Execution Copy
ENVIRONMENTAL INDEMNIFICATION AGREEMENT
THIS
ENVIRONMENTAL
INDEMNIFICATION
AGREEMENT (this
"Agreement") is made
and entered into as of this 26th day of
December, 2003, by and among PHIBRO
ANIMAL HEALTH CORPORATION
(formerly known as Philipp Brothers Chemicals, Inc.),
a New York corporation (the "Company"), PRINCE MFG LLC, a Delaware limited
liability company (the
"Prince Stockholder"),
THE PRINCE MANUFACTURING COMPANY,
an Illinois corporation ("Prince" and together with the Company, the Prince
Stockholder and Prince, the
"Phibro Parties"), and PRINCE MINERAL COMPANY, INC.,
a Delaware corporation (the "Buyer") (each a "Party" and, together, the
"Parties").
W I T N E S S E T H:
WHEREAS,
the Phibro Parties,
the Buyer and the
shareholders of the Buyer
are parties to a Purchase and
Sale Agreement,
dated as of December
26th, 2003
(the "Purchase Agreement"), pursuant to which, among other
things, Prince
has
agreed to convey to the
Buyer, and the Buyer has agreed to purchase from Prince,
the Prince Assets (as defined
in the Purchase Agreement);
WHEREAS,
the Prince Assets include, among other things, the real
property
listed in Schedule 2.1(a) to the Purchase Agreement (the "Prince Real
Property");
WHEREAS,
in connection with the closing of the
transactions
under the
Purchase Agreement, a
subsidiary of the Company, Prince Agri Products, Inc.,
has
agreed to convey the
Kentucky Street Property (as defined in the Purchase
Agreement) (the Prince Real Property and the Kentucky Street Property are
referred to herein as the
"Real Property") to the Buyer; and
WHEREAS,
the Phibro
Parties and the Buyer
desire to allocate,
as among
themselves, obligations and
liabilities after the Closing in respect of Existing
Environmental Conditions
(defined below) and certain other environmental matters
as set forth
herein;
NOW
THEREFORE, in
consideration of the mutual promises and agreements set
forth herein, the Parties
agree as follows:
1.
Indemnification.
(a) Phibro Parties Indemnified Matters.
Subject to
the limitations and minimum amounts in Section 1(c) below,
the
Phibro Parties agree, jointly
and severally, to
indemnify, defend and
hold the
Buyer (and its respective
shareholders,
officers, directors, employees, agents,
successors and assigns)
(collectively, the "Buyer Indemnified Parties") harmless
from and against any and all
Third Party Claims or Damages (including, without
limitation, costs associated with the performance of Response Actions as
described in Section 2(a) of
this Agreement) to the extent arising out of any of
the following (the "Phibro
Parties Indemnified Matters"):
(i) any Existing Environmental Conditions;
(ii) any Third Party
Claims to the extent
alleging exposure to
or
Damages arising from any Existing
Environmental
(ii) Conditions, including,
without limitation, (A) all litigation matters listed in Schedule 5.8 of
the
Purchase Agreement or (B) all
Third Party Claims relating to the Release of
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or exposure to Hazardous
Materials from any inventory, products, materials,
processes or operations of the Prince Business or at the Real
Property on
or
before the Closing
Date;
(iii) any breach of the representations and warranties made by
any
of the Phibro Parties in Sections 5.9(c) (with respect to Permits
issued under
or relating to Environmental
Laws) or 5.11 of the Purchase Agreement;
(iv) (1) the assessment of any fine or monetary penalty levied
by a Governmental
Authority on the Buyer
for any violation or alleged violation
of Environmental Laws as in effect as of the
Closing Date
associated with the
Real Property or the Prince Business, but only to the extent that such
assessment is caused by a
violation occurring on or prior to the Closing Date or
arises from any violation
described in Schedule A hereto, and (2) except for the
matters described on Schedule
A hereto, all costs and expenses required to bring
the Real Property or the Prince Business into compliance with applicable
Environmental Laws as in
effect as of the Closing Date; or
(v) any past, present
or future Damages, Third Party Claims or
claims by any Governmental Authority arising from any Excluded
Real
Property
(including, without
limitation, the Blue Mountain Property), including, without
limitation, Damages or Third
Party Claims arising from (1) the actual or alleged
presence, Release of, or exposure to any
Hazardous Materials at, on, under
or
emanating from any Excluded Real
Property, whether known or unknown,
(2) any
Hazardous Materials generated at or
transported from any Excluded Real Property
and disposed of or stored at
off-site locations, (3) any violation of applicable
Environmental Laws at any
Excluded Real Property, and (4) any acts or omissions,
or conditions at the Excluded Real Property that give rise to
liability
under
any Environmental
Law.
(b) Buyer Indemnified Matters.
Except as
provided in Section 3
of this Agreement,
the Buyer agrees to
indemnify, defend and hold the Phibro Parties (and their respective
shareholders, officers, directors, employees, agents, successors and
assigns)
harmless from and against any
and all Third Party Claims or Damages (including,
without limitation, costs
associated with the performance of Response Actions as
described in Section 2(b) of
this Agreement) to the extent arising out of any of
the following (the "Buyer
Indemnified Matters"):
(i) the Release of, or exposure to any Hazardous Materials at, on,
under or emanating from any
Real Property that occurs after the Closing Date;
(ii) any Hazardous
Materials generated or
produced by the Buyer or
the Prince Business or transported from any Real Property and disposed of
or
stored at off-site locations
after the Closing Date;
(iii) any violation of
any Environmental
Laws by the Buyer or
the
Buyer's agents, representatives or employees or by the Prince
Business at any
Real Property to the extent
such violation occurs
after the Closing Date and is
not caused by, related to or in continuation of any violations of
applicable
Environmental Laws by the Prince Business or at any Real Property occurring
prior to the Closing Date;
or
(iv) any Third Party
Claims relating to the
Release of or exposure
to Hazardous Materials from any inventory,
products, materials, processes or
operations of the Prince
Business or at the
Real Property where such Release or
exposure occurs after the
Closing Date.
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(c) Limitations on Indemnity.
(i) Minimum Claim Amount. The Phibro Parties shall not be
required
to indemnify any Buyer Indemnified Party under this Agreement except to the
extent that (A) the
aggregate amount of Damages with respect to any claim or
series of related
claims for which the
Buyer Indemnified
Parties is
otherwise
entitled to indemnification pursuant to this Agreement
exceeds the
following:
(1) with respect to any claim
for indemnification
made under Section 1(a)(i) or
(iv)(2) ("Special
Environmental Claims"), $50,000 (excluding legal fees and
the
Buyer's costs for
investigation as described in Section 2(c) of this
Agreement);
and (2) with respect to any claim for indemnification made under Section
1(a)(iii), $12,500 (excluding
legal fees and the Buyer's costs for investigation
as described in Section 2(c)
of this Agreement)
(each a "Minimum Claim Amount")
(it being understood and agreed, with respect to each of clause (1) and
(2),
that the Phibro Parties shall not be liable for
any Damages with respect to any
claim or series of related
claims in the event
that such Damages are
less than
the applicable Minimum Claim Amount, and if such aggregate amount exceeds the
applicable Minimum Claim Amount, then the Buyer Indemnified Parties shall be
entitled to indemnification
for the full amount of such Damages, subject to the
deductible and limitations on maximum amount of recovery set forth in this
Section 1(c)), and (B) with
respect to claims made under Section 1(a)(iii), the
aggregate amount of Damages for which the Buyer Indemnified Parties are
otherwise entitled to
indemnification pursuant to this Agreement and pursuant
to
Section 12 of the Purchase
Agreement exceeds $210,000 (the "Deductible Amount")
(it being understood and agreed, with respect to claims made under Section
1(a)(iii), that (1) any claim or series of
related claims for Damages less than
the applicable Minimum Claim Amount shall be disregarded for purposes of
calculating the Deductible
Amount and (2) the Deductible Amount is intended as a
deductible, and the Phibro
Parties shall not be liable for any Damages less than
the Deductible Amount for which the Buyer
Indemnified
Parties are
otherwise
entitled to indemnification), whereupon the Buyer Indemnified
Parties shall be
entitled to be paid the
excess of the aggregate amount of all such Damages
over
$210,000, subject to the limitations on maximum amount of recovery set
forth
elsewhere in this Section
1(c); provided,
however, that Damages
arising out of
any claim for indemnification
made under Section
1(a)(ii), (iv)(1) or
(v), any
Fraud Claim (as defined in the Purchase Agreement), or any claim for
indemnification for the assessment of any fine or
monetary penalty
relating to
matters described in Schedule A hereto (collectively, "Non-Deductible
Environmental Claims") shall, subject to the other provisions of
Section 1(c),
be indemnified in their entirety by
the Phibro Parties and shall not be subject
to the Minimum Claim Amount. Neither Special Environmental Claims nor
Non-Deductible Environmental Claims will count
towards or reduce the Deductible
Amount. Notwithstanding anything contained herein to the
contrary, the matters
described on Schedule A shall not be subject
to indemnification
by the
Phibro
Parties nor considered Phibro
Parties Indemnified Matters, except to the extent
of the assessment of any fine
or monetary penalty relating to matters described
on Schedule A
hereto.
(ii) General Limit.
The aggregate amount
of Damages payable by the
Phibro Parties pursuant to Section 1(a)(iii) above shall not exceed an
amount
(such amount, the "General Limit") equal to
$5,000,000 less amounts previously
paid by or on behalf of the Phibro Parties pursuant to this Agreement or
pursuant to Section 12 of the
Purchase Agreement
(excluding,
in any case,
any
amounts paid in respect of
Fraud Claims).
(iii) Maximum Amount. The aggregate amount of Damages payable by
the
Phibro Parties pursuant to Section 1(a)(i), (ii), and (iv) above shall
not
exceed an amount (such
amount, the "Maximum
Amount") equal to
$15,000,000 less
amounts previously paid by or on behalf of
the Phibro Parties
pursuant to this
Agreement or pursuant to
Section 12 of the Purchase Agreement.
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<PAGE>
(iv) No Limitations on Indemnity for Excluded Real Property.
Notwithstanding anything to the contrary
contained herein,
the Phibro
Parties
shall be liable for any and all Damages arising out of any claim for
indemnification made under Section 1(a)(v) and any such Damages will
not count
towards or be subject to the
thresholds or limitations on liability set forth in
this Agreement (including, without limitation, the Minimum Claim Amount,
the
General Limit or the Maximum
Amount).
(v) Consequential
Damages. The limitations on liability of the
Phibro Parties set forth in clauses (ii) and (iii) of Section
12.5(j) of
the
Purchase Agreement are hereby
incorporated by
reference and made a part of this
Agreement with respect to
liability under this Agreement.
(vi) Changes to
Environmental
Laws after the Closing
Date. If a
Response Action that would not be required
as of the Closing Date (whether then
known or unknown)
under Environmental Laws in effect as of that time
becomes
necessary after the Closing
Date to the extent of a change in Environmental Laws
after the Closing Date, the
Phibro Parties shall not be responsible for the cost
or performance of such
Response Action. To
the extent that the performance of a
Response Action, that is or would be required as of the Closing Date under
Environmental Laws in effect
as of that time, becomes more costly due to changes
in Environmental Laws after the Closing Date, the Phibro Parties shall be
responsible for performing
Response Actions to the Least Stringent Environmental
Standards as provided in
Section 2(a) of this Agreement.
(d) No Assumption of Liability by the Buyer.
Anything
to the contrary notwithstanding, the Buyer shall not assume,
and
shall not be deemed to have
assumed, any liability
or obligation for any of the
Phibro Parties Indemnified
Matters. Without limiting the provisions of
Section
1(c), neither the thresholds or limitations on liability in
Section 1(c) with
respect to indemnification nor any failure of the Phibro
Parties to
indemnify
the Buyer shall be
construed to imply or
create an assumption
of liability
by
the Buyer of any Phibro
Parties Indemnified Matter.
2.
Performance of Response Actions.
(a) Performance of Response Actions for Phibro Parties
Indemnified
Matters.
The Phibro
Parties agree that
they shall cause the
Consultant to perform
the Response Actions relating
to Phibro Parties
Indemnified Matters at the Real
Property in accordance with applicable Environmental Laws and generally
acceptable engineering
standards to the Least Stringent Environmental
Standards.
All costs for the
performance
of Response
Actions which are Phibro Parties'
Indemnified Matters hereunder shall be at the Phibro Parties sole cost and
expense, subject to Section 1(c) of this
Agreement.
The Buyer shall grant
the
Phibro Parties and the Consultant reasonable access to the Real Property at
reasonable times upon reasonable prior notice for the performance
of Response
Actions. The Buyer shall make available to
the Phibro Parties,
upon reasonable
notice and at reasonable
times, employees of the Prince
Business or the
Buyer
who have supervisory responsibility for environmental matters at any Real
Property. The Phibro Parties agree that they shall
cause the Consultant to use
commercially reasonable efforts to minimize or avoid any
interference with the
conduct of operations at any
Real Property. The
Phibro Parties shall also cause
the Consultant to perform such Response Actions in a timely and
workmanlike
manner. The Phibro Parties
agree to cause the Consultant to obtain and maintain,
in full force and effect during the period of time that the
Consultant
is
engaged in the performance of Response Actions relating to Phibro Parties
Indemnified Matters,
comprehensive general
liability insurance and professional
liability insurance covering
all work to be performed at the
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Real Property, in a minimum coverage amount of $2,000,000 for personal
injury
and property damage and
errors and omissions.
Prior to the
commencement of any
Response Actions, the Consultant shall provide the
Buyer with
certificates of
insurance evidencing such coverage and naming the Buyer as an additional
insured. The Phibro Parties shall restore any portions of any Real
Property
affected by the Response
Actions relating to Phibro Parties Indemnified Matters
as soon as practicable after completion of such Response Actions and shall
promptly complete such restoration in a
commercially
reasonable manner at
the
Phibro Parties' expense. The
Phibro Parties shall provide copies of all reports,
documents or testing data to the Buyer within five (5) days after the
preparation by it or by the Consultant or the receipt of same. The Phibro
Parties shall not file or submit
any written documents to any Governmental
Authority relating to the performance of Response Actions, the Existing
Environmental Conditions or
the Real Property without the prior written approval
of the Buyer, which approval shall not be unreasonably withheld. The Phibro
Parties shall be entitled to control the
performance
of Response
Actions for
Phibro Parties Indemnified
Matters, so long as performed in conformance with the
terms and conditions of this
Agreement. The Phibro Parties shall be permitted to
contact and discuss the performance of Response Actions for Phibro Parties
Indemnified Matters with the
appropriate
Governmental Authority after providing
notice to the Buyer and the
Buyer shall have the right to participate (or have
its representatives participate) in such discussions at its discretion. The
Buyer shall have the right to have its representatives present during the
performance of any Response Actions and shall have the right
to obtain
split
samples during any subsurface
testing at any Real
Property. The Phibro
Parties
shall be responsible for any fines or penalties
assessed with respect to the
performance of Response
Actions relating to Phibro Parties Indemnified Matters.
To the extent that, during the performance of Response Actions for Phibro
Parties Indemnified Matters, any Hazardous Material must be disposed of
off-site, the Phibro Parties
shall (or shall cause the Consultant to) dispose of
such Hazardous Materials in accordance with
applicable
Environmental
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