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                                                                EXHIBIT 10.38



                              AMENDED AND RESTATED
                               SECURITY AGREEMENT


         THIS AMENDED AND RESTATED SECURITY AGREEMENT, dated as of March 24,
1997 (this " Security Agreement"), amends and restates that certain Amended and
Restated Security Agreement entered into as of September 16, 1996 among IPC,
INC., a Delaware corporation (the "Borrower"), IVEX PACKAGING CORPORATION, a
Delaware corporation ("Holdings"), certain Subsidiaries of the Borrower party
thereto (the "Prior Guarantors") and NATIONSBANK, N.A., in its capacity as
agent (in such capacity, the "Agent") for the lenders from time to time party
to the Original Credit Agreement described below (the "Prior Lenders").

                                    RECITALS

         WHEREAS, the Borrower, Holdings, the Prior Guarantors, the Prior
Lenders and the Agent entered into that certain Credit Agreement, dated as of
December 7, 1995 (as amended and/or modified from time to time thereafter, the
"Original Credit Agreement");

         WHEREAS, the Original Credit Agreement has been amended and restated
pursuant to that certain Amended and Restated Credit Agreement, dated as of the
date hereof (as amended, modified, extended, renewed or replaced from time to
time, the "Credit Agreement"), among the Borrower, Holdings, the Domestic
Subsidiaries of the Borrower party thereto (such Domestic Subsidiaries,
together with Holdings, individually a "Guarantor" and collectively the
"Guarantors"), the lenders from time to time party thereto (the "Lenders") and
the Agent; and

         WHEREAS, the Lenders have required that the Borrower and the
Guarantors (the Guarantors together with the Borrower, individually an
"Obligor", and collectively the "Obligors") secure or resecure, as applicable,
their respective obligations under the Credit Agreement and the other Credit
Documents in accordance with the terms of this Security Agreement.

         NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

         1.      Definitions.

                (a)  Unless otherwise defined herein, capitalized terms used 
         herein shall have the meanings ascribed to such terms in the Credit
         Agreement.  All terms used in this Security Agreement that are
         defined in the Uniform Commercial Code in effect in the State of New
         York (the "UCC") and which are not otherwise defined herein shall have
         the meanings set forth therein.

                (b)  In addition, the following terms shall have the following
         meanings:


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         "Copyright Licenses":  any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without     
limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.

         "Copyrights":  (i) all copyrights in all Works, now existing or
hereafter created or acquired, all registrations and recordings thereof, and
all applications in connection therewith, whether in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in Schedule
7.19(a) to the Credit Agreement, and (ii) all renewals thereof including,
without limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.

         "Excluded Equipment":  all de-inking equipment (not to exceed a
maximum aggregate value of $6,000,000) purchased from Milnor Corporation for
use at the Detroit, Michigan facility of IPMC, Inc.

         "Patent License":  all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell any
invention covered by a Patent, including, without limitation, any thereof
referred to in Schedule 7.19(a) to the Credit Agreement.

         "Patents":  (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without limitation,
any thereof referred to in Schedule 7.19(a) to the Credit Agreement, and (b)
all applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof, including,
without limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.

         "Trademark License":  means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark, including,
without limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement.

         "Trademarks":  (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule 7.19(a) to the Credit
Agreement, and (b) all renewals thereof including, without limitation, any
thereof referred to in Schedule 7.19(a) to the Credit Agreement.



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                          "Work":  any work which is subject to copyright
                 protection pursuant to Title 17 of the United States Code or
                 the applicable copyright legislation of any other country.

         2.      Grant of Security Interest in the Collateral.  To secure the
prompt payment and performance in full when due, whether by lapse of time,
acceleration or otherwise, of the Secured Obligations (as defined in Section 3
hereof), each Obligor hereby grants to the Agent, for the benefit of the
Lenders, a continuing security interest in, and a right to set off against, any
and all right, title and interest of such Obligor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Collateral"):

                 (a)      All equipment, including, without limitation, all
         vehicles, rolling stock, machinery, tools, furniture, furnishings,
         office equipment and trade fixtures, but excluding any computer
         equipment in which ABB Credit has a first priority security interest
         as of the date hereof; provided, however that no security interest
         shall exist in the Excluded Equipment until such time as the
         Michigan Department of Natural Resources shall have released its
         security interest in the same;

                 (b)      All accounts and receivables and all goods
         represented by or securing accounts and receivables, including,
         without limitation, all rents and tenant payments, if any; provided,
         that such security interest will be released if, and to the extent
         that, Receivables Transaction occurs;

                 (c)      All inventory, including, without limitation, all raw
         materials, all work in process and all goods held by an Obligor for
         sale or lease;

                 (d)      All contract rights, including, without limitation,
         all rights under management agreements, tax sharing agreements and
         lease agreements and all rights to payment of money, tax refunds and
         insurance proceeds, but excluding (i) any contract identified on
         Schedule 5(e) hereto, and (ii) any immaterial contract that expressly
         prohibits a grant of security interest in such contract and that would
         subject an Obligor to damages for such breach;

                 (e)      All other general intangibles;

                 (f)      All instruments, documents, chattel paper,
         securities, policies and certificates of insurance, deposits, cash or
         other goods;

                 (g)      All books, records, files, computer software and
         other similar writings or evidence of each Obligor's business;

                 (h)      All Copyrights, Copyright Licenses, Patents, Patent
         Licenses, Trademarks and Trademark Licenses;



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                 (i)      All other personal property of any kind or type
         whatsoever owned by an Obligor;

                 (j)      All accessions and additions to, and substitutions
         and replacements of, any and all of the foregoing, whether now
         existing or hereafter arising; and

                 (k)      All proceeds and products of the foregoing and all
         insurance relating to the foregoing collateral and all proceeds
         thereof (including, without limitation, insurance proceeds payable on
         account of business interruption), whether now existing or hereafter
         arising.

         The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that (i) the Collateral shall exclude the Newton Property
until such time as any Obligor shall obtain a fee interest in the Newton
Property and (ii) the security interest created hereby in the Collateral is not
to be construed as an assignment of any Copyrights, Copyright Licenses,
Patents, Patent Licenses, Trademarks or Trademark Licenses.

         3.      Security for Obligations.  The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following, whether now existing or hereafter incurred (the "Secured
Obligations"):

                 (a)      In the case of the Borrower, the prompt performance 
         and observance by the Borrower of all obligations of the Borrower
         under  the Credit Agreement, the Notes, this Security Agreement and
         the other Credit Documents to which the Borrower is a party;

                 (b)      In the case of the Guarantors, the prompt performance
         and observance by such Guarantor of all obligations of such Guarantor
         under the Credit Agreement, this Security Agreement and the other
         Credit Documents to which such Guarantor is a party, including,
         without limitation, its guaranty obligations arising under Section 5
         of the Credit Agreement; and

                 (c)      Subject to clause 25(c)(iii) hereof, all other
         indebtedness, liabilities and obligations of any kind or nature owing
         from any Obligor to any Lender or the Agent in connection with (i)
         this Security Agreement or any other Credit Document, whether now
         existing or hereafter arising, due or to become due, direct or
         indirect, absolute or contingent, and howsoever evidenced, held or
         acquired, together with any and all modifications, extensions,
         renewals and/or substitutions of any of the foregoing, (ii) collecting
         and enforcing the Credit Party Obligations and (iii) liabilities
         arising under interest rate protection agreements entered into
         pursuant to the Credit Agreement.

         4.      Provisions Relating to Accounts Receivable.

                 (a)      Anything herein to the contrary notwithstanding, each
         of the Obligors shall remain liable under each of the accounts
         receivable to observe and perform all the conditions and obligations
         to be observed and performed by it thereunder, all in accordance




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         with the terms of any agreement giving rise to each such account
         receivable.  Neither the Agent nor any Lender shall have any
         obligation or liability under any account receivable (or any agreement
         giving rise thereto) by reason of or arising out of this Security
         Agreement or the receipt by the Agent or any Lender of any payment
         relating to such account receivable pursuant hereto, nor shall the
         Agent or any Lender be obligated in any manner to perform any of the
         obligations of an Obligor under or pursuant to any account receivable
         (or any agreement giving rise thereto), to make any payment, to make
         any inquiry as to the nature or the sufficiency of any payment
         received by it or as to the sufficiency of any performance by any
         party under any account receivable (or any agreement giving rise
         thereto), to present or file any claim, to take any action to enforce
         any performance or to collect the payment of any amounts which may
         have been assigned to it or to which it may be entitled at any time or
         times; provided, however, that the Agent agrees to execute all
         documents reasonably necessary to enable the Obligors to collect upon
         any accounts receivable.

                 (b)      Once during each calendar year or at any time after
         the occurrence and during the continuation of an Event of Default, the
         Agent shall have the right, but not the obligation, to make test
         verifications of the accounts receivable in any manner and through any
         medium that it reasonably considers advisable, and the Obligors shall
         furnish all such assistance and information as the Agent may require
         in connection with such test verifications.  At any time and from time
         to time, upon the Agent's request, the Obligors shall cause
         independent public accountants or others satisfactory to the Agent to
         furnish (once each calendar year at the expense of the Obligors and at
         all other times at the expense of the Lenders) to the Agent reports
         showing reconciliations, aging and test verifications of, and trial
         balances for, the accounts receivable.  The Agent in its own name or
         in the name of others may communicate with account debtors on the
         accounts receivable to verify with them to the Agent's satisfaction
         the existence, amount and terms of any accounts receivable.

         5.      Representations and Warranties. Each Obligor hereby represents
and warrants to the Agent, for the benefit of the Lenders, that so long as any
of the Secured Obligations remain outstanding or any Credit Document is in
effect (other than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents) or any Letter
of Credit shall remain outstanding, and until all of the Commitments shall have
been terminated:

                 (a)  Chief Executive Office; Books & Records.  Each Obligor's
         chief executive office and chief place of business is (and for the
         prior four months have been) located at the locations set forth on
         Schedule 7.23(c) to the Credit Agreement, and each Obligor keeps its
         books and records at such locations.

                 (b)  Location of Collateral.  The location of all tangible
         property included in the Collateral owned by each Obligor is as shown
         on Schedule 7.23(b) to the Credit Agreement; provided, however that
         the Obligors, in the aggregate, may have up to $2,500,000 (determined
         on the basis of Obligors' costs) of inventory held by customers
         pursuant to consignment arrangements.




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                 (c)  Ownership.  Each Obligor is the legal and beneficial
         owner of its Collateral and has the right to pledge, sell, assign or
         transfer the same (excluding any Collateral which is non-assignable by
         its terms).  Each Obligor's legal name is as shown in this Security
         Agreement and no Obligor has in the past four months changed its name,
         been party to a merger, consolidation or other change in structure or
         used any tradename except as set forth in Schedule 5(c) attached 
         hereto.

                 (d)  Security Interest/Priority.  This Security Agreement
         creates a valid security interest in favor of the Agent, for the
         benefit of the Lenders, in the Collateral (excluding any Collateral
         which is non-assignable by its terms) of such Obligor and, when
         properly perfected by filing or registration, shall constitute a valid
         perfected security interest in such Collateral, to the extent such
         security can be perfected by filing under the UCC or other applicable
         personal property security legislation, free and clear of all Liens
         except for Permitted Liens.

                 (e)  Contracts; Agreements.  Except as provided in
         Schedule 5(e) attached hereto, the Borrower has no material contracts
         or agreements which are non-assignable by their terms or which prevent
         the granting of a security interest therein.

                 (f)  Receivables.  (i) Each receivable of the Obligors and the
         papers and documents relating thereto are genuine and in all material
         respects what they purport to be, (ii)_in the case of each receivable
         which is an account receivable, each receivable arises out of (A) a
         bona fide sale of goods sold and delivered by such Obligor (or is in
         the process of being delivered) or (B) services theretofore actually
         rendered by such Obligor to, the account debtor named therein, (iii)
         no receivable (excluding inter-company receivables) of an Obligor is
         evidenced by any instrument or chattel paper valued in excess of
         $100,000, unless such instrument or chattel paper has been theretofore
         endorsed over and delivered to the Agent and (iv) no surety bond was
         required or given in connection with any receivables of an Obligor or
         the contracts or purchase orders out of which they arose.

                 (g)  Inventory.  Except as permitted under Section 5(b)
         hereof, no inventory is held by an Obligor pursuant to consignment,
         sale or return, sale on approval or similar arrangement.

                 (h)  Copyrights, Patents and Trademarks.

                          (i)     Schedule 7.19(a) to the Credit Agreement
                 includes all material Copyrights, Copyright Licenses, Patents,
                 Patent Licenses, Trademarks and Trademark Licenses owned by
                 the Obligors in their own names as of the date hereof.

                          (ii)    Except as set forth in Schedule 7.19(a) to
                 the Credit Agreement, to the best of each Obligor's knowledge,
                 each material Copyright, Patent and




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                 Trademark of such Obligor is valid, subsisting, unexpired,
                 enforceable and has not been abandoned.

                          (iii)   Except as set forth in Schedule 7.19(a) to
                 the Credit Agreement and except for immaterial oral or written
                 non-commercial permissions, none of such material Copyrights,
                 Patents and Trademarks is the subject of any licensing or
                 franchise agreement.

                          (iv)    No holding, decision or judgment has been
                 rendered by any Governmental Authority which would be
                 reasonably likely to limit, cancel or question the validity of
                 any material Copyright, Patent or Trademark.

                          (v)     No action or proceeding is pending seeking to
                 limit, cancel or question the validity of any material
                 Copyright, Patent or Trademark, or which, if adversely
                 determined, would be reasonably likely to have a Material
                 Adverse Effect.

                          (vi)    All applications pertaining to the material
                 Copyrights, Patents and Trademarks of each Obligor have been
                 duly and properly filed, and all registrations or letters
                 pertaining to such Copyrights, Patents and Trademarks have
                 been duly and properly filed and issued.

                          (vii)   Except as permitted under the Credit
                 Agreement, no Obligor has made any assignment or agreement in
                 conflict with the security interest in the material
                 Copyrights, Patents or Trademarks of each Obligor hereunder.

         6.      Covenants.  Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document is in effect
(other than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents) or any Letter
of Credit shall remain outstanding, and until all of the Commitments shall have
been terminated, such Obligor shall:

                 (a)      Other Liens.  Defend the Collateral against the
         claims and demands of all other parties claiming an interest therein,
         keep the Collateral free from all Liens, except for Permitted Liens
         and Liens arising pursuant to consignment arrangements permitted under
         Sections 5(b) and 5(g) hereto, and not sell, exchange, transfer,
         assign, lease or otherwise dispose of the Collateral or any interest
         therein, except as permitted under the Credit Agreement.

                 (b)      Preservation of Collateral.  Keep the Collateral in
         good order, condition and repair in all material respects and not use
         the Collateral in violation of the provisions of this Security
         Agreement or any other agreement relating to the Collateral or any
         policy insuring the Collateral or any applicable statute, law, bylaw,
         rule, regulation or ordinance, except as permitted under the Credit
         Agreement.




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                 (c)      Instruments/Chattel Paper.  Deliver to the Agent all
         instruments and chattel paper valued in excess of $100,000 which
         represents or relates to the Collateral.

                 (d)      Change in Location.  Not, without providing 30 days
         prior written notice to the Agent and without filing such further
         financing statements or amendments to any previously filed financing
         statements as the Agent may require, (i) change the location of its
         chief executive office and chief place of business (as well as its
         books and records) from the locations set forth on Schedule 7.23(c)
         to the Credit Agreement, (ii) change the location of its Collateral
         from the locations set forth for such Obligor on Schedule 7.23(b)  of
         the Credit Agreement, except as otherwise permitted by Section 5(b)
         hereof or as set forth in the Credit Agreement, or (iii) change its
         name, be party to a merger, consolidation or other change in structure
         or use any tradename other than as set forth on Schedule 5(c) attached
         hereto.

                 (e)      Inspection.  Upon reasonable notice, and during
         reasonable hours, at all times allow the Agent or its representatives
         to visit and inspect the Collateral as set forth in Section 8.11 of
         the Credit Agreement.

                 (f)      Perfection of Security Interest.  Execute and deliver
         to the Agent such agreements, assignments or instruments (including
         affidavits, notices, reaffirmations and amendments and restatements of
         existing documents, as the Agent may reasonably request) and do all
         such other things as the Agent may reasonably deem necessary or
         appropriate (i) to assure to the Agent its security interests
         hereunder, including, but not limited to, (A) such financing
         statements (including renewal statements) or amendments thereof or
         supplements thereto or other instruments as the Agent may from time to
         time reasonably request in order to perfect and maintain the security
         interests granted hereunder in accordance with the UCC, (B) with
         regard to material Copyrights, a Notice of Grant of Security Interest
         in Copyrights for filing with the United States Copyright Office in
         the form of Schedule 6(f)-1 attached hereto, (C) with regard to
         material Patents, a Notice of Grant of Security Interest in Patents
         for filing with the United States Patent and Trademark Office in the
         form of Schedule 6(f)-2 attached hereto, and (D) with regard to
         material Trademarks, a Notice of Grant of Security Interest in
         Trademarks for filing with the United States Patent and Trademark
         Office in the form of Schedule 6(f)-3 attached hereto, (ii) to
         consummate the transactions contemplated hereby and (iii) to otherwise
         protect and assure the Agent of its rights and interests hereunder.
         To that end, each Obligor agrees that the Agent may file one or more
         financing statements disclosing the Agent's security interest in any
         or all of the Collateral of such Obligor without, to the extent
         permitted by law, such Obligor's signature thereon, and further each
         Obligor also hereby irrevocably makes, constitutes and appoints the
         Agent, its nominee or any other person whom the Agent may designate,
         as such Obligor's attorney in fact with full power and for the limited
         purpose to sign in the name of such Obligor any such financing
         statements, or amendments and supplements to financing statements,
         renewal financing statements, notices or any similar documents which
         in the Agent's reasonable discretion would be necessary, appropriate
         or convenient in order to perfect and maintain perfection of the
         security interests granted hereunder, such power, being coupled with
         an interest,




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         being and remaining irrevocable so long as the Credit Agreement is in
         effect (other than any obligations with respect to the indemnities and
         the representations and warranties set forth in the Credit Documents)
         or any amounts payable thereunder or under any other Credit Document
         or any Letter of Credit shall remain outstanding, and until all of the
         Commitments thereunder shall have terminated. Each Obligor hereby
         agrees that a carbon, photographic or other reproduction of this
         Security Agreement or any such financing statement is sufficient for
         filing as a financing statement by the Agent without notice thereof to
         such Obligor wherever the Agent may in its sole discretion desire to
         file the same.  In the event for any reason the law of any
         jurisdiction other than New York becomes or is applicable to the
         Collateral of any Obligor or any part thereof, or to any of the
         Secured Obligations, such Obligor agrees to execute and deliver all
         such instruments and to do all such other things as the Agent in its
         sole discretion reasonably deems necessary or appropriate to preserve,
         protect and enforce the security interests of the Agent under the law
         of such other jurisdiction (and, if an Obligor shall fail to do so
         promptly upon the request of the Agent, then the Agent may execute any
         and all such requested documents on behalf of such Obligor pursuant to
         the power of attorney granted hereinabove).  If any Collateral is in
         the possession or control of an Obligor's agents and the Agent so
         requests, such Obligor agrees to notify such agents in writing of the
         Agent's security interest therein and, upon the Agent's request,
         instruct them to hold all such Collateral for the Lenders' account and
         subject to the Agent's instructions.  Each Obligor agrees to mark its
         books and records to reflect the security interest of the Agent in the
         Collateral.

                 (g)      Treatment of Receivables.  Not grant or extend the
         time for payment of any receivable, or compromise or settle any
         receivable for less than the full amount thereof, or release any
         person or property, in whole or in part, from payment thereof, or
         allow any credit or discount thereon, other than as normal and
         customary in the ordinary course of an Obligor's business (including
         the acceptance of certain notes by the Borrower in its sales of
         polystyrene sheets and films).

                 (h)      Covenants Relating to Copyrights.  Except as
          otherwise permitted by the Credit Agreement,

                          (i)     Employ the Copyright for each material Work
                 with such notice of copyright as may be required by law to
                 secure copyright protection.

                          (ii)    Not do any act or knowingly omit to do any
                 act whereby any material Copyright may become invalidated and
                 (A) not do any act, or knowingly omit to do any act, whereby
                 any material Copyright may become injected into the public
                 domain; (B) notify the Agent immediately if it knows, or has
                 reason to know, that any material Copyright may become
                 injected into the public domain or of any adverse
                 determination or development (including, without limitation,
                 the institution of, or any such determination or development
                 in, any court or tribunal in the United States or any other
                 country), other than a non-final determination of any such
                 court, regarding an Obligor's ownership of any such Copyright
                 or its



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<PAGE>   10

                 validity; (C) take all necessary steps as it shall deem
                 appropriate under the circumstances to maintain and pursue
                 each application (and to use its best efforts to obtain the
                 relevant registration) and to maintain each registration of
                 each material Copyright owned by an Obligor including, without
                 limitation, filing of applications for renewal where
                 necessary; and (D) promptly notify the Agent of any material
                 infringement of any material Copyright of an Obligor of which
                 it becomes aware and take such actions as it shall reasonably
                 deem appropriate under the circumstances to protect such
                 Copyright, including, where appropriate, the bringing of suit
                 for infringement, seeking injunctive relief and seeking to
                 recover any and all damages for such infringement.

                          (iii)   Not make any assignment or agreement in
                 conflict with the security interest in the Copyrights of each
                 Obligor hereunder.

         (i)     Covenants Relating to Patents and Trademarks.

                          (i)     (A) Except as otherwise permitted by the
                 Credit Agreement, continue to use each material Trademark in
                 such a manner as to maintain such Trademark in full force free
                 from any claim of abandonment for non-use, (B) use its best
                  efforts to maintain as in the past the quality of products and
                 services offered under such Trademark, (C) employ such
                 Trademark with the appropriate notice of registration or
                 notice of trademark, as applicable, sufficient to protect such
                 Trademark, (D) not adopt or use any mark which is confusingly
                 similar or a colorable imitation of such Trademark unless the
                 Agent, for the ratable benefit of the Lenders, shall obtain a
                 perfected security interest in such mark pursuant to this
                 Security Agreement, and (E) except as otherwise permitted by
                 the Credit Agreement, not (and not permit any licensee or
                 sublicensee thereof to) do any act or knowingly omit to do any
                 act whereby any such Trademark may become invalidated.

                          (ii)    Except as otherwise permitted by the Credit
                 Agreement, not do any act, or omit to do any act, whereby any
                 Patent may become abandoned or dedicated, if the same can be
                 reasonably expected to have a Material Adverse Effect.

                          (iii)   Notify the Agent and the Lenders immediately
                 if it knows, or has reason to know, that any application or
                 registration relating to any material Patent or Trademark may
                 become abandoned or dedicated, or of any adverse determination
                 or development (including, without limitation, the institution
                 of, or any such determination or development in, any
                 proceeding in the United States Patent and Trademark Office or
                 any court or tribunal in any country), other than non-final
                 determinations of any such office or court, regarding an
                 Obligor's ownership of any material Patent or Trademark or its
                 right to register the same or to keep and maintain the same.



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<PAGE>   11

                          (iv)    Take all reasonable and necessary steps, as
                 it shall deem appropriate under the circumstances, including,
                 without limitation, in any proceeding before the United States
                 Patent and Trademark Office, or any similar office or agency
                 in any other country or any political subdivision thereof, to
                 maintain and pursue each application (and use its best efforts
                 to obtain the relevant registration) and to maintain each
                 registration of the material Patents and Trademarks,
                 including, without limitation, filing of applications for
                 renewal, affidavits of use and affidavits of incontestability.

                          (v)     Promptly notify the Agent and the Lenders
                 after it learns that any material Patent or Trademark included
                 in the Collateral is materially infringed, misappropriated or
                 diluted by a third party, and take such actions as it shall
                 reasonably deem appropriate under the circumstances to protect
                 such material Patent or Trademark, including, where
                 appropriate, the bringing of suit for infringement,
                 misappropriation or dilution, seeking injunctive relief where
                 appropriate and seeking to recover any and all damages for
                 such infringement, misappropriation or dilution.

                          (vi)    Except as otherwise permitted by the Credit
                 Agreement, not make any assignment or agreement in conflict
                 with the security interest in the Patents or Trademarks of
                 each Obligor hereunder.

                 (j)      New Patents, Copyrights and Trademarks.  Whenever an
         Obligor, either by itself or through an agent, employee, licensee or
         designee, shall file an application for the registration of any
         Copyright, Patent or Trademark with the United States Patent and
         Trademark Office or any similar office or agency in any other country
         or any political subdivision thereof, an Obligor shall report such
         filing to the Agent and the Lenders within five Business Days after
         the last day of the fiscal quarter in which such filing occurs.  Upon
         request of the Agent, an Obligor shall promptly provide the Agent with
         (i) a listing of all such applications (together with a listing of the
         issuance of registrations or letters on present applications), which
         new applications and issued registrations or letters shall be subject
         to the terms and conditions hereunder, and (ii) (A) with respect to
         Copyrights, a duly executed amendment or modification to the Notice of
         Security Interest in Copyrights, (B) with respect to Patents, a duly
         executed amendment or modification to the Notice of Security Interest
         in Patents, (C) with respect to Trademarks, a duly executed amendment
         or modification to the Notice of Security Interest in Trademarks or
         (D) such other duly executed documents as the Agent may request in a
         form acceptable to counsel for the Agent and suitable for recording to
         evidence the security interest in the Copyright, Patent or Trademark
         which is the subject of such new application to the Agent as provided
         in Section 2 hereof, and subject to all the terms hereof.

                 (k)      Insurance.  Insure, repair and replace the Collateral
         of such Obligor as set forth in the Credit Agreement.  All insurance
         proceeds received in connection with the Collateral shall be subject
         to the security interest of the Agent hereunder.





                                    -11-
<PAGE>   12

         7.      Advances by Lenders.  On failure of any Obligor to perform any
of the covenants and agreements contained herein, the Agent may, at its sole
option and in its sole discretion, perform the same and in so doing may expend
such sums as the Agent may reasonably deem advisable in the performance
thereof, including, without limitation, the payment of any insurance premiums,
the payment of any taxes, a payment to obtain a release of a Lien or potential
Lien, expenditures made in defending against any adverse claim and all other
expenditures which the Agent or the Lenders may make for the protection of the
security hereof or which may be compelled to make by operation of law.  All
such sums and amounts so expended shall be repayable by the Obligors on a joint
and several basis promptly upon timely notice thereof and demand therefor,
shall constitute additional Secured Obligations and shall bear interest from
the date said amounts are expended at the default rate provided in Section
3.1(b) of the Credit Agreement for Revolving Loans that are Base Rate Loans.
No such performance of any covenant or agreement by the Agent or the Lenders on
behalf of any Obligor, and no such advance or expenditure therefor, shall
relieve the Obligors of any default under the terms of this Security Agreement
or the other Credit Documents.  The Lenders may make any payment hereby
authorized in accordance with any bill, statement or estimate procured from the
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by an
Obligor in appropriate proceedings and against which adequate reserves are
being maintained in accordance with GAAP.

         8.      Events of Default.

         The occurrence of an event which under the Credit Agreement would
constitute an Event of Default shall be an Event of Default hereunder (an
"Event of Default").

         9.      Remedies.

                 (a)      General Remedies.  Upon the occurrence of an Event of
         Default and during continuation thereof, the Lenders shall have, in
         addition to the rights and remedies provided herein, in the Credit
         Documents or by law (including, but not limited to, the rights and
         remedies set forth in the Uniform Commercial Code of the jurisdiction
         applicable to the affected Collateral), the rights and remedies of a
         secured party under the UCC to the extent permitted by law (regardless
         of whether the UCC is the law of the jurisdiction where the rights and
         remedies are asserted and regardless of whether the UCC applies to the
         affected Collateral), and further, the Agent may, with or without
         judicial process or the aid and assistance of others, (i) enter on any
         premises on which any of the Collateral may be located and, without
         resistance or interference by the Obligors, take possession of the
         Collateral, (ii)  dispose of any Collateral on any such premises,
         (iii) require the Obligors to assemble and make available to the Agent
         at the expense of the Obligors any Collateral at any place and time
         designated by the Agent which is reasonably convenient to both
         parties, (iv) remove any Collateral from any such premises for the
         purpose of effecting sale or other disposition thereof, and/or (v)
         without demand and without advertisement, notice, hearing or process
         of law, all of which each of the




                                    -12-
<PAGE>   13

         Obligors hereby waives to the fullest extent permitted by law, at any
         place and time or times, sell and deliver any or all Collateral held
         by or for it at public or private sale, by one or more contracts, in
         one or more parcels, for cash, upon credit or otherwise, at such
         prices and upon such terms as the Agent deems advisable, in its sole
         discretion (subject to any and all mandatory legal requirements).  In
         addition to all other sums due the Agent and the Lenders with respect
         to the Secured Obligations, the Obligors shall pay the Agent and each
         of the Lenders all reasonable documented costs and expenses incurred
         by the Agent or any such Lender, including, but not limited to,
         reasonable attorneys' fees and court costs, in obtaining or
         liquidating the Collateral, in enforcing payment of the Secured
         Obligations, or in the prosecution or defense of any action or
         proceeding by or against the Agent or the Lenders or the Obligors
         concerning any matter arising out of or connected with this Security
         Agreement, any Collateral or the Secured Obligations, including,
         without limitation, any of the foregoing arising in, arising under or
         related to a case under the Bankruptcy Code.  To the extent the rights
         of notice cannot be legally waived hereunder, each Obligor agrees that
         any requirement of reasonable notice shall be met if such notice is
         personally served on or mailed, postage prepaid, to the Borrower in    
         accordance with the notice provisions of Section 12.1 of the Credit
         Agreement at least 10 days before the time of sale or other event
         giving rise to the requirement of such notice. The Agent and the
         Lenders shall not be obligated to make any sale or other disposition
         of the Collateral regardless of notice having been given.  To the
         extent permitted by law, any Lender may be a purchaser at any such
         sale.  To the extent permitted by applicable law, each of the Obligors
         hereby waives all of its rights of redemption with respect to any such
         sale.  Subject to the provisions of applicable law, the Agent and the
         Lenders may postpone or cause the postponement of the sale of all or
         any portion of the Collateral by announcement at the time and place of
         such sale, and such sale may, without further notice, to the extent
         permitted by law, be made at the time and place to which the sale was
         postponed, or the Agent and the Lenders may further postpone such sale
         by announcement made at such time and place.

                 (b)      Remedies relating to Receivables.  Upon the
         occurrence of an Event of Default and during the continuation thereof,
         whether or not the Agent has exercised any or all of its rights and
         remedies hereunder, each Obligor will promptly upon written request of
         the Agent instruct all account debtors to remit all payments in
         respect of the receivables to a mailing location selected by the
         Agent.  In addition, the Agent or its designee may notify any
         Obligor's customers and account debtors that the receivables of such
         Obligor have been assigned to the Agent or of the Agent's security
         interest therein, and may (either in its own name or in the name of an
         Obligor or both) demand, collect (including without limitation by way
         of a lockbox arrangement), receive, take receipt for, sell, sue for,
         compound, settle, compromise and give acquittance for any and all
         amounts due or to become due on receivables, and, in the Agent's
         discretion, file any claim or take any other action or proceeding to
         protect and realize upon the security interest of the Lenders in the
         receivables.  Each Obligor acknowledges and agrees that the proceeds
         of its receivables remitted to or on behalf of the Agent in accordance
         with the provisions hereof shall be solely for the Agent's own
         convenience and that such Obligor shall not have any right, title or
         interest in such accounts or in any such other amounts except as





                                    -13-
<PAGE>   14

         expressly provided herein.  The Agent and the Lenders shall have no
         liability or responsibility to any Obligor for acceptance of a check,
         draft or other order for payment of money bearing the legend "payment
         in full" or words of similar import or any other restrictive legend or
         endorsement or be responsible for determining the correctness of any
         remittance.  Each Obligor hereby agrees to indemnify the Agent and the
         Lenders from and against all liabilities, damages, losses, actions,
         claims, judgments, costs, expenses, charges and reasonable attorneys'
         fees suffered or incurred by the Agent or the Lenders because of the
         maintenance of the foregoing arrangements except as relating to or
         arising out of the gross negligence or willful misconduct of the Agent
         or a Lender or its officers, employees or agents.  The foregoing
         indemnity shall survive the repayment of the Secured Obligations and
         the termination of the Commitments.

                 (c)      Access.  In addition to the rights and remedies
         hereunder, upon the occurrence of an Event of Default and during the
         continuance thereof, the Agent shall have the right to enter and
         remain upon the various premises of the Obligors without cost or
         charge to the Agent, and use the same, together with materials,
         supplies, books and records of the Obligors for the purpose of
         collecting and liquidating the Collateral, or for preparing for sale
         and conducting the sale of the Collateral, whether by foreclosure,
         auction or otherwise.  In addition, the Agent may remove Collateral,
         or any part thereof, from such premises and/or any records with
         respect thereto, in order to effectively collect or liquidate such
         Collateral.

                 (d)      Nonexclusive Nature of Remedies.  Failure by the
         Agent or the Lenders to exercise any right, remedy or option under
         this Agreement or any other Credit Document or as provided by law, or
         any delay by the Agent or the Lenders in exercising the same, shall
         not operate as a waiver of any such right, remedy or option.  No
         waiver hereunder shall be effective unless it is in writing, signed by
         the party against whom such waiver is sought to be enforced and then
         only to the extent specifically stated, which in the case of the Agent
         or the Lenders shall only be granted as provided herein.  To the
         extent permitted by law, neither the Agent, the Lenders, nor any party
         acting as attorney for the Agent or the Lenders, shall be liable
         hereunder for any acts or omissions or for any error of judgment or
         mistake of fact or law other than their gross negligence or willful
         misconduct hereunder.  The rights and remedies of the Agents and the
         Lenders under this Agreement shall be cumulative and not exclusive of
         any other right or remedy which the Agent or the Lenders may have.

                 (e)      Retention of Collateral.  The Agent may, after
         providing the notices required by Section 9-505(2) of the UCC or
         otherwise complying with the requirements of applicable law of the
         relevant jurisdiction, to the extent the Agent is in possession of any
         of the Collateral, retain the Collateral in satisfaction of the
         Secured Obligations.  Unless and until the Agent shall have provided
         such notices, however, the Agent shall not be deemed to have retained
         any Collateral in satisfaction of any Secured Obligations for any
         reason.





                                    -14-
<PAGE>   15

                 (f)      Deficiency.  In the event that the proceeds of any
         sale, collection or realization are insufficient to pay all amounts to
         which the Agent or the Lenders are legally entitled, the Obligors
         shall be jointly and severally liable for the deficiency, together
         with interest thereon at the default rate specified in Section 3.1(b)
         of the Credit Agreement for Revolving Loans that are Base Rate Loans,
         together with the costs of collection and the reasonable fees of any
         attorneys employed by the Agent to collect such deficiency.  Any
         surplus remaining after the full payment and satisfaction of the
         Secured Obligations shall be returned to the Obligors or to whomsoever
         a court of competent jurisdiction shall determine to be entitled
         thereto.

         10.     Rights of the Agent.

                 (a)      Power of Attorney.  In addition to other powers of
         attorney contained herein, each Obligor hereby designates and appoints
         the Agent, on behalf of the Lenders, and each of its designees or
         agents, as attorney-in-fact of such Obligor, irrevocably and with
         power of substitution, with authority to take any or all of the
         following actions upon the occurrence and during the continuance of an
         Event of Default:

                          (i)     to demand, collect, settle, compromise,
                 adjust and give discharges and releases concerning the
                 Collateral, all as the Agent may reasonably determine;

                          (ii)    to commence and prosecute any actions at any
                 court for the purposes of collecting any Collateral and
                 enforcing any other right in respect thereof;

                          (iii)   to defend, settle or compromise any action
                 brought and, in connection therewith, give such discharge or
                 release as the Agent may deem reasonably appropriate;

                          (iv)    receive, open and dispose of mail addressed
                 to an Obligor and endorse checks, notes, drafts, acceptances,
                 money orders, bills of lading, warehouse receipts or other
                 instruments or documents evidencing payment, shipment or
                 storage of the goods giving rise to the Collateral of such
                 Obligor on behalf of and in the name of such Obligor, or
                 securing, or relating to such Collateral;

                          (v)     sell, assign, transfer, make any agreement in
                 respect of, or otherwise deal with or exercise rights in
                 respect of, any Collateral or the goods or services which have
                 given rise thereto, as fully and completely as though the Bank
                 were the absolute owner thereof for all purposes;

                          (vi)    adjust and settle claims under any insurance
                 policy relating thereto;

                          (vii)   execute and deliver all assignments,
                 conveyances, statements, financing statements, renewal
                 financing statements, security agreements,




                                    -15-
<PAGE>   16

                 affidavits, notices and other agreements, instruments and
                 documents that the Agent may determine necessary in order to
                 perfect and maintain the security interests and liens granted
                 in this Security Agreement and in order to fully consummate
                 all of the transactions contemplated therein;

                          (viii)  institute any foreclosure proceedings that 
                 the Agent may deem appropriate; and

                          (ix)    do and perform all such other acts and things
                 as the Agent may reasonably deem to be necessary, proper or
                 convenient in connection with the Collateral.

This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document is in effect or any Letter of Credit shall
remain outstanding and (ii) until all of the Commitments shall have been
terminated.  The Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges and options expressly or
implicitly granted to the Agent in this Security Agreement, and shall not be
liable for any failure to do so or any delay in doing so.  The Agent shall not
be liable for any act or omission or for any error of judgment or any mistake
of fact or law in its individual capacity or its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or willful
misconduct.  This power of attorney is conferred on the Agent solely to
protect, preserve and realize upon its security interest in the Collateral.

                 (b)      Performance by the Agent of Obligations.  If any
         Obligor fails to perform any agreement or obligation contained herein,
         the Agent itself may perform, or cause performance of, such agreement
         or obligation, and the expenses of the Agent incurred in connection
         therewith shall be payable by the Obligors on a joint and several
         basis pursuant to Section 12 hereof.

                 (c)      Assignment by the Agent.  The Agent may from time to
         time assign the Collateral and any portion thereof, and the assignee
         shall be entitled to all of the rights and remedies of the Agent under
         this Security Agreement in relation thereto.

                 (d)      The Agent's Duty of Care.  Other than the exercise of
         reasonable care to assure the safe custody of the Collateral while
         being held by the Agent hereunder, the Agent shall have no duty or
         liability to preserve rights pertaining thereto, it being understood
         and agreed that the Obligors shall be responsible for preservation of
         all rights in the Collateral, and the Agent shall be relieved of all
         responsibility for the Collateral upon surrendering it or tendering
         the surrender of it to the Obligors.  The Agent shall be deemed to
         have exercised reasonable care in the custody and preservation of the
         Collateral in its possession if the Collateral is accorded treatment
         substantially equal to that which the Agent accords its own property,
         which shall be no less than the treatment employed by a reasonable and
         prudent agent in the industry, it being understood that the





                                    -16-
<PAGE>   17

         Agent shall not have responsibility for taking any necessary steps to
         preserve rights against any parties with respect to any of the
         Collateral.

         11.     Application of Proceeds.  Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.7 of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.

         12.     Costs of Counsel.  At all times hereafter, the Obligors agree
to promptly pay upon demand any and all reasonable documented costs and
expenses of the Agent or the Lenders, (i) as required under Section 12.5 of the
Credit Agreement and (ii) as necessary to protect the Collateral or to exercise
any rights or remedies under this Security Agreement or with respect to any
Collateral.  All of the foregoing costs and expenses shall constitute Secured
Obligations hereunder.

         13.     Continuing Agreement.

                 (a)      This Security Agreement shall be a continuing
         agreement in every respect and shall remain in full force and effect
         so long as the Credit Agreement is in effect or any amounts payable
         thereunder or under any other Credit Document or any Letter of Credit
         shall remain outstanding, and until all of the Commitments thereunder
         shall have terminated (other than any obligations with respect to the
         indemnities and the representations and warranties set forth in the
         Credit Documents).  Upon such payment and termination, this Security
         Agreement shall be automatically terminated and, the Agent and the
         Lenders shall, upon the request and at the expense of the Obligors,
         forthwith release all of its liens and security interests hereunder
         and shall execute and deliver all UCC termination statements and/or
         other documents reasonably requested by the Obligors evidencing such
         termination.  Notwithstanding the foregoing all releases and
         indemnities provided hereunder shall survive termination of this
         Security Agreement.

                 (b)      This Security Agreement shall continue to be
         effective or be automatically reinstated, as the case may be, if at
         any time payment, in whole or in part, of any of the Secured
         Obligations is rescinded or must otherwise be restored or returned by
         the Agent or any Lender as a preference, fraudulent conveyance or
         otherwise under any bankruptcy, insolvency or similar law, all as
         though such payment had not been made; provided that in the event
         payment of all or any part of the Secured Obligations is rescinded or
         must be restored or returned, all reasonable costs and expenses
         (including without limitation any reasonable legal fees and
         disbursements) incurred by the Agent or any Lender in defending and
         enforcing such reinstatement shall be deemed to be included as a part
         of the Secured Obligations.





                                    -17-
<PAGE>   18

         14.     Amendments; Waivers; Modifications.  This Security Agreement
and the provisions hereof may not be amended, waived, modified, changed,
discharged or terminated except as set forth in Section 12.6 of the Credit
Agreement.

         15.     Successors in Interest.  This Security Agreement shall create
a continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the
Agent and the Lenders and their successors and assigns; provided, however, that
none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement.  To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.

         16.     Notices.  All notices required or permitted to be given under
this Security Agreement shall be in conformance with Section 12.1 of the Credit
Agreement.

         17.     Counterparts.  This Security Agreement may be executed in any
number of counterparts, each of which where so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument.  It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.

         18.     Headings.  The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning
or construction of any provision of this Security Agreement.

         19.     Governing Law; Submission to Jurisdiction; Venue.

                 (a)      THIS SECURITY AGREEMENT AND THE RIGHTS AND
         OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND
         CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
         NEW YORK.  Any legal action or proceeding with respect to this
         Security Agreement may be brought in the courts of the State of North
         Carolina, or of the United States for the Western District of North
         Carolina, and, by execution and delivery of this Security Agreement,
         each Obligor hereby irrevocably accepts for itself and in respect of
         its property, generally and unconditionally, the jurisdiction of such
         courts.  Each Obligor further irrevocably consents to the service of
         process out of any of the aforementioned courts in any such action or
         proceeding by the mailing of copies thereof by registered or certified
         mail, postage prepaid, to it at the address for notices pursuant to
         Section 12.1 of the Credit Agreement, such service to become 
         effective 30 days after such mailing. Nothing herein shall affect the
         right of the Agent to serve process in any other manner permitted
         by law or to commence legal proceedings or to otherwise proceed
         against any Obligor in any other jurisdiction.





                                    -18-
<PAGE>   19

                 (b)      Each Obligor hereby irrevocably waives any objection
         which it may now or hereafter have to the laying of venue of any of
         the aforesaid actions or proceedings arising out of or in connection
         with this Security Agreement brought in the courts referred to in
         subsection (a) hereof and hereby further irrevocably waives and agrees
         not to plead or claim in any such court that any such action or
         proceeding brought in any such court has been brought in an
         inconvenient forum.

         20.     Waiver of Jury Trial.  TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

         21.     Severability.  If any provision of any of the Security
Agreement is determined to be illegal, invalid or unenforceable, such provision
shall be fully severable and the remaining provisions shall remain in full
force and effect and shall be construed without giving effect  to the illegal,
invalid or unenforceable provisions.

         22.     Entirety.  This Security Agreement and the other Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.

         23.     Survival.  All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement
and the other Credit Documents, the delivery of the Notes and the making of the
Loans and the issuance of the Letters of Credit under the Credit Agreement.

         24.     Other Security.  To the extent that any of the Secured
Obligations are now or hereafter secured by property other than the Collateral
(including, without limitation, real property and securities owned by an
Obligor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence of any Event of Default,
and the Agent and the Lenders have the right, in their sole discretion, to
determine which rights, security, liens, security interests or remedies the
Agent and the Lenders shall at any time pursue, relinquish, subordinate, modify
or take with respect thereto, without in any way modifying or affecting any of
them or any of the Agent's and the Lenders' rights or the Secured Obligations
under this Security Agreement or under any other of the Credit Documents.

         25.     Joint and Several Obligations of Obligors.

                 (a)  Subject to clause (c), each of the Obligors is accepting
         joint and several liability hereunder in consideration of the
         financial accommodation to be provided by the Lenders under the Credit
         Agreement, for the mutual benefit, directly and indirectly, of





                                    -19-
<PAGE>   20

         each of the Obligors and in consideration of the undertakings of each
         of the Obligors to accept joint and several liability for the
         obligations of each of them.

                 (b)  Subject to clause (c), each of the Obligors jointly and
         severally hereby irrevocably and unconditionally accepts, not merely
         as a surety but also as a co-debtor, joint and several liability with
         the other Obligors with respect to the payment and performance of all
         of the Secured Obligations arising under this Security Agreement and
         the other Credit Documents, it being the intention of the parties
         hereto that all the Obligations shall be the joint and several
         obligations of each of the Obligors without preferences or distinction
         among them.

                 (c)  Notwithstanding any provision to the contrary
         contained herein or in any other of the Credit Documents,

                          (i)     to the extent the obligations of a Guarantor
                 shall be adjudicated to be invalid or unenforceable for any
                 reason (including, without limitation, because of any
                 applicable state or federal law relating to fraudulent
                 conveyances or transfers) then the obligations of each
                 Guarantor hereunder shall be limited to the maximum amount
                 that is permissible under applicable law (whether federal or
                 state and including, without limitation, the Bankruptcy Code),
                 and

                          (ii)    the obligations of Holdings hereunder shall
                 be limited hereunder and in all the Credit Documents, in the
                 aggregate, to an amount equal to $153,000,000.

         26.     Rights of Required Lenders.  All rights of the Agent
hereunder, if not exercised by the Agent, may be exercised by the Required
Lenders.

                [remainder of page intentionally left blank]





                                    -20-
<PAGE>   21

         Each of the parties hereto has caused a counterpart of this Amended
and Restated Security Agreement to be duly executed and delivered as of the
date first above written.

BORROWER:                         IPC, INC.
                                  a Delaware corporation

                                  By:_____________________
                                  Name:___________________
                                  Title:__________________





                                    -21-
<PAGE>   22

GUARANTORS:               IVEX PACKAGING CORPORATION,
                          a Delaware corporation

                          By:______________________
                          Name:____________________
                          Title:___________________
                          
                          IVEX PAPER MILL CORPORATION,
                          a Delaware corporation
                          
                          IPMC HOLDING CORPORATION,
                          a Delaware corporation
                          
                          IPMC, INC.,
                          a Delaware corporation
                          
                          VALLEY EXPRESS LINES, INC.,
                          a Delaware corporation
                          
                          KAMA OF ILLINOIS CORPORATION,
                          a Delaware corporation
                          
                          PACKAGING PRODUCTS, INC.,
                          a Delaware corporation
                          
                          CFI INDUSTRIES, INC.,
                          a Delaware corporation
                          
                          PLASTOFILM INDUSTRIES, INC.,
                          a Delaware corporation
                          
                          CFI RECYCLING, INC.,
                          a Delaware corporation
                          
                          TRIO PRODUCTS, INC.,
                          a Delaware corporation
                          
                          By:________________________
                          Name:______________________
                          Title:_____________________ of each of
                          the above named Guarantors
                          
                          



                                    -22-
<PAGE>   23

         Accepted and agreed to as of the date first above written.

                                  NATIONSBANK, N.A., as Agent

                                  By:_____________________
                                  Name:___________________
                                  Title:__________________





















                                    -23-
<PAGE>   24

                                SCHEDULE 6(f)-1

                                       to

                              Amended and Restated

                               Security Agreement

                           dated as of March 24, 1997

                         in favor of NationsBank, N.A.,

                                    as Agent


                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                   COPYRIGHTS


United States Copyright Office

Gentlemen:

Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of March 24, 1997 (as the same may be amended, modified, extended or
restated from time to time, the "Security Agreement") by and among the Obligors
party thereto (each an "Obligor" and collectively, the "Obligors") and
NationsBank, N.A., as Agent (the "Agent") for the lenders referenced therein
(the "Lenders"), the undersigned Obligor has granted a continuing security
interest in and continuing lien upon, the copyrights and copyright applications
shown below to the Agent for the ratable benefit of the Lenders:

                                 COPYRIGHTS

                                                               Date of
  Copyright No.             Description of Copyright          Copyright



                                    -26-


<PAGE>   25

                           Copyright Applications

   Copyright              Description of Copyright          Date of Copyright
Applications No.                  Applied For                  Applications   


         The Obligors and the Agent, on behalf of the Lenders, hereby
acknowledge and agree that the security interest in the attached copyrights and
copyright applications (i) may only be terminated in accordance with the terms
of the Security Agreement and (ii) is not to be construed as an assignment of
any copyright or copyright application.

                                  Very truly yours,

                                  __________________________________
                                  [Obligor]

                                  By:___________________________
                                  Name:_________________________
                                  Title:________________________


Acknowledged and Accepted:

NATIONSBANK, N.A., as Agent

By:__________________________
Name:________________________
Title:_______________________





                                    -27-
<PAGE>   26

                                SCHEDULE 6(f)-2

                                       to

                              Amended and Restated

                               Security Agreement

                           dated as of March 24, 1997

                         in favor of NationsBank, N.A.,

                                    as Agent

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                    PATENTS


United States Patent and Trademark Office

Gentlemen:

Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of March 24, 1997 (as the same may be amended, modified, extended or
restated from time to time, the "Security Agreement") by and among the Obligors
party thereto (each an "Obligor" and collectively, the "Obligors") and
NationsBank, N.A., as Agent (the "Agent") for the lenders referenced therein
(the "Lenders"), the undersigned Obligor has granted a continuing security
interest in and continuing lien upon, the patents and patent applications shown
below to the Agent for the ratable benefit of the Lenders:

                                   PATENTS

                               Description of Patent                  Date of
   Patent No.                          Item                           Patent


                             Patent Applications

     Patent                     Description of Patent             Date of Patent
Applications No.                    Applied For                    Applications





                                    -28-
<PAGE>   27

The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the attached patents and patent
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
patent or patent application.

                                  Very truly yours,

                                  __________________________________
                                  [Obligor]

                                  By:__________________________
                                  Name:________________________
                                  Title:_______________________


Acknowledged and Accepted:

NATIONSBANK, N.A., as Agent

By:__________________________
Name:________________________
Title:_______________________





                                    -29-
<PAGE>   28


                                SCHEDULE 6(f)-3

                                       to

                              Amended and Restated

                               Security Agreement

                           dated as of March 24, 1997

                         in favor of NationsBank, N.A.,

                                    as Agent

                                     NOTICE

                                       OF

                           GRANT OF SECURITY INTEREST

                                       IN

                                   TRADEMARKS


United States Patent and Trademark Office

Gentlemen:

Please be advised that pursuant to the Amended and Restated Security Agreement
dated as of March 24, 1997 (as the same may be amended, modified, extended or
restated from time to time, the "Security Agreement") by and among the Obligors
party thereto (each an "Obligor" and collectively, the "Obligors") and
NationsBank, N.A., as Agent (the "Agent") for the lenders referenced therein
(the "Lenders"), the undersigned Obligor has granted a continuing security
interest in and continuing lien upon, the trademarks and trademark applications
shown below to the Agent for the ratable benefit of the Lenders:

                                 TRADEMARKS

                          Description of Trademark         Date of
   Trademark No.                    Item                   Trademark




                             Trademark Applications





                                    -30-
<PAGE>   29


   Trademark               Description of Trademark           Date of Trademark
Applications No.                  Applied For                    Applications


The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge and
agree that the security interest in the attached trademarks and trademark
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
trademark or trademark application.

                                  Very truly yours,

                                  __________________________________
                                  [Obligor]

                                  By:___________________________
                                  Name:_________________________
                                  Title:________________________


Acknowledged and Accepted:

NATIONSBANK, N.A., as Agent

By:__________________________
Name:________________________
Title:_______________________






                                    -31-