<PAGE>
                                                                    EXHIBIT 10.7



                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT, dated as of this January 1 day of 2002, between
IPC, Inc. (formerly Ivex Packaging Corporation), a Delaware corporation, (the
"Company") and George V. Bayly (the "Executive").

         The Executive is currently employed by the Company under an Employment
Agreement dated as of May 30, 1996 (the "1996 Agreement"), and the Company and
the Executive desire to enter into this Agreement with respect to the
Executive's continuing employment by the Company on the terms and conditions set
forth herein, amending and restating in its entirety the 1996 Agreement.

         Accordingly, the parties agree as follows:

         1. Employment, Duties and Acceptance

            1.1 Employment by the Company; Duties. The Company hereby agrees to
continue to employ the Executive for a current term expiring at the end of the
day on December 31, 2004, unless earlier terminated as herein provided.
Beginning on January 1, 2002, the term of this Agreement shall be extended
automatically for one (1) additional day for each day which has then elapsed
since December 31, 2001 unless, at any time after December 31, 2001, either the
Board of Directors of the Company (the "Board"), on behalf of the Company, or
the Executive gives written notice to the other, in accordance with Section
14.2, below, that such automatic extension of the term of this Agreement shall
cease. Any such notice shall be effective immediately upon delivery. The current
term of this Agreement, plus any extension by operation of this Section 1, shall
be hereinafter referred to as the "Term." During the Term, the Executive shall
at all times serve in the capacity of Chairman, President and Chief Executive
Officer of the Company. In addition, the Company agrees that the Executive shall
serve during the Term as a director of the Company and as a director and
chairman of the board of directors of Ivex Packaging Corporation, the holding
company for the Company ("Ivex"). During the Term, the Executive shall devote
his best efforts and substantially all his business time and services to the
Company and Ivex, subject to the direction of the Board.

            1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such continuing employment and shall render the services and perform the
duties described above.

         2. Compensation and Other Benefits

            2.1 Annual Salary. The Company shall pay to the Executive an annual
salary (the "Annual Salary") in the amount of six hundred twenty-six thousand
and six hundred fifty-three dollars ($626,553). The Annual Salary may be
increased from time to time at the sole discretion of the Board. The Annual
Salary shall be payable in accordance with the payroll policies of the Company
as from time to time in effect, but in no event less frequently than twice each
month, less such deductions as shall be required to be withheld by applicable
law and regulations.



<PAGE>

            2.2 Bonuses. The Company shall pay to the Executive an annual
performance bonus based upon the terms and provisions of the Company's Senior
Management Incentive Compensation Plan. The Executive may also receive such
additional bonuses as shall, in the discretion of the Board, be awarded to him.

            2.3 Vacation Policy. The Executive shall be entitled to paid
vacation in accordance with the vacation policy of the Company; provided,
however, that the Executive shall be entitled to at least four (4) weeks paid
vacation during each year of the Term.

            2.4 Benefits. The Company agrees to permit the Executive during the
Term, if and to the extent eligible, to participate in any group life,
hospitalization or disability insurance plan, health program, pension or
retirement plan, savings plan, similar benefit plan or other so-called "fringe
benefits" of the Company (collectively "Benefits") which may be available to
other senior executives of the Company, with the Executive's participation to be
on terms no less favorable to the Executive than the terms provided to such
other executives.

            2.5 Supplemental Benefits. During the Term, the Company will pay an
aggregate amount of one hundred and fifty thousand dollars ($150,000) each year
to purchase a combination of (a) life insurance and disability insurance
covering the Executive and (b) investments intended to provide non-qualified
retirement benefits for the Executive. The benefits provided under this Section
2.5 shall be hereinafter referred to as the "Supplemental Benefits." The Company
will consult with the Executive prior to making such purchases, and the specific
decisions by the Company about such purchases will be subject to approval by the
Executive as reasonable and satisfactory. The particular arrangements for
providing such insurance and non-qualified retirement benefits shall be designed
to minimize the extent to which such benefits are currently taxable to the
Executive, unless otherwise agreed in writing by the Company and the Executive.

            2.6 General Business Expenses. The Company shall pay or reimburse
the Executive for all expenses reasonably and necessarily incurred by the
Executive during the Term in the performance of the Executive's services under
this Agreement. Such payment shall be made upon presentation of such
documentation as the Company customarily requires of its senior executive
employees prior to making such payments or reimbursements. In addition, the
Company shall provide the Executive with appropriate office space, office
furniture and supplies and the services of a secretary in the Chicago area.

            2.7 Company Car and Country Club Membership. During the Term, the
Company shall provide for the Executive, at the Company's expense, a late model
automobile for the Executive's use in the performance of his services under the
Agreement. In addition, the Company shall reimburse the Executive for any annual
membership fees of a country club to be designated by the Executive during the
Term.

         3. Investment Opportunities. The rights of the Executive under the
non-qualified stock option agreements dated September 30, 1997 (two (2) such
agreements), December 31, 1998 and February 10, 1999, entered into under the
Company's 1997 Long-Term Stock Incentive Plan shall continue in full force and
effect and shall not be diminished in any way by this Agreement.



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<PAGE>

         4. Non-Competition

            4.1 Covenants Against Competition. The Executive acknowledges that:
(a) the Company, through its subsidiaries, is currently engaged in the business
of (1) manufacturing and selling coated and laminated papers, films and foil
which are used in a wide range of industrial and commercial applications, (2)
manufacturing, thermoforming and distributing polystyrene, oriented polystyrene
sheet, oriented polystyrene film, high impact polystyrene sheet and related
polystyrene products that have been developed or produced by the Company and its
subsidiaries, (3) manufacturing and selling of thermoformed plastic containers
and parts including, without limitation, food packaging applications, (4)
manufacturing and selling of Kraft and crepe papers and (5) manufacturing and
selling of converted paper products including, without limitation, single-faced
corrugated paper products, shipping and mailing envelopes and fluted paper
packaging products, and the Company may, during the Term, enter into other
related types of businesses (collectively, the "Company Business"); provided,
however, that the term "Company Business" shall not include the folding carton
business; (b) the Company Business is conducted throughout the United States and
Canada; (c) his work for the Company will give him access to trade secrets of
and confidential information concerning the Company and its subsidiaries; (d)
the agreements and covenants contained in this Agreement are essential to
protect the business and goodwill of the Company; and (e) he has means to
support himself and his dependents other than by engaging in the Company
Business and the provisions of this Agreement will not impair such ability.
Accordingly, the Executive covenants and agrees as follows:

                4.1.1 Non-Compete. The Executive shall not during the Restricted
Period (as defined below) in the United States, Canada or any other place where
the Company and its affiliates conduct substantial manufacturing operations
related to the Company Business, directly or indirectly (except in the
Executive's capacity as an officer of the Company or any of its affiliates), (a)
engage or participate in the Company Business; (b) enter the employ of, or
render any other services to, any person engaged in the Company Business; or (c)
become interested in any such person in any capacity, including, without
limitation, as an individual partner, shareholder, lender, officer, director,
principal, agent or trustee; provided, however, that the Executive may own,
directly or indirectly, solely as an investment, securities of any entity traded
on any national securities exchange or listed on the National Association of
Securities Dealers Automated Quotation System if the Executive is not a
controlling person of, or a member of a group which controls, such entity and
the Executive does not, directly or indirectly, own five percent (5%) or more of
any class of equity securities, or securities convertible into or exercisable or
exchangeable for five percent (5%) or more of any class of equity securities, of
such entity. As used herein, the "Restricted Period" shall mean a period
commencing on January 28, 1991 and terminating upon the first to occur of (w)
the date on which the Company terminates the Executive's employment without
Cause, (x) the date on which the Executive terminates his employment for Good
Reason, (y) the date of termination of this Agreement, or (z) the date on which
a Change of Control (as defined in Section 10, below) occurs; provided, however,
that if the Company shall have terminated the Executive's employment with the
Company for Cause or if the Executive shall have terminated his employment with
the Company without Good Reason, the Restricted Period shall end on the first
anniversary of such termination of employment.



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<PAGE>

                4.1.2 Confidential Information; Personal Relationships. The
Executive acknowledges that the Company has a legitimate and continuing
proprietary interest in the protection of its confidential information and that
it has invested substantial sums and will continue to invest substantial sums to
develop, maintain and protect confidential information. The Executive agrees
that, during and after the Restricted Period, the Executive shall keep secret
and retain in strictest confidence, and shall not use for the benefit of himself
or others, all confidential information directly relating to the Company
Business including, without limitation, financial information, trade secrets,
customer lists, details of client or consultant contracts, pricing policies,
operational methods, marketing plans or strategies, product development
techniques or plans, business acquisition plans, new personnel acquisition
plans, methods of manufacture, technical processes, designs and design projects,
inventions and research projects of the Company, its affiliates, or any other
entity which may hereafter become an affiliate thereof, learned by the Executive
heretofore or hereafter unless otherwise in the public domain other than as a
result of disclosure by the Executive.

                4.1.3 Property of the Company. All memoranda, notes, lists,
records, engineering drawings, technical specifications and related documents
and other documents or papers (and all copies thereof) relating to the Company,
including such items stored in computer memories, microfiche or by any other
means, made or compiled by or on behalf of the Executive since January 28, 1991,
or made available to the Executive after that date relating to the Company, its
affiliates or any entity which may hereafter become an affiliate thereof, shall
be the property of the Company, and shall be delivered to the Company promptly
upon the termination of the Executive's employment with the Company or at any
other time upon request.

                4.1.4 Original Material. The Executive agrees that any
inventions, discoveries, improvements, ideas, concepts or original works of
authorship relating directly to the Company Business, including without
limitation computer apparatus, programs and manufacturing techniques, whether or
not protectable by patent or copyright, that have been originated, developed or
reduced to practice by the Executive alone or jointly with others during the
Executive's employment with the Company shall be the property of and belong
exclusively to the Company. The Executive shall promptly and fully disclose to
the Company the origination or development by the Executive of any such material
and shall provide the Company with any information that it may reasonably
request about such material.

                4.1.5 Employees of the Company and its Affiliates. During the
Restricted Period, the Executive shall not, directly or indirectly, (a) hire or
solicit, or cause others to hire or solicit, for employment by any person other
than the Company or any affiliate or successor thereof, any employee of, or
person employed within the two (2) years preceding the Executive's hiring of
such person or solicitation of such person by, the Company and its affiliates or
successors or (b) encourage any such employee to leave his or her employment.

                4.1.6 Customers of the Company. During the Restricted Period,
the Executive shall not, except by reason of and in his capacity as an officer
of the Company, directly or indirectly request or advise a customer of the
Company or its subsidiaries to curtail or cancel such customer's business
relationship with the Company.



                                       4
<PAGE>

            4.2 Rights and Remedies Upon Breach. If the Executive breaches, or
threatens to commit a breach of, any of the provisions contained in Section 4.1
of this Agreement (the "Restrictive Covenants"), the Company shall have the
following rights and remedies, each of which rights and remedies shall be
independent of the others and severally enforceable, and each of which is in
addition to, and not in lieu of, any other rights and remedies available to the
Company under law or in equity:

                4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy to the Company.

                4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits, monies,
accruals, increments or other benefits derived or received by the Executive as
the result of any action constituting a breach of the Restrictive Covenants.

            4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in duration and
geographical Tscope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect without regard to the invalid portions.

            4.4 Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, such court shall have the
power to reduce the duration or scope of such provision, as the case may be,
and, in its reduced form, such provision shall then be enforceable.

            4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of such
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company that such determination
not bar or in any way affect the right of the Company to the relief provided
above in the courts of any other jurisdiction within the geographical scope of
such Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.

         5. Termination

            5.1 Termination upon Death. If the Executive dies during the Term,
this Employment Agreement shall terminate, except that the Executive's legal
representatives shall be entitled to receive the Annual Salary earned up to the
date of the Executive's death, plus (a) unpaid Benefits accrued up to the date
of Executive's death, (b) an amount equal to the Executive's target annual
performance bonus for the year in which his death occurs, multiplied




                                       5
<PAGE>

by a fraction, the numerator of which is the number of days that the Executive
was employed by the Company during that year and the denominator of which is
three hundred and sixty-five (365). In addition, the Company shall, for the
remainder of the Term, continue to provide the Executive's dependents with
Benefits at the levels that were applicable to the Executive and his dependents
on the date immediately prior to his death, or provide equivalent benefits
through separate insurance coverage.

            5.2 Termination With Cause. The Company has the right, at any time
during the Term, subject to all of the provisions hereof, exercisable by serving
notice, effective on or after the date of service of such notice as specified
therein, to terminate the Executive's employment under this Agreement and
discharge the Executive for Cause. As used in this Section 5.2, the term "Cause"
shall mean and include (a) chronic alcoholism or drug addition, (b) deliberate
misappropriation of any material amount of money or other assets or properties
of the Company or any affiliate or successor thereof, (c) except where the
nonperformance is caused by the illness or other similar incapacity or
disability of the Executive, gross and continuing neglect in the substantial
performance of duties reasonably assigned to the Executive that is not corrected
promptly upon receipt by the Executive of written notice delivered at the
direction of the Board specifically identifying the manner in which it is
alleged that the Executive has not substantially performed his duties, (d) any
willful and material breach of any of the terms of this Agreement except where
the breach is caused by the illness or other similar incapacity or disability of
the Executive or (e) conviction of a misdemeanor involving moral turpitude or
conviction of a felony. If the Company terminates the Executive's employment for
Cause, the Company's obligation to the Executive shall be limited solely to the
payment of unpaid Annual Salary accrued and Benefits vested up to the effective
date specified in the Company's notice of termination.

            5.3 Suspension upon Disability. If during the Term the Executive
becomes physically or mentally disabled, whether totally or partially, as
evidenced by the written statement of a competent physician licensed to practice
medicine in the United States who is mutually acceptable to the Company and the
Executive (or the Executive's designee or closest relative, if the Executive is
not then able to make such a choice), so that the Executive is unable
substantially to perform his services hereunder for (a) a period of six (6)
consecutive months or (b) for shorter periods aggregating nine (9) months or
more during any twelve (12)-month period, the Company may at any time after the
last day of the six (6) consecutive months of disability or the day on which the
shorter periods of disability equal an aggregate of nine (9) months, by written
notice to the Executive, suspend the term of the Executive's employment
hereunder and discontinue payments of the Annual Salary for the duration of the
disability; provided, however, that the Company may so suspend the term of the
Executive's employment hereunder only if the Executive is then covered by a
long-term disability plan of the Company (which may include appropriate
insurance) which the Executive has previously approved as reasonable and
satisfactory. The Executive shall be entitled to the full compensation payable
to him hereunder for periods of disability shorter than the periods specified in
parts (a) and (b) of the previous sentence. No action permitted by this Section
5.3 shall be deemed to extend the Term or to constitute a breach of this
Agreement. Any other provision of this Section 5.3 notwithstanding, if the
Executive is permanently disabled to such an extent that he is unable to
substantially perform his services hereunder, then the Company shall, for the
remainder of the Term, continue to provide the Executive and his dependents with
Benefits and Supplemental




                                       6
<PAGE>

Benefits at the levels that were applicable to the Executive and his dependents
immediately prior to his disability, or provide equivalent benefits through
separate insurance coverage.

            5.4 Termination Without Cause. The Company may, at any time during
the Term, terminate the Executive's employment without Cause by giving the
Executive notice of such termination, effective on or after the date of service
of such notice. In the event of such termination, the Executive shall be
entitled to receive the severance benefits described in Section 6, below.

            5.5 Termination for Good Reason. The Executive may terminate his
employment hereunder for Good Reason at any time during the Term by giving the
Company notice of such termination, effective on or after the date of service of
such notice. For purposes of this Agreement, "Good Reason" shall mean the
continuation of any of the following (without the Executive's express prior
written consent) after written notice provided by the Executive and the failure
by the Company to remedy such event or condition within thirty (30) days after
receipt of such notice:

            (a) A reduction in the Executive's Annual Salary, as in effect
pursuant to Section 2.1;

            (b) Failure by the Company to pay to the Executive any bonus which
is payable pursuant to Section 2.2;

            (c) A failure by the Company to provide, on terms no less favorable
to the Executive than the terms offered to other senior executives of the
Company, any benefit or compensation plan (including any pension, profit
sharing, life insurance, health, accidental death or dismemberment or disability
plan), or any substantially similar benefit or compensation plan, which has been
made available to such other executives; provided, however, that nothing in this
part (c) shall be construed to mean that the Company shall be constrained from
amending or eliminating any benefit or compensation plan as such is applied to
the Executive and to other senior executives of the Company;

            (d) The assignment to the Executive of any duties materially
inconsistent with the Executive's position as Chairman, President and Chief
Executive Officer of the Company;

            (e) A change in the Executive's title or the line of authority
through which the Executive is required to report, it being understood that the
Executive shall report directly to the Board but shall, on occasion, be expected
to perform tasks at the direction of one or more executive officers of Acadia
Partners, L.P.;

            (f) Failure to elect the Executive as a director and chairman of the
Board of the Company or as a director and chairman of the board of Ivex;

            (g) Failure by the Company to obtain, in accordance with Section 13,
below, the written agreement of any successor in interest to the business of the
Company to assume and perform the obligations of the Company under this
Agreement;



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            (h) The giving of notice by the Company to stop the automatic
extension of the Term which is provided for by Section 1.1 of this Agreement;

            (i) Any other material breach of this Agreement by the Company; or

            (j) Any material breach of the agreements referred to in Section 3,
above.

            Anything in this Agreement to the contrary notwithstanding, a
termination by the Executive for any reason during the period of three (3)
months which begins six (6) months after a Change of Control shall be deemed to
be a termination for Good Reason for all purposes of this Agreement. In the
event of any termination for Good Reason, the Executive shall be entitled to
receive the severance benefits described in Section 6, below.

            5.6 Termination without Good Reason. The Executive may, at any time
during the Term, terminate his employment under this Agreement by giving the
Company at least thirty (30) days prior written notice of such termination. In
the event of such termination, the Company shall pay to the Executive all Annual
Salary, annual performance bonuses and Benefits which have accrued as of the
effective date of such termination but may discontinue payment of any
compensation or benefits accruing from and after such date.

         6. Severance Benefits. In the event the Executive becomes entitled,
under Section 5.4 or Section 5.5, above, to severance benefits under this
Section 6, he shall receive the following, in addition to payment of his Annual
Salary through the date of termination of his employment:

            6.1 A lump sum, payable upon termination of employment, equal to
four (4) times the sum of (a) the Executive's Annual Salary for one (1) year, at
the rate in effect at the time of the termination of his employment (or, if the
Company has reduced the Executive's Annual Salary in breach of this Agreement,
at the Executive's Annual Salary rate without regard to such reduction) and (b)
the target amount of the Executive's annual performance bonus for the year in
which the termination of his employment occurs;

            6.2 Payment, upon termination of employment, of an annual
performance bonus for the year of termination, calculated by multiplying the
target amount of the Executive's annual performance bonus for the year by a
fraction, the numerator of which is the number of days that the Executive was
employed by the Company during that year and the denominator of which is three
hundred and sixty-five (365); provided, if such termination occurs during the
bonus performance year of, or the year next following, a Change of Control, then
such bonus shall not be less than the target amount in effect immediately prior
to such Change of Control (prorated by the fraction provided in this Section 6.2
above).

            6.3 Payment in due course of any Benefits accrued to the date of
termination but previously unpaid; and

            6.4 Continuation of Benefits and Supplemental Benefits for the
Executive and his dependents for four (4) years after the date of termination of
the Executive's employment, at the levels that were applicable to the Executive
and such dependents immediately prior to such termination, or provision of
equivalent benefits through separate insurance coverage; provided,




                                       8
<PAGE>

however, that the medical insurance coverage provided through such continuation
of Benefits shall continue until the earlier of (a) the date on which the
Executive begins to be covered by comparable medical insurance provided by a new
employer; or (b) without regard for such four (4) year limitation, the latter of
the dates on which the Executive and his current wife becomes eligible for
Medicare or a comparable governmental medical insurance program ("Medicare"). In
addition, the Company shall pay or reimburse the Executive (as the Company and
Executive shall agree): (i) the amount of premiums that exceed the cost of
traditional Medicare coverage (Part A and Part B) for more comprehensive
Medicare benefits (such as "Medicare + Choice" coverage) for the Executive and
his current wife, as may be designated by the Executive, plus (ii) the full
amount of premiums for Medicare-supplemental medical insurance coverage (also
known as "Medigap") for the Executive and his current wife under a Medigap
insurance contract designated by the Executive from time to time or provide to
the Executive and his current wife substantially equivalent benefits in the
event that such coverages are not available to either of them. Execution of this
Agreement by the Executive shall not be considered a waiver of any rights or
entitlements he may have under applicable law to continuation of coverage under
any group health plan maintained by the Company or any of its affiliates.

            6.5 If such termination occurs on or after (or within close
proximity in time or in anticipation of) a Change of Control: (a) full vesting
of Executives' options granted under the Company's stock option and restricted
stock plans, (b) full vesting under the Packaging Holdings, L.L.C.'s Long-Term
Incentive Compensation Plan, and (c) the immediate acceleration and lump sum
payment of $750,000 to the Executive's (for the year in which such Change of
Control occurs) under the Company's 1999 Long-Term Incentive Plan. All such
stock options shall be exercisable for the remaining stated term thereof under
each applicable stock option award agreement.

         7. No Duty to Mitigate. After a termination of the Executive's
employment under this Agreement, the Executive will not be obligated to mitigate
damages by seeking other comparable employment. If such termination occurs after
a Change of Control, any severance benefits payable to the Executive under
Section 6 of this Agreement will not be subject to reduction for any
compensation received from other employment. However, if such termination is not
preceded by a Change of Control, the severance benefits payable to the Executive
under Section 6.1, above, will be reduced by an amount equal to fifty percent
(50%) of the compensation received by the Executive from other employment during
the period of four (4) years after such termination. For purposes of applying
the immediately preceding sentence, a Change of Control will be deemed to have
preceded the termination of the Executive's employment with the Company if that
termination occurs within one hundred and eighty (180) days prior to the Change
of Control, unless it is reasonably demonstrated by the Company that such
termination was for a substantial business reason unrelated to the Change of
Control.

         8. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
life, health, accident, disability or other insurance upon the Executive in any
amount or amounts that it may deem necessary or appropriate to protect its
interest. The Executive agrees to aid the Company in procuring such insurance by
submitting to medical examinations and by filling out, executing and delivering
such applications and other instruments in writing as may reasonably be required
by an insurance



                                       9
<PAGE>

company or companies to which any application or applications for insurance may
be made by or for the Company.

         9. Indemnification.

            9.1 The Company shall, to the extent not prohibited by law,
indemnify the Executive if he is made, or threatened to be made, a party to any
threatened, pending or completed, action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Company to procure a judgment in its favor (hereinafter a
"Proceeding"), by reason of the fact that the Executive is or was a director,
officer or employee of the Company, or is or was serving in any capacity at the
request of the Company for any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs, charges and
expenses (including attorneys' fees and disbursements).

            9.2 The Company shall, from time to time, reimburse or advance to
the Executive the funds necessary for payment of expenses, including attorneys'
fees and disbursements, incurred in connection with any Proceeding, in advance
of the final disposition of such Proceeding; provided, however, that, if
required by the Delaware General Corporation Law, such expenses incurred by or
on behalf of the Executive may be paid in advance of the final disposition of a
Proceeding only upon receipt by the Company of an undertaking, by or on behalf
of the Executive, to repay any such amount so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right of
appeal that the Executive is not entitled to be indemnified for such expenses.

            9.3 The right to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 9 shall not be deemed
exclusive of any other rights which the Executive may have or hereafter be
entitled to under any law, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office.

            9.4 The right to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 9 shall continue as
to the Executive after he has ceased to be a director, officer or employee and
shall inure to the benefit of the heirs, executors and administrators of the
Executive.

            9.5 The Company shall have power to purchase and maintain insurance
on behalf of the Executive against any liability asserted against the Executive
or incurred by the Executive in his capacity as a director, officer, employee or
agent of the Company, or arising out of the Executive's status as such, whether
or not the Company would have the power to indemnify the Executive against such
liability under the provisions of this Section 9, the by-laws of the Company or
under Section 145 of the Delaware General Corporation Law or any other provision
of law.

            9.6 The right to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 9 shall be
enforceable by the Executive in any court of competent jurisdiction. The burden
of proving that such



                                       10
<PAGE>

indemnification or reimbursement or advancement of expenses is not appropriate
shall be on the Company. Neither the failure of the Company (including its board
of directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that such indemnification
or reimbursement or advancement of expenses is proper in the circumstances nor
an actual determination by the Company (including its board of directors,
independent legal counsel, or its stockholders) that the Executive is not
entitled to such indemnification or reimbursement or advancement of expenses,
shall constitute a defense to the action or create a presumption that the
Executive is not so entitled. The Executive shall also be indemnified for any
expenses incurred in connection with successfully establishing his right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any proceeding.

            9.7 If the Executive serves in any capacity (a) any affiliate of the
Company or (b) any employee benefit plan of the Company or any affiliate of the
Company, then he shall be deemed to be doing so at the request of the Company.

            9.8 The Executive may elect to have his right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding, to the extent permitted by law, or on
the basis of the applicable law in effect at the time such indemnification or
reimbursement or advancement of expenses is sought. Such election shall be made,
by a notice in writing to the Company, at the time indemnification or
reimbursement or advancement of expenses is sought; provided that if no such
notice is given, the right to indemnification or reimbursement or advancement of
expenses shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.

         10. Change of Control. For the purposes of this Agreement, a "Change of
Control" shall mean:

                (i) The acquisition by individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent
(20%) or more of either (1) the then outstanding shares of common stock of Ivex
Packaging Corporation, the holding company for the Company, ("Ivex") (the
"Outstanding Ivex Common Stock") or (2) the combined voting power of the then
outstanding voting securities of Ivex entitled to vote generally in the election
of directors (the "Outstanding Ivex Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from Ivex, (B) any
acquisition by Ivex, or (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by Ivex or any corporation controlled by
Ivex; or

                (ii) Individuals who, as of the date hereof, constitute the
board of directors of Ivex (the "Incumbent Ivex Board") cease for any reason to
constitute at least a majority of the board of directors of Ivex; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the




                                       11
<PAGE>

shareholders of Ivex, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Ivex Board shall be considered as though
such individual were a member of the Incumbent Ivex Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Incumbent Ivex Board; or

                (iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding Ivex
Common Stock and Outstanding Ivex Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, at least sixty
percent (60%) of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their respective ownership, immediately
prior to such Business Combination, of the Outstanding Ivex Common Stock and
Outstanding Ivex Voting Securities; provided, however, that the provisions of
this Section 10(b) shall be applied, in connection with and after any such
Business Combination, as if all references to Ivex (except in the definition of,
and references to, the Ivex Incumbent Board) were replaced by references to the
corporation resulting from such Business Combination and shall be applied, with
respect to any subsequent Business Combination, as if the reference in this
subsection (iii) to "at least sixty percent (60%)" were replaced by a reference
to "at least ninety-five percent (95%)"; or

                (iv) Approval by the shareholders of the Company or of Ivex of a
complete liquidation or dissolution of the Company or of Ivex, respectively;
provided, however, that a Change of Control shall not result from approval by
the shareholders of Ivex of a dissolution of Ivex for the purpose of making a
pro rata distribution of shares of the Company to the shareholders of Ivex; and
provided further that, after any such distribution, the provisions of this
Section 10 shall be applied as if all references to Ivex (except in the
definition of, and references to, the Ivex Incumbent Board) were replaced by
references to the Company.

         11. Certain Additional Payments by the Company.

            11.1 Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 11) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code"), or if any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all




                                       12
<PAGE>

taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

            11.2 Subject to the provisions of Section 11.3, all determinations
required to be made under this Section 11, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within fifteen (15) business days of the receipt
of notice from the Executive that there has been a Payment, or such earlier time
as is requested by the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting a Change
of Control, the Executive may appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). The Accounting Firm shall
assist the Executive with the preparation and filing of any income tax return
required of the Executive which relates to the period or periods in which
Executive received a Payment or a Gross-Up Payment. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 11, shall be paid by the Company to the
Executive within five (5) days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 11.3 and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

            11.3 The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty
(30)-day period following the date on which the Executive gives such notice to
the Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:

            (a) Give the Company any information reasonably requested by the
Company relating to such claim,





                                       13
<PAGE>

            (b) Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

            (c) Cooperate with the Company in good faith in order effectively to
contest such claim, and

            (d) Permit the Company to participate in any proceedings relating to
such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 11.3, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

            11.4 If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 11.3, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 11.3) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 11.3, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30)
days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of any Gross-Up Payment required to be paid.


                                       14
<PAGE>

         12. Payment of Attorneys' Fees. The Company shall pay promptly upon
receipt of proper invoices:

            (a) All reasonable attorneys' fees and related expenses incurred by
the Executive in connection with the negotiation and preparation of this
Agreement; and

            (b) To the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment due pursuant to this Agreement), plus in each case interest (from
the date of any such disbursement by the Executive) at the applicable federal
rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986,
as amended; provided, however, that the Company shall not be obligated to make
such payment with respect to any contest in which the Company prevails over the
Executive.

         13. Successors. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. For purposes of this Section 13, the term "successor" shall
include any entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act) which has ultimate beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of at least fifty percent
(50%) of any other entity or entities which succeed to all or substantially all
of the business and/or assets of the Company; provided, however, that the term
"successor" shall not include any partner or stockholder who is a natural
person. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement, by operation of
law or otherwise.

         14. Other Provisions.

             14.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:

                  (i) "affiliate" with respect to any person means any other
person controlling, controlled by or under common control with, or the parents,
spouse, lineal descendants or beneficiaries of, such person.

                  (ii) "person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.

             14.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid, or by reputable commercial delivery
service. Any such notice shall be deemed given when delivered as follows:




                                       15
<PAGE>

             (a) If to the Company, to:
                 IPC, Inc.
                 100 Tri-State Drive
                 Suite 200
                 Lincolnshire, Illinois  60069
                 Attention:  Mr. Frank V. Tannura

                 With copies to:

                 IPC, Inc.
                 100 Tri-State Drive
                 Suite 200
                 Lincolnshire, Illinois  60069
                 Attention:  G. Douglas Patterson, Esq.

             (b) If to the Executive, to:
                 George V. Bayly
                 101 Pembroke Drive
                 Lake Forest, Illinois 60045

                 With a copy to:

                 Vedder, Price, Kaufman & Kammholz
                 222 North LaSalle Street, Suite 2600
                 Chicago, Illinois  60601
                 Attention:  Robert J. Stucker, Esq.

             Any party may change its address for notice hereunder by notice to
the other party hereto.

             14.3 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and, in amending
and restating the 1996 Agreement, supersedes the 1996 Agreement and (except for
those certain agreements referred to in Section 3 hereof) all other prior
agreements, written or oral, with respect thereto. In the case of any conflict
between the terms of this Agreement (the "Terms") and the provisions of any
plan, policy, or practice of the Company, or agreement or award thereunder, as
in effect from time to time (the "Provisions"), Executive's rights or the
Company's obligations shall be established by whichever of the Terms or
Provisions would be more beneficial to Executive. If the choice between the
Terms or the Provisions is unclear at the time such choice must be made, the
Executive may, in his sole discretion, choose to be treated under either the
Terms or the Provisions.

             14.4 Waivers and Amendments. This Agreement may be amended,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. Nor shall any waiver on the part of any party of any such right,
power or




                                       16
<PAGE>

privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.

             14.5 Governing Law and Enforcement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Illinois,
where the employment of the Executive shall be deemed, in major part, to be
performed, and enforcement of this Agreement or any other legal action taken
with respect to this Agreement shall be taken in the courts of appropriate
jurisdiction in Lake County, Illinois.

             14.6 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive.

             14.7 Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

             14.8 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.

             14.9 Confidentiality. The Executive hereby agrees to keep the terms
and provisions of this Agreement confidential.

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.



                                                   IPC, INC.


                                                   By:
                                                      --------------------------
                                                       Name:
                                                            --------------------
                                                       Title:
                                                             -------------------

                                                   EXECUTIVE



                                                   -----------------------------
                                                   George V. Bayly


                                    GUARANTEE

         Ivex Packaging Corporation, the holding company for the Company, hereby
guarantees the payment of all compensation, payments and/or benefits due to the
Executive or his dependents or beneficiaries under this Agreement or any of the
plans, programs or arrangements referred to herein, if, as and when such
compensation, payments and/or benefits are not timely






                                       17
<PAGE>

paid by the Company or are not otherwise timely paid pursuant to any such plan,
program or arrangement.


                                                   IVEX PACKAGING CORPORATION


                                                   By:
                                                      --------------------------
                                                       Name:
                                                            --------------------
                                                       Title:
                                                             -------------------


                                       18