -------     ------- 
STOCKHOLDERS' EQUITY:                                                              
  Paid-in capital...........................................     1,896       1,186 
  Accumulated deficit.......................................    (2,631)     (3,937)
  Cumulative foreign currency translation adjustment........     4,309       3,777 
                                                               -------     ------- 
     TOTAL STOCKHOLDERS' EQUITY.............................     3,574       1,026 
                                                               -------     ------- 
                                                               $50,470     $44,991 
                                                               =======     ======= 

The accompanying notes are an integral part of the financial statements 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

                                                        [Enlarge/Download Table]

                                                              FOR THE YEARS ENDED JUNE 30, 
                                                             ------------------------------
                                                               2004       2003       2002  
                                                             --------   --------   --------
                                                                  (U.S.$ IN THOUSANDS)     
                                                                                           
NET SALES................................................... $ 5,742    $ 6,625    $ 4,196 
NET SALES -- RELATED PARTIES................................  28,970     26,994     21,509 
                                                             -------    -------    ------- 
  TOTAL SALES...............................................  34,712     33,619     25,705 
COST OF GOODS SOLD..........................................  25,293     31,435     21,631 
                                                             -------    -------    ------- 
  GROSS PROFIT..............................................   9,419      2,184      4,074 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................   3,334      2,595      2,018 
                                                             -------    -------    ------- 
  OPERATING INCOME (LOSS)...................................   6,085       (411)     2,056 
OTHER:                                                                                     
  Interest expense..........................................      95         62        365 
  Interest expense -- related parties.......................   3,335      2,849      2,486 
  Other (income) expense, net...............................    (265)     1,283      2,294 
                                                             -------    -------    ------- 
  INCOME (LOSS) BEFORE INCOME TAXES.........................   2,920     (4,605)    (3,089)
PROVISION (BENEFIT) FOR INCOME TAXES........................   1,614     (1,086)    (1,098)
                                                             -------    -------    ------- 
  NET INCOME (LOSS).........................................   1,306     (3,519)    (1,991)
OTHER COMPREHENSIVE INCOME:                                                                
  Change in currency translation adjustment.................     532      2,401      1,319 
                                                             -------    -------    ------- 
  COMPREHENSIVE INCOME (LOSS)............................... $ 1,838    $(1,118)   $  (672)
                                                             =======    =======    ======= 

The accompanying notes are an integral part of the financial statements 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                                                    FOR THE YEARS ENDED JUNE 30, 2004 AND 2003 AND 2002  
                                                   ------------------------------------------------------
                                                                                   FOREIGN               
                                                                                  CURRENCY               
                                                    PAID-IN     (ACCUMULATED     TRANSLATION             
                                                    CAPITAL       DEFICIT)       ADJUSTMENT       TOTAL  
                                                   ---------   --------------   -------------   ---------
                                                                    (U.S.$ IN THOUSANDS)                 
                                                                                                         
BALANCE, JUNE 30, 2001............................   $   --        $ 1,573          $   57       $ 1,630 
  Contribution from parent........................      459                                          459 
  Net (loss)......................................                  (1,991)                       (1,991)
  Foreign currency translation adjustment.........                                   1,319         1,319 
                                                     ------        -------          ------       ------- 
BALANCE, JUNE 30, 2002............................   $  459        $  (418)         $1,376       $ 1,417 
                                                     ======        =======          ======       ======= 
  Contribution from parent........................      727                                          727 
  Net (loss)......................................                  (3,519)                       (3,519)
  Foreign currency translation adjustment.........                                   2,401         2,401 
                                                     ------        -------          ------       ------- 
BALANCE, JUNE 30, 2003............................   $1,186        $(3,937)         $3,777       $ 1,026 
                                                     ======        =======          ======       ======= 
  Contribution from parent........................      710                                          710 
  Net (loss)......................................                   1,306                         1,306 
  Foreign currency translation adjustment.........                                     532           532 
                                                     ------        -------          ------       ------- 
BALANCE, JUNE 30, 2004............................   $1,896        $(2,631)         $4,309       $ 3,574 
                                                     ======        =======          ======       ======= 

The accompanying notes are an integral part of the financial statements 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

STATEMENTS OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                             FOR THE YEARS ENDED JUNE 30, 
                                                             ---------------------------- 
                                                              2004      2003       2002   
                                                             -------   -------   -------- 
                                                                 (U.S.$ IN THOUSANDS)     
                                                                                          
OPERATING ACTIVITIES:                                                                     
  Net income (loss)......................................... $ 1,306   $(3,519)  $ (1,991)
  Adjustments to reconcile net income (loss) to net cash                                  
     provided (used) by operating activities:                                             
     Depreciation and amortization..........................   2,669     2,019      2,252 
     Deferred taxes.........................................     112       142       (178)
     Allocated selling, general and administrative expenses                               
       from parent..........................................     658       727        459 
     Effects of changes in foreign currency and other.......    (264)    1,268      1,912 
     Changes in operating assets and liabilities:                                         
       Accounts receivable..................................    (945)     (322)       886 
       Inventories..........................................  (8,762)    2,270    (10,325)
       Prepaid expenses and other current assets............   1,369    (1,191)       273 
       Other assets.........................................      --        --         66 
       Related party receivables and payables...............   5,135     1,557      4,022 
       Accounts payable.....................................  (2,395)    3,523      1,472 
       Accrued expenses and other liabilities...............   2,790    (8,244)     3,193 
                                                             -------   -------   -------- 
          NET CASH PROVIDED (USED) BY OPERATING                                           
            ACTIVITIES......................................   1,673    (1,770)     2,041 
                                                             -------   -------   -------- 
INVESTING ACTIVITIES:                                                                     
  Capital expenditures......................................  (1,613)   (2,149)    (1,938)
  Acquisition of a business.................................      --        --     (4,422)
  Other investing...........................................      --        --         -- 
                                                             -------   -------   -------- 
          NET CASH USED BY INVESTING ACTIVITIES.............  (1,613)   (2,149)    (6,360)
                                                             -------   -------   -------- 
FINANCING ACTIVITIES:                                                                     
  Net increase in intercompany debt.........................   8,181     3,432      3,540 
  Payment of Pfizer obligations.............................  (8,225)       --         -- 
                                                             -------   -------   -------- 
          NET CASH PROVIDED (USED) BY FINANCING                                           
            ACTIVITIES......................................     (44)    3,432      3,540 
                                                             -------   -------   -------- 
EFFECT OF EXCHANGE RATE CHANGES ON CASH.....................      11        54        128 
                                                             -------   -------   -------- 
          NET INCREASE (DECREASE) IN CASH AND CASH                                        
            EQUIVALENTS.....................................      27      (433)      (651)
CASH AND CASH EQUIVALENTS at beginning of period............     185       618      1,269 
                                                             -------   -------   -------- 
CASH AND CASH EQUIVALENTS at end of period.................. $   212   $   185   $    618 
                                                             =======   =======   ======== 
Supplemental Cash Flow Information:                                                       
  Interest paid............................................. $    55   $    88   $     -- 
  Income taxes paid.........................................      --       366        358 

The accompanying notes are an integral part of the financial statements 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS 
(U.S.$ IN THOUSANDS)

1.  DESCRIPTION OF BUSINESS                                                     

 Phibro Animal Health SA, a company organized under the laws of Belgium,
(the "Company") is a manufacturer and marketer of a broad range of animal health
and nutrition products, specifically medicated feed additives ("MFA"), which the
Company sells in various markets predominately to the poultry, swine and cattle 
markets.                                                                        

The Company is a direct wholly-owned subsidiary of Philipp Brothers   
Netherlands III B.V. ("BV III") and an indirect wholly-owned subsidiary of both 
Philipp Brothers Netherlands I B.V. ("BV I") and Phibro Animal Health           
Corporation ("PAHC").                                                           

  On November 30, 2000, PAHC purchased the medicated feed additive ("MFA")
business of Pfizer, Inc. The Company, BV III and BV I were part of that         
acquisition. In connection with the MFA acquisition additional purchase price of
$4,422 was earned and paid in 2002. All earn-out requirements have been         
satisfied and no further payments are necessary.                                

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

BASIS OF PRESENTATION:                                                      

  The Company presents its financial statements on the basis of its fiscal
year ending June 30. All references to years 2004, 2003, and 2002 in these      
financial statements refer to the fiscal year ended June 30 of that year.       

RISKS AND UNCERTAINTIES:                                                    

The use of antibiotics in medicated feed additives is a subject of    
legislative and regulatory interest. The issue of potential for increased       
bacterial resistance to certain antibiotics used in certain food-producing      
animals is the subject of discussions on a worldwide basis and, in certain      
instances, has led to government restrictions on the use of antibiotics in      
food-producing animals. The sale of feed additives containing antibiotics is a  
material portion of the Company's business. Should regulatory or other          
developments result in further restrictions on the sale of such products, it    
could have a material adverse impact on the Company's financial position,       
results of operations and cash flows.                                           

   The testing, manufacturing, and marketing of certain products are subject
to extensive regulation by numerous government authorities in the United States 
and other countries.                                                            

    A significant portion of the Company's sales and earnings are attributable
to transactions with related parties.                                           

USE OF ESTIMATES:                                                           

Preparation of the Company's financial statements in conformity with  
accounting principles generally accepted in the United States of America        
requires management to make certain estimates and assumptions that affect the   
reported amounts of assets, liabilities, revenues, expenses and related         
disclosures. Actual results could differ from these estimates. Significant      
estimates include reserves for bad debts, inventory obsolescence, environmental 
matters, depreciation and amortization periods of long-lived assets,            
recoverability of long-lived assets and realizability of deferred tax assets and
actuarial assumptions related to the Company's pension plan.                    

REVENUE RECOGNITION:                                                        

   Revenue is recognized upon transfer of title and when risk of loss passes
to the customer, generally at time of shipment. Net sales reflect total sales   
billed, less reductions for goods returned and trade discounts.                 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CASH:                                                                       

Cash includes cash in banks. Cash also includes cash on deposit in a  
restricted bank account under a contractual obligation with a customer, in the  
amount of $175 at June 30, 2004 and 2003. This cash was subsequently released   
during December 2004.                                                           

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:                    

  Trade accounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for doubtful accounts is the Company's best        
estimate of the probable credit losses in its existing accounts receivable. The 
allowance is based on historical write-off experience and is reviewed           
periodically. Past due balances are reviewed individually for collectibility.   
Account balances are charged against the allowance when the Company feels that  
it is probable that the receivable will not be recovered.                       

The allowance for doubtful accounts was:                              

                                                                [Download Table]

                                                             2004  2003  2002 
                                                             ----  ----  -----
                                                                              
Balance at beginning of period.............................. $22   $--   $  --
Provision for bad debts.....................................  --    22      --
Bad debt write-offs.........................................  (9)   --      --
                                                             ---   ---   -----
Balance at end of period.................................... $13   $22   $  --
                                                             ===   ===   =====

INVENTORIES:                                                                

   Inventories are valued at the lower of cost or market. Cost is determined
principally under the first-in, first-out (FIFO) method. Obsolete and unsaleable
inventories are reflected at estimated net realizable value. Inventory costs    
include materials, direct labor and manufacturing overhead. Inventories are     
comprised of:                                                                   

                                                                [Download Table]

                                                               AS OF JUNE 30,  
                                                              -----------------
                                                               2004      2003  
                                                              -------   -------
                                                                               
Raw materials...............................................  $   910   $   820
Work-in-process.............................................      166        60
Finished goods..............................................   22,083    12,580
                                                              -------   -------
Total inventory.............................................  $23,159   $13,460
                                                              =======   =======

PROPERTY, PLANT AND EQUIPMENT:                                              

Property, plant and equipment are stated at cost.                     

  Depreciation is charged to results of operations using the straight-line
method based upon the assets' estimated useful lives ranging from 8 to 20 years 
for buildings and improvements and 3 to 10 years for machinery and equipment.   

 The Company capitalizes costs that extend the useful life or productive
capacity of an asset. Repair and maintenance costs are expensed as incurred. In 
the case of disposals, the assets and related accumulated depreciation are      
removed from the accounts, and the net amounts, less proceeds from disposal, are
included in the statements of operations and comprehensive income (loss).       

INTANGIBLES:                                                                

  Product intangibles cost arising from the MFA acquisition was $2,191 and
$2,069 at June 30, 2004 and 2003, respectively, and accumulated amortization of 
$622 and $251 at June 30, 2004 and 2003, respectively.                          

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense was $252, $156 and $201 for 2004, 2003 and 2002,           
respectively. Amortization expense from the MFA acquisition for each of the next
five years from 2005 to 2009 is expected to be approximately $250 per year.     
These product intangible costs are being amortized on a straight-line basis over
ten years with 6 1/2 years remaining at June 30, 2004.                          

FOREIGN CURRENCY TRANSLATION:                                               

  Financial position and results of operations of the Company are measured
using the Euro as the functional currency. Assets and liabilities are translated
at the exchange rates in effect at each fiscal year end. The translation        
adjustments related to assets and liabilities that arise from the use of        
differing exchange rates from period to period are included in cumulative       
foreign currency translation adjustment on the Company's balance sheet. Income  
statement accounts are translated at the average rates of exchange prevailing   
during the year.                                                                

Foreign currency transaction gains and losses primarily arise from    
short-term intercompany balances. Net foreign currency transaction (gains)      
losses were $(264), $1,268 and $1,912 for 2004, 2003 and 2002, respectively, and
were included in other (income) expense, net in the statements of operations and
comprehensive income (loss).                                                    

    PAHC considers long-term notes payable with related parties to be balances
for which settlement is not planned or anticipated in the foreseeable future.   
PAHC considers these balances to be part of the net investment and, accordingly,
foreign currency transaction (gains) losses from such items are recorded in     
cumulative foreign currency translation adjustment on the Company's balance     
sheet.                                                                          

RECOVERABILITY OF LONG-LIVED ASSETS:                                        

  The Company evaluates the recoverability of long-lived assets, including
intangible assets, when events or circumstances indicate that a diminution in   
value may have occurred, using financial indicators such as historical and      
future ability to generate cash flows from operations. The Company's policy is  
to record an impairment loss in the period it is determined the carrying amount 
of the asset may not be recoverable. This determination is based on an          
evaluation of such factors as the occurrence of a significant event, a          
significant change in the environment in which the business operates, or if the 
expected future net cash flows (undiscounted and without interest or income     
taxes) are less than the carrying amount of the assets.                         

INCOME TAXES:                                                               

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

RESEARCH AND DEVELOPMENT EXPENDITURES:                                      

     Research and development expenditures are expensed as incurred, recorded in
selling, general and administrative expenses and were $122 for 2004. There were 
no research and development expenditures in 2003 and 2002.                      

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS:                                              

     The Company adopted the following new and revised accounting pronouncements
in fiscal 2004:                                                                 

Statement of Financial Accounting Standards No. 132, "Employers'      
Disclosures about Pensions and Other Postretirement Benefits, an amendment to   
FASB Statements No. 87, 88, and 106 (revised 2003)" ("SFAS No. 132"). This      
revision to SFAS No. 132 relates to employers' disclosures about pension plans  
and other postretirement benefit plans. SFAS No. 132 now requires additional    
disclosures to describe the types of plan assets, investment strategy,          
measurement date(s), plan obligations, cash flows, and components of net        
periodic benefit cost recognized during interim periods of defined pension plans
and other defined postretirement plans. The additional disclosures required by  
this revision to SFAS No. 132 have been provided.                               

  FASB Interpretation No. 46, "Consolidation of Variable Interest Entities
(revised December 2003)" ("FIN No. 46"). This revision to FIN No. 46 clarifies  
the application of Accounting Research Bulletin No. 51, "Consolidated Financial 
Statements", to certain entities in which equity investors do not have the      
characteristics of a controlling financial interest or do not have sufficient   
equity at risk for the entity to finance its activities without additional      
subordinated financial support. The adoption of FIN No. 46 did not result in a  
material impact on the Company's financial statements.                          

   The Company will adopt the following new accounting pronouncements during
2005:                                                                           

   Statement of Financial Accounting Standards No. 151, "Inventory Costs, an
amendment to Accounting Research Bulletin No. 43, Chapter 4" ("SFAS No. 151").  
SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing"  
to clarify the accounting for abnormal amounts of idle facility expense,        
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB No. 
43, Chapter 4, previously stated that ". . . under some circumstances, items    
such as idle facility expense, excessive spoilage, double freight, and          
rehandling costs may be so abnormal as to require treatment as current period   
charges. . . ." SFAS No. 151 requires that those items be recognized as current 
period charges regardless of whether they meet the criterion of "so abnormal".  
In addition, SFAS No. 151 requires that allocation of fixed production overheads
to the costs of conversion be based on the normal capacity of the production    
facilities. SFAS No. 151 is effective for inventory costs incurred during fiscal
years beginning after June 30, 2005 and the provisions of this statement shall  
be applied prospectively. The Company is currently assessing the impact of this 
statement.                                                                      

Statement of Financial Accounting Standards No. 153, "Exchanges of    
Nonmonetary Assets, an amendment of APB Opinion No. 29" ("SFAS No. 153"). SFAS  
No. 153 amends APB Opinion No. 29 to eliminate the exception for nonmonetary    
exchanges of similar productive assets and replaces it with a general exception 
for exchanges of nonmonetary assets that do not have commercial substance. A    
nonmonetary exchange has commercial substance if the future cash flows of the   
entity are expected to change significantly as a result of the exchange. SFAS   
No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after December 2004. The provisions of this statement shall be applied
prospectively. The Company is currently assessing the impact of this statement. 

3.  REFINANCING                                                                 

     On October 21, 2003, PAHC issued 105,000 units consisting of $85,000 of 13%
Senior Secured Notes due 2007 of PAHC and $20,000 13% Senior Secured Notes due  
2007 of Philipp Brothers Netherlands III B.V., the direct parent of the Company.
Certain proceeds from the issuance were to satisfy its outstanding obligations  
to Pfizer Inc., including $8,225 of accounts payable.                           

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4.  PROPERTY, PLANT AND EQUIPMENT                                               

Property, plant and equipment is comprised of:                        

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                              ----------------- 
                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Land........................................................  $ 1,912   $ 1,806 
Buildings and improvements..................................    6,153     5,811 
Machinery and equipment.....................................   16,425    14,133 
                                                              -------   ------- 
                                                               24,490    21,750 
Less: accumulated depreciation..............................   (7,169)   (4,701)
                                                              -------   ------- 
                                                              $17,321   $17,049 
                                                              =======   ======= 

     Depreciation expense was $2,417, $1,863 and $2,051 for 2004, 2003 and 2002,
respectively.                                                                   

5.  RELATED PARTY TRANSACTIONS                                                  

   The Company transacts business with PAHC and certain of its subsidiaries.
The amounts of these transactions, and the related receivables and payables,    
reflected in the Company's financial statements are as follows:                 

                                                                [Download Table]

                                                          2004     2003     2002  
                                                         -------  -------  -------
                                                                                  
Product sales........................................... $28,970  $26,994  $21,509
Product purchases.......................................   3,553    5,344    3,498
Receivables at June 30..................................   4,527    8,553    9,770
Payables at June 30.....................................   2,879    1,835    1,371

     The Company has notes payable to related parties. These notes bear interest
at 13.125% per annum and interest is payable annually on December 31. The       
Company's related interest obligations to related parties will be payable only  
to the extent that the Company's cash flows are sufficient to service such      
obligations. These notes mature on December 7, 2007 and July 2, 2011. These     
notes payable are included in notes payable -- related parties on the Company's 
balance sheet.                                                                  

   Cost allocations from PAHC and certain other related parties are included
in selling, general and administrative expenses on the Company's statements of  
operations and comprehensive income (loss). These allocations are based upon the
ratio of the Company's third party sales to the third party sales of PAHC and   
certain other related parties, and represent administrative costs incurred by   
these entities in support of the operations of the Company. These cost          
allocations amounted to $658, $727 and $459 for 2004, 2003 and 2002,            
respectively. PAHC and the certain other related parties have elected not to    
seek repayment for these amounts from the Company and have contributed these    
amounts as additional capital to the Company.                                   

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES                              

Accrued expenses and other current liabilities are comprised of:      

                                                                [Download Table]

                                                              AS OF JUNE 30, 
                                                              ---------------
                                                               2004     2003 
                                                              ------   ------
                                                                             
Employee related expenses...................................  $2,507   $2,053
Tax accruals................................................   4,059    2,072
Other accrued liabilities...................................   1,725      679
                                                              ------   ------
                                                              $8,291   $4,804
                                                              ======   ======

7.  DEBT GUARANTEED                                                             

 In October 2003 PAHC issued 105,000 units, consisting of $85,000 of 13%
Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and $20,000 of 13%
Senior Secured Notes due 2007 of Philipp Brothers Netherlands III B.V. (the     
"Dutch Senior Notes" and together with the US Senior notes, the "Senior Secured 
Notes"), (the "Dutch issuer"), the direct parent of the Company.                

   The Dutch Senior Notes are senior secured obligations of the Dutch issuer
and are guaranteed on a senior secured basis by PAHC and by the restricted      
subsidiaries of the Dutch issuer, presently consisting of the Company. The Dutch
Senior Notes and related guarantees are secured by a pledge of all the accounts 
receivable, a security interest or floating charge on the inventory to the      
extent permitted by applicable law, and a mortgage on substantially all of the  
real property of the Dutch issuer and each of its restricted subsidiaries, a    
pledge of 100% of the capital stock of each subsidiary of the Dutch issuer, and 
a pledge of the intercompany loans made by the Dutch issuer to its restricted   
subsidiaries.                                                                   

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

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

8.  EMPLOYEE BENEFIT PLANS                                                      

  The Company maintains a defined benefit plan for eligible employees. The
benefits provided by the plan are based upon years of service and the employees'
average compensation, as defined. The measurement date for the plan was June 30,
2004 and 2003, respectively.                                                    

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

    Reconciliations of changes in benefit obligations, plan assets, and funded
status of the plans were:                                                       

                                                                [Download Table]

                                                             JUNE 2004  JUNE 2003
                                                             ---------  ---------
                                                                                 
CHANGE IN BENEFIT OBLIGATION                                                     
Benefit obligation at beginning of year.....................  $6,595     $4,251  
Service cost................................................     467        310  
Employee contributions......................................      27        100  
Interest cost...............................................     374        259  
Benefits paid...............................................      (3)       (29) 
Actuarial (gain) or loss....................................    (475)       879  
Exchange rate impact........................................     338        825  
                                                              ------     ------  
Benefit obligation at end of year...........................  $7,323     $6,595  
                                                              ======     ======  

    At June 30, 2004 and 2003, the accumulated benefit obligations were $4,383
and $4,248, respectively.                                                       

                                                                [Download Table]

                                                             JUNE 2004  JUNE 2003
                                                             ---------  ---------
                                                                                 
CHANGE IN PLAN ASSETS                                                            
Fair value of plan assets at beginning of year..............  $4,566     $2,882  
Actual return on plan assets................................     435        204  
Employer contributions......................................     558        841  
Employee contributions......................................      27        100  
Benefits paid...............................................      (3)       (29) 
Exchange rate impact........................................     245        568  
                                                              ------     ------  
Fair value of plan assets at end of year....................  $5,828     $4,566  
                                                              ======     ======  

                                                                [Download Table]

                                                             JUNE 2004  JUNE 2003
                                                             ---------  ---------
                                                                                 
FUNDED STATUS                                                                    
Funded status of the plan...................................  $(1,495)   $(2,029)
Unrecognized net actuarial (gain) or loss...................      368        961 
                                                              -------    ------- 
(Accrued) pension cost......................................  $(1,127)   $(1,068)
                                                              =======    ======= 

    The Company expects to contribute $602 to the plan during fiscal 2005. The
Company's policy is to fund the plan in amounts which comply with contribution  
limits imposed by law.                                                          

Components of net periodic pension expense were:                      

                                                                [Download Table]

                                                             2004    2003    2002  
                                                             -----   -----   ----- 
                                                                                   
Service cost -- benefits earned during the year............. $ 467   $ 310   $ 217 
Interest cost on benefit obligation.........................   374     259     164 
Expected return on plan assets..............................  (300)   (203)   (123)
Amortization of net actuarial loss..........................    22      --      -- 
                                                             -----   -----   ----- 
Net periodic pension cost................................... $ 563   $ 366   $ 258 
                                                             =====   =====   ===== 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Significant actuarial assumptions for the plan were:                  

                                                                [Download Table]

                                                              2004   2003   2002
                                                              ----   ----   ----
                                                                                
Discount rate for service and interest......................  5.5%   5.8%   5.8%
Expected rate of return on plan assets......................  6.0%   6.0%   6.0%
Rate of compensation increase...............................  3.0%   3.0%   3.0%
Discount rate for year-end benefit obligation...............  5.5%   5.5%   5.8%

Estimated future benefit payments, including benefits attributable to 
future service, are as follows:                                                 

                                                                [Download Table]
                                                                    
2005........................................................  $   37
2006........................................................      38
2007........................................................      40
2008........................................................      41
2009........................................................      42
2010-2014...................................................   1,817

The Company's plan target allocations for fiscal 2005 and the weighted
asset allocation of plan assets as of June 30, 2004 and 2003 are as follows:    

                                                                [Download Table]

                                                              2005   2004   2003
                                                              ----   ----   ----
                                                                                
Debt securities.............................................  59%    62%    79% 
Equity securities...........................................  25%    21%    20% 
Other.......................................................  16%    17%     1% 

    The expected long-term rate of return for the plan's total assets is based
on the expected return of each of the above categories, weighted based on the   
target allocation for each class. Equity securities are expected to return 7.5% 
over the long-term, while debt securities are expected to return 5.5%.          

   The Company assumed the liability for the plan during 2002 as part of the
MFA acquisition from Pfizer.                                                    

9.  INCOME TAXES                                                                

                                                                [Download Table]

                                                           2004    2003      2002   
                                                          ------  -------   ------- 
                                                                                    
Income (loss) before income taxes........................ $2,920  $(4,605)  $(3,089)
                                                          ======  =======   ======= 
Current tax provision (benefit).......................... $1,502  $(1,228)  $  (920)
Deferred tax provision (benefit).........................    112      142      (178)
                                                          ------  -------   ------- 
Provision (benefit) for income taxes..................... $1,614  $(1,086)  $(1,098)
                                                          ======  =======   ======= 

     Reconciliations of the statutory income tax rate to the Company's effective
tax rate are:                                                                   

                                                                [Download Table]

                                                             2004   2003    2002  
                                                             ----   -----   ----- 
                                                              %       %       %   
                                                                                  
Statutory income tax rate................................... 34.0   (34.0)  (40.0)
Expenses with no tax benefit................................ 16.9     5.4     6.0 
Changes in valuation allowance.............................. (6.5)    4.1      -- 
Other....................................................... 10.9     0.9    (1.5)
                                                             ----   -----   ----- 
Effective income tax rate................................... 55.3   (23.6)  (35.5)
                                                             ====   =====   ===== 

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

     The tax effects of significant temporary differences that comprise deferred
tax assets and deferred tax liabilities at June 30, 2004 and 2003 were:         

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                              ----------------- 
                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Deferred tax assets:                                                            
  Depreciation..............................................  $     7   $     7 
  Inventory.................................................      615       615 
  Net operating loss carry forwards.........................       --       191 
  Other.....................................................       97        11 
                                                              -------   ------- 
                                                                  719       824 
  Less: valuation allowance.................................       --      (191)
                                                              -------   ------- 
                                                                  719       633 
                                                              -------   ------- 
Deferred tax liabilities:                                                       
  Depreciation..............................................   (1,022)     (990)
  Other.....................................................   (1,143)     (977)
                                                              -------   ------- 
                                                               (2,165)   (1,967)
                                                              -------   ------- 
Net deferred tax liability..................................  $(1,446)  $(1,334)
                                                              =======   ======= 

  Deferred taxes are included in the following line items on the Company's
balance sheets:                                                                 

                                                                [Download Table]

                                                               AS OF JUNE 30,   
                                                              ----------------- 
                                                               2004      2003   
                                                              -------   ------- 
                                                                                
Prepaid expenses and other current assets...................  $   315   $   315 
Other liabilities...........................................   (1,761)   (1,649)
                                                              -------   ------- 
                                                              $(1,446)  $(1,334)
                                                              =======   ======= 

The Company incurred losses in 2003 and prior years and assessed the  
likelihood of recovering net deferred tax assets, which resulted in the         
recording of valuation allowances. In 2004 the Company had taxable income and   
utilized the net operating loss carry forwards from 2003 and prior years. The   
Company will continue to evaluate the likelihood of recoverability of the       
remaining deferred tax assets based upon actual and expected operating          
performance.                                                                    

10.  SUBSEQUENT EVENTS                                                          

ISSUANCE OF ADDITIONAL 13% SENIOR SECURED NOTES:                              

On December 21, 2004, PAHC completed a private offering of 22,491     
additional units consisting of $18,207 13% Senior Secured Notes due 2007 of PAHC
(the "U.S. Notes") and $4,284 13% Senior Secured Notes due 2007 (the "Dutch     
Notes" and together with the U.S. Notes, the "Additional Notes") of Philipp     
Brothers Netherlands III B.V., the direct parent of the Company (the "Dutch     
Issuer" and together with PAHC, the "Issuers"). The Additional Notes were issued
under the Indenture dated October 21, 2003, as amended and supplemented (the    
"Indenture") under which the Issuers previously issued 105,000 units consisting 
of $85,000 aggregate principal amount of U.S. Notes and $20,000 aggregate       
principal amount of Dutch Notes. The proceeds from the sale of the Additional   
Notes will be used to refinance a portion of PAHC's indebtedness under its      
domestic senior credit facility.                                                

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PHIBRO ANIMAL HEALTH SA (BELGIUM) 

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

SALE OF BELGIUM PLANT:                                                      

On December 16, 2004 the Company entered into an agreement with       
GlaxoSmithKline Biologicals ("GSK") to sell to GSK substantially all of the     
Company's facilities in Rixensart, Belgium ("the Belgium Plant") as follows     
(U.S. dollar amounts at the December 16, 2004 exchange rate): (i) the transfer  
of substantially all of the land and buildings and certain equipment of the     
Company at the Belgium Plant, as well as the industrial activities and          
intellectual property relating to certain solvent technology of the Company for 
a purchase price of EUR 6,200 ($8,238), payable at closing; (ii) the transfer to
GSK of a majority of the employees of the Belgium Plant and the corresponding   
responsibility for statutory severance obligations; (iii) GSK agreeing to be    
responsible for costs of removal, by demolition or otherwise, certain buildings 
not to be used by it, but for the Company to reimburse GSK up to a maximum of   
EUR 700 ($930) for such removal costs; (iv) in recognition of the benefits to   
PAHC from the proposed transaction, the Company agreeing to pay to GSK EUR 1,500
($1,993) within six months from the closing date, EUR 1,500 ($1,993) within     
eighteen months from the closing date, EUR 1,500 ($1,993) within thirty months  
from the closing date, and EUR 500 ($664) within forty-two months from the      
closing date; (v) the Company retaining certain excess land (valued at          
approximately EUR 400 ($531)) and being able to sell such land for its own      
account; (vi) the Company being responsible for certain plant closure costs and 
legally required severance indemnities in connection with workforce reductions, 
estimated in total to be EUR 7,700 ($10,231), of which an amount estimated to be
approximately EUR 4,100 ($5,448) would be payable at or around the closing and  
an aggregate amount so estimated to be approximately EUR 3,600 ($4,783) would be
payable over periods up to thirteen years; and (vii) the Company retaining any  
or all equipment at the Belgium Plant, and being able to sell such equipment for
the account of the Company or transfer such equipment, together with other      
assets and rights related to the production of virginiamycin, to Philipp        
Brothers Brasil Holdings Ltda., a related party, which owns a facility in       
Guarulhos, Brazil or in connection with alternative production arrangements.    

    The foregoing transactions and agreements are subject to a closing that is
expected to occur no earlier than July 1, 2005 nor later than June 30, 2006.    

 The Dutch Notes and related guarantees are secured by a mortgage on the
Belgium Plant which will be released in connection with the closing of the sale 
of the Belgium Plant to GSK.                                                    

     The carrying value of the Belgium Plant and related assets at September 30,
2004 is EUR 13,908 ($18,480). The Company is in the process of evaluating the   
accounting for this transaction and will record an impairment loss, if required,
in the second quarter ended December 31, 2004. In addition, the Company will    
expense severance, plant closure and other related costs in the period in which 
such liabilities are incurred in accordance with Statement of Financial         
Accounting Standards No. 146, "Accounting for Costs Associated with Exit or     
Disposal Activities". As of the date of this filing, estimates of such costs are
in process of being determined.                                                 

11.  FINANCIAL INSTRUMENTS                                                      

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

The carrying amounts of cash, trade receivables and trade payables is 
considered to be representative of their fair value because of their short      
maturities.                                                                     

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PART II 

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.                            

  The following summaries are subject to the complete text of the statutes
and organizational documents of the Registrants described below and are         
qualified in their entirety by reference thereto.                               

  Phibro Animal Health Corporation and Phibro Chemicals, Inc. are New York
corporations. Phibro-Tech, Inc., Prince Agriproducts, Inc., Phibro Animal Health
Holdings, Inc., and Phibro Animal Health U.S., Inc. are Delaware corporations.  
Phibrochem, Inc. and C P Chemicals, Inc. are New Jersey Corporations. Western   
Magnesium Corp. is a California corporation.                                    

    1. Phibro Animal Health Corporation and Phibro Chemicals, Inc., each a New
York corporation.                                                               

 Under Sections 721 through 725 of the New York Business Corporation Law
(the "NYBCL"), a corporation has broad powers to indemnify its directors,       
officers and other employees. These sections (i) provide that the statutory     
indemnification and advancement of expenses provisions of the NYBCL are not     
exclusive, provided that no indemnification may be made to or on behalf of any  
director or officer if a judgment or other final adjudication adverse to the    
director or officer establishes that his or her acts were committed in bad faith
or were the result of active and deliberate dishonesty and were material to the 
cause of action so adjudicated, or that he or she personally gained in fact a   
financial profit or other advantage to which he or she was not legally entitled,
(ii) establish procedures for indemnification and advancement of expenses that  
may be contained in the certificate of incorporation or by-laws, or, when       
authorized by either of the foregoing, set forth in a resolution of the         
shareholders or directors or an agreement providing for indemnification and     
advancement of expenses, (iii) apply a single standard for statutory            
indemnification for third-party and derivative suits by providing that          
indemnification for third-party and derivative suits by providing that          
indemnification is available if the director or officer acted in good faith, for
a purpose which he or she reasonably believed to be in the best interests of the
corporation, and in criminal actions, had no reasonable cause to believe that   
his or her conduct was unlawful and (iv) permit the advancement of litigation   
expenses upon receipt of an undertaking to repay such advance if the director or
officer is ultimately determined not to be entitled to indemnification or to the
extent the expenses advanced exceed the indemnification to which the director or
officer is entitled. Section 726 of the NYBCL permits the purchase of insurance 
to indemnify a corporation or its officers and directors to the extent          
permitted.                                                                      

   Article Sixth of the Certificate of Incorporation of Phibro Animal Health
Corporation provides that each and every person who may become a director of the
corporation shall be relieved from any liability that might exist through       
contracting or dealing with the corporation for the benefit of himself or any   
firm, association or corporation in which he is or may be in any manner         
interested, provided that the interest in any such contract or transaction of   
any such director shall be fully disclosed. Article Sixth further provides that 
the corporation shall indemnify each director and officer against expenses      
reasonably incurred by him in connection with any action, suit, or proceeding to
which he may be made a party by reason of his being or having been a director or
officer of the corporation, to the fullest extent permitted by the NYBCL.       
Article Eighth provides that, to the fullest extent permitted by the NYBCL, the 
personal liability of directors of the corporation to the corporation or its    
shareholders for damages for any breach of duty in such capacity is eliminated. 

   Article VI of the By-Laws of Phibro Chemicals, Inc. provides that, to the
fullest extent permitted by the laws of the State of New York, a director of the
corporation shall not be liable to the corporation or the shareholders for      
monetary damages for breach of fiduciary duty as director. Article VI further   
provides that each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,     
criminal, administrative or investigative (a "proceeding"), by reason of the    
fact that he or she, or a person of whom he or she is the legal representative, 
is or was a director or officer of the corporation or is or was serving at the  
request of the corporation as a director, officer, employee or agent of another 
corporation or of a partnership, joint venture, trust or other enterprise,      
including service with respect to employee benefit plans, whether the basis of  
such proceeding is alleged action in an official capacity as a                  

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director, officer, employee or agent in any other capacity while serving as a   
director, officer, employee or agent, shall be indemnified and held harmless by 
the corporation to the fullest extent authorized by the laws of the State of New
York, as the same exists or may hereafter be amended (but, in the case of any   
such amendment, only to the extent that such amendment permits the corporation  
to provide broader indemnification rights than said law permitted the           
corporation to provide prior to such amendment), against all expense, liability 
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or    
penalties and amounts paid or to be paid in settlement) reasonably incurred or  
suffered by such person in connection therewith and such indemnification shall  
continue as to a person who has ceased to be a director, officer, employee or   
agent and shall inure to the benefit of his or her heirs, executors and         
administrators; provided, however that the corporation shall indemnify any such 
person seeking indemnification in connection with a proceeding initiated by such
person only if such proceeding was authorized by the Board of Directors of the  
corporation. Such right to indemnification shall be a contract right and shall  
include the right to be paid by the corporation the expense incurred in         
defending any such proceeding in advance of its final disposition; provided,    
however, that if the laws of the State of New York require, the payment of such 
expenses incurred by a director or officer in advance of the final disposition  
of a proceeding shall be made only upon delivery to the corporation of an       
undertaking, by or on behalf of such director or officer, to repay all amounts  
so advanced if it shall ultimately be determined that such director or officer  
is not entitled to be indemnified by the corporation. The corporation may       
maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the corporation or another corporation, partnership, joint 
venture, trust or other enterprise against any such expense, liability or loss, 
whether or not the corporation would have the power to indemnify such person    
against such expense, liability or loss under the laws of the State of New York.

2. Phibro-Tech, Inc., Prince Agriproducts, Inc., Phibro Animal Health 
Holdings, Inc., and Phibro Animal Health U.S., Inc., each a Delaware            
corporation.                                                                    

Section 145 of the Delaware General Corporation Law ("DGCL") provides 
generally and in pertinent part that a Delaware corporation may indemnify its   
directors and officers who are or were party or are threatened to be made a     
party to any threatened, pending or completed action, suit or proceeding,       
whether civil, criminal, administrative or investigative, other than an action  
by or in the right of the corporation, by reason of the fact that they are or   
were a director, officer, employee or agent of the corporation, or are or were  
serving at the request of the corporation as a director, officer, employee or   
agent of another corporation, partnership, joint venture, trust or other        
enterprise, against expenses (including attorneys' fees), judgments, fines and  
amounts paid in settlement actually and reasonably incurred by them in          
connection with such action, suit or proceeding if they acted in good faith and 
in a manner they reasonably believed to be in or not opposed to the best        
interests of the corporation, and, with respect to any criminal action or       
proceeding, had no reasonable cause to believe their conduct was unlawful.      
Section 145 further provides that a Delaware corporation may indemnify its      
directors and officers who were or are a party or are threatened to be a made   
party to any threatened, pending or completed action or suit by or in the right 
of the corporation to procure a judgment in its favor by reason of the fact that
they are or were a director, officer, employee or agent of the corporation, or  
are or were serving at the request of the corporation as a director, officer,   
employee or agent of another corporation, partnership, joint venture, trust or  
other enterprise against expenses (including attorneys' fees) actually and      
reasonably incurred by them in connection with the defense or settlement of such
action or suit if they acted in good faith and in a manner they reasonably      
believed to be in or not opposed to the best interests of the corporation and   
except that no indemnification shall be made in respect of any claim, issue or  
matter as to which such person shall have been adjudged to be liable to the     
corporation unless and only to the extent that the Court of Chancery or the     
court in which such action or suit was brought shall determine upon application 
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.     

    Section 102(b)(7) of the DGCL provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a     
director to the corporation or its stockholders for monetary damages for breach 
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty  
of loyalty to the corporation or its stockholders,                              

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(ii) for acts or omissions not in good faith or which involve intentional       
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL   
(relating to liability for unauthorized acquisitions or redemptions of, or      
dividends on, capital stock) or (iv) for any transaction from which the director
derived an improper personal benefit.                                           

PHIBRO-TECH, INC.                                                               

Article Nine of the Certificate of Incorporation of Phibro-Tech, Inc. 
provides that the corporation shall indemnify, to the full extent permitted by  
Section 145 of the DGCL, as amended from time to time, all persons whom it may  
indemnify pursuant thereto.                                                     

Article V of the By-Laws of Phibro-Tech, Inc. provides that the       
corporation, to the full extent permitted by the laws of the State of Delaware, 
shall indemnify any person who, was or is made a party to or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding 
(including any appeal thereof), whether civil, criminal, administrative or      
investigative in nature (other than an action by or in the right of the         
corporation), by reason of the fact that such person is or was a director or    
officer of the corporation, or it at a time when he was a director or officer of
the corporation, is or was serving at the request of, or to represent the       
interests of, the corporation as a director, officer, partner, fiduciary,       
employee or agent (a "Subsidiary Officer") of another corporation, partnership, 
joint venture, trust, employee benefit plan or other enterprise (and "Affiliated
Entity"), against expenses (including attorneys' fees and disbursements), costs,
judgment, fines, penalties and amounts paid in settlement actually and          
reasonably incurred by such person in connection with such action, suit or      
proceeding if such person acted in good faith and in a manner such person       
reasonably believed to be in or not opposed to the best interest of the         
corporation, and with respect to any criminal action or proceeding, had no      
reasonable cause to believe his or her conduct was unlawful; provided, however, 
that the corporation shall not be obligated to indemnify against any amount paid
in settlement unless the corporation has consented to such settlement, which    
consent shall not be unreasonably withheld. The termination or any action suit  
or proceeding by judgment, order, settlement or conviction or upon a plea of    
nolo contendere or its equivalent shall not, of itself, create a presumption    
that the person did not act in good faith and in a manner which such person     
reasonably believed to be in or not opposed to the best interests of the        
corporation, and, with respect to any criminal action or proceeding, that such  
person had reasonable cause to believe that his or her conduct was unlawful.    
Article V further provides that the corporation, to the full extent permitted by
the laws of the State of Delaware, shall indemnify any person who was or is made
a party to or is threatened to be made a party to any threatened, pending or    
completed action or suit (including any appeal thereof) brought in the right of 
the corporation to procure a judgment in its favor by reason of the fact that   
such person is or was a director or officer of the corporation, or, if at a time
when he was a director or officer to the corporation, is or was serving at the  
request or, or to represent the interests of, the corporation as a Subsidiary   
Officer of an Affiliated Entity against expenses (including attorneys' fees and 
disbursements) and costs actually and reasonably incurred by such person in     
connection with such action or suit if such person acted in good faith and in a 
manner such person reasonably believed to be in or not opposed to the best      
interests of the corporation, and except that no indemnification shall be made  
in respect of any claim, issue or matter as to which such person shall have been
adjudged to the corporation unless, and except to the extent that, the Court of 
Chancery of the State of Delaware or the court in which such judgment was       
rendered shall determine upon application that, despite the adjudication of     
liability but in view of all the circumstances of the case, such person is      
fairly and reasonably entitled to indemnity for such expenses and costs as the  
Court of Chancery of the State of Delaware or such other court shall deem       
proper. Any indemnification described in the preceding paragraph shall be made  
by the corporation only as authorized in the specific case upon a determination 
that indemnification is proper under the circumstances because such person has  
met the applicable standard as set forth above. Such determination shall be made
(a) by the Board of Directors by a majority vote of a quorum consisting of      
directors who were not parties to the action, suit or proceeding in respect of  
which indemnification is sought or by majority vote of the members of a         
committee of the Board of Directors composed of at least three members each of  
whom is not a party to such action, suit or proceeding, or (b) if such quorum is
not obtainable and/or such a committee is not established or obtainable, or,    
even if obtainable, if a quorum of disinterested directors so directs, by       
independent legal counsel in a written opinion, or (c) by the stockholders.     
Expenses and costs incurred by an officer or director in defending              
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any such action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt or an     
undertaking by or on behalf of such person to repay such amount if it shall     
ultimately be determined that such person is not entitled to be indemnified by  
the corporation. In addition, the corporation may purchase and maintain         
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of, or to         
represent the interests of, the corporation as a Subsidiary Officer of any      
Affiliated Entity, against any liability asserted against such person and       
incurred by such person in any such capacity, or arising out of such person's   
status as such, whether or not the corporation would have the power to indemnify
such person against such liability under the provisions of Article V or         
applicable law.                                                                 

PRINCE AGRIPRODUCTS, INC.                                                       

     Article IX of the Certificate of Incorporation of Prince Agriproducts, Inc.
provides that the corporation shall indemnify each director and officer thereof 
against all costs and expenses reasonably incurred by or imposed upon him in    
connection with or arising out of any action, suit or proceeding in which he may
be involved or to which he may be made a party by reason of his being or having 
been a director of officer of the corporation, except in relation to matters as 
to which he shall be finally adjudged in any such action, suit or proceeding to 
be liable for negligence or misconduct in the performance of his duty as such   
director or officer. In the case of settlement of any such action, suit or      
proceeding, such director or officer shall be indemnified by the corporation    
against the cost and expense of such settlement, including any amount paid to   
the corporation or to such other corporation, reasonably incurred by him, after 
and only after (a) the corporation shall have been advised by independent       
counsel that such director or officer is not liable for negligence or misconduct
in the performance of his duty as such director or officer in relation to the   
matters covered by such action, suit or proceeding, and that such cost and      
expense does not substantially exceed the expense which might reasonably be     
incurred by such director or officer in conducting such action, suit or         
proceeding to a final conclusion, or (b) the holders of a majority of the shares
of the capital stock of the corporation issued and outstanding in the hands of  
disinterested persons and entitled to vote shall by vote at any annual meeting  
of the stockholders, or at any special meeting called for the purpose, approve  
such settlement and the indemnification of such director or officer.            
"Disinterested persons" as used therein shall mean any (w) person other than a  
director or officer who, at the time, is or may, as such director or officer, be
entitled to indemnification pursuant to the foregoing provisions, (x) any       
corporation or organization of which any such person owns of record or          
beneficially five per cent (5%) or more of the voting stock, (y) any firm or    
association of which any such person is a member, and (z) any spouse, child,    
parent, brother or sister or any such stockholder.                              

PHIBRO ANIMAL HEALTH HOLDINGS, INC.                                             

    Article Eighth of the Certificate of Incorporation of Phibro Animal Health
Holdings, Inc. provides that the corporation shall, to the fullest extent       
permitted by law, as the same is now or may hereafter be in effect, indemnity   
each person (including the heirs, executors, administrators and other personal  
representatives of such person) against expenses, including attorneys' fees,    
judgements, fines and amounts paid in settlement, actually and reasonably       
incurred by such person in connection with any threatened, pending or completed 
suit, action or proceeding (whether civil, criminal, administrative or          
investigative in nature or otherwise) in which such person may be involved by   
reason of the fact that he or she is or was a director or officer of the        
corporation or is or was serving any other incorporated or unincorporated       
enterprise in such capacity at the request of the corporation.                  

  Section 6 of the By-Laws of Phibro Animal Health Holdings, Inc. provides
that Each person who was or is a party or is threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil, criminal,         
administrative or investigative (a "proceeding"), by reason of the fact that he,
or a person of whom he is the legal representative, is or was a director or     
officer of the corporation or is or was serving at the request of the           
corporation as a director, officer, employee or agent of another corporation or 
of a partnership, joint venture, trust or other enterprise, including service   
with respect to employee benefit plans, whether the basis of such proceeding is 
alleged action or inaction in an official capacity or in any other capacity     
while serving as director, officer, employee or agent, shall be indemnified and 
held harmless by the corporation to the fullest                                 

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extent permitted by the General Corporation Law of Delaware, as amended from    
time to time, against all costs, charges, expenses, liabilities and losses      
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties   
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith, and that indemnification shall continue as 
to a person who has ceased to be a director, officer, employee or agent and     
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in section 6.2, the corporation shall         
indemnify any such person seeking indemnification in connection with a          
proceeding (or part thereof) initiated by that person, only if that proceeding  
(or part thereof) was authorized by the Board. The right to indemnification     
conferred in these by-laws shall be a contract right and shall include the right
to be paid by the corporation the expenses incurred in defending any such       
proceeding in advance of its final disposition; provided, however, that, if the 
General Corporation Law of Delaware, as amended from time to time, requires, the
payment of such expenses incurred by a director or officer in his capacity as a 
director or officer (and not in any other capacity in which service was or is   
rendered by that person while a director or officer, including, without         
limitation, service to an employee benefit plan) in advance of the final        
disposition of a proceeding shall be made only upon delivery to the corporation 
of an undertaking, by or on behalf of such director or officer, to repay all    
amounts so advanced, if it shall ultimately be determined that such director or 
officer is not entitled to be indemnified under these by-laws or otherwise. The 
corporation may, by action of its Board, provide indemnification to employees   
and agents of the corporation with the same scope and effect as the foregoing   
indemnification of directors and officers.                                      

PHIBRO ANIMAL HEALTH U.S., INC.                                                 

    Article Eighth of the Certificate of Incorporation of Phibro Animal Health
U.S., Inc. provides that the corporation shall, to the fullest extent permitted 
by law, as the same is now or may hereafter be in effect, indemnity each person 
(including the heirs, executors, administrators and other personal              
representatives of such person) against expenses, including attorneys' fees,    
judgements, fines and amounts paid in settlement, actually and reasonably       
incurred by such person in connection with any threatened, pending or completed 
suit, action or proceeding (whether civil, criminal, administrative or          
investigative in nature or otherwise) in which such person may be involved by   
reason of the fact that he or she is or was a director or officer of the        
corporation or is or was serving any other incorporated or unincorporated       
enterprise in such capacity at the request of the corporation.                  

   Section 6 of the By-Laws of Phibro Animal Health U.S., Inc. provides that
Each person who was or is a party or is threatened to be made a party to or is  
involved in any action, suit or proceeding, whether civil, criminal,            
administrative or investigative (a "proceeding"), by reason of the fact that he,
or a person of whom he is the legal representative, is or was a director or     
officer of the corporation or is or was serving at the request of the           
corporation as a director, officer, employee or agent of another corporation or 
of a partnership, joint venture, trust or other enterprise, including service   
with respect to employee benefit plans, whether the basis of such proceeding is 
alleged action or inaction in an official capacity or in any other capacity     
while serving as director, officer, employee or agent, shall be indemnified and 
held harmless by the corporation to the fullest extent permitted by the General 
Corporation Law of Delaware, as amended from time to time, against all costs,   
charges, expenses, liabilities and losses (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in        
settlement) reasonably incurred or suffered by such person in connection        
therewith, and that indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of  
his heirs, executors and administrators; provided, however, that, except as     
provided in section 6.2, the corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by  
that person, only if that proceeding (or part thereof) was authorized by the    
Board. The right to indemnification conferred in these by-laws shall be a       
contract right and shall include the right to be paid by the corporation the    
expenses incurred in defending any such proceeding in advance of its final      
disposition; provided, however, that, if the General Corporation Law of         
Delaware, as amended from time to time, requires, the payment of such expenses  
incurred by a director or officer in his capacity as a director or officer (and 
not in any other capacity in which service was or is rendered by that person    
while a director or officer, including, without limitation, service to an       
employee benefit plan) in advance of the final disposition of a proceeding shall
be made only upon delivery to                                                   
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the corporation of an undertaking, by or on behalf of such director or officer, 
to repay all amounts so advanced, if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under these bylaws or     
otherwise. The corporation may, by action of its Board, provide indemnification 
to employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.                            

    3. C P Chemicals, Inc. and Phibrochem, Inc, each a New Jersey corporation.

Section 14A:3-5 of the New Jersey Business Corporation Act ("NJBCA")  
provides that a New Jersey business corporation shall have the power to         
indemnify a corporate agent against expenses and liabilities in connection with 
any proceeding involving such persons by reason of his serving or having served 
in such capacity or for such person's acts taken in such capacity as a director,
officer, employee or agent of the corporation if such actions were taken in good
faith and in a manner which he reasonably believed to be in or not opposed to   
the best interests of the corporation, and with respect to any criminal         
proceeding, if he had no reasonable cause to believe his conduct was unlawful,  
provided that any such proceeding is not by or in the right of the corporation. 
Section 14A:3-5 further provides that a New Jersey corporation shall have the   
power to indemnify its corporate agent against expenses incurred in connection  
with any proceeding by or in the right of the corporation to procure a judgment 
in its favor which involves such person by reason of his serving or having      
served in such capacity, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation.      
However, in such proceeding no indemnification shall be provided in respect of  
any claim, issue or matter as to which such person shall have been adjudged to  
be liable to the corporation, unless and only to the extent that the Superior   
Court or the court in which such proceeding was brought shall determine upon    
application that despite the adjudication of liability, but in view of all      
circumstances of the case, such person is fairly and reasonably entitled to     
indemnification for such expenses as the Superior Court or such other court     
shall deem proper. Section 14A:3-5 defines a "corporate agent" as any person who
is or was a director, officer, employee or agent of the indemnifying corporation
or of any constituent corporation absorbed by the indemnifying corporation in a 
consolidation or merger and any person who is or was a director, officer,       
trustee, employee or agent of any other enterprise, serving as such at the      
request of the indemnifying corporation, or of any such constituent corporation,
or the legal representative of any such director, officer, trustee, employee or 
agent. Section 14A:2-7(3) of the NJBCA enables a corporation in its certificate 
of incorporation to limit the liability of directors and officers of the        
corporation to the corporation or its shareholders. Specifically, the           
certificate of incorporation may provide that directors and officers of the     
corporation will not be personally liable for money damages for breach of a duty
as a director or an officer, except for any breach of duty based upon an act or 
omission (i) in breach of the director's or officer's duty of loyalty to the    
corporation or its shareholders, (ii) not in good faith or involving a knowing  
violation of law, or (iii) resulting in the receipt by such director of an      
improper personal benefit.                                                      

C P CHEMICALS, INC.                                                             

    Article VII, Section 7 of the By-Laws of C P Chemicals, Inc. provides that
the corporation shall indemnify its officers, directors, employees and agents to
the extent permitted by the General Corporation Law of New Jersey.              

PHIBROCHEM, INC.                                                                

Article VII of the By-Laws of Phibrochem, Inc. provides that, to the  
fullest extent permitted by the NJBCA as the same exists or may be amended, a   
director of the corporation shall not be liable to the corporation or its       
stockholders for monetary damages for breach of fiduciary duty as director.     

     Article VII further provides that each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or       
proceeding, whether civil, criminal, administrative or investigative (a         
"proceeding"), by reason of the fact that he or she, or a person of whom he or  
she is the legal representative, is or was a director or officer of the         
corporation or is or was serving at the request of the corporation as a         
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to     
employee benefit plans, whether the basis of such                               

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proceeding is alleged action in an official capacity as a director, officer,    
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the corporation to 
the fullest extent authorized by the NJBCA, as the same exists or may hereafter 
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such amendment), against 
all expense, liability and loss (including attorneys' fees, judgments, fines,   
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)   
reasonably incurred or suffered by such person in connection therewith and such 
indemnification shall continue as to a person who has ceased to be a director,  
officer, employee or agent and shall inure to the benefit of his or her heirs,  
executors and administrators; provided, however that the corporation shall      
indemnify any such person seeking indemnification in connection with a          
proceeding or part thereof initiated by such person only if such proceeding or  
part thereof was authorized by the Board of Directors of the corporation. Such  
right to indemnification shall be a contract right and shall include the right  
to be paid by the corporation the expenses incurred in defending any such       
proceeding in advance of its final disposition; provided, however, that if the  
NJBCA requires, the payment of such expenses incurred by a director or officer  
in his or her capacity as a director or officer (and not in any other capacity  
in which service was or is rendered by such person while a director or officer, 
including, without limitation, service to an employee benefit plan) in advance  
of the final disposition of a proceeding shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director or officer, to  
repay all amounts so advanced if it shall ultimately be determined that such    
director or officer is not entitled to be indemnified by the corporation The    
corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the corporation with the same scope and effect as the   
foregoing indemnification of directors and officers.                            

   Article VII further provides that the corporation may maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent  
of the corporation or another corporation, partnership, joint venture, trust or 
other enterprise against any such expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense, 
liability or loss under the NJBCA.                                              

4. Western Magnesium Corp., a California corporation.                 

  Section 317 of the California General Corporation Law provides generally
and in pertinent part that a California corporation may indemnify its directors 
and officers against expenses, judgments, fines and settlements actually and    
reasonably incurred in connection with any threatened, pending or completed     
civil, criminal, administrative or investigative action, other than an action by
or in the right of the corporation, if, in connection with the matters in issue,
they acted in good faith and in a manner the person reasonably believed to be in
the best interests of the corporation and, in the case of a criminal proceeding,
had no reasonable cause to believe the conduct of the person was unlawful.      
Section 317 further provides that, in connection with the defense or settlement 
of any action by or in the right of the corporation, a California corporation   
may indemnify its directors and officers against expenses actually and          
reasonably incurred by that person in connection with the defense or settlement 
of the action if the person acted in good faith, in a manner the person believed
to be in the best interest of the corporation and its shareholders. Section 317 
further provides that a California corporation may grant its directors and      
officer additional rights of indemnification through Articles of Incorporation  
and By-Laws provisions, and otherwise.                                          

5. Philipp Brothers Netherlands III B.V.                              

   Dutch law in general provides that a company organized under Dutch law in
The Netherlands may indemnify its managing directors against managing directors'
liability, provided, however, that such indemnity cannot include; acts of wilful
intent (opzet) by the managing directors; intentional violations of law, gaining
of personal profits or other advantages to which the managing director(s) was   
not entitled (including violation of insider trading rules insofar these have   
been committed intentionally and whereby the director has relied on internal or 
external correct advice).                                                       

    Further, under Dutch law, it is uncertain whether such indemnity can cover
liability of a managing director for grossly negligent (grove nalatigheid) or   
intentionally reckless (bewuste roekeloosheid) wrongful acts committed by that  
managing director. In bankruptcy situations, the indemnity may not always be    
upheld                                                                          
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in cases where gross negligence can be proven. Furthermore, it is uncertain     
whether the indemnity can cover liability of a managing director vis-a-vis the  
Company in case of serious fault (ernstig verwijt) on the basis of article 2:9  
Dutch Civil Code, but generally speaking leading legal doctrine has taken the   
view that granting of an indemnity of internal liability vis-a-vis the Company  
on the basis of article 2:9 Dutch Civil Code is not permitted. The criterium of 
serious fault relates to the criterium gross negligence.                        

6. Phibro Animal Health SA                                            

  Under Belgian law, directors and the statutory auditor may be liable for
damages to the company, a trustee in bankruptcy and third parties in case of    
improper performance of their duties, violation of the company's Articles of    
Association or the Companies Act, or tortious misconduct. Under certain         
circumstances, directors may also be criminally liable. One or more stockholders
holding at least one percent of our common stock or holding shares representing 
a fractional value in our capital of at least EUR 1,250,000 can, under certain  
conditions provided in the Companies Act, sue the directors and the statutory   
auditor derivatively on behalf of the company.                                  

A simple majority of the stockholders at a duly convened stockholders 
meeting may discharge directors and the statutory auditor from liability to the 
company relating to the performance of their respective duties after the        
presentation of a management report and the annual accounts by the company's    
directors and presentation of the statutory auditors' report to the company's   
stockholders. This discharge prohibits stockholders who voted in favor of the   
discharge from bringing derivative suits on behalf of the company on such       
grounds. A general discharge of director or auditor liability does not relieve  
such persons from liability to third parties or for violations of the Companies 
Act or the Articles of Association. Violations of the Articles of Association   
may only be discharged if specifically disclosed to the stockholders.           
Notwithstanding a general discharge, directors and auditors may be held liable  
in the performance of their duties for the company, if the stockholders were not
aware of the true situation of the company at the time the discharge was voted. 

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ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.                           

                                                                [Download Table]

EXHIBIT NO.                      DESCRIPTION OF EXHIBIT                   
-----------                      ----------------------                   
                                                                          
   3.1        Composite Certificate of Incorporation of Phibro Animal     
              Health Corporation(14)                                      
   3.2        By-laws of Phibro Animal Health Corporation(1)              
   3.3        Certificate of Incorporation of Phibro-Tech, Inc.(1)        
   3.4        By-Laws of Phibro-Tech, Inc.(1)                             
   3.5        Certificate of Incorporation of C P Chemicals, Inc.(19)     
   3.6        By-Laws of C P Chemicals, Inc.(1)                           
   3.7        Certificate of Incorporation of Prince Agriproducts, Inc.(1)
   3.8        By-Laws of Prince Agriproducts, Inc.(1)                     
   3.9        Certificate of Incorporation of Phibro Animal Health        
              Holdings, Inc.(19)                                          
   3.10       By-Laws of Phibro Animal Health Holdings, Inc.(19)          
   3.11       Certificate of Incorporation of Phibro Animal Health U.S.,  
              Inc.(19)                                                    
   3.12       By-Laws of Phibro Animal Health U.S., Inc.(19)              
   3.13       Certificate of Incorporation of Phibrochem, Inc.(1)         
   3.15       By-Laws of Phibrochem, Inc.(1)                              
   3.16       Certificate of Incorporation of Phibro Chemicals, Inc.(1)   
   3.17       By-Laws of Phibro Chemicals, Inc.(1)                        
   3.18       Certificate of Incorporation of Western Magnesium Corp.(1)  
   3.19       By-Laws of Western Magnesium Corp.(1)                       
   3.20       Articles of Association and Deed of Incorporation of Philipp
              Brothers Netherlands III B.V.(19)                           
   3.21       Articles of Association of Phibro Animal Health SA.(19)     
   4.1        Indenture, dated as of June 11, 1998, among Registrant, the 
              Guarantors named therein and The Chase Manhattan Bank, as   
              trustee, relating to the 9 7/8% Senior Subordinated Notes   
              due 2008 of Registrant, and exhibits thereto, including Form
              of 9 7/8% Senior Subordinated Note due 2008 of Company.(1)  
   4.1.1      First Supplemental Indenture, dated as of January 15, 1999, 
              among Registrant, the Guarantors named therein and The Chase
              Manhattan Bank, as trustee, relating to the 9 7/8% Senior   
              Subordinated Notes due 2008 of Registrant.(10)              
   4.1.2      Second Supplemental Indenture, dated as of March 19, 2003,  
              among Registrant, the Guarantors named therein and JPMorgan 
              Chase Bank, as trustee, relating to the 9 7/8% Senior       
              Subordinated Notes due 2008 of Registrant.(10)              
   4.1.3      Third Supplemental Indenture, dated as of June 10, 2003,    
              among Registrant, the Guarantors named therein and JPMorgan 
              Chase Bank, as trustee, relating to the 9 7/8% Senior       
              Subordinated Notes due 2008 of Registrant.(10)              
   4.1.4      Fourth Supplemental Indenture, dated as of October 1, 2003, 
              among Registrant, the Guarantors named therein and JPMorgan 
              Chase Bank, as trustee, relating to the 9 7/8% Senior       
              Subordinated Notes due 2008 of Registrant.(11)              
   4.1.5      Fifth Supplemental Indenture, dated as of October 21, 2003, 
              among Registrant, the Guarantors named therein and JPMorgan 
              Chase Bank, as trustee, relating to the 9 7/8% Senior       
              Subordinated Notes due 2008 of Registrant.(12)              
   4.1.6      Sixth Supplemental Indenture, dated as of June 25, 2004,    
              among Registrant, the Guarantors named therein and JPMorgan 
              Chase Bank, as trustee, relating to the 9 7/8% Senior       
              Subordinated Notes due 2008 of Registrant.(16)              
   4.2        Indenture, dated as of October 21, 2003, by and among Phibro
              Animal Health Corporation and Philipp Brothers Netherlands  
              III B.V., as Issuers, the Guarantors named therein, and HSBC
              Bank USA, as Trustee and Collateral Agent.(13)              

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                                                                [Download Table]

EXHIBIT NO.                      DESCRIPTION OF EXHIBIT                   
-----------                      ----------------------                   
                                                                          
   4.2.1      First Supplemental Indenture, dated as of June 25, 2004, by 
              and among Phibro Animal Health Corporation and Philipp      
              Brothers Netherlands III B.V., as Issuers, the Guarantors   
              named therein, and HSBC Bank USA, National Association as   
              Trustee and Collateral Agent.(16)                           
   4.2.2      Second Supplemental Indenture, dated as of December 8, 2004,
              by and among Phibro Animal Health Corporation and Philipp   
              Brothers Netherlands III B.V., as Issuers, the Guarantors   
              named therein, and HSBC Bank USA, National Association as   
              Trustee and Collateral Agent.(18)                           
              Certain instruments which define the rights of holders of   
              long-term debt of Registrant and its consolidated           
              subsidiaries have not been filed as Exhibits to this Report 
              since the total amount of securities authorized under any   
              such instrument does not exceed 10% of the total assets of  
              Registrant and its subsidiaries on a consolidated basis, as 
              of June 30, 2004. For a description of such indebtedness,   
              see Note 8 of Notes to Consolidated Financial Statements.   
              Registrant hereby agrees to furnish copies of such          
              instruments to the Securities and Exchange Commission upon  
              its request.                                                
   5.1        Opinion of Golenbock Eiseman Assor Bell & Peskoe LLP.(20)   
   5.2        Opinion of Allen & Overy LLP.(19)                           
   5.3        Opinion of Allen & Overy LLP.(19)                           
  10.1        Manufacturing and Supply Distributorship Agreement, dated   
              August 5, 1996, by and between Merck & Co., Inc. and        
              Koffolk, Inc.: assigned by Merck & Co., Inc. to Merial      
              Limited.(1)                                                 
  10.2        Lease, dated September 27, 2004 between Phibro Animal Health
              Corporation and Hartz Mountain Industries, Inc.(19)         
  10.3        Lease, dated June 30, 1995, between First Dice Road Co. and 
              Phibro-Tech, Inc., as amended May 1998.(1)                  
  10.4        Lease, dated December 24, 1981, between Koffolk (1949) Ltd. 
              and Israel Land Administration.(1)                          
  10.5        Master Lease Agreement, dated February 27, 1998, between    
              General Electric Capital Corp., Registrant and Phibro-Tech, 
              Inc.(1)                                                     
  10.6        Stockholders Agreement, dated December 29, 1987, by and     
              between Registrant, Charles H. Bendheim, Jack C. Bendheim   
              and Marvin S. Sussman.(1)                                   
  10.7        Employment Agreement, dated December 29, 1987, by and       
              between Phibro Animal Health Corporation and Marvin S.      
              Sussman.(1)++                                               
  10.8        Stockholders Agreement, dated February 21, 1995, between    
              James O. Herlands and Phibro-Tech, Inc., as amended as of   
              June 11, 1998.(1)                                           
  10.9        Form of Severance Agreement, dated as of February 21, 1995, 
              between Phibro Animal Health Corporation and James O.       
              Herlands.(1)++                                              
  10.10       Agreement of Limited Partnership of First Dice Road Company,
              dated June 1, 1985, by and among Western Magnesium Corp.,   
              Jack Bendheim, Marvin S. Sussman and James O. Herlands, as  
              amended November 1985.(1)                                   
  10.11       Philipp Brothers Chemicals, Inc. Retirement Income and      
              Deferred Compensation Plan Trust, dated as of January 1,    
              1994, by and between Registrant on its own behalf and on    
              behalf of C P Chemicals, Inc., Phibro-Tech, Inc. and the    
              Trustee thereunder; Philipp Brothers Chemicals, Inc.        
              Retirement Income and Deferred Compensation Plan, dated     
              March 18, 1994 "Retirement Income and Deferred Compensation 
              Plan").(1)++                                                
  10.11.1     First, Second and Third Amendments to Retirement Income and 
              Deferred Compensation Plan.(2)++                            
  10.12       Form of Executive Income Deferred Compensation Agreement,   
              each dated March 11, 1990, by and between Registrant and    
              each of Jack Bendheim, James Herlands and Marvin            
              Sussman.(1)++                                               
  10.13       Form of Executive Income Split Dollar Agreement, each dated 
              March 1, 1990, by and between Registrant and each of Jack   
              Bendheim, James Herlands and Marvin Sussman.(1)++           
  10.14       Administrative Consent Order, dated March 11, 1991, issued  
              by the State of New Jersey Department of Environmental      
              Protection, Division of Hazardous Waste Management, to C.P. 
              Chemicals, Inc.(1)                                          

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EXHIBIT NO.                      DESCRIPTION OF EXHIBIT                   
-----------                      ----------------------                   
                                                                          
  10.15       Agreement for Transfer of Ownership, dated as of June 8,    
              2000, between C. P. Chemicals, Inc. ("CP") and the Township 
              of Woodbridge ("Township"), and related Environmental       
              Indemnification Agreement, between CP and Township, and     
              Lease, between Township and CP.(2)                          
  10.16       Stockholders' Agreement, dated as of January 5, 2000, among 
              shareholders of Penick Holding Company ("PHC"), and         
              Certificate of Incorporation of PHC and Certificate of      
              Designation, Preferences and Rights of Series A Redeemable  
              Cumulative Preferred Stock of PHC.(2)                       
  10.17       Asset Purchase Agreement, dated as of September 28, 2000,   
              among Pfizer, Inc., the Asset Selling Corporations (named   
              therein) and Registrant, and various exhibits and certain   
              Schedules thereto.(3)+                                      
  10.17.1     Amendment, dated August 11, 2003 to Asset Purchase          
              Agreement, dated as of September 28, 2000, among Pfizer,    
              Inc., the Asset Selling Corporations (named therein) and    
              Registrant.(10)                                             
  10.18       Stock Purchase Agreement, dated as of November 30, 2000,    
              between Registrant and the Purchasers (as defined           
              therein).(4)                                                
  10.19       Stockholders' Agreement, dated as of November 30, 2000,     
              among Registrant, the Investor Stockholders (as defined     
              therein) and Jack C. Bendheim.(4)                           
  10.20       United States Asset Purchase Agreement between Phibro-Tech, 
              Inc. and Nufarm, Inc. dated as of May 1, 2001.(5)           
  10.20.1     Amendment No. 1 to United States Asset Purchase Agreement   
              between Phibro-Tech, Inc. and Nufarm, Inc. dated as of June 
              14, 2001.(6)                                                
  10.21       Supply Agreement between Phibro-Tech, Inc. and Nufarm, Inc. 
              dated as of May 1, 2001.(5)                                 
  10.22       License Agreement between Phibro-Tech, Inc. and Nufarm, Inc.
              dated as of May 1, 2001.(5)                                 
  10.23       Management and Advisory Services Agreement dated November   
              30, 2000 between Registrant and Palladium Equity Partners,  
              L.L.C.(7)++                                                 
  10.24       Employment Agreement, dated May 28, 2002, by and between    
              Registrant and Gerald K. Carlson.(8)++                      
  10.25       Consulting Agreement dated as of November 1, 2004, by and   
              between Phibro Animal Health Corporation and David          
              McBeath.(19)++                                              
  10.26       Stock Purchase Agreement, dated August 14, 2003, by and     
              between Registrant and Cemex, Inc.(9)                       
  10.27       Loan and Security Agreement, dated October 21, 2003, by and 
              among, the lenders identified on the signature pages        
              thereto, Wells Fargo Foothill, Inc., and Phibro Animal      
              Health Corporation ("Parent), and each of Parent's          
              Subsidiaries identified on the signature pages thereto.(13) 
  10.27.1     Amendment Number One to Loan and Security Agreement dated   
              November 14, 2003.(12)                                      
  10.27.2     Amendment Number Two to Loan and Security Agreement dated   
              April 29, 2004.(14)                                         
  10.27.3     Amendment Number Three to Loan and Security Agreement dated 
              September 24, 2004.(16)                                     
  10.27.4     Amendment Number Four to Loan and Security Agreement dated  
              December 20, 2004.(18)                                      
  10.28       Intercreditor and Lien Subordination Agreement, dated as of 
              October 21, 2003, made by and among Wells Fargo Foothill,   
              Inc., HSBC Bank USA, Phibro Animal Health Corporation ("Par-
              ent") and those certain subsidiaries of the Parent party    
              thereto.(12)                                                
  10.28.1     Amendment One to Intercreditor Agreement dated December 20, 
              2004.(18)                                                   
  10.29       Purchase and Sale Agreement dated as of December 26, 2003 by
              and among Phibro Animal Health Corporation ("PAHC"), Prince 
              MFG, LLC ("Prince MFG"), The Prince Manufacturing Company   
              ("Prince" and together with PAHC and Prince MFG, the "Phibro
              Parties"), Palladium Equity Partners II, L.P. ("PEP II"),   
              Palladium Equity Partners II-A, L.P., ("PEP II-A"),         
              Palladium Equity Investors II, L.P. ("PEI II", and together 
              with PEP II and PEP II-A, the "Investor Stockholders", and  
              Prince Mineral Company, Inc. ("Buyer")(15)                  
  10.30       Environmental Indemnification Agreement dated as of December
              26, 2003 between the Phibro Parties and Buyer.(15)          
  10.31       Amendment to Stockholders Agreement dated as of December 26,
              2003 between PAHC, the Investor Stockholders and Jack       
              Bendheim.(15)                                               

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EXHIBIT NO.                      DESCRIPTION OF EXHIBIT                   
-----------                      ----------------------                   
                                                                          
  10.32       Advisory Fee Agreement dated as of December 26, 2003 between
              Buyer and PAHC.(15)                                         
  10.33       Purchase Agreement by and between Phibro Animal Health SA   
              and GlaxoSmithKline Biologicals SA, dated December 16,      
              2004.(21)*                                                  
  12          Computation of Ratio of Earnings to Fixed Charges.(20)      
  21          List of Subsidiaries.(19)                                   
  23.1        Consent of PricewaterhouseCoopers LLP.(20)                  
  23.2        Consent of Golenbock Eiseman Assor Bell & Peskoe LLP        
              (included in Exhibit 5.1).(20)                              
  23.3        Consent of Allen & Overy LLP (included in Exhibit 5.2).(19) 
  23.4        Consent of Allen & Overy LLP (included in Exhibit 5.3).(19) 
  24.1        Powers of Attorney (included on signature pages hereof).    
  25.1        Statement of Eligibility of HSBC Bank USA, National         
              Association on Form T-1.(19)                                
  99.1        Form of Letter of Transmittal.(19)                          
  99.2        Form of Notice of Guaranteed Delivery.(19)                  
  99.3        Form of Letter to Holders of Units.(19)                     
  99.4        Form of Letter to Brokers, Dealers, Commercial Banks, Trust 
              Companies and Other Nominees Concerning Offer For All       
              Outstanding.(19)                                            
  99.5        Form of Letter to Clients Concerning Offer For All          
              Outstanding Units.(19)                                      
  99.6        Guidelines for Certification of Taxpayer Identification     
              Number on Substitute Form W-9.(19)                          

---------------                                                                 

 (1) Filed as an Exhibit to the Registrant's Registration Statement on Form S-4,
No. 333-64641.                                                        

(2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2000.                                      

 (3) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended September 30, 2000.                                             

(4) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated  
November 30, 2000.                                                    

 (5) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended March 31, 2001.                                                 

(6) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated  
June 14, 2001.                                                        

(7) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001.                                      

(8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2002.                                      

(9) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated  
     September 11, 2003, as amended by the Registrant's Form 8-K/A dated June 2,
2004.                                                                 

(10) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the 
fiscal year ended June 30, 2003.                                      

(11) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
October 2, 2003.                                                      

(12) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended September 30, 2003.                                             

(13) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
October 31, 2003.                                                     

(14) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended March 31, 2004.                                                 

(15) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
January 12, 2004.                                                     

(16) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the 
fiscal year ended June 30, 2004.                                      

(17) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
December 9, 2004.                                                     

(18) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
December 23, 2004.                                                    

(19) Previously filed.                                                          

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(20) Filed with this amendment.                                                 

(21) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for  
the quarter ended December 31, 2004.                                  

(*) A request for confidential treatment has been submitted for portions of   
such document. Confidential portions have been omitted and furnished  
separately to the SEC in accordance with Rule 24b-2 of the Securities 
Exchange Act.                                                         

(+) A request for confidential treatment has been granted for portions of such
    document. Confidential portions have been omitted and furnished separately
to the SEC in accordance with Rule 406(b).                            

(++) This Exhibit is a management compensatory plan or arrangement.             

Documents listed above filed as exhibits to registration statements filed under 
the Securities Act or reports filed under the Securities Exchange Act are       
incorporated into this Registration Statement by reference.                     

ITEM 22.  UNDERTAKINGS.                                                         

(a) The undersigned registrant hereby undertakes:                     

     (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:      

           (i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;                                         

             (ii) To reflect in the prospectus any facts or events arising after
    the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the 
   aggregate, represent a fundamental change in the information in the
      registration statement. Notwithstanding the foregoing, any increase or
      decrease in volume of securities offered (if the total dollar value of
      securities offered would not exceed that which was registered) and any
    deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the 
       Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
   volume and price represent no more than a 20% change in the maximum
      aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;             

            (iii) To include any material information with respect to the plan
      of distribution not previously disclosed in the registration statement
or any material change to such information in the registration  
statement;                                                      

    (2) That, for the purpose of determining any liability under the
    Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered 
   therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.                         

          (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the     
termination of the offering.                                          

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the  
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities 
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit 
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be  
deemed to be a new registration statement relating to the securities offered    
therein, and the offering of such securities at that time shall be deemed to be 
the initial bona fide offering thereof.                                         

     (c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of  
the registrant pursuant to the foregoing provisions, or otherwise, the          
registrant has been advised that in the opinion of the Securities and Exchange  
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification 
against such liabilities (other than the payment by the registrant of expenses  
incurred or paid by a director, officer or controlling person of the registrant 
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the                  

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securities being registered, the registrant will, unless in the opinion of its  
counsel the matter has been settled by controlling precedent, submit to a court 
of appropriate jurisdiction the question whether such indemnification by it is  
against public policy as expressed in the Act and will be governed by the final 
adjudication of such issue.                                                     

     (d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to   
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of   
such request, and to send the incorporated documents by first class mail or     
other equally prompt means. This includes information contained in documents    
filed subsequent to the effective date of the registration statement through the
date of responding to the request.                                              

  (e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the      
company being acquired involved therein, that was not the subject of and        
included in the registration statement when it became effective.                

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SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this post-effective amendment to this registration statement to be   
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                                    PHIBRO ANIMAL HEALTH CORPORATION

                                By:     /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                            Jack C. Bendheim
                                           Chairman of the Board

                                 By:     /s/ GERALD K. CARLSON
                                            ------------------------------------
                                           Gerald K. Carlson
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

              SIGNATURE                              TITLE                      DATE       
              ---------                              -----                      ----       
                                                                                           

        /s/ GERALD K. CARLSON               Chief Executive Officer       February 24, 2005
--------------------------------------   (Principal Executive Officer)                     
          Gerald K. Carlson                                                                

         /s/ JACK C. BENDHEIM           Director, Chairman of the Board   February 24, 2005
--------------------------------------   (Principal Executive Officer)                     
           Jack C. Bendheim                                                                

        /s/ RICHARD G. JOHNSON              Chief Financial Officer       February 24, 2005
--------------------------------------  (Principal Financial Officer and                   
          Richard G. Johnson             Principal Accounting Officer)                     

        /s/ MARVIN S. SUSSMAN                       Director              February 24, 2005
--------------------------------------                                                     
          Marvin S. Sussman                                                                

        /s/ JAMES O. HERLANDS                       Director              February 24, 2005
--------------------------------------                                                     
          James O. Herlands                                                                

                  *                                 Director                               
--------------------------------------                                                     
            Sam Gejdenson                                                                  

                                                    Director                               
--------------------------------------                                                     
          Mary Lou Malanoski                                                               

                                                    Director                               
--------------------------------------                                                     
             Peter Joseph                                                                  

                                                    Director                               
--------------------------------------                                                     
           Marcos Rodriguez                                                                

 *By:        /s/ JACK C. BENDHEIM                                         February 24, 2005
        ------------------------------                                                     
               Jack C. Bendheim                                                            
               Attorney-in-fact                                                            

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    Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this post-effective amendment to this registration statement to be   
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                                         PHILIPP BROTHERS NETHERLANDS III B.V.

                                By:     /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                            Jack C. Bendheim
                                           Managing Director

                                 By:    /s/ JOSEPH KATZENSTEIN
                                            ------------------------------------
                                            Joseph Katzenstein
                                           Managing Director

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

                   SIGNATURE                                   TITLE               DATE    
                   ---------                                   -----               ----    
                                                                                           

              /s/ JACK C. BENDHEIM                  Managing Director (Principal   February
------------------------------------------------    Executive Officer, Principal   24, 2005
                Jack C. Bendheim                  Financial Officer and Principal          
                                                        Accounting Officer)                

             /s/ JOSEPH KATZENSTEIN                      Managing Director         February
------------------------------------------------                                   24, 2005
               Joseph Katzenstein                                                          

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    Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this post-effective amendment to this registration statement to be   
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                     PHIBRO-TECH, INC.

                                By:     /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                            Jack C. Bendheim
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

                   SIGNATURE                                    TITLE                      DATE       
                   ---------                                    -----                      ----       
                                                                                                      

              /s/ JACK C. BENDHEIM                        Director and Chief         February 24, 2005
------------------------------------------------     Executive Officer (Principal                     
                Jack C. Bendheim                          Executive Officer)                          

             /s/ MARVIN S. SUSSMAN                             Director              February 24, 2005
------------------------------------------------                                                      
               Marvin S. Sussman                                                                      

             /s/ JAMES O. HERLANDS                             Director              February 24, 2005
------------------------------------------------                                                      
               James O. Herlands                                                                      

              /s/ W. DWIGHT GLOVER                            President              February 24, 2005
------------------------------------------------                                                      
                W. Dwight Glover                                                                      

             /s/ DAVID C. STORBECK                 Vice President, Chief Financial   February 24, 2005
------------------------------------------------     Officer (Principal Financial                     
               David C. Storbeck                   Officer and Principal Accounting                   
                                                               Officer)                               

*By:              /s/ JACK C. BENDHEIM                                               February 24, 2005
       ------------------------------------------                                                     
                    Jack C. Bendheim                                                                  
                    Attorney-in-fact                                                                  

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    Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this post-effective amendment to this registration statement to be   
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                             PRINCE AGRIPRODUCTS, INC.

                                By:     /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                            Jack C. Bendheim
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

                   SIGNATURE                                     DATE                      TITLE      
                   ---------                                     ----                      -----      
                                                                                                      

              /s/ JACK C. BENDHEIM                  Director, President and Chief    February 24, 2005
------------------------------------------------     Executive Officer (Principal                     
                Jack C. Bendheim                          Executive Officer)                          

             /s/ MARVIN S. SUSSMAN                      Director and President       February 24, 2005
------------------------------------------------                                                      
               Marvin S. Sussman                                                                      

             /s/ JAMES O. HERLANDS                             Director              February 24, 2005
------------------------------------------------                                                      
               James O. Herlands                                                                      

             /s/ DAVID C. STORBECK                 Vice President, Chief Financial   February 24, 2005
------------------------------------------------     Officer (Principal Financial                     
               David C. Storbeck                   Officer and Principal Accounting                   
                                                               Officer)                               

*By:              /s/ JACK C. BENDHEIM                                               February 24, 2005
       ------------------------------------------                                                     
                    Jack C. Bendheim                                                                  
                    Attorney-in-fact                                                                  

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     Pursuant to the requirements of the Securities Act of 1933, the registrants
have caused this post-effective amendment to this registration statement to be  
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                                       PHIBRO ANIMAL HEALTH HOLDINGS, INC.
                                   PHIBRO ANIMAL HEALTH U.S., INC.

                                By:     /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                            Jack C. Bendheim
                                           Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

                   SIGNATURE                                    TITLE                     DATE       
                   ---------                                    -----                     ----       
                                                                                                     

              /s/ JACK C. BENDHEIM                   Director and Chief Executive   February 24, 2005
------------------------------------------------          Officer (Principal                         
                Jack C. Bendheim                          Executive Officer)                         

             /s/ MARVIN S. SUSSMAN                             Director             February 24, 2005
------------------------------------------------                                                     
               Marvin S. Sussman                                                                     

             /s/ JAMES O. HERLANDS                             Director             February 24, 2005
------------------------------------------------                                                     
               James O. Herlands                                                                     

             /s/ DAVID C. STORBECK                 Vice President, Chief Financial  February 24, 2005
------------------------------------------------     Officer (Principal Financial                    
               David C. Storbeck                        Officer and Principal                        
                                                         Accounting Officer)                         

*By:              /s/ JACK C. BENDHEIM                                              February 24, 2005
       ------------------------------------------                                                    
                    Jack C. Bendheim                                                                 
                    Attorney-in-fact                                                                 

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     Pursuant to the requirements of the Securities Act of 1933, the registrants
have caused this post-effective amendment to this registration statement to be  
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                       C P CHEMICALS, INC.
                          PHIBRO CHEMICALS, INC.
                     PHIBRO CHEM, INC.
                           WESTERN MAGNESIUM CORP.

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

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

                   SIGNATURE                                    TITLE                     DATE       
                   ---------                                    -----                     ----       
                                                                                                     

              /s/ JACK C. BENDHEIM                  Director and Chief Executive    February 24, 2005
------------------------------------------------         Officer (Principal                          
                Jack C. Bendheim                         Executive Officer)                          

             /s/ MARVIN S. SUSSMAN                            Director              February 24, 2005
------------------------------------------------                                                     
               Marvin S. Sussman                                                                     

             /s/ JAMES O. HERLANDS                            Director              February 24, 2005
------------------------------------------------                                                     
               James O. Herlands                                                                     

             /s/ DAVID C. STORBECK                 Vice President, Chief Financial  February 24, 2005
------------------------------------------------    Officer (Principal Financial                     
               David C. Storbeck                        Officer and Principal                        
                                                         Accounting Officer                          

*By:              /s/ JACK C. BENDHEIM                                              February 24, 2005
       ------------------------------------------                                                    
                    Jack C. Bendheim                                                                 
                    Attorney-in-fact                                                                 

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    Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this post-effective amendment to this registration statement to be   
signed by the undersigned, thereunto duly authorized, in the city of Ridgefield 
Park, State of New Jersey on February 24, 2005.                                 

                           PHIBRO ANIMAL HEALTH SA

                                By:     /s/ JACK C. BENDHEIM
                                            ------------------------------------
                                            Jack C. Bendheim
                                            Director

Pursuant to the requirements of the Securities Act of 1933, this      
post-effective amendment to this registration statement has been signed by the  
following persons on behalf of the registrant in the capacities and on the dates
indicated.                                                                      

                                                        [Enlarge/Download Table]

              SIGNATURE                              TITLE                     DATE       
              ---------                              -----                     ----       
                                                                                          

         /s/ JACK C. BENDHEIM            (Principal Executive Officer,   February 24, 2005
--------------------------------------  Principal Financial Officer and                   
           Jack C. Bendheim              Principal Accounting Officer)                    

        /s/ MARVIN S. SUSSMAN                       Director             February 24, 2005
--------------------------------------                                                    
          Marvin S. Sussman                                                               

        /s/ JAMES O. HERLANDS                       Director             February 24, 2005
--------------------------------------                                                    
          James O. Herlands                                                               

 *By:        /s/ JACK C. BENDHEIM                                        February 24, 2005
        ------------------------------                                                    
               Jack C. Bendheim                                                           
               Attorney-in-fact                                                           

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EXHIBIT INDEX 

                                                                [Download Table]

EXHIBIT NO.                        DESCRIPTION OF EXHIBIT                   
-----------                        ----------------------                   
                                                                            
  3.1           Composite Certificate of Incorporation of Phibro Animal     
                Health Corporation(14)                                      
  3.2           By-laws of Phibro Animal Health Corporation(1)              
  3.3           Certificate of Incorporation of Phibro-Tech, Inc.(1)        
  3.4           By-Laws of Phibro-Tech, Inc.(1)                             
  3.5           Certificate of Incorporation of C P Chemicals, Inc.(19)     
  3.6           By-Laws of C P Chemicals, Inc.(1)                           
  3.7           Certificate of Incorporation of Prince Agriproducts, Inc.(1)
  3.8           By-Laws of Prince Agriproducts, Inc.(1)                     
  3.9           Certificate of Incorporation of Phibro Animal Health        
                Holdings, Inc.(19)                                          
  3.10          By-Laws of Phibro Animal Health Holdings, Inc.(19)          
  3.11          Certificate of Incorporation of Phibro Animal Health U.S.,  
                Inc.(19)                                                    
  3.12          By-Laws of Phibro Animal Health U.S., Inc.(19)              
  3.13          Certificate of Incorporation of Phibrochem, Inc.(1)         
  3.15          By-Laws of Phibrochem, Inc.(1)                              
  3.16          Certificate of Incorporation of Phibro Chemicals, Inc.(1)   
  3.17          By-Laws of Phibro Chemicals, Inc.(1)                        
  3.18          Certificate of Incorporation of Western Magnesium Corp.(1)  
  3.19          By-Laws of Western Magnesium Corp.(1)                       
  3.20          Articles of Association and Deed of Incorporation of Philipp
                Brothers Netherlands III B.V.(19)                           
  3.21          Articles of Association of Phibro Animal Health SA.(19)     
  4.1           Indenture, dated as of June 11, 1998, among Registrant, the 
                Guarantors named therein and The Chase Manhattan Bank, as   
                trustee, relating to the 9 7/8% Senior Subordinated Notes   
                due 2008 of Registrant, and exhibits thereto, including Form
                of 9 7/8% Senior Subordinated Note due 2008 of Company.(1)  
  4.1.1         First Supplemental Indenture, dated as of January 15, 1999, 
                among Registrant, the Guarantors named therein and The Chase
                Manhattan Bank, as trustee, relating to the 9 7/8% Senior   
                Subordinated Notes due 2008 of Registrant.(10)              
  4.1.2         Second Supplemental Indenture, dated as of March 19, 2003,  
                among Registrant, the Guarantors named therein and JPMorgan 
                Chase Bank, as trustee, relating to the 9 7/8% Senior       
                Subordinated Notes due 2008 of Registrant.(10)              
  4.1.3         Third Supplemental Indenture, dated as of June 10, 2003,    
                among Registrant, the Guarantors named therein and JPMorgan 
                Chase Bank, as trustee, relating to the 9 7/8% Senior       
                Subordinated Notes due 2008 of Registrant.(10)              
  4.1.4         Fourth Supplemental Indenture, dated as of October 1, 2003, 
                among Registrant, the Guarantors named therein and JPMorgan 
                Chase Bank, as trustee, relating to the 9 7/8% Senior       
                Subordinated Notes due 2008 of Registrant.(11)              
  4.1.5         Fifth Supplemental Indenture, dated as of October 21, 2003, 
                among Registrant, the Guarantors named therein and JPMorgan 
                Chase Bank, as trustee, relating to the 9 7/8% Senior       
                Subordinated Notes due 2008 of Registrant.(12)              
  4.1.6         Sixth Supplemental Indenture, dated as of June 25, 2004,    
                among Registrant, the Guarantors named therein and JPMorgan 
                Chase Bank, as trustee, relating to the 9 7/8% Senior       
                Subordinated Notes due 2008 of Registrant.(16)              
  4.2           Indenture, dated as of October 21, 2003, by and among Phibro
                Animal Health Corporation and Philipp Brothers Netherlands  
                III B.V., as Issuers, the Guarantors named therein, and HSBC
                Bank USA, as Trustee and Collateral Agent.(13)              
  4.2.1         First Supplemental Indenture, dated as of June 25, 2004, by 
                and among Phibro Animal Health Corporation and Philipp      
                Brothers Netherlands III B.V., as Issuers, the Guarantors   
                named therein, and HSBC Bank USA, National Association as   
                Trustee and Collateral Agent.(16)                           

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  4.2.2         Second Supplemental Indenture, dated as of December 8, 2004,
                by and among Phibro Animal Health Corporation and Philipp   
                Brothers Netherlands III B.V., as Issuers, the Guarantors   
                named therein, and HSBC Bank USA, National Association as   
                Trustee and Collateral Agent.(18)                           
                Certain instruments which define the rights of holders of   
                long-term debt of Registrant and its consolidated           
                subsidiaries have not been filed as Exhibits to this Report 
                since the total amount of securities authorized under any   
                such instrument does not exceed 10% of the total assets of  
                Registrant and its subsidiaries on a consolidated basis, as 
                of June 30, 2004. For a description of such indebtedness,   
                see Note 8 of Notes to Consolidated Financial Statements.   
                Registrant hereby agrees to furnish copies of such          
                instruments to the Securities and Exchange Commission upon  
                its request.                                                
  5.1           Opinion of Golenbock Eiseman Assor Bell & Peskoe LLP.(20)   
  5.2           Opinion of Allen & Overy LLP.(19)                           
  5.3           Opinion of Allen & Overy LLP.(19)                           
 10.1           Manufacturing and Supply Distributorship Agreement, dated   
                August 5, 1996, by and between Merck & Co., Inc. and        
                Koffolk, Inc.: assigned by Merck & Co., Inc. to Merial      
                Limited.(1)                                                 
 10.2           Lease, dated September 27, 2004 between Phibro Animal Health
                Corporation and Hartz Mountain Industries, Inc.(19)         
 10.3           Lease, dated June 30, 1995, between First Dice Road Co. and 
                Phibro-Tech, Inc., as amended May 1998.(1)                  
 10.4           Lease, dated December 24, 1981, between Koffolk (1949) Ltd. 
                and Israel Land Administration.(1)                          
 10.5           Master Lease Agreement, dated February 27, 1998, between    
                General Electric Capital Corp., Registrant and Phibro-Tech, 
                Inc.(1)                                                     
 10.6           Stockholders Agreement, dated December 29, 1987, by and     
                between Registrant, Charles H. Bendheim, Jack C. Bendheim   
                and Marvin S. Sussman.(1)                                   
 10.7           Employment Agreement, dated December 29, 1987, by and       
                between Phibro Animal Health Corporation and Marvin S.      
                Sussman.(1)++                                               
 10.8           Stockholders Agreement, dated February 21, 1995, between    
                James O. Herlands and Phibro-Tech, Inc., as amended as of   
                June 11, 1998.(1)                                           
 10.9           Form of Severance Agreement, dated as of February 21, 1995, 
                between Phibro Animal Health Corporation and James O.       
                Herlands.(1)++                                              
 10.10          Agreement of Limited Partnership of First Dice Road Company,
                dated June 1, 1985, by and among Western Magnesium Corp.,   
                Jack Bendheim, Marvin S. Sussman and James O. Herlands, as  
                amended November 1985.(1)                                   
 10.11          Philipp Brothers Chemicals, Inc. Retirement Income and      
                Deferred Compensation Plan Trust, dated as of January 1,    
                1994, by and between Registrant on its own behalf and on    
                behalf of CP Chemicals, Inc., Phibro-Tech, Inc. and the     
                Trustee thereunder; Philipp Brothers Chemicals, Inc.        
                Retirement Income and Deferred Compensation Plan, dated     
                March 18, 1994 "Retirement Income and Deferred Compensation 
                Plan").(1)++                                                
 10.11.1        First, Second and Third Amendments to Retirement Income and 
                Deferred Compensation Plan.(2)++                            
 10.12          Form of Executive Income Deferred Compensation Agreement,   
                each dated March 11, 1990, by and between Registrant and    
                each of Jack Bendheim, James Herlands and Marvin            
                Sussman.(1)++                                               
 10.13          Form of Executive Income Split Dollar Agreement, each dated 
                March 1, 1990, by and between Registrant and each of Jack   
                Bendheim, James Herlands and Marvin Sussman.(1)++           
 10.14          Administrative Consent Order, dated March 11, 1991, issued  
                by the State of New Jersey Department of Environmental      
                Protection, Division of Hazardous Waste Management, to C.P. 
                Chemicals, Inc.(1)                                          
 10.15          Agreement for Transfer of Ownership, dated as of June 8,    
                2000, between C.P. Chemicals, Inc. ("CP") and the Township  
                of Woodbridge ("Township"), and related Environmental       
                Indemnification Agreement, between CP and Township, and     
                Lease, between Township and CP.(2)                          

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 10.16          Stockholders' Agreement, dated as of January 5, 2000, among 
                shareholders of Penick Holding Company ("PHC"), and         
                Certificate of Incorporation of PHC and Certificate of      
                Designation, Preferences and Rights of Series A Redeemable  
                Cumulative Preferred Stock of PHC.(2)                       
 10.17          Asset Purchase Agreement, dated as of September 28, 2000,   
                among Pfizer, Inc., the Asset Selling Corporations (named   
                therein) and Registrant, and various exhibits and certain   
                Schedules thereto.(3)+                                      
 10.17.1        Amendment, dated August 11, 2003 to Asset Purchase          
                Agreement, dated as of September 28, 2000, among Pfizer,    
                Inc., the Asset Selling Corporations (named therein) and    
                Registrant.(10)                                             
 10.18          Stock Purchase Agreement, dated as of November 30, 2000,    
                between Registrant and the Purchasers (as defined           
                therein).(4)                                                
 10.19          Stockholders' Agreement, dated as of November 30, 2000,     
                among Registrant, the Investor Stockholders (as defined     
                therein) and Jack C. Bendheim.(4)                           
 10.20          United States Asset Purchase Agreement between Phibro-Tech, 
                Inc. and Nufarm, Inc. dated as of May 1, 2001.(5)           
 10.20.1        Amendment No. 1 to United States Asset Purchase Agreement   
                between Phibro-Tech, Inc. and Nufarm, Inc. dated as of June 
                14, 2001.(6)                                                
 10.21          Supply Agreement between Phibro-Tech, Inc. and Nufarm, Inc. 
                dated as of May 1, 2001.(5)                                 
 10.22          License Agreement between Phibro-Tech, Inc. and Nufarm, Inc.
                dated as of May 1, 2001.(5)                                 
 10.23          Management and Advisory Services Agreement dated November   
                30, 2000 between Registrant and Palladium Equity Partners,  
                L.L.C.(7)++                                                 
 10.24          Employment Agreement, dated May 28, 2002, by and between    
                Registrant and Gerald K. Carlson.(8)++                      
 10.25          Consulting Agreement dated as of November 1, 2004, by and   
                between Phibro Animal Health Corporation and David          
                McBeath.(19)++                                              
 10.26          Stock Purchase Agreement, dated August 14, 2003, by and     
                between Registrant and Cemex, Inc.(9)                       
 10.27          Loan and Security Agreement, dated October 21, 2003, by and 
                among, the lenders identified on the signature pages        
                thereto, Wells Fargo Foothill, Inc., and Phibro Animal      
                Health Corporation ("Parent"), and each of Parent's         
                Subsidiaries identified on the signature pages thereto.(13) 
 10.27.1        Amendment Number One to Loan and Security Agreement dated   
                November 14, 2003.(12)                                      
 10.27.2        Amendment Number Two to Loan and Security Agreement dated   
                April 29, 2004.(14)                                         
 10.27.3        Amendment Number Three to Loan and Security Agreement dated 
                September 24, 2004.(16)                                     
 10.27.4        Amendment Number Four to Loan and Security Agreement dated  
                December 20, 2004.(18)                                      
 10.28          Intercreditor and Lien Subordination Agreement, dated as of 
                October 21, 2003, made by and among Wells Fargo Foothill,   
                Inc., HSBC Bank USA, Phibro Animal Health Corporation       
                ("Parent") and those certain subsidiaries of the Parent     
                party thereto.(12)                                          
 10.28.1        Amendment One to Intercreditor Agreement dated December 20, 
                2004.(18)                                                   
 10.29          Purchase and Sale Agreement dated as of December 26, 2003 by
                and among Phibro Animal Health Corporation ("PAHC"), Prince 
                MFG, LLC ("Prince MFG"), The Prince Manufacturing Company   
                ("Prince" and together with PAHC and Prince MFG, the "Phibro
                Parties"), Palladium Equity Partners II, L.P. ("PEP II"),   
                Palladium Equity Partners II-A, L.P., ("PEP II-A"),         
                Palladium Equity Investors II, L.P. ("PEI II", and together 
                with PEP II and PEP II-A, the "Investor Stockholders", and  
                Prince Mineral Company, Inc.("Buyer")(15)                   
 10.30          Environmental Indemnification Agreement dated as of December
                26, 2003 between the Phibro Parties and Buyer.(15)          
 10.31          Amendment to Stockholders Agreement dated as of December 26,
                2003 between PAHC, the Investor Stockholders and Jack       
                Bendheim.(15)                                               
 10.32          Advisory Fee Agreement dated as of December 26, 2003 between
                Buyer and PAHC.(15)                                         
 10.33          Purchase Agreement by and between Phibro Animal Health SA   
                and GlaxoSmithKline Biologicals SA, dated December 16,      
                2004.(21)*                                                  
 12             Computation of Ratio of Earnings to Fixed Charges.(20)      
 21             List of Subsidiaries.(19)                                   

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 23.1           Consent of PricewaterhouseCoopers LLP.(20)                 
 23.2           Consent of Golenbock Eiseman Assor Bell & Peskoe LLP       
                (included in Exhibit 5.1).(20)                             
 23.3           Consent of Allen & Overy LLP (included in Exhibit 5.2).(19)
 23.4           Consent of Allen & Overy LLP (included in Exhibit 5.3).(19)
 24.1           Powers of Attorney (included on signature pages hereof).   
 25.1           Statement of Eligibility of HSBC Bank USA, National        
                Association on Form T-1.(19)                               
 99.1           Form of Letter of Transmittal.(19)                         
 99.2           Form of Notice of Guaranteed Delivery.(19)                 
 99.3           Form of Letter to Holders of Units.(19)                    
 99.4           Form of Letter to Brokers, Dealers, Commercial Banks, Trust
                Companies and Other Nominees Concerning Offer For All      
                Outstanding(19)                                            

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EXHIBIT NO.                        DESCRIPTION OF EXHIBIT              
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 99.5           Form of Letter to Clients Concerning Offer For All     
                Outstanding Units(19)                                  
 99.6           Guidelines for Certification of Taxpayer Identification
                Number on Substitute Form W-9.(19)                     

---------------                                                                 

 (1) Filed as an Exhibit to the Registrant's Registration Statement on Form S-4,
No. 333-64641.                                                        

(2) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2000.                                      

 (3) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended September 30, 2000.                                             

(4) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated  
November 30, 2000.                                                    

 (5) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended March 31, 2001.                                                 

(6) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated  
June 14, 2001.                                                        

(7) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001.                                      

(8) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 2002.                                      

(9) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated  
     September 11, 2003, as amended by the Registrant's Form 8-K/A dated June 2,
2004.                                                                 

(10) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the 
fiscal year ended June 30, 2003.                                      

(11) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
October 2, 2003.                                                      

(12) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended September 30, 2003.                                             

(13) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
October 31, 2003.                                                     

(14) Filed as an Exhibit to the Registrant's Report on Form 10-Q for the quarter
ended March 31, 2004.                                                 

(15) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
January 12, 2004.                                                     

(16) Filed as an Exhibit to the Registrant's Annual Report on Form 10-K for the 
fiscal year ended June 30, 2004.                                      

(17) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
December 9, 2004.                                                     

(18) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated   
December 23, 2004.                                                    

(19) Previously filed.                                                          

(20) Filed with this amendment.                                                 

(21) Filed as an Exhibit to the Registrant's Quarterly Report on Form 10-Q for  
the quarter ended December 31, 2004.                                  

* A request for confidential treatment has been made for certain potions of   
 such document. Confidential portions have been omitted and filed separately
 with the SEC as required by Rule 24b - 2 under the Securities Exchange Act.

(+) A request for confidential treatment has been granted for portions of such
    document. Confidential portions have been omitted and furnished separately
to the SEC in accordance with Rule 406(b).                            

(++) This Exhibit is a management compensatory plan or arrangement.