Document:

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                                                                   Exhibit 10.2

                                                                [EXECUTION COPY]

                               SECURITY AGREEMENT

     This SECURITY AGREEMENT (this "Agreement"), entered into as of February 10,
2005, is executed and delivered by PAHC HOLDINGS CORPORATION, a Delaware
corporation ("Debtor"), in favor of HSBC BANK USA, NATIONAL ASSOCIATION
("HSBC"), as collateral agent (together with its successor(s) thereto in such
capacity, "Collateral Agent") for the Trustee and Holders, in light of the
following:

     WHEREAS, Debtor, Collateral Agent and HSBC, as Trustee ("Trustee"), have
entered into an Indenture, dated as of February 10, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which Debtor has issued $29,000,000 aggregate principal amount of its 15%
Senior Secured Notes due 2010 (and, together with any additional notes that may
be issued by Debtor from time to time thereunder or exchanged therefor or for
such additional notes, the "Notes");

     WHEREAS, Debtor desires to secure its Obligations under the Notes by
granting to Collateral Agent, for the benefit of itself, the Trustee and the
Holders, security interests in the Collateral as set forth herein; and

     WHEREAS, to induce the Initial Purchaser to purchase the Notes, each Holder
to hold the Notes to be held by it and HSBC to act in its capacities as Trustee
and Collateral Agent, Debtor desires to pledge, grant, transfer, and assign to
Collateral Agent, for the benefit of itself, the Holders and the Trustee, a
security interest in the Collateral to secure the Secured Obligations, as
provided herein.

     NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and each intending to
be bound hereby, Collateral Agent and Debtor agree as follows:

     1.   DEFINITIONS AND CONSTRUCTION.

          1.1 DEFINITIONS. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Indenture. As
used in this Agreement, the following terms shall have the following
definitions:

     "Account" means any "account" (as that term is defined in Article 9 of the
Code), and any and all supporting obligations in respect thereof.

     "Additional Documents" has the meaning set forth in Section 2.4(c) of this
Agreement.
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     "Agreement" has the meaning set forth in the preamble of this Agreement.

     "Bankruptcy Code" shall have the meaning ascribed to the term Bankruptcy
Law in the Indenture.

     "Books" means, with respect to Debtor, all of Debtor's now owned or
hereafter acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of Debtor's Records relating to its business operations or financial
condition, and all of its goods or General Intangibles related to such
information).

     "Code" means the Uniform Commercial Code as in effect from time to time in
the State of New York.

     "Collateral" means all of Debtor's now owned or hereafter acquired right,
title, and interest in and to each of the following: Accounts; Books; commercial
tort claims; Deposit Accounts; Equipment; General Intangibles; Inventory;
Investment Property (including all securities and Securities Accounts);
Negotiable Collateral; any money, or other assets of Debtor which now or
hereafter come into the possession, custody, or control of Collateral Agent; and
the proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance covering any or all of the foregoing,
and any and all Accounts, Debtor's Books, Deposit Accounts, Equipment, General
Intangibles, Inventory, Investment Property, Negotiable Collateral, money, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion thereof
or interest therein, and the proceeds thereof; provided, however, that
Collateral shall not include any Voting Stock of Phibro Animal Health until the
earlier to occur of (i) the redemption of all of the outstanding shares of the
Series C Preferred Stock of Phibro Animal Health and (ii) March 1, 2005.

     "Collateral Agent" has the meaning set forth in the preamble to this
Agreement.

     "Collateral Agent's Liens" means the Liens granted by Debtor to Collateral
Agent under this Agreement or the other Indenture Documents to which Debtor is a
party.

     "Collections" means all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).

     "Commercial Tort Claim Assignment" has the meaning set forth in Section
2.4(b) of this Agreement.

     "Control Agreement" means a control agreement, in form and substance
reasonably satisfactory to the Collateral Agent, executed and delivered by (a)
Debtor, (b) Collateral Agent, and (c) the applicable (i) securities intermediary
(with respect to a Securities Account of Debtor) or (ii) bank (with respect to a
Deposit Account of Debtor).

     "Debtor" has the meaning set forth in the preamble to this Agreement.

     "Debtor's Books" means Debtor's now owned or hereafter acquired books and
records (including all of its Records indicating, summarizing, or evidencing its
assets (including the

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Collateral) or liabilities, all of its Records relating to its business
operations or financial condition, and all of its goods or General Intangibles
related to such information).

     "Defeasance" means, with respect to any obligation, the defeasance thereof
pursuant to a "defeasance" or "covenant defeasance" as defined in and described
under Section 8.02 of the Indenture.

     "Deposit Account" means any "deposit account" (as that term is defined in
the Code).

     "Disposition" shall have the meaning ascribed to the term Asset Sale in the
Indenture, and the words "Dispose" and "Disposal" shall be interpreted
similarly.

     "Equipment" means "equipment" (as that term is defined in the Code), and
includes machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), computer hardware, tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.

     "General Intangibles" means "general intangibles" (as that term is defined
in the Code), (including limited liability company interests, payment
intangibles, contract rights, rights to payment, rights arising under common
law, statutes, or regulations, choses or things in action, goodwill, patents,
trade names, trade secrets, trademarks, servicemarks, copyrights, blueprints,
drawings, purchase orders, customer lists, monies due or recoverable from
pension funds, route lists, rights to payment and other rights under any royalty
or licensing agreements, infringement claims, computer programs, information
contained on computer disks or tapes, software, literature, reports, catalogs,
insurance premium rebates, tax refunds, and tax refund claims) and any and all
supporting obligations in respect thereof, and any other personal property other
than Accounts, Deposit Accounts, goods, Investment Property, and Negotiable
Collateral.

     "Governmental Authority" means any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.

     "HSBC" has the meaning set forth in the preamble of this Agreement.

     "Indenture" has the meaning set forth in the recitals to this Agreement.

     "Indenture Documents" means this Agreement, the other Collateral
Agreements, the Indenture and the Notes.

     "Inventory" means "inventory" (as that term is defined in the Code).

     "Investment Property" means "investment property" (as that term is defined
in the Code), and any and all supporting obligations in respect thereof.

     "Issuers" means each Subsidiary of Debtor whose Capital Stock is or may
from time to time be pledged hereunder to the Collateral Agent for the benefit
of the Secured Parties, and any successors to each such Subsidiary, whether by
merger or otherwise.

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     "Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Debtor and its Restricted Subsidiaries,
taken as a whole, (b) a material impairment of Debtor's or any of its Restricted
Subsidiaries' ability to perform its obligations under the Indenture Documents
to which it is a party or of any Secured Party's ability to enforce the Secured
Obligations or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of the Collateral Agent's Liens with respect to the
Collateral as a result of an action or failure to act on the part of Debtor or
any of its Restricted Subsidiaries.

     "Negotiable Collateral" means letters of credit, letter of credit rights,
instruments, promissory notes, drafts, documents, and chattel paper (including
electronic chattel paper and tangible chattel paper), and any and all supporting
obligations in respect thereof.

     "Notes" has the meaning set forth in the recitals to this Agreement.

     "Permitted Disposition" means a Disposition consummated in accordance with
the terms of Section 4.16 of the Indenture.

     "Permitted Protest" means the right of Debtor to protest any taxes (other
than payroll taxes or taxes that are the subject of a United States federal tax
lien); provided that (a) a reserve with respect to such obligation is
established on the books of Debtor in such amount as is required under GAAP, (b)
any such protest is instituted promptly and prosecuted diligently by Debtor in
good faith, and (c) while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Collateral
Agent's Liens.

     "Record" means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.

     "Secured Obligations" means all liabilities, obligations, or undertakings
owing by Debtor to Collateral Agent, the Trustee or any Holder of any kind or
description arising out of or outstanding under, advanced or issued pursuant to,
or evidenced by the Indenture, this Agreement, or any of the other Indenture
Documents, irrespective of whether for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, voluntary or
involuntary, whether now existing or hereafter arising, and including all
interest, costs, indemnities, fees (including attorneys fees), and expenses
(including interest, costs, indemnities, fees, and expenses that, but for the
provisions of the Bankruptcy Code, would have accrued irrespective of whether a
claim therefor is allowed) and any and all other amounts which Debtor is
required to pay pursuant to any of the foregoing, by law, or otherwise.

     "Securities Account" means any "securities account" (as that term is
defined in the Code).

     "Trustee" has the meaning set forth in the recitals to this Agreement.

     "Voidable Transfer" has the meaning set forth in Section 11.8 to this
Agreement.

          1.2 CODE. Any terms used in this Agreement which are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.

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          1.3 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in any of the
other Indenture Documents to this Agreement or any of the other Indenture
Documents shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements,
thereto and thereof, as applicable (subject to any restrictions on such
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth therein). In
the event of a direct conflict between the terms and provisions of this
Agreement and the Indenture, it is the intention of the parties hereto that both
such documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of the Indenture shall control and govern; provided, however, that
the inclusion herein of additional obligations on the part of Debtor and
supplemental rights and remedies in favor of Collateral Agent, in each case in
respect of the Collateral, shall not be deemed a conflict with the Indenture.
Any reference herein to the payment in full of the Secured Obligations shall
mean the payment in full in cash of all Secured Obligations other than
contingent indemnification Secured Obligations. Any reference herein to any
Person shall be construed to include such Person's successors and assigns. Any
requirement of a writing contained herein shall be satisfied by the transmission
of a Record and any Record transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.

          1.4 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.

     2.   CREATION OF SECURITY INTEREST.

          2.1 GRANT OF SECURITY INTEREST. Debtor hereby grants to Collateral
Agent, for the benefit of itself, the Holders and the Trustee, a continuing
security interest in all of its right, title, and interest in all currently
existing and hereafter acquired or arising Collateral in order to secure prompt
repayment of any and all of the Secured Obligations in accordance with the terms
and conditions of the Indenture Documents and in order to secure prompt
performance by Debtor of Debtor's covenants and duties under the Indenture
Documents. Collateral Agent's Liens in and to the Collateral shall attach to all
Collateral without further act on the part of Collateral Agent or Debtor.
Anything contained in this Agreement or any other Indenture Document to the
contrary notwithstanding, except for Permitted Dispositions, Debtor does not
have any authority, express or implied, to Dispose of any item or portion of the
Collateral.

          2.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that the perfection or priority of Collateral Agent's security
interest is dependent on or enhanced by possession,

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Debtor, immediately upon the request of Collateral Agent, shall endorse and
deliver physical possession of such Negotiable Collateral to Collateral Agent.

          2.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Collateral Agent or Collateral Agent's designee may (a) notify
Account Debtors of Debtor that the Accounts, chattel paper, or General
Intangibles have been assigned to Collateral Agent or that Collateral Agent has
a security interest therein, or (b) collect Debtor's Accounts, chattel paper, or
General Intangibles directly and charge the reasonable collection costs and
expenses to Debtor. Debtor agrees that it will hold in trust for Collateral
Agent, as Collateral Agent's trustee, any Collections that it receives and
immediately will deliver such Collections to Collateral Agent or to any Deposit
Account of Debtor that is subject to a Control Agreement in their original form
as received by Debtor.

          2.4 FILING OF FINANCING STATEMENTS; COMMERCIAL TORT CLAIMS; DELIVERY
OF ADDITIONAL DOCUMENTATION REQUIRED.

          (a) Debtor shall file or cause to be filed any financing statement
necessary or desirable to effectuate the transactions contemplated by this
Agreement and the other Indenture Documents, and any continuation statement or
amendment with respect thereto, in any appropriate filing office.

          (b) If Debtor acquires any commercial tort claims after the date
hereof, Debtor shall promptly (but in any event within 3 Business Days after
such acquisition) deliver to Collateral Agent a written description of such
commercial tort claim and shall deliver a written agreement, in form and
substance reasonably satisfactory to Collateral Agent, pursuant to which Debtor
shall pledge and collaterally assign all of its right, title and interest in and
to such commercial tort claim to Collateral Agent, as security for the Secured
Obligations (a "Commercial Tort Claim Assignment").

          (c) At any time upon the request of Collateral Agent, Debtor shall
execute (if applicable) and deliver to Collateral Agent, any and all financing
statements, original financing statements in lieu of continuation statements,
security agreements, pledges, assignments, Commercial Tort Claim Assignments,
endorsements of certificates of title, and all other documents (collectively,
the "Additional Documents") that Collateral Agent may reasonably request in form
and substance reasonably satisfactory to Collateral Agent, to create, perfect
and continue perfected or to better perfect the Collateral Agent's Liens in the
Collateral (whether now owned or hereafter arising or acquired, tangible or
intangible) and in order to fully consummate all of the transactions
contemplated hereby and under the other Indenture Documents. Debtor, to the
maximum extent permitted by applicable law, authorizes Collateral Agent to
execute any such Additional Documents in Debtor's name and authorizes Collateral
Agent to file such executed Additional Documents in any appropriate filing
office. In addition, on such periodic basis as Collateral Agent shall require,
Debtor shall (i) provide Collateral Agent with a report of all new material
patentable, copyrightable, or trademarkable materials acquired or generated by
Debtor during the prior period, (ii) cause all material patents, copyrights and
trademarks acquired or generated by Debtor that are not already the subject of a
registration with the appropriate filing office (or an application therefor
diligently prosecuted) to be registered

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with such appropriate filing office in a manner sufficient to impart
constructive notice of Debtor's ownership thereof, and (iii) cause to be
prepared, executed, and delivered to Collateral Agent supplemental schedules to
the applicable Indenture Documents to identify such patents, copyrights and
trademarks as being subject to the security interests created hereunder.

          2.5 POWER OF ATTORNEY. Subject to the terms of the Indenture, Debtor
hereby irrevocably makes, constitutes, and appoints Collateral Agent (and any of
Collateral Agent's officers, employees, or agents designated by Collateral
Agent) as Debtor's true and lawful attorney, with power to: (a) if Debtor
refuses to, or fails timely to execute and deliver any of the documents
described in Section 2.4, sign the name of Debtor on any of the documents
described in Section 2.4; (b) at any time that an Event of Default has occurred
and is continuing, sign Debtor's name on any invoice or bill of lading relating
to the Collateral, drafts against Account Debtors, or notices to Account
Debtors; (c) send requests for verification of Accounts; (d) endorse Debtor's
name on any of its payment items (including all of its Collections) that may
come into the Collateral Agent's possession; (e) at any time that an Event of
Default has occurred and is continuing, make, settle, and adjust all claims
under Debtor's policies of insurance and make all determinations and decisions
with respect to such policies of insurance; and (f) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting the Accounts, chattel paper, or General Intangibles directly with
Account Debtors, for amounts and upon terms which Collateral Agent determines to
be reasonable, and Collateral Agent may cause to be executed and delivered any
documents and releases which Collateral Agent determines to be necessary. The
appointment of Collateral Agent as Debtor's attorney, and each and every one of
Collateral Agent's rights and powers, being coupled with an interest, is
irrevocable until, and shall terminate when, all of the Secured Obligations have
been paid in full or the Defeasance thereof shall have been consummated.

          2.6 RIGHT TO INSPECT. Collateral Agent (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Debtor's Books and make copies or abstracts thereof and to check, test,
and appraise the Collateral, or any portion thereof, in order to verify Debtor's
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.

          2.7 CONTROL AGREEMENT. Debtor agrees that it will not transfer assets
out of any of its Deposit Accounts or Securities Accounts; provided, however,
that so long as no Event of Default has occurred and is continuing or would
result therefrom, Debtor may use such assets (and the proceeds thereof) to the
extent not prohibited by this Agreement or the other Indenture Documents and, if
the transfer is to another bank or securities intermediary, so long as Debtor,
Collateral Agent, and the substitute bank or securities intermediary have
entered into a Control Agreement. Debtor agrees that (a) it shall take any and
all reasonable steps that Collateral Agent requests in order for Collateral
Agent to obtain control in accordance with Sections 9-104, 9-105, 9-106, and
9-107 of the Code with respect to (i) any of its Securities Accounts (other than
the Escrow Account) (to the extent that any such Securities Account contains
cash, cash equivalents, or Investment Property in an aggregate amount in excess
of $10,000 (other than following the occurrence and during the continuance of
any Event of Default)), (ii) any of its Deposit Accounts (other than the Escrow
Account) (to the extent that any such Deposit Account has a balance in excess of
$10,000 (other than following the occurrence and during the continuance of any
Event of Default)), and (iii) any electronic chattel paper, Investment Property,
and letter-of-credit

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rights, in each case, to the extent the value thereof exceeds $5,000 (other than
following the occurrence and during the continuance of any Event of Default). No
arrangement contemplated hereby or by any Control Agreement in respect of any
Securities Accounts or other Investment Property shall be modified by Debtor
without the prior written consent of Collateral Agent. Subject to the terms of
the Indenture, upon the occurrence and during the continuance of a Default or
Event of Default, Collateral Agent may notify any bank or securities
intermediary to liquidate the applicable Deposit Account or Securities Account
or any related Investment Property maintained or held thereby and remit the
proceeds thereof to a Deposit Account over which the Collateral Agent maintains
control (as defined in Section 9-104 of the Code) for the benefit of itself, the
Holders and the Trustee.

          2.8 DEPOSIT ACCOUNTS.

          (a) Within 30 days of the Issue Date, Debtor shall have delivered to
Collateral Agent a Control Agreement executed by the parties thereto with
respect to each Deposit Account and each Securities Account (other than the
Escrow Account) that has a balance exceeding $10,000 on the date hereof;
provided, however, that Debtor shall not have any Deposit Accounts or Securities
Accounts (other than the Escrow Account) that are not the subject of any Control
Agreement to the extent the aggregate balance thereof exceeds $25,000.

          (b) At any time that the balance in any Deposit Account of Debtor
(other than the Escrow Account) that is not the subject of a Control Agreement
exceeds $5,000 for any consecutive five (5) day period, Debtor shall immediately
transfer or cause to be transferred such balance into a Deposit Account that is
the subject of a Control Agreement.

     3.   REPRESENTATIONS AND WARRANTIES.

     Debtor represents and warrants, as of the date it became a party hereto, to
each Secured Party insofar as the representations and warranties contained
herein are applicable to Debtor and its properties, as set forth in this Section
3.

          3.1 AS TO CAPITAL STOCK OF CERTAIN SUBSIDIARIES. The Collateral
comprised of Capital Stock of any Issuer that is (a) a Subsidiary of Debtor and
(b) a general partnership, limited partnership or limited liability company (i)
are not dealt in or traded on securities exchanges or in securities markets,
(ii) do not have terms expressly providing that they are securities governed by
Article 8 of the Uniform Commercial Code as in effect in the jurisdiction in
which such Issuer was formed, and (iii) are not investment company securities,
and are not, therefore, "securities" governed by Article 8 of the Code.

     Pursuant to the Stockholders Agreement, dated as of November 30, 2000,
among, inter alia, Phibro Animal Health, Jack C. Bendheim and the Palladium
Investors; no Voting Stock of Phibro Animal Health may be the subject of any
Lien hereunder unless the Collateral Agent shall have previously agreed to be
bound by the terms thereof.

          3.2 AS TO AFFILIATE INDEBTEDNESS. No Indebtedness owing by any
Affiliate of Debtor to Debtor is evidenced by a security.

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          3.3 NO ENCUMBRANCES. Debtor has good and indefeasible title to its
personal property assets free and clear of Liens except for Permitted Liens.

          3.4 EQUIPMENT. All of the Equipment of Debtor in all material respects
is used or held for use in its business and is fit for such purposes, subject to
ordinary wear and tear.

          3.5 LOCATION OF INVENTORY AND EQUIPMENT. Except as set forth on
Schedule 3.5, the Inventory and Equipment of Debtor is not stored with a bailee,
warehouseman, or similar party and is located only at, or in-transit between,
the locations identified on Schedule 3.5 (as such Schedule may be updated
pursuant to Section 4.2).

          3.6 STATE OF INCORPORATION; LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN;
ORGANIZATIONAL ID NUMBER; COMMERCIAL TORT CLAIMS.

          (a) The jurisdiction of organization of Debtor is set forth on
Schedule 3.6(a).

          (b) The chief executive office of Debtor is located at the address
indicated on Schedule 3.6(b) (as such Schedule may be updated pursuant to
Section 4.2).

          (c) Debtor's FEIN and organizational identification number, if any,
are identified on Schedule 3.6(c).

          (d) As of the date Debtor became a party hereto, Debtor did not hold
any commercial tort claims, except as set forth on Schedule 3.6(d).

          3.7 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.

          (a) Debtor is duly organized and existing and in good standing under
the laws of the jurisdiction of its organization and qualified to do business in
any state where the failure to be so qualified reasonably could be expected to
have a Material Adverse Change.

          (b) Set forth on Schedule 3.7(b), is a complete and accurate
description of the authorized Capital Stock of Debtor, by class, and, as of the
Issue Date, a description of the number of shares of each such class that are
issued and outstanding. Other than as described on Schedule 3.7(b), there are no
subscriptions, options, warrants, or calls relating to any shares of Debtor's
Capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Except as set forth on Schedule
3.7(b), Debtor is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its Capital Stock or any
security convertible into or exchangeable for any of its Capital Stock.

          (c) Set forth on Schedule 3.7(c), is a complete and accurate list of
Debtor's direct Subsidiaries, showing: (i) the jurisdiction of their
organization, (ii) the number of shares of each class of Capital Stock
authorized for each of such Subsidiaries, and (iii) the number and the
percentage of the outstanding shares of each such class owned directly or
indirectly by Debtor. All of the outstanding Capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.

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          (d) Except as set forth on Schedule 3.7(d), there are no
subscriptions, options, warrants, or calls relating to any shares of Debtor's
direct Subsidiaries' Capital Stock, including any right of conversion or
exchange under any outstanding security or other instrument. Except as set forth
on Schedule 3.7(d), Debtor is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of any of its
Subsidiary's Capital Stock or any security convertible into or exchangeable for
any such Capital Stock.

          3.8 DUE AUTHORIZATION; NO CONFLICT.

          (a) The execution, delivery, and performance by Debtor of this
Agreement and the other Indenture Documents to which it is a party have been
duly authorized by all necessary action on the part of Debtor.

          (b) The execution, delivery, and performance by Debtor of this
Agreement and the other Indenture Documents to which it is a party do not and
will not (i) violate any provision of federal, state, or local law or regulation
applicable to Debtor, the organic documents of Debtor, or any order, judgment,
or decree of any court or other Governmental Authority binding on Debtor, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse of
time or both) a default under any contractual obligation of Debtor that could
reasonably be expected to result in a Material Adverse Effect, (iii) result in
or require the creation or imposition of any Lien of any nature whatsoever upon
any properties or assets of Debtor, other than Permitted Liens, or (iv) require
any approval of Debtor's interestholders or any approval or consent of any
Person under any material contractual obligation of Debtor, other than in the
case of clauses (iii) and (iv), consents or approvals that have been obtained
and that are still in force and effect.

          (c) Other than the filing of financing statements, the filings
required with the United States Patent and Trademark Office and the United
States Copyright Office and any consents required in foreign jurisdictions as a
matter of applicable law with respect to the stock pledges of the equity
interests in the Issuers that are Foreign Subsidiaries, the execution, delivery,
and performance by Debtor of this Agreement and the other Indenture Documents to
which Debtor is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
Governmental Authority other than consents or approvals that have been obtained
and that are still in force and effect.

          (d) This Agreement and the other Indenture Documents to which Debtor
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by Debtor will be the legally valid and binding
obligations of Debtor, enforceable against Debtor in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.

          (e) The Collateral Agent's Liens in the Collateral are validly
created, perfected, and first priority Liens, subject only to other Permitted
Liens.

          3.9 INTELLECTUAL PROPERTY. Debtor and each Domestic Restricted
Subsidiary of Debtor owns, or holds licenses in, all trademarks, trade names,
copyrights, patents, patent rights,

                                      -10-
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and licenses that are necessary to the conduct of its business as currently
conducted. Attached hereto as Schedule 3.9 (as updated from time to time) is a
true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which Debtor is the owner or is an exclusive licensee.

          3.10 DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. Set forth on Schedule
3.10 are all of Debtor's Deposit Accounts and Securities Accounts, including,
with respect to each bank or securities intermediary (i) the name and address of
such Person, and (ii) the account numbers of the Deposit Accounts or Securities
Accounts maintained with such Person.

     4. AFFIRMATIVE COVENANTS. Debtor covenants and agrees that until payment in
full of the Secured Obligations or the Defeasance thereof, Debtor shall do all
of the following:

          4.1 INSURANCE.

          (a) Debtor shall comply with its obligations under Section 4.05(b) of
the Indenture. Debtor shall deliver copies of all policies relating to insurance
required under such Section to Collateral Agent with a satisfactory lender's
loss payable endorsement naming Collateral Agent as loss payee or additional
insured, as appropriate, as its interest may appear. Each such policy of
insurance or endorsement shall contain a clause requiring the insurer to give
not less than 30 days' prior written notice to Collateral Agent in the event of
cancellation of the policy for any reason whatsoever.

          (b) Debtor shall give Collateral Agent prompt notice of any loss
exceeding $5,000 that is covered by such insurance. So long as no Default or
Event of Default has occurred and is continuing, Debtor shall have the right to
adjust any losses claimed after the Closing Date. At any time following the
occurrence and during the continuance of a Default or an Event of Default,
Collateral Agent shall have the exclusive right to adjust any losses claimed
after the Issue Date without any liability to Debtor whatsoever in respect of
such adjustments, and any monies received as payment for any loss under any
insurance policy mentioned above (other than liability insurance policies) or as
payment of any award or compensation for condemnation or taking by eminent
domain, shall be paid over to Collateral Agent to be held as cash collateral and
applied to the obligations of Debtor under the Indenture Documents as they
become due or shall be disbursed to Debtor for application to the cost of
repairs, replacements, or restorations as such costs become due. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction.

          (c) Debtor will not take out separate insurance concurrent in form or
contributing in the event of loss with that required to be maintained under this
Section 4.05(b) of the Indenture, unless Collateral Agent is included thereon as
named insured with the loss payable to Collateral Agent under a lender's loss
payable endorsement or its equivalent. Debtor immediately shall notify
Collateral Agent whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Collateral Agent.

                                      -11-
<PAGE>
          4.2 LOCATION OF INVENTORY AND EQUIPMENT. Keep its Inventory and
Equipment only at the locations identified on Schedule 3.5 and its chief
executive office only at the location identified on Schedule 3.6(b); provided,
however, that (a) Debtor may amend Schedule 3.5 and Schedule 3.6(b) so long as
such amendment occurs by written notice to Collateral Agent not less than 30
days after the date on which such Inventory or Equipment is moved to such new
location or such chief executive office is relocated so long as such new
location is within the continental United States and (b) Debtor may keep
Inventory having an aggregate fair market value not exceeding $10,000 at
locations other than those specified on Schedule 3.5 or 3.6(b).

     5. NEGATIVE COVENANTS. Debtor covenants and agrees that until payment in
full of the Secured Obligations or the Defeasance thereof, Debtor will not do
any of the following:

          5.1 CHANGE NAME. Change its name, FEIN, organizational identification
number, state of organization, or organizational identity; provided, however,
that Debtor may change its name or other such information upon at least 30 days'
prior written notice to Collateral Agent of such change and so long as, at the
time of such written notification, Debtor provides any financing statements or
amendments to financing statements necessary to perfect and continue perfected
the Collateral Agent's Liens.

     6. COLLATERAL AGENT'S RIGHTS AND REMEDIES.

          6.1 RIGHTS AND REMEDIES. Upon the occurrence and during the
continuance of an Event of Default and subject to the terms of the Indenture, in
addition to all other rights and remedies available to Collateral Agent as
provided hereafter, Collateral Agent may, at its election, without notice of its
election and without demand (other than any notice required to be provided to
Debtor pursuant to the terms of the Indenture), do any one or more of the
following, all of which are authorized by Debtor:

          (a) Proceed directly and at once, without notice, against Debtor to
collect and recover the full amount or any portion of the Secured Obligations,
without first proceeding against Debtor, or against any security or collateral
for the Secured Obligations;

          (b) Exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein and in the Indenture or otherwise available to
it, all the rights and remedies available to it at law (including those of a
secured party under the Code) or in equity;

          (c) Settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which Collateral Agent considers advisable, and in
such cases, Collateral Agent will credit Debtor with only the net amounts
received by Collateral Agent in payment of such disputed Accounts after
deducting all amounts owed to Collateral Agent pursuant to Section 8.3;

          (d) Without notice or demand upon Debtor, make such payments and do
such acts as Collateral Agent considers reasonably necessary to protect its
security interest in the Collateral. Debtor agrees to assemble the Collateral if
Collateral Agent so requires, and to make the Collateral available to Collateral
Agent as Collateral Agent may designate. Debtor authorizes Collateral Agent to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or

                                      -12-
<PAGE>
compromise any encumbrance, charge, or lien which in Collateral Agent's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to any of
Debtor's owned premises, Debtor hereby grants, to the fullest extent permitted
by law and binding contract, Collateral Agent a license to enter into possession
of such premises and to occupy the same, without charge, for up to one hundred
twenty (120) days in order to exercise any of Collateral Agent's rights or
remedies provided herein, at law, in equity, or otherwise;

          (e) Without notice to Debtor (such notice being expressly waived), and
without constituting an acceptance of any collateral in full or partial
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Secured Obligations any and all (i) balances and deposits of Debtor
held by Collateral Agent, or (ii) indebtedness at any time owing to or for the
credit or the account of Debtor held by Collateral Agent;

          (f) Hold, as cash collateral, any and all balances and deposits of
Debtor held by Collateral Agent to secure the full and final repayment of all of
the Secured Obligations;

          (g) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Debtor hereby grants Collateral Agent (to the fullest extent
permitted by law and binding contract) a license or other right to use, without
charge, Debtor's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of advertising for sale and selling any Collateral, and Debtor's
rights under all licenses and all franchise agreements shall inure to Collateral
Agent's benefit;

          (h) Sell all or any part of the Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Debtor's premises) as
Collateral Agent reasonably determines is commercially reasonable. It is not
necessary that such Collateral be present at any such sale;

          (i) Give notice of the disposition of the Collateral as follows:

               (i) Collateral Agent shall give Debtor a notice in writing of the
          time and place of public sale, or, if the sale is a private sale or
          some other disposition other than a public sale is to be made of the
          Collateral, then the time on or after which the private sale or other
          disposition is to be made; and

               (ii) The notice shall be personally delivered or mailed, postage
          prepaid, to Debtor as provided in Section 9, at least ten (10) days
          before the earliest time of disposition set forth in the notice; no
          notice needs to be given prior to the disposition of any portion of
          the Collateral that is perishable or threatens to decline speedily in
          value or that is of a type customarily sold on a recognized market;

          (j) Credit bid and purchase at any public sale;

                                      -13-
<PAGE>
          (k) Seek the appointment of a receiver or keeper to take possession of
all or any portion of the Collateral or to operate same and, to the maximum
extent permitted by law, may seek the appointment of such a receiver or keeper
without the requirement of prior notice or a hearing;

          (l) On behalf of itself, the Holders and the Trustee, shall have all
other rights and remedies available at law or in equity or pursuant to any other
Indenture Document; and

          (m) Be entitled to any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Debtor. Any excess will
be returned, without interest and subject to the rights of third Persons, by
Collateral Agent to Debtor.

          6.2 REMEDIES CUMULATIVE. Collateral Agent's rights and remedies under
this Agreement, the other Indenture Documents, and all other agreements shall be
cumulative. Collateral Agent shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Collateral Agent of one right or remedy shall be deemed an election,
and no waiver by any Secured Party of any Event of Default on Debtor's part
shall be deemed a continuing waiver. No delay by any Secured Party shall
constitute a waiver, election, or acquiescence by it.

     7. TAXES AND EXPENSES REGARDING THE COLLATERAL.

     If Debtor fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Collateral Agent, in its sole
discretion and without prior notice to Debtor, may (but shall not be obligated
to) do any or all of the following: (a) make payment of the same or any part
thereof (except to the extent that the validity of such assessment or tax is the
subject of a Permitted Protest); or (b) in the case of the failure to comply
with Section 4.05(b) of the Indenture, obtain and maintain such insurance
policies as may be required under such Section to insure Debtor's ownership and
use of the Collateral, and take any action with respect to such policies as
Collateral Agent deems prudent. Any amounts paid or deposited by Collateral
Agent shall immediately become additional Secured Obligations, and shall be
secured by the Collateral. Any payments made by Collateral Agent shall not
constitute an agreement by Collateral Agent to make similar payments in the
future or a waiver by Collateral Agent, of any Event of Default under this
Agreement. Collateral Agent need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance, or lien and the receipt
of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.

     8. WAIVERS; INDEMNIFICATION.

          8.1 DEMAND; PROTEST; ETC. Debtor waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Collateral Agent, on which Debtor may in any way
be liable.

                                      -14-
<PAGE>
          8.2 COLLATERAL AGENT'S LIABILITY FOR COLLATERAL. So long as Collateral
Agent complies with its obligations, if any, under the Code, Collateral Agent
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Debtor.

          8.3 INDEMNIFICATION. Debtor shall pay, indemnify, defend, and hold the
Collateral Agent-Related Persons and each of their respective officers,
employees, and agents (each, an "Indemnified Person") harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, and damages, and all reasonable attorneys
fees and disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective of whether
suit is brought), at any time asserted against, imposed upon, or incurred by any
of them (a) in connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Indenture Documents, or the transactions contemplated hereby or thereby or
the monitoring of Debtor's compliance with the terms of this Agreement and the
other Indenture Documents, and (b) with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Indenture
Document, or the use of the proceeds of the credit provided thereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto (all the
foregoing, collectively, the "Indemnified Liabilities"). The foregoing to the
contrary notwithstanding, Debtor shall not have any obligation to any
Indemnified Person under this Section 8.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of any such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Secured Obligations. If any Indemnified Person makes any
payment to any other Indemnified Person with respect to an Indemnified Liability
as to which Debtor was required to indemnify the Indemnified Person receiving
such payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Debtor with respect thereto. WITHOUT LIMITATION,
THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF
ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

     9. NOTICES.

          All notices and other communications hereunder to either party hereto
shall be in writing and shall be mailed, sent or delivered in accordance with
the Indenture.

     10. CHOICE OF LAW AND VENUE. THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

                                      -15-
<PAGE>
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER INDENTURE DOCUMENTS SHALL BE TRIED AND LITIGATED
ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE COLLATERAL
AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY
BE FOUND. DEBTOR AND COLLATERAL AGENT WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 10.

     11. GENERAL PROVISIONS.

          11.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Debtor and accepted and executed by Collateral Agent.

          11.2 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the respective successors and assigns of each of the parties;
provided, however, that Debtor may not assign this Agreement or any rights or
duties hereunder other than pursuant to the terms of the Indenture.

          11.3 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.

          11.4 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Collateral Agent, any
other Secured Party or Debtor, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.

          11.5 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

          11.6 AMENDMENTS; ETC. No amendment or waiver of any provision of this
Agreement nor consent to any departure by Debtor herefrom shall in any event be
effective unless the same shall be in writing and signed by Collateral Agent and
Debtor, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the part of
Collateral Agent to exercise, and no delay in exercising any right under this
Agreement, any other Indenture Document, or otherwise with

                                      -16-
<PAGE>
respect to any of the Secured Obligations, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under this Agreement, any
other Indenture Document, or otherwise with respect to any of the Secured
Obligations preclude any other or further exercise thereof or the exercise of
any other right. The remedies provided for in this Agreement or otherwise with
respect to any of the Secured Obligations are cumulative and not exclusive of
any remedies provided by law.

          11.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.

          11.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Secured Obligations by Debtor or the transfer by Debtor to
Collateral Agent of any property of Debtor should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
Collateral Agent is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that Collateral
Agent is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys' fees of Collateral Agent related thereto, the liability
of Debtor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.

          11.9 DEBTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding:

          (a) Debtor will remain liable under the contracts and agreements
     included in the Collateral to the extent set forth therein, and will
     perform all of its duties and obligations under such contracts and
     agreements to the same extent as if this Agreement had not been executed;

          (b) the exercise by Collateral Agent of any of its rights hereunder
     will not release Debtor from any of its duties or obligations under any
     such contracts or agreements included in the Collateral; and

          (c) none of Collateral Agent, the Trustee or any Holder will have any
     obligation or liability under any contracts or agreements included in the
     Collateral by reason of this Agreement, nor will any such Person be
     obligated to perform any of the obligations or duties of Debtor thereunder
     or to take any action to collect or enforce any claim for payment assigned
     hereunder.

                                      -17-
<PAGE>
          11.10 COLLATERAL COMPRISED OF CAPITAL STOCK OF SUBSIDIARIES. The
provisions of the Pledge Agreement, as they relate to Collateral comprised of
Capital Stock of Persons that are Subsidiaries of Debtor are incorporated by
reference herein, mutatis mutandis.

          11.11 CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall: (i) remain in full
force and effect until the payment in full of all Secured Obligations or the
Defeasance thereof except as otherwise provided in the Indenture; (ii) be
binding upon Debtor and its successors and assigns, except as otherwise provided
in the Indenture; and (iii) inure to the benefit of Collateral Agent and its
successors, transferees, and assigns. Upon the payment in full of all Secured
Obligations or the Defeasance thereof, the security interests granted herein
shall automatically terminate and all rights to the Collateral shall revert to
Debtor. Upon any termination of any security interest referred to in this
Section 11.11, Collateral Agent will, at Debtor's expense, execute and deliver
to Debtor such documents without recourse, representation or warranty as Debtor
shall reasonably request to evidence such termination.

                            [signature page follows]

                                      -18-
<PAGE>
          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.

                                        PAHC HOLDINGS CORPORATION

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

ACCEPTED AND AGREED TO:

HSBC BANK USA, NATIONAL ASSOCIATION
as Collateral Agent

By: /s/ Herawatteee Alli
    ---------------------------------
    Name: Herawattee Alli
    Title: Assistant Vice President

                                                              SECURITY AGREEMENT<PAGE>

                                                                   Exhibit 10.3

                                                                [EXECUTION COPY]

                                PLEDGE AGREEMENT

     This PLEDGE AGREEMENT (this "Agreement"), dated as of February 10, 2005, is
entered into by and between PAHC HOLDINGS CORPORATION, a Delaware corporation
("Pledgor") and HSBC BANK USA, NATIONAL ASSOCIATION ("HSBC"), as collateral
agent (together with its successor(s) thereto in such capacity, "Collateral
Agent") for the Trustee and Noteholders, in light of the following:

     WHEREAS, Pledgor, Collateral Agent and HSBC, as Trustee ("Trustee"), have
entered into an Indenture, dated as of February 10, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which Pledgor has issued $29,000,000 aggregate principal amount of its 15%
Senior Secured Notes due 2010 (and, together with any additional notes that may
be issued by Pledgor from time to time thereunder or exchanged therefor or for
such additional notes, the "Notes");

     WHEREAS, Pledgor beneficially owns the specified Equity Interests
identified as Pledged Interests in the Persons identified as Issuers listed
under the name of Pledgor on Schedule A attached hereto (or any addendum
thereto);

     WHEREAS, Pledgor desires to secure its Obligations under the Notes by
granting to Collateral Agent, for the benefit of itself, the Trustee and the
Noteholders, security interests in the Collateral as set forth herein; and

     WHEREAS, to induce the Initial Purchaser to purchase the Notes, each
Noteholder to hold the Notes to be held by it and HSBC to act in its capacities
as Trustee and Collateral Agent, Pledgor desires to pledge, grant, transfer, and
assign to Collateral Agent, for the benefit of itself, the Noteholders and the
Trustee, a security interest in the Pledged Collateral (as hereinafter defined)
to secure the Secured Obligations (as hereinafter defined), as provided herein.

     NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:

     1.   Definitions And Construction.

          (a) Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Indenture. The
following terms, as used in this Agreement, shall have the following meanings:

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

     "Bankruptcy Code" shall have the meaning ascribed to the term Bankruptcy
Law in the Indenture.
<PAGE>
     "Chief Executive Office" means the address of the chief executive office of
Pledgor set forth on Schedule B hereto.

     "Code" means the Uniform Commercial Code as in effect from time to time in
the State of New York.

     "Collateral Agent" has the meaning set forth in the preamble hereto.

     "Defeasance" means, with respect to any obligation, the defeasance thereof
pursuant to a "defeasance" or "covenant defeasance" as defined in and described
under Section 8.02 of the Indenture.

     "Disposition" shall have the meaning ascribed to the term Asset Sale in the
Indenture, and the words "Dispose", "Disposing" and "Disposal" shall be
interpreted similarly.

     "Equity Interests" means all shares, units, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company, or equivalent entity,
whether voting or nonvoting, including general partner partnership interests,
limited partner partnership interests, common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor statute.

     "Future Rights" means (a) to the extent of Pledgor's interest therein, all
shares of, all securities convertible or exchangeable into, and all warrants,
options, or other rights to purchase Equity Interests of any other Person in
which Pledgor, after the date of this Agreement, acquires a direct equity
interest, irrespective of whether such Person is or becomes a Subsidiary of
Pledgor; and (b) the certificates or instruments representing such additional
Equity Interests, convertible or exchangeable securities, warrants, and other
rights and all dividends, cash, options, warrants, rights, instruments, and
other property or proceeds from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of such Equity
Interests.

     "Holder" has the meaning set forth in Section 3(c) of this Agreement.

     "HSBC" has the meaning set forth in the preamble of this Agreement.

     "Indenture" has the meaning set forth in the recitals hereto.

     "Indenture Documents" means this Agreement, the other Collateral
Agreements, the Indenture and the Notes.

     "Issuers" means each of the Persons identified as an Issuer on Schedule A
attached hereto (or any addendum thereto), and any successors thereto, whether
by merger or otherwise.

                                        2
<PAGE>
     "Noteholders" has the meaning ascribed to the term "Holders" set forth in
the Indenture.

     "Notes" has the meaning set forth in the recitals hereto.

     "Permitted Disposition" means a Disposition consummated in accordance with
the terms of Section 4.16 of the Indenture.

     "Pledged Collateral" and "Collateral" mean the Pledged Interests, the
Future Rights, and the Proceeds, collectively; provided, however, that neither
Pledged Collateral nor Collateral shall include any Voting Stock of Phibro
Animal Health until the earlier to occur of (i) the redemption of all of the
outstanding shares of the Series C Preferred Stock of Phibro Animal Health and
(ii) March 1, 2005.

     "Pledged Interests" means all of the Equity Interests identified as Pledged
Interests of such Issuer on Schedule A attached hereto (or any addendum
thereto).

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

     "Proceeds" means all proceeds (including proceeds of proceeds) of the
Pledged Interests and Future Rights including all: (a) rights, benefits,
distributions, premiums, profits, dividends, interest, cash, instruments,
documents of title, accounts, contract rights, inventory, equipment, general
intangibles, deposit accounts, chattel paper, and other property from time to
time received, receivable, or otherwise distributed in respect of or in exchange
for, or as a replacement of or a substitution for, any of the Pledged Interests,
Future Rights, or proceeds thereof (including any cash, Equity Interests, or
other securities or instruments issued after any recapitalization, readjustment,
reclassification, merger or consolidation with respect to the Issuers and any
security entitlements, as defined in the Code, with respect thereto); (b)
"proceeds," as such term is defined in the Code; (c) proceeds of any insurance,
indemnity, warranty, or guaranty (including guaranties of delivery) payable from
time to time with respect to any of the Pledged Interests, Future Rights, or
proceeds thereof; (d) payments (in any form whatsoever) made or due and payable
to Pledgor from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Pledged Interests,
Future Rights, or proceeds thereof; and (e) other amounts from time to time paid
or payable under or in connection with any of the Pledged Interests, Future
Rights, or proceeds thereof.

     "Record" means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.

     "SEC" means the United States Securities and Exchange Commission and any
successor thereto.

     "Secured Obligations" means all liabilities, obligations, or undertakings
owing by Pledgor to Collateral Agent, the Trustee or any Noteholder of any kind
or description arising out of or outstanding under, advanced or issued pursuant
to, or evidenced by the Indenture, the Notes, this Agreement, or any of the
other Indenture Documents, irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due,

                                        3
<PAGE>
voluntary or involuntary, whether now existing or hereafter arising, and
including all interest, costs, indemnities, fees (including attorneys fees), and
expenses (including interest, costs, indemnities, fees, and expenses that, but
for the provisions of the Bankruptcy Code, would have accrued irrespective of
whether a claim therefor is allowed) and any and all other amounts which Pledgor
is required to pay pursuant to any of the foregoing, by law, or otherwise.

     "Securities Act" has the meaning set forth in Section 9(c).

     "Trustee" has the meaning set forth in the recitals hereto.

          (b) Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the terms "include" and "including" are not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and other similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, subsection, clause, schedule and exhibit references herein are to this
Agreement unless otherwise specified. All of the exhibits or schedules attached
to this Agreement shall be deemed incorporated herein by reference. Any
reference in this Agreement to any of the following documents includes any and
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements thereto or thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth therein): the Indenture, this Agreement, and
the other Indenture Documents. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Collateral Agent, the
Trustee, any Noteholder, or Pledgor, whether under any rule of construction or
otherwise. On the contrary, this Agreement has been reviewed by Pledgor,
Collateral Agent, the Noteholders and the Trustee, and their respective counsel,
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of Collateral
Agent, the Trustee, any Noteholder and Pledgor. Any reference herein to the
payment in full of the Secured Obligations shall mean the payment in full in
cash of all Secured Obligations other than contingent indemnification Secured
Obligations. Any reference herein to any Person shall be construed to include
such Person's successors and assigns. Any requirement of a writing contained
herein shall be satisfied by the transmission of a Record and any Record
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein. In the event of any
direct conflict between the express terms and provisions of this Agreement and
of the Indenture, the terms and provisions of the Indenture shall control;
provided, however, that the inclusion herein of additional obligations on the
part of Pledgor and supplemental rights and remedies in favor of Collateral
Agent, in each case with respect to the Pledged Collateral, shall not be deemed
a conflict with the Indenture.

     2. Pledge. Pledgor hereby pledges, grants, transfers, and assigns to
Collateral Agent, for the benefit of Collateral Agent, the Noteholders and the
Trustee, a security interest in all of Pledgor's right, title, and interest in
and to the Pledged Collateral in order to secure prompt repayment of any and all
of the Secured Obligations in accordance with the terms and conditions of the
Indenture Documents to which Pledgor is a party, and in order to secure prompt

                                        4
<PAGE>
performance by Pledgor of Pledgor's covenants and duties under each Indenture
Document to which Pledgor is a party. Anything contained in this Agreement or
any other Indenture Document to the contrary notwithstanding, except for
Permitted Dispositions and as permitted in Section 3(d) of this Agreement,
Pledgor does not have any authority, express or implied, to Dispose of any item
or portion of the Pledged Collateral.

     3.   Delivery and Registration of Pledged Collateral.

          (a) All certificates or instruments representing or evidencing the
Pledged Collateral shall be promptly delivered by Pledgor to Collateral Agent or
Collateral Agent's designee pursuant hereto at a location designated by
Collateral Agent and shall be held by or on behalf of Collateral Agent pursuant
hereto, and shall be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Collateral Agent.

          (b) Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent shall have the right, at any time in its discretion
and without notice to any Pledgor, to transfer to or to register on the books of
the Issuers (or of any other Person maintaining records with respect to the
Pledged Collateral) in the name of Collateral Agent for the benefit of the
Secured Parties or any of its nominees any or all of the Pledged Collateral. In
addition, Collateral Agent shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.

          (c) If, at any time and from time to time, any Pledged Collateral
(including any certificate or instrument representing or evidencing any Pledged
Collateral) is in the possession of a Person other than Collateral Agent or
Pledgor (a "Holder"), then Pledgor shall promptly, at Collateral Agent's option,
either cause such Pledged Collateral to be delivered into Collateral Agent's
possession, or execute and deliver to such Holder a written
notification/instruction, and take all other steps necessary to perfect the
security interest of Collateral Agent in such Pledged Collateral, including
obtaining from such Holder a written acknowledgment that such Holder holds such
Pledged Collateral for Collateral Agent, all pursuant to the Code or other
applicable law governing the perfection of Collateral Agent's security interest
in the Pledged Collateral in the possession of such Holder. Each such
notification/instruction and acknowledgment shall be in form and substance
reasonably satisfactory to Collateral Agent.

          (d) Any and all Pledged Collateral (including dividends, interest, and
other cash distributions) at any time received or held by Pledgor shall be so
received or held in trust for Collateral Agent, shall be segregated from other
funds and property of Pledgor and shall be forthwith delivered to Collateral
Agent in the same form as so received or held, with any necessary endorsements;
provided that cash dividends, cash interest or cash distributions received by
Pledgor, if and to the extent they are not prohibited by the Indenture, may be
retained by Pledgor in accordance with Section 4 and used in the ordinary course
of Pledgor's business.

                                        5
<PAGE>
          (e) If at any time and from time to time any Pledged Collateral
consists of an uncertificated security or a security in book entry form, then
Pledgor shall promptly cause such Pledged Collateral to be registered or
entered, as the case may be, in the name of Collateral Agent, for the benefit of
the Secured Parties, or otherwise cause the security interest held by Collateral
Agent, for the benefit of the Secured Parties, to be perfected in accordance
with applicable law.

     4.   Voting Rights and Dividends.

          (a) With respect to Pledgor, so long as (i) no Event of Default shall
have occurred and be continuing or (ii) if an Event of Default has occurred and
is continuing, Pledgor shall not have received the written notice from
Collateral Agent described below in Section 4(b), Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Pledged Collateral applicable to it or any part thereof for any purpose not
inconsistent with the terms of the Indenture Documents.

          (b) Upon the occurrence and during the continuance of an Event of
Default, at the election of Collateral Agent, upon the receipt by Pledgor of
written notice of such election by Collateral Agent, all rights of Pledgor to
exercise the voting and other consensual rights or receive and retain cash
dividends or distributions that it would otherwise be entitled to exercise or
receive and retain, as applicable pursuant to Section 4(a), shall cease, and all
such rights shall thereupon become vested in Collateral Agent, for the benefit
of the Secured Parties, who shall thereupon have the sole right to exercise such
voting or other consensual rights and to receive and retain such cash dividends
and distributions subject to the terms of the Indenture. Upon the receipt of
such written notice, Pledgor shall execute and deliver (or cause to be executed
and delivered) to Collateral Agent all such proxies and other instruments as
Collateral Agent may reasonably request for the purpose of enabling Collateral
Agent to exercise, on behalf of the Secured Parties, the voting and other rights
which it is entitled to exercise, on behalf of the Secured Parties, and to
receive the dividends and distributions that it is entitled to receive and
retain, on behalf of the Secured Parties, pursuant to the preceding sentence.
Following the waiver or cure of any such Event of Default, Collateral Agent
shall, upon the reasonable request and at the expense of Pledgor, execute and
deliver (without recourse, representation or warranty) to Pledgor such
agreements or instruments as Pledgor may reasonably request, to terminate such
proxies and other instruments.

     5. Representations and Warranties. Pledgor represents, warrants, and
covenants to Collateral Agent as follows:

          (a) Pledgor has taken all steps it deems necessary or appropriate to
be informed on a continuing basis of changes or potential changes affecting the
Pledged Collateral (including rights of conversion and exchange, rights to
subscribe, payment of dividends, reorganizations or recapitalization, tender
offers and voting rights), and Pledgor agrees that none of Collateral Agent, the
Trustee or any Noteholder shall have any responsibility or liability for
informing Pledgor of any such changes or potential changes or for taking any
action or omitting to take any action with respect thereto;

                                        6
<PAGE>
          (b) To the best of Pledgor's knowledge, all information herein or
hereafter supplied to Collateral Agent or any other Secured Party by or on
behalf of Pledgor in writing with respect to the Pledged Collateral is, or in
the case of information hereafter supplied will be, accurate and complete in all
material respects;

          (c) Pledgor is and will be the sole legal and beneficial owner of the
Pledged Collateral (including the Pledged Interests and all other Pledged
Collateral acquired by Pledgor after the date hereof) free and clear of any
adverse claim, Lien, or other right, title, or interest of any party, other than
the Liens held by Collateral Agent for the benefit of Collateral Agent, the
Noteholders and the Trustee and the Permitted Liens;

          (d) This Agreement and the delivery to Collateral Agent of the Pledged
Interests representing Pledged Collateral (or the delivery to all Noteholders of
the Pledged Interests representing Pledged Collateral of the
notification/instruction referred to in Section 3 of this Agreement), creates a
valid, perfected, and first priority security interest in one hundred percent
(100%) of the Pledged Interests which are in certificated form in favor of
Collateral Agent for the benefit of itself, the Trustee and the Noteholders,
securing payment of the Secured Obligations, and all actions necessary to
achieve such perfection have been duly taken, subject to the laws under which
each Issuer that is a Foreign Subsidiary is organized;

          (e) Schedule A to this Agreement is true and correct and complete in
all material respects as of the date hereof; without limiting the generality of
the foregoing, as of the date hereof: (i) except as set forth in Schedule A, all
the Pledged Interests are in certificated form, and, except to the extent
registered in the name of Collateral Agent or its nominee, for the benefit of
the Secured Parties, pursuant to the provisions of this Agreement, are
registered in the name of Pledgor; and (ii) the Pledged Interests as to each of
the Issuers constitute at least the percentage of all the fully diluted issued
and outstanding Equity Interests of such Issuer as set forth in Schedule A to
this Agreement;

          (f) The Pledged Interests that are Equity Interests in general
partnerships, limited partnerships or limited liability companies (i) are not
dealt in or traded on securities exchanges or in securities markets, (ii) do not
have terms expressly providing that they are securities governed by Article 8 of
the Code, and (iii) are not investment company securities, and are not,
therefore, "securities" governed by Article 8 of the Code;

          (g) There are no presently existing Future Rights or Proceeds (other
than cash dividends and distributions) owned by Pledgor as of the date hereof;

          (h) The Pledged Interests have been duly authorized and validly issued
and are fully paid and nonassessable (subject in the case of each Issuer
incorporated under the New York Business Corporation Law, to section 630
thereof);

          (i) Neither the pledge of the Pledged Collateral pursuant to this
Agreement nor the extensions of credit represented by the Secured Obligations
violates Regulation T, U or X of the Board of Governors of the Federal Reserve
System; and

                                        7
<PAGE>
          (j) Each direct Subsidiary of Pledgor is an Issuer of Pledged
Interests that have been pledged hereunder.

     6.   Further Assurances.

          (a) Pledgor agrees that from time to time, at the expense of Pledgor,
it will promptly execute and deliver all further instruments and documents, and
take all further action that may be necessary or reasonably desirable, or that
Collateral Agent, on behalf of Collateral Agent, the Noteholders and the
Trustee, may request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Collateral Agent, on
behalf of Collateral Agent, the Noteholders and the Trustee, to exercise and
enforce its rights and remedies hereunder with respect to any Pledged
Collateral. Without limiting the generality of the foregoing, Pledgor will: (i)
at the request of Collateral Agent, mark conspicuously each of its records
pertaining to the Pledged Collateral with a legend, in form and substance
reasonably satisfactory to Collateral Agent, indicating that such Pledged
Collateral is subject to the security interest granted hereby; (ii) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or reasonably desirable, or as
Collateral Agent may reasonably request, in order to perfect and preserve the
security interests granted or purported to be granted hereby; (iii) allow
inspection of the Pledged Collateral and Records related thereto by Collateral
Agent or Persons designated by Collateral Agent, from time to time hereafter;
and (iv) appear in and defend any action or proceeding that may affect Pledgor's
title to or Collateral Agent's security interest in the Pledged Collateral.

          (b) Pledgor shall file, or shall cause to be filed, one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Pledged Collateral. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering the Pledged
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

          (c) Pledgor will furnish to Collateral Agent, upon the request of
Collateral Agent: (i) a certificate executed by an authorized officer of
Pledgor, and dated as of the date of delivery to Collateral Agent, itemizing in
such detail as Collateral Agent may request, the Pledged Collateral which, as of
the date of such certificate, has been delivered to Collateral Agent by Pledgor
pursuant to the provisions of this Agreement; and (ii) such statements and
schedules further identifying and describing the Pledged Collateral and such
other reports in connection with the Pledged Collateral as Collateral Agent may
request.

     7.   Covenants of Pledgor. Pledgor shall:

          (a) Perform each and every covenant in the Indenture Documents
applicable to Pledgor;

          (b) At all times keep at least one complete set of its records
concerning substantially all of the Pledged Collateral at its Chief Executive
Office as set forth in Schedule B hereto, and not change the location of its
Chief Executive Office or such records without giving Collateral Agent at least
thirty (30) days' prior written notice thereof;

                                        8
<PAGE>
          (c) Upon receipt by Pledgor of any material notice, report, or other
communication from any of the Issuers or any Holder relating to all or any part
of the Pledged Collateral, deliver such notice, report or other communication to
Collateral Agent promptly, but in no event later than five (5) days following
the receipt thereof by Pledgor; and

          (d) Not permit any of the Issuers to: (i) authorize the amendment of
or amend the organic documents of such Issuer that is a general partnership,
limited partnership or limited liability company to provide that the Equity
Interests of such Issuer is governed by Article 8 of the Uniform Commercial Code
as adopted by the jurisdiction in which such Issuer is formed, or (ii) authorize
the issuance of or issue certificates evidencing any of the Equity Interests of
such Issuer that is a general partnership, limited partnership or limited
liability company, without giving the Collateral Agent at least thirty (30)
days' prior written notice thereof.

     8.   Collateral Agent as Pledgor's Attorney-in-Fact.

          (a) Pledgor hereby irrevocably appoints Collateral Agent, on behalf of
Collateral Agent, the Noteholders and the Trustee, as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Collateral Agent or otherwise, from time to time at
Collateral Agent's discretion, to take any action and to execute any instrument
that Collateral Agent, on behalf of Collateral Agent, the Noteholders and the
Trustee, may reasonably deem necessary or advisable to accomplish the purposes
of this Agreement, including: (i) upon the occurrence and during the continuance
of an Event of Default, to receive, endorse, and collect all instruments made
payable to Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof to the
extent permitted hereunder and to give full discharge for the same and to
execute and file governmental notifications and reporting forms; (ii) to issue
any notifications/instructions Collateral Agent deems necessary pursuant to
Section 3 of this Agreement; or (iii) to arrange for the transfer of the Pledged
Collateral on the books of any of the Issuers or any other Person to the name of
Collateral Agent or to the name of Collateral Agent's nominee.

          (b) In addition to the designation of Collateral Agent as Pledgor's
attorney-in-fact in subsection (a), Pledgor hereby irrevocably appoints
Collateral Agent, on behalf of Collateral Agent, the Noteholders and the
Trustee, as Pledgor's agent and attorney-in-fact with power to make, execute and
deliver any and all documents and writings which may be necessary or appropriate
for approval of, or be required by, any regulatory authority located in any
city, county, state or country where Pledgor or any of the Issuers engage in
business, in order to transfer or to more effectively transfer any of the
Pledged Interests or otherwise enforce the rights granted hereunder to
Collateral Agent, the Noteholders and the Trustee, or Collateral Agent for the
benefit thereof.

     9. Remedies upon Default. Upon the occurrence and during the continuance of
an Event of Default:

          (a) Collateral Agent, on behalf of Collateral Agent, the Noteholders
and the Trustee, may exercise in respect of the Pledged Collateral, in addition
to other rights and

                                        9
<PAGE>
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the Code (irrespective of whether
the Code applies to the affected items of Pledged Collateral), and Collateral
Agent, on behalf of Collateral Agent, the Noteholders and the Trustee, may also
without notice (except as specified below) sell the Pledged Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of Collateral Agent's offices or elsewhere, for cash,
on credit or for future delivery, at such time or times and at such price or
prices and upon such other terms as Collateral Agent may deem commercially
reasonable, irrespective of the impact of any such sales on the market price of
such Pledged Collateral. To the maximum extent permitted by applicable law,
Collateral Agent may be the purchaser of any or all of the Pledged Collateral at
any such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Pledged Collateral sold at any such public sale, to use and apply all or any
part of the Secured Obligations as a credit on account of the purchase price of
any Pledged Collateral payable at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the part
of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay, or appraisal that it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. Pledgor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) calendar days' notice to Pledgor of the time and place of
any public sale or the time after which a private sale is to be made shall
constitute reasonable notification. Collateral Agent shall not be obligated to
make any sale of Pledged Collateral regardless of notice of sale having been
given. Collateral Agent may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the maximum extent permitted by law, Pledgor hereby waives any claims against
Collateral Agent arising because the price at which any Pledged Collateral may
have been sold at such a private sale was less than the price that might have
been obtained at a public sale, even if Collateral Agent accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree.

          (b) Pledgor hereby agrees that any sale or other Disposition of the
Pledged Collateral conducted in conformity with reasonable commercial practices
of banks, insurance companies, or other financial institutions in the State of
New York in Disposing of property similar to the Pledged Collateral shall be
deemed to be commercially reasonable.

          (c) Pledgor hereby acknowledges that the sale by Collateral Agent of
any Pledged Collateral pursuant to the terms hereof in compliance with the
Securities Act of 1933 as now in effect or as hereafter amended, or any similar
statute hereafter adopted with similar purpose or effect (the "Securities Act"),
as well as applicable "Blue Sky" or other state securities laws may require
strict limitations as to the manner in which Collateral Agent or any subsequent
transferee of the Pledged Collateral may Dispose thereof. Pledgor acknowledges
and agrees that in order to protect Collateral Agent's interest it may be
necessary to sell the Pledged Collateral at a price less than the maximum price
attainable if a sale were delayed or were made in another manner, such as a
public offering under the Securities Act. Pledgor shall not have any objection
to sale in such a manner and agrees that Collateral Agent shall have no
obligation to obtain the maximum possible price for the Pledged Collateral so
long as the sale is conducted in a commercially reasonable manner. Without
limiting the generality of the foregoing, Pledgor

                                       10
<PAGE>
agrees that, upon the occurrence and during the continuation of an Event of
Default, Collateral Agent may, subject to applicable law, from time to time
attempt to sell all or any part of the Pledged Collateral by a private
placement, restricting the bidders and prospective purchasers to those who will
represent and agree that they are purchasing for investment only and not for
distribution. In so doing, Collateral Agent may solicit offers to buy the
Pledged Collateral or any part thereof for cash, from a limited number of
investors deemed by Collateral Agent, in its reasonable judgment, to be
institutional investors or other responsible parties who might be interested in
purchasing the Pledged Collateral. If Collateral Agent shall solicit such offers
and so long as the sale is conducted in accordance with applicable law, then the
acceptance by Collateral Agent of one of the offers shall be deemed to be a
commercially reasonable method of Disposition of the Pledged Collateral.

          (d) If Collateral Agent shall determine to exercise its right to sell
all or any portion of the Pledged Collateral pursuant to this Section, Pledgor
agrees that, upon request of Collateral Agent, Pledgor will, at its own expense:

               (i) use its best efforts to execute and deliver, and cause the
Issuers and the directors and officers thereof to execute and deliver, all such
instruments and documents, and to do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of Collateral Agent, advisable to
register such Pledged Collateral under the provisions of the Securities Act, and
to cause the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectuses which, in the opinion of Collateral Agent, are necessary or
advisable, all in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission applicable
thereto;

               (ii) use its best efforts to qualify the Pledged Collateral under
the state securities laws or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Pledged Collateral, as requested by
Collateral Agent;

               (iii) cause the Issuers to make available to their respective
security holders, as soon as practicable, an earnings statement which will
satisfy the provisions of Section 11(a) of the Securities Act;

               (iv) execute and deliver, or cause the officers and directors of
the Issuers to execute and deliver, to any Person, entity or governmental
authority as Collateral Agent may choose, any and all documents and writings
which, in Collateral Agent's reasonable judgment, may be necessary or
appropriate for approval, or be required by, any regulatory authority located in
any city, county, state or country where Pledgor or the Issuers engage in
business, in order to transfer or to more effectively transfer the Pledged
Interests or otherwise enforce Collateral Agent's rights hereunder; and

               (v) do or cause to be done all such other acts and things as may
be necessary to make such sale of the Pledged Collateral or any part thereof
valid and binding and in compliance with applicable law.

                                       11
<PAGE>
Pledgor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section and that such failure would not be
adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.

          (e) PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW:
(i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME
COLLATERAL AGENT DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN
THIS SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS
OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW
EXISTING OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a)
OF THIS SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.

     10. Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, any cash held by Collateral Agent as Pledged Collateral
and all cash proceeds received by Collateral Agent in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral pursuant to the exercise by Collateral Agent of its remedies as a
secured creditor as provided in Section 9 shall be applied from time to time by
Collateral Agent as provided in the Indenture.

     11. Duties of Collateral Agent. The powers conferred on Collateral Agent
hereunder are solely to protect its interests in the Pledged Collateral and
shall not impose on it any duty to exercise such powers. Except as provided in
Section 9-207 of the Code, Collateral Agent shall have no duty with respect to
the Pledged Collateral or any responsibility for taking any necessary steps to
preserve rights against any Persons with respect to any Pledged Collateral.

     12. Choice of Law and Venue. THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER INDENTURE DOCUMENTS SHALL BE TRIED
AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PLEDGED COLLATERAL OR OTHER PROPERTY
MAY BE BROUGHT, AT COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH PLEDGED
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. PLEDGOR AND COLLATERAL AGENT WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12.

                                       12
<PAGE>
     13. Amendments; Etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by Pledgor herefrom shall in any event be
effective unless the same shall be in writing and signed by Collateral Agent and
Pledgor, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the part of
Collateral Agent to exercise, and no delay in exercising any right under this
Agreement, any other Indenture Document, or otherwise with respect to any of the
Secured Obligations, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under this Agreement, any other Indenture
Document, or otherwise with respect to any of the Secured Obligations preclude
any other or further exercise thereof or the exercise of any other right. The
remedies provided for in this Agreement or otherwise with respect to any of the
Secured Obligations are cumulative and not exclusive of any remedies provided by
law.

     14. Notices. All notices and other communications hereunder to either party
hereto shall be in writing and shall be mailed, sent or delivered in accordance
with the Indenture.

     15. Continuing Security Interest. This Agreement shall create a continuing
security interest in the Pledged Collateral and shall: (i) remain in full force
and effect until the payment in full of the Secured Obligations (other than
contingent indemnification obligations) or the Defeasance thereof; (ii) be
binding upon Pledgor and its successors and assigns; and (iii) inure to the
benefit of Collateral Agent and its successors, transferees, and assigns, in
each case other than as expressly permitted pursuant to the terms of the
Indenture Documents. Upon the payment in full of the Secured Obligations (other
than contingent indemnification obligations) or the Defeasance thereof, the
security interests granted herein shall automatically terminate and all rights
to the Pledged Collateral shall revert to Pledgor. Upon any such termination,
Collateral Agent will, at Pledgor's expense, execute and deliver to Pledgor such
documents without recourse, representation or warranty as Pledgor shall
reasonably request to evidence such termination. Such documents shall be
prepared by Pledgor and shall be in form and substance reasonably satisfactory
to Collateral Agent.

     16. Pledgor Remains Liable. Anything herein to the contrary
notwithstanding:

          (a) Pledgor will remain liable under all agreements (including all
limited liability company agreements) relating to the Pledged Collateral to the
extent set forth therein, and will perform all of its duties and obligations
under such agreements to the same extent as if this Agreement had not been
executed;

          (b) the exercise by Collateral Agent of any of its rights hereunder
will not release Pledgor from any of its duties or obligations under any such
agreements; and

          (c) none of Collateral Agent, the Trustee or any Noteholder will have
any obligation or liability under any such agreement by reason of this
Agreement, nor will any such Person be obligated to perform any of the
obligations or duties of Pledgor thereunder.

     17. Revival and Reinstatement of Obligations. If the incurrence or payment
of the Secured Obligations by Pledgor, any Defeasance thereof or the transfer by
Pledgor to Collateral Agent of any property of Pledgor should for any reason
subsequently be declared to be void or

                                       13
<PAGE>
voidable under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Collateral Agent is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Collateral Agent is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys' fees of Collateral Agent related thereto, the liability of Pledgor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.

     18. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement or be given any substantive effect.

     19. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

     20. Counterparts; Telefacsimile Execution. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, or binding effect hereof.

     21. Waiver of Marshaling. Pledgor and Collateral Agent acknowledge and
agree that in exercising any rights under or with respect to the Pledged
Collateral: (i) Collateral Agent is under no obligation to marshal any Pledged
Collateral; (ii) Collateral Agent may, in its absolute discretion, realize upon
the Pledged Collateral in any order and in any manner it so elects; and (iii)
Collateral Agent may, in its absolute discretion, apply the proceeds of any or
all of the Pledged Collateral to the Secured Obligations in any order and in any
manner it so elects in accordance with the Indenture Documents. Pledgor waives
any right to require the marshaling of any of the Pledged Collateral.

     22. Waiver of Jury Trial. PLEDGOR AND COLLATERAL AGENT HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. PLEDGOR AND COLLATERAL AGENT REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL

                                       14
<PAGE>
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

                            [Signature page follows.]

                                       15
<PAGE>
     IN WITNESS WHEREOF, each party hereto have caused this Agreement to be duly
executed and delivered as of the date first written above.

                                        PLEDGOR:

                                        PAHC HOLDINGS CORPORATION,
                                        a Delaware corporation

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

ACCEPTED AND AGREED:
HSBC BANK USA, NATIONAL ASSOCIATION,
as Collateral Agent

By: /s/ Herawattee Alli
    ---------------------------------
    Name: Herawattee Alli
    Title: Assistant Vice President
<PAGE>
                                   SCHEDULE A

                                       TO

                                PLEDGE AGREEMENT

                       Pledgor: PAHC HOLDINGS CORPORATION

                                Pledged Interests

<TABLE>
<CAPTION>
                                                                                                     PERCENTAGE
                                                                                                     OF CAPITAL
                                                                                         PLEDGOR'S   STOCK HELD
                                          NUMBER                          CERTIFICATE   PERCENTAGE   BY PLEDGOR    CERTIFICATED/
ISSUER / JURISDICTION OF ORGANIZATION    OF SHARES          CLASS           NUMBER(S)    OWNERSHIP     PLEDGED    UNCERTIFICATED
-------------------------------------   ----------   ------------------   -----------   ----------   ----------   --------------
<S>                                     <C>          <C>                  <C>           <C>          <C>          <C>
Phibro Animal Health Corporation,            5,207   Series A Preferred       PA-2         100%         100%       Certificated
   a New York corporation
                                        11,888.501   Class B Common           B565         100%         100%       Certificated
</TABLE>

Phibro Animal Health Corporation's Series C Preferred Stock is held by Palladium
Investors, and its Class A Common Stock is held one-half by Pledgor and one-half
by Jack Bendheim. The Class A Common Stock shall not be pledged until the
earlier to occur of (i) the redemption of all of the outstanding shares of such
Series C Preferred Stock and (ii) March 1, 2005.
<PAGE>
                                   SCHEDULE B

                                       TO

                                PLEDGE AGREEMENT

                       PLEDGOR: PAHC Holdings Corporation

                       ADDRESS OF CHIEF EXECUTIVE OFFICE:

                      c/o Phibro Animal Health Corporation
                      65 Challenger Road
                      Ridgefield Park, NJ 07660

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