LIBERTY GROUP HOLDINGS INC
SECURITY  AGREEMENT
<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>SECURITY  AGREEMENT
<TEXT>

                               SECURITY AGREEMENT

      This Security Agreement is entered into this 22nd day of September,  2000,
between LIBERTY GROUP HOLDINGS, INC., a Delaware corporation whose address is 11
52nd Street, Brooklyn, New York 11232 (referred to hereinafter as "Grantor") and
Marvin N. Raab whose address is 429 Coolidge Road, Cherry Hill, New Jersey 08002
(referred to hereinafter as "Raab).
                                   BACKGROUND
      Grantor is a Delaware  corporation  whose  offices  are located at 11 52nd
Street,  Brooklyn,  New York 11232. The stock of Philadelphia Foods, Inc., which
is owned by Raab, is to be sold to Liberty  Processing &  Distribution,  Inc., a
Delaware  corporation  ("Liberty") under the terms of a Stock Purchase Agreement
dated  September  15,  2000  ("Stock  Agreement").  Liberty  is a  wholly  owned
subsidiary  of  Grantor.  Liberty  has given a  Promissory  Note dated even date
herewith ("Note") in the amount of Five Hundred Thousand  ($500,000.00)  Dollars
to Raab for part of the cash payment due under the terms of the Stock Agreement.
If Closing  pursuant to the Stock Agreement does not occur on or before November
15, 2000, the Note becomes due and payable to Raab as a break-up fee as the sole
and complete remedy to Raab to cover Raab's costs and time expended on the stock
purchase  transaction.  As security for the payment of the Note,  the Grantor is
pledging all of its accounts  receivable and inventory.  This Security Agreement
and the security  interest created herein is intended to continue until the Note
is paid in full.  Notwithstanding  anything contained herein to the contrary, in
any action  commenced  to enforce  the  obligations  of the  Grantor  created or
arising  hereunder  or under the Note,  the  judgment  shall not be  enforceable
against any assets of the Grantor or any of its subsidiaries or affiliates other
than the  Collateral.  Recourse for any  violation or breach of the terms of the
Note or this  Agreement  shall  only be  against  the  Collateral  and any  such
judgment  shall not be  subject  to  execution  on,  nor be a lien on, any other
assets of the Grantor or the Grantor itself.  Grantor  represents that the value
of the  Collateral  owned by it and that  Collateral  owned by its wholly  owned
company,  Liberty Food Group,  LLC, is sufficient to cover the obligations under
the Note.
      NOW THEREFORE,  in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
      1.    Definitions.   The   following   words  shall  have  the  following
meanings  when used in this  Agreement.  Terms not  otherwise  defined  in this
Agreement  shall have the  meanings  attributed  to such  terms in the  Uniform
Commercial Code as defined by New York Statute.
            1.1  Agreement.  This Security  Agreement,  as this Agreement may be
amended or modified from time to time,  together with all exhibits and schedules
attached to this Agreement from time to time.
            1.2  Collateral.  The following  described  property of the Grantor,
whether  now owned or  hereafter  acquired,  whether now  existing or  hereafter
arising and wherever located: All inventory, accounts and accounts receivable.
                  1.2.1  In  addition,  the  term  Collateral  includes  all the
following,  whether now owned or  hereafter  acquired,  whether now  existing or
hereafter arising, and wherever located:
                        1.2.1.1     All    proceeds,     including    insurance
proceeds,  from the sale,  destruction,  loss or other disposition of any of the
property described in this section.
                        1.2.1.2     All  records  and data  relating  to any of
the  property  described  in this  section,  whether  in the form of a  writing,
photograph,  microfilm,  microfiche,  or electronic media,  together with all of
Grantor's rights, title and interest in and to all computer software required to
utilize,  create,  maintain and process any such  records or data on  electronic
media.
            1.3  Event of  Default.  The  words  "Event  of  Default"  means and
includes  without  limitation  any of the events and defaults set forth below in
the section Events of Default.
            1.4   Grantor.  The word  "Grantor"  means Liberty Group  Holdings,
Inc., a Delaware corporation, its successors and assigns together.
            1.5 Indebtedness.  The word  "Indebtedness",  means the indebtedness
evidenced by the Note,  including all principal and interest,  together with all
other indebtedness and costs and expenses for which Grantor is responsible under
the Note or this Agreement or under any of the related documents.
            1.6   Raab.   Marvin   N.   Raab,   his   heirs,   representatives,
successors and assigns.
            1.7   Related  Documents.  The word "Related  Documents"  means and
include without limitation all this Agreement and the Note.
      2.    Obligations  of Grantor.  Grantor  warrants  and  covenants to Raab
as follows:
            2.1 Grantor agrees to execute such financing  statements and to take
whatever other actions are reasonably  requested by Raab to perfect and continue
Raab's security  interest in the Collateral.  Upon the request of Raab,  Grantor
will deliver to Raab any and all of the documents evidencing or constituting the
Collateral, and Grantor will note Raab's interest upon any and all chattel paper
if not delivered to Raab for possession by Raab. Grantor hereby appoints Raab as
its  irrevocable  attorney-in-fact  for the purpose of executing  any  documents
necessary  to perfect  or to  continue  the  security  interest  granted in this
Agreement.  Raab may at any time and without further authorization from Grantor,
file a carbon, photographic, or other reproduction of any financing statement or
of this Agreement for use as a financing statement.  Grantor will reimburse Raab
for all  reasonable  expenses for the  perfection  and the  continuation  of the
perfection of Raab's security interest in the collateral.  Grantor promptly will
notify  Raab before any change in  Grantor's  name  including  any change to the
assumed business name of the Grantor.  This is a continuing  Security  Agreement
and will continue in effect even though all or any part of the  Indebtedness  is
paid in full  and  even  though  for a period  of time  the  Grantor  may not be
indebted to Raab.
      3.    No Violation.  The execution  and delivery of this  Agreement  will
not violate any law or  agreement  governing  Grantor or to which  Grantor is a
party,  and its  certificate  or  articles of  incorporation  and bylaws do not
prohibit any term or condition of this Agreement.
      4. Enforceability of Collateral.  To the extend the Collateral consists of
accounts,  chattel paper, or general intangibles,  the Collateral is enforceable
in accordance  with its terms,  it genuine,  and complies with  applicable  laws
concerning  form,  content  and manner of  preparation  and  execution,  and all
persons  appearing to be obligated on the Collateral have authority and capacity
to contract and are in fact obligated as they appear to be on the Collateral. At
the time any account  becomes  subject to a security  interest in favor of Raab,
the account shall be a good and valid account  representing an undisputed,  bona
fide indebtedness  incurred by the account debtor,  for merchandise held subject
to  delivery  instructions  or  therefore  shipped or  delivered  pursuant  to a
contract of sale, or for services therefore performed by Grantor with or for the
account  debtor;  there  shall be no setoffs or  counterclaims  against any such
account as the account exists at the time of execution hereof;  and no agreement
under which any deductions or discounts may be claimed shall have been made with
the account debtor except those disclosed to Raab in writing.
      5. Location of the  Collateral.  Grantor,  upon the request of Raab,  will
deliver  to Raab in form  satisfactory  to  Raab a  schedule  of the  Collateral
locations  relating to Grantor's  operations,  including without  limitation the
following:  (a) all real  property  being  rented or leased by Grantor;  (b) all
storage facilities owned,  rented,  leased or being used by Grantor; and (c) all
other properties  where Collateral is or may be located.  Except in the ordinary
course  of its  business,  Grantor  shall not  remove  the  Collateral  from its
existing locations without the prior written consent of Raab.
      6. Removal of Collateral. Grantor shall keep the Collateral (or the extent
the  Collateral  consists of intangible  property such as accounts,  the records
concerning  the  Collateral)  at Grantor's  address  shown above.  Except in the
ordinary course of its business, including the sales of inventory, Grantor shall
not remove the Collateral from its existing locations, without the prior written
consent of Raab.
      7.  Transactions  involving  Collateral.  Except for inventory sold in the
ordinary  course of business or accounts  collected  in the  ordinary  course of
Grantor's business, Grantor shall not sell, offer to sell, or otherwise transfer
or dispose of Collateral.  While Grantor is not in default under this Agreement,
Grantor may sell inventory,  but only in the ordinary course of its business and
only to buyers who qualify as a buyer in the ordinary course of business. A sale
in the  ordinary  course of  Grantor's  business  does not include a transfer in
partial  or total  satisfaction  of a debt or any bulk sale.  Grantor  shall not
further  pledge,  mortgage,  encumber or otherwise  permit the  Collateral to be
subject to any lien, security interest,  encumbrance,  or charge, other than the
security  interest  provided for in this  Agreement,  without the prior  written
consent of Raab. Unless waived by Raab, all proceeds from any disposition of the
Collateral  (for whatever  reason) shall be held in trust for Raab and shall not
be commingled with any other funds; provided however, this requirement shall not
constitute consent by Raab for any sale or other disposition.
      8. Title.  Grantor  represents and warrants to Raab that it holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien created by this  Agreement  and a prior lien granted to SUAN
INVESTMENT  in a principal  amount of One Hundred Fifty  Thousand  ($150,000.00)
Dollars  plus  interest  accruing  from April,  2000.  Except as  aforesaid,  no
financing  statement  covering  any of the  Collateral  is on file in any public
office other than those which reflect the security  interests  specified in this
Agreement  or to which Raab has  specifically  consented.  Grantor  shall defend
Raab's  rights in the  Collateral  against  the claims and  demands of all other
persons other than SUAN INVESTMENTS.
      9. Collateral Schedules and Locations. As often as Raab shall require, but
no more than three (3) times during the term of this  Agreement,  and insofar as
the  Collateral  consists of accounts  and general  intangibles,  Grantor  shall
deliver to Raab schedules of such Collateral, including such information as Raab
may reasonably require, but not in excess of once per five-day period, including
without limitation names and addresses of account debtors and agings of accounts
and  general  intangibles.  Insofar as the  Collateral  consists  of  inventory,
Grantor  shall  deliver to Raab,  as often as Raab shall  require,  such  lists,
descriptions and designations of such Collateral as Raab may require to identify
the nature,  extent, and location of such Collateral.  Such information shall be
submitted for Grantor and each of its subsidiaries or related companies.
      10.  Maintenance and Inspection of Collateral.  Grantor shall maintain all
tangible  Collateral in good  condition  and repair.  Grantor will not commit or
permit damage to or destruction of the Collateral or any part of the Collateral.
Raab and his designated representatives and agents shall have the right, upon no
less than 24-hours' prior notice to Grantor, at all reasonable times to examine,
inspect, and audit the Collateral wherever located. Grantor shall notify Raab of
all cases involving the return, rejection, repossession, loss or damage of or to
any Collateral;  or any request for credit or adjustment or of any other dispute
arising with respect to the  Collateral;  and  generally of all  happenings  and
events affecting the Collateral or the value or the amount of the Collateral.
      11.  Taxes,  Assessments  and Liens.  Grantor will pay when due all taxes,
assessments,  and liens upon the  Collateral;  its use or  operation,  upon this
Agreement,  upon any promissory  note evidencing the  Indebtedness,  or upon any
other Related  Documents.  Grantor may withhold any such payment or may elect to
contest  any  lien  if  Grantor  is in  good  faith  conducting  an  appropriate
proceeding to contest the  obligation  to pay and so long as Raab's  interest in
the Collateral is not  jeopardized in Raab's sole opinion.  If the Collateral is
subject to a lien which is not  discharged  within  fifteen  (15) days,  Grantor
shall  deposit  with Raab cash,  a  sufficient  corporate  surety  bond or other
security satisfactory to Raab in an amount adequate to provide for the discharge
of the lien plus any  interest,  costs,  attorneys'  fees or other  charges that
could  accrue  as a result  of  foreclosure  or sale of the  Collateral.  In any
contest,  Raab shall defend  itself and Raab and shall satisfy any final adverse
judgment before enforcement  against the Collateral.  Grantor shall name Raab as
an official obligee under any surety bond furnished in the contest proceedings.
      12. Compliance With Government Requirements. Grantor shall comply promptly
with  all  laws,   ordinances,   rules  and  regulations  of  all   governmental
authorities,   now  or  hereafter  in  effect,   applicable  to  the  ownership,
production,  disposition, or use of the Collateral.  Grantor may contest in good
faith any such law,  ordinance or regulation and withhold  compliance during any
proceeding,  including  appropriate  appeals,  so long as Raab's interest in the
Collateral, in Raab's opinion, is not jeopardized.
      13.  Hazardous  Substances.  Grantor  represents  and  warrants  that  the
Collateral never has been, and never will be so long as this Agreement remains a
lien  on  the  Collateral,  used  for  the  generation,   manufacture,  storage,
transportation,  treatment,  disposal,  release  or  threatened  release  of any
hazardous  waste or substance,  as those terms are defined in the  Comprehensive
Environmental Response.  Compensation, and Liability Act of 1980, as amended, 42
U.S.C.  Section  9601,  et  seq.   ("CERCLA"),   the  Superfund  Amendments  and
Reauthorization  Act of  1986,  Pub.  L.  No.  99-499  ("SARA"),  the  Hazardous
Materials  Transportation  Act, 49 U.S.C.,  Section 1801, et seq.,  the Resource
Conservation  and  Recovery  Act, 42 U.S.C.,  Section  6901,  et seq.,  or other
applicable state or Federal laws, rules, or regulations  adopted pursuant to any
of the foregoing.  The terms "hazardous  waste" and "hazardous  substance" shall
also include,  without  limitation,  petroleum and petroleum  by-products or any
fraction  thereof and asbestos.  The  representations  and warranties  contained
herein are based on Grantor's due diligence in investigation  the Collateral for
hazardous  wastes and  substances.  Grantor  hereby (a)  releases and waives any
future claims  against Raab for indemnity or  contribution  in the event Grantor
becomes  liable for cleanup or other costs under any such laws and (b) agrees to
indemnify and hold harmless Raab against any and all claims and losses resulting
from a breach of this provision of this Agreement.  This obligation to indemnify
shall  survive  the payment of the  indebtedness  and the  satisfaction  of this
Agreement.
      14. Maintenance of Casualty Insurance.  Grantor shall procure and maintain
all risks  insurance,  including  without  limitation  fire, theft and liability
coverage  together with such other insurance as Raab may require with respect to
the Collateral,  in form, amounts,  coverages and basis reasonably acceptable to
Raab and  issued  by a  company  or  companies  reasonably  acceptable  to Raab.
Grantor,  upon  request  of Raab,  will  deliver  to Raab  from time to time the
policies or  certificates of insurance in form  satisfactory to Raab,  including
stipulations that coverages will not be cancelled or diminished without at least
thirty (30) days prior written  notice to Raab and not including any  disclaimer
of the  insurer's  liability for failure to give such a notice.  Each  insurance
policy also shall  include an  endorsement  providing  that coverage in favor of
Raab will no be impaired  in any way by any act,  omission or default of Grantor
or any other person.  In connection  with all policies  covering assets in which
Raab holds or is offered a security  interest,  Grantor  will  provide Raab with
such loss payable or other  endorsements as Raab may require.  If Grantor at any
time fails to obtain or maintain any insurance as required under this Agreement,
Raab may (but shall not be  obligated  to) obtain such  insurance  as Raab deems
appropriate,  including if it so chooses "single interest  insurance" which will
cover only Raab's interest in Collateral.
      15. Application of Insurance Proceeds.  Grantor shall promptly notify Raab
of any loss or damage of the Collateral.  Raab may make proof of loss if Grantor
fails to do so within  fifteen  (15) days of the  casualty.  All proceeds of any
insurance on the Collateral,  including accrued proceeds thereon,  shall be held
by Raab as part of the Collateral.  If Raab consents to repair or replacement of
the damaged or destroyed  Collateral,  Raab shall,  upon  satisfactory  proof of
expenditure,  pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or  restoration.  If Raab does not consent to repair or replacement of
the Collateral, Raab shall retain a sufficient amount of the proceeds to pay all
of the  Indebtedness,  and shall pay the balance to Grantor.  Any proceeds which
have not been  disbursed  within six (6) months  after  their  receipt and which
Grantor has not committed to the repair or restoration  of the Collateral  shall
be used to prepay the indebtedness.
      16.  Insurance  Reserves.   If  Grantor  fails  to  provide  and  maintain
insurances as required  herein,  Raab may require  Grantor to maintain with Raab
reserves for payment of insurance  premiums,  which reserves shall be created by
monthly  payments  from Grantor of a sum  estimated by Raab to be  sufficient to
produce,  at least  fifteen  (15) days before the  premium due date,  amounts at
least equal to the  insurance  premiums to be paid.  If fifteen (15) days before
payment is due, the reserve  funds are  insufficient,  Grantor shall upon demand
pay any deficiency to Raab. The reserve funds shall be held by Raab as a general
deposit  and shall  constitute  a  non-interest-bearing  account  which Raab may
satisfy by payment of the  insurance  premium  required to be paid by Grantor as
they become due. Raab does not hold the reserve funds in trust for Grantor,  and
Raab is not the agent of Grantor for payment of the insurance  premiums required
to be paid by Grantor.  The  responsibility  for the  payment of premiums  shall
remain Grantor's sole responsibility.
      17.  Insurance  Reports.  Grantor,  upon request of Raab, shall furnish to
Raab reports on each existing  policy of insurance  showing that  information as
Raab  may  reasonably  request  including  the  following:  (a) the  name of the
insurer;  (b) the risks insured;  (c) the amount of the policy; (d) the property
insured;  (e) the then current  value on the basis of which  insurance  has been
obtained and the manner of determining  that value;  and (f) the expiration date
of the policy. In addition, Grantor shall upon request by Raab (however not more
often that  annually) and at his sole  expense,  have an  independent  appraiser
satisfactory  to Raab  determine,  the  cash  value or  replacement  cost of the
Collateral.
      18. Grantor's Right to Possession and to Collect  Accounts.  Until default
and except as otherwise  provided  below with  respect to accounts,  Grantor may
have possession of the tangible  personal property and beneficial use of all the
Collateral  and may use it in any  lawful  manner  not  inconsistent  with  this
Agreement or the Related  Documents.  Until otherwise  notified by Raab, Grantor
may collect any of the  Collateral  consisting of accounts.  If Raab at any time
has possession of any  Collateral,  whether before or after an Event of Default,
Raab  shall be deemed  to have  exercised  reasonable  care in the  custody  and
preservation  of the  Collateral  if Raab takes such action for that  purpose as
Grantor  shall  request  or as Raab,  in  Raab's  sole  discretion,  shall  deem
appropriate under the circumstances, but failure to honor any request by Grantor
shall not of itself be deemed to be a failure to exercise  reasonable care. Raab
shall not be required to take any steps  necessary to preserve any rights in the
Collateral against prior parties, nor to protect,  preserve or maintain any such
security interest given to secure the indebtedness.
      19.  Expenditures  by Raab.  If not  discharged or paid when due, Raab may
(but shall not be  obligated  to)  discharge  or pay any amounts  required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes,  liens,  security interests,  encumbrances,  and other claims, at any
time  levied  or  placed  on the  Collateral.  Raab  also may (but  shall not be
obligated  to) pay all costs  for  insuring,  maintaining,  and  preserving  the
Collateral.  All such  expenditures  incurred or paid by Raab for such  purposes
will then bear  interest at the rate of  eighteen  (18%)  percent  from the date
incurred or paid by Raab to the date of repayment by Grantor.  All such expenses
shall  become a part of the  indebtedness  and,  at Raab's  option,  will (a) be
payable on  demand,  (b) be added to the  balance  of the Note and be  appointed
among and be payable with any  installment  payments to become due during either
(i) the term of any  applicable  insurance  policy or (ii) the remaining term of
the Note or (c) be treated as a balloon payment which will be due and payable at
the Note's  maturity.  This Agreement also will secure payment of these amounts.
Such right shall be in addition to all other  rights and  remedies to which Raab
may be entitled upon the occurrence of an Event of Default.
      20.   Events  of  Default.  Each of the  following  shall  constitute  an
Event of Default under this Agreement:
            20.1  Default  of  Indebtedness.  Failure  of  Grantor  to may  any
payment when due on the Indebtedness.
            20.2  Other  Defaults.  Failure  of  Grantor  to comply  with or to
perform any other term,  obligation,  covenant or  condition  contained in this
Agreement or in any of the Related Documents.
            20.3 False  Statements.  Any warranty,  representation  or statement
made or furnished to Raab by or on behalf of Grantor under this  Agreement,  the
Note or the Related  Documents is false or misleading  in any material  respect,
either now or at the time made or furnished.
            20.4  Defective  Collateralization.  This  Agreement  or  any of the
Related  Documents ceases to be in full force and effect  (including  failure of
any collateral  documents to create a valid and perfected  security  interest or
lien) at any time for any reason.
            20.5  Insolvency.   The  dissolution  or  termination  of  Grantor's
existence as a going business,  the insolvency of Grantor,  the appointment of a
receiver for any part of Grantor's  property,  any assignment for the benefit of
creditors,  any type of creditor workout,  or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Grantor.
            20.6 Creditor or Forfeiture Proceedings. Commencement of foreclosure
or  forfeiture   proceedings,   whether  by  judicial   proceeding,   self-help,
repossession  or  any  other  method,  by  any  creditor  of  Grantor  or by any
governmental  agency against the Collateral or any other collateral securing the
indebtedness.
      21.   Events  Affecting  Guarantor.  Any of the  preceding  events occurs
with respect to any  Guarantor  of any of the  indebtedness  or such  Guarantor
dies or becomes incompetent.
      22.   Adverse   Change.   A  material   adverse   change  occurs  in  the
Collateral,   or  Raab   reasonably   believes   the  prospect  of  payment  or
performance of the Indebtedness is impaired.
      23.  Rights and Remedies on Default.  If an Event of Default  occurs under
this  Agreement,  at any time  thereafter,  Raab  shall have all the rights of a
secured party under the New York Uniform Commercial Code, even if the Collateral
is located in another  jurisdiction,  or the laws of the Uniform Commercial Code
in such  other  jurisdiction  if the  laws of New York  cannot  be  applied.  In
addition  and  without  limitation,  Raab  may  exercise  any one or more of the
following rights and remedies:
            23.1  Assemble  Collateral.  Raab may require  Grantor to deliver to
Raab all or any portion of the Collateral and any and all  certificates of title
and other  documents  relating to the  Collateral.  Raab may require  Grantor to
assemble  the  Collateral  and  make it  available  to  Raab  at a  place  to be
designated  by Raab.  Raab also shall have full power to enter upon the property
of Grantor to take  possession of and remove the  Collateral.  If the Collateral
contains other goods not covered by this Agreement at the time of  repossession,
Grantor  agrees  Raab may take  such  other  goods,  provided  that  Raab  makes
reasonable efforts to return them to Grantor after repossession.
            23.2 Sell the Collateral. Raab shall have full power to sell, lease,
transfer,  or otherwise deal with the Collateral or proceeds  thereof in his own
name or that of  Grantor.  Raab may sell the  Collateral  at public  auction  or
private sale. Unless the Collateral threatens to decline speedily in value or is
a  type  customarily  sold  on a  recognized  market,  Raab  will  give  Grantor
reasonable notice of the time after which any private sale or any other intended
disposition  of the  Collateral is to be made.  The  requirements  of reasonable
notice  shall be met if such  notice is given at least ten (10) days  before the
time of the sale or disposition. All expenses relating to the disposition of the
collateral,  including  without  limitation  the expenses of retaking,  holding,
insuring,  preparing for sale and selling the Collateral, shall become a part of
the indebtedness  secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.
            23.3 Appoint  Receiver.  To the extent  permitted by applicable law,
Raab shall have the following rights and remedies regarding the appointment of a
receiver:  (a) Raab may have a receiver  appointed as a matter of right, (b) the
receiver may be an employee of Raab and may serve without bond, and (c) all fees
of the receiver and his or her  attorney  shall become part of the  indebtedness
secured by this  Agreement and shall be payable on demand,  with interest at the
Note rate from date of expenditure until repaid.
            23.4  Collect  Revenues,  Apply  Accounts.  Raab,  either  itself or
through a receiver,  may collect the payments,  rents, income, and revenues from
the Collateral.  Raab may at any time in his discretion  transfer any Collateral
into  his own name or that of his  nominee  and  receive  the  payments,  rents,
income,   and  revenues  therefrom  and  hold  the  same  as  security  for  the
indebtedness  or  apply  it to  payment  of the  indebtedness  in such  order of
preference  as  Raab  may  determine.  Insofar  as the  Collateral  consists  of
accounts, general intangibles,  insurance policies, instruments,  chattel paper,
chooses in action, or similar property, Raab may demand,  collect,  receipt for,
settle,  compromise,  adjust, sue for, foreclose or realize on the Collateral as
Raab may determine,  whether or not  indebtedness or Collateral is then due. For
these purposes, Raab may, on behalf of and in the name of Grantor, receive, open
and dispose of mail  addressed to Grantor;  change any address to which mail and
payments  are to be sent;  and  endorse  notes,  checks,  drafts,  money  order,
documents of title,  instruments and items pertaining to payment,  shipment,  or
storage of any  Collateral.  To facilitate  collection,  Raab may notify account
debtors and obligers on any Collateral to make payments directly to Raab.
            23.5 Obtain  Deficiency.  If Raab  chooses to sell any or all of the
Collateral,  Raab may  obtain a  judgment  against  Grantor  for any  deficiency
remaining  on the  indebtedness  due to Raab after  application  of all  amounts
received  from the exercise of the rights  provided in this  Agreement.  Grantor
shall be liable  for a  deficiency  even if the  transaction  described  in this
subsection is a sale of accounts or chattel paper.
      24. Other Rights and Remedies. Raab shall have all the rights and remedies
of a secured  creditor under the provisions of the Uniform  Commercial  Code, as
may be amended from time to time. In addition,  Raab shall have and may exercise
any or all other rights and remedies it may have available at law, in equity, or
otherwise.
      25.  Cumulative  Remedies.  All of Raab's  rights  and  remedies,  whether
evidenced by this  Agreement or the Related  Documents or by any other  writing,
shall be cumulative and may be exercised singularly or concurrently. Election by
Raab to pursue any remedy shall not exclude pursuit of any other remedy,  and an
election  to make  expenditures  or to take action to perform an  obligation  of
Grantor under this  Agreement,  after  Grantor's  failure to perform,  shall not
affect Raab's right to declare a default and to exercise his remedies.
      26.   Miscellaneous  Provisions.  The following miscellaneous  provisions
are a part of this Agreement:
            26.1   Amendments.   This  Agreement,   together  with  any  Related
Documents,  constitutes the entire understanding and agreement of the parties as
to the matters set forth in this  Agreement.  No  alteration  of or amendment to
this  Agreement  shall be  effective  unless  given in writing and signed by the
party or parties sought to be charged or bound by the alteration or amendment.
            26.2  Applicable  Law. This Agreement has been delivered to Raab and
accepted by Raab in the State of New York. If there is a lawsuit, Grantor agrees
upon Raab's request to submit to the  jurisdiction of the courts of the State of
New York.  Raab and  Grantor  hereby  waive  the right to any jury  trial in any
action,  proceeding,  or counterclaim  brought by either Raab or Grantor against
the other.  This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
            26.3 Attorney's  Fees;  Expenses.  Grantor agrees to pay upon demand
all of Raab's costs and  expenses,  including  attorneys'  fees and Raab's legal
expenses,  incurred in connection with the  enforcement of this Agreement.  Raab
may pay someone else to help enforce this  Agreement,  and Grantor shall pay the
costs and  expenses  of such  enforcement.  Costs and  expenses  include  Raab's
attorneys' fees and legal expenses whether or not there is a lawsuit,  including
attorneys'  fees and legal  expenses for bankruptcy  proceedings  (and including
efforts to modify or vacate any automatic stay or injunction),  appeals, and any
anticipated post-judgment collection services.  Grantor also shall pay all court
costs and such additional fees as may be directed by the court.
            26.4  Caption  Headings.  Caption  headings in this  Agreement  are
for  convenience  purposes  only and are not to be used to  interpret or define
the provisions of this Agreement.
            26.5 Notices.  All notices required to be given under this Agreement
shall  be given  in  writing,  may be sent by  telefacsimile  (unless  otherwise
required  by law),  and  shall be  effective  when  actually  delivered  or when
deposited  with a nationally  recognized  overnight  courier or deposited in the
United States mail, first class, postage prepaid, addressed to the party to whom
the notice is to be given at the at the following addresses.
            Raab:             Marvin N. Raab
                                    4229 Coolidge Road
                                    Cherry Hill, NJ 08002

            With a copy to:   Richard P. Freedman, Esq.
                                    Angelini, Viniar & Freedman
                                    413 Route 70 East
                                    Cherry Hill, NJ  08003

            Grantor:                Liberty Group Holdings, Inc.
                                    11 52nd Street
                                    Brooklyn, Ny  11232

            With a copy to:   David Lubin, Esq.
                                    Herrick & Feinstein, LLP
                                    2 Park Avenue
                                    New York, NY  10016

        Any party may change its  address for notices  under this  Agreement  by
giving formal written notice to the other parties specifying that the purpose of
the  notice is to  change  the  party's  address.  To the  extent  permitted  by
applicable  law, if there is more than one  Grantor,  notice to any Grantor will
constitute notice to all Grantors.  For notice purposes,  Grantor will keep Raab
informed at all times of Grantor's current address(es).
      26. No Joint Venture or Partnership.  The relationship of Grantor and Raab
created by this  Agreement  is  strictly  that of  debtor-creditor,  and nothing
contained in this Agreement or in any of the Related  Documents  shall be deemed
or construed to create a partnership or joint venture between Grantor and Raab.
      27. Power of Attorney. Grantor hereby appoints Raab as his true and lawful
attorney-in-fact,  irrevocably,  with  full  power  of  substitution  to do  the
following:  (a) to demand,  collect,  receive,  receipt for, sue and recover all
sums of money or other property which may now or hereafter  become due, owing or
payable  from the  Collateral;  (b) to  execute,  sign and  endorse  any and all
claims, instruments,  receipts, checks, drafts or warrants issued in payment for
the Collateral; (c) to settle or compromise any and all claims arising under the
Collateral,  and, in the place and stead of Grantor,  to execute and deliver his
release and settlement for the claim;  and (d) to file any claim or claims or to
take any action or institute or take part in any proceedings,  either in his own
name or in the name of Grantor,  or otherwise,  which in the  discretion of Raab
may seem to be necessary or  advisable.  This power is given as security for the
indebtedness, and the authority hereby conferred is and shall be irrevocable and
shall remain in full force and effect until renounced by Raab.
      28. Severability. If a court of competent jurisdiction finds any provision
of  this  Agreement  to  be  invalid  or  unenforceable  as  to  any  person  or
circumstance,   such  finding  shall  not  render  that  provision   invalid  or
unenforceable as to any other persons or  circumstances.  If feasible,  any such
offending  provision  shall be deemed to be  modified to be within the limits of
enforceability  or validity;  however,  if the offending  provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in all
other respects shall remain valid and enforceable.
      29.   Successor  Interests.  Subject to the  limitations  set forth above
on transfer of the  Collateral,  this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns.
      30. Waiver.  Raab shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Raab. No delay or
omission on the part of Raab in  exercising  any right shall operate as a waiver
of such  right or any  other  right.  A waiver  by Raab of a  provision  of this
Agreement  shall not prejudice or constitute a waiver of Raab's right  otherwise
to demand strict  compliance  with that provision or any other provision of this
Agreement.  No prior waiver by Raab, nor any course of dealing  between Raab and
Grantor,  shall  constitute  a  waiver  of any  of  Raab's  rights  or of any of
Grantor's  obligations  as to any future  transactions.  Whenever the consent of
Raab is required under this  Agreement,  the granting of such consent by Raab in
any instance shall not  constitute  continuing  consent to subsequent  instances
where such  consent is required  and in all cases such consent may be granted or
withheld in the sole discretion of Raab.
[SIGNATURES ON FOLLOWING PAGE]


<PAGE>



      IN WITNESS  WHEREOF,  the parties  hereto have set their hands and seal or
caused  this  Security  Agreement  to be  executed  the day and year first above
written.

                                    LIBERTY GROUP HOLDINGS, INC., a
                                    Delaware corporation, Grantor


ATTEST:

________________________            BY:
                                       ------------------------------




                                    MARVIN N. RAAB


</TEXT>
</DOCUMENT>
