<PAGE>   1
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                   FORM 10-K
                                   ---------

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                      SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1996      Commission File Number 33-60714

                           IVEX PACKAGING CORPORATION
             (Exact name of registrant as specified in its charter)


                         DELAWARE                      76-0171625
               (State or other jurisdiction         (I.R.S. Employer
                     of incorporation)             Identification No.)

            100 TRI-STATE DRIVE
          LINCOLNSHIRE, ILLINOIS                   60069
          (Address of Principal Executive Office)  (Zip Code)


       Registrant's Telephone number, including area code: (847) 945-9100

                                   ---------

          Securities registered pursuant to Section 12(b) of the Act:

                                      None

          Securities registered pursuant to Section 12(g) of the Act:

                                      None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/

     Aggregate market value of the voting stock held by non-affiliates of the
registrant at March 26, 1997. None.

     At March 26, 1997, 1,072,246 shares of common stock with a par value of
$0.01 were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

                                      NONE

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                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
                                             PART I
<S>       <C>                                                                           <C>
Item 1.   Business ...................................................................     1
Item 2.   Properties .................................................................    10
Item 3.   Legal Proceedings ..........................................................    11
Item 4.   Submission of Matters to a Vote of Security Holders ........................    11

                                         PART II

Item 5.   Market for the Registrant's Common Equity and Related Stockholder Matters ..    12
Item 6.   Selected Financial Data ....................................................    12
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of
             Operations ..............................................................    14
Item 8.   Financial Statements and Supplementary Data ................................    22
Item 9.   Changes In and Disagreements With Accountants on Accounting and Financial
             Disclosures .............................................................    43

                                         PART III

Item 10.  Directors and Executive Officers of the Registrant .........................    43
Item 11.  Executive Compensation .....................................................    45
Item 12.  Security Ownership of Certain Beneficial Owners and Management .............    50
Item 13.  Certain Relationships and Related Transactions .............................    52

                                         PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K ...........    53
</TABLE>


<PAGE>   3


                                     PART I

ITEM 1. BUSINESS

     Ivex(R) Packaging Corporation, a Delaware corporation (the "Company" or
"Ivex(R)"), owns all of the outstanding common stock of IPC, Inc., a Delaware
corporation ("IPC").

THE COMPANY

     The Company is a vertically integrated, specialty packaging company
engaged in the manufacturing and marketing of plastic and paper products to
consumer and industrial packaging markets.  The Company's businesses may
generally be categorized under the following two product groups:
        
   - CONSUMER PACKAGING, an integrated manufacturer of plastic and paper
     products used primarily in food packaging applications, represented
     approximately 52% of the Company's net sales and 54% of the Company's
     earnings before interest, taxes, depreciation, amortization and
     nonrecurring charges ("EBITDA") during the 12 months ended December 31,
     1996.  Plastic packaging produced from Company manufactured oriented
     polystyrene ("OPS") sheet, includes hinged and two-piece containers and
     trays for deli foods, salads, cookies, berries, cakes and other food
     products.  The Company's paper products consist of single face corrugated
     paper liners for cookies and candy, susceptor materials for microwave
     applications, fluted cups for baking and other specialty paper
     products.  The Company markets its products under its Ivex(R) brand name
     to national wholesale bakeries,  supermarket chains, foodservice
     distributors, fast food chains and major agricultural growers.  In August
     1996, the Company expanded its plastic packaging product offering to
     include medical and electronics packaging made from a variety of plastics
     including high impact polystyrene("HIPS") sheet, polyethylene
     terephthelate ("PET") sheet, polyvinyl chloride ("PVC") sheet and high
     density polyethylene ("HDPE") sheet with the acquisition of Plastofilm(R)
     Industries, Inc. ("Plastofilm(R)").  During the first quarter of 1997, the
     Company increased its OPS plastic packaging capabilities in North America
     and Europe through the acquisition of M&R(TM) Plastics, Inc. ("M&R(TM)") 
     located in Laval, Quebec and the acquisition of the OPS business of Viskase
     Limited  located in Sedgefield, England (see "Management's Discussion and
     Analysis of Financial Condition and Results of Operations - Recent
     Developments").

         As part of its integrated operating strategy, the Company manufactures
     OPS sheet and film, HIPS sheet, PET sheet and polystyrene resin.  The
     Company is the largest producer of OPS sheet in North America, using
     approximately 43% for its own production and selling the balance to third
     party converters.  The Company enhanced its OPS extrusion capacity in
     North America with the acquisition of M&R and established its first OPS
     extrusion capacity in Europe with the acquisition of the Sedgefield,
     England OPS operations.  In addition, as a result of the Company's 
     acquisition of Plastofilm and  Trio Products, Inc. ("Trio") during the
     third quarter of 1996, the Company expanded the range of its extruded
     product offering to include sheet made from HDPE, PVC and polypropylene
     ("PP").  The Company's film and sheet are marketed under its Kama(R) brand
     name.

   - INDUSTRIAL PACKAGING, an integrated manufacturer and coater of a variety
     of film, paper and foil products for protective packaging and a
     manufacturer of various grades of paper, represented approximately 48% of
     the Company's net sales and 46% of the Company's EBITDA during the 12
     months ended December 31, 1996.  Protective packaging products include     
     paper and film maskings, self-sealing coated packaging papers, films and
     corrugated paper and heavy-duty mailing envelopes.  The Company is one of
     the largest producers of industrial protective masking materials in North
     America and uses customized formulations of adhesive and cohesive
     materials in its masking and self-sealing packaging products.  Customers
     for industrial protective masking papers and films include manufacturers   
     of metal, plastic, glass, wood and marble products.  Typical end-users for
     its self-sealing products include major U.S. automotive parts 
     manufacturers and book publishers.  Additionally, the Company is one
     of the largest producers in North America of single face corrugated paper
     products used to protect goods during shipment such as glassware,
     furniture, automobile 



                                      1

<PAGE>   4


     parts, light bulbs and cosmetics.  The Company's mailing envelopes and
     padded envelopes are marketed under the brand names Jet-Cor(TM),
     Jet-Lite(R) and Jet-Pak(R).  The Company's coated papers include coated
     water-activated gummed papers, release papers and laminations.  The
     Company's water activated gummed printing papers are used in labels,
     postage stamps and business forms.

         As part of its integrated operating strategy, the Company manufactures
     a variety of recycled kraft papers made from post-consumer and     
     post-industrial fibers and specialty lightweight papers made primarily
     from virgin pulp. Products include kraft paper for grocery and food bags;
     golden brown paper for envelopes such as the Company's Jet-Pak(R) mailers;
     creped kraft paper for bag closures used in packaging pet food, seed, feed
     and fertilizer; and specialty lightweight papers suitable for waxing,
     polycoating and foil laminating for use in fast food applications and
     candy wrappers.   A portion of the Company's recycled papers are used
     internally in the production of single face corrugated paper, cohesive
     coated paper and mailing envelopes.  Customers for the Company's specialty
     papers  include large, integrated paper producers as well as packaging
     companies.

     The Company's principal operating subsidiary is IPC and IPC's principal
operating subsidiaries are Ivex Corporation, Kama of Illinois Corporation, Ivex
Paper Mill Corporation, IPMC, Inc., Ivex Holdings, Ltd. and  Plastofilm
Industries, Inc.  The following trademarks used in this Form are owned by the
Company or one of its affiliates:  Ivex(R), Kama(R), Plastofilm(R), M&R(TM),
Jet-Pak(R), Jet-Lite(R) and Jet-Cor(TM). IPC was formed in December 1992 to
hold the businesses of the Company and IPMC, Inc., companies owned by Acadia
Partners, L.P. ("Acadia") and certain related investors.  As a condition to and
concurrently with IPC's December 1992 offering of $158.0 million of 12-1/2%
Senior Subordinated Notes due 2002 (the "12-1/2% IPC Notes" or the "Notes"),
the Company acquired all of the common stock of IPMC, Inc. and transferred all
of the Company's then existing operating subsidiaries and IPMC, Inc. to IPC in
exchange for all of the shares of IPC's common stock and the assumption by IPC
of certain debt obligations of the Company.  As a result, the Company's
operating subsidiaries and IPMC, Inc. became wholly-owned subsidiaries of IPC. 
In March 1993, the Company issued $160.0 million of 13-1/4% Senior Discount
Debentures due 2005 (the "13-1/4% Company Discount Debentures" or the "Discount
Debentures") for an aggregate consideration of approximately $65.0 million. 
The Company used a portion of the $65.0 million of proceeds from the Discount
Debentures to redeem certain securities of Acadia and certain related investors
and the Company contributed the remaining portion of the proceeds from the
13-1/4% Company Discount Debentures to IPC.

     The Company's principal executive offices are located at 100 Tri-State
Drive, Suite 200, Lincolnshire, Illinois 60069, and its telephone number is
(847) 945-9100.




                                      2



<PAGE>   5


GENERAL DESCRIPTION

     The following table summarizes the net sales, products, customers and end
product uses of the Company's two product groups:


<TABLE>
<CAPTION>
                            1996       % OF
                          NET SALES    NET
    PRODUCT GROUP           (000)     SALES        PRODUCTS               CUSTOMERS               END PRODUCT USES
---------------------     ---------   -----  --------------------  --------------------------     ------------------------
<S>                       <C>        <C>    <C>                          <C>                      <C>
Consumer Packaging ....   $234,584     52%  Plastic containers,          Supermarkets,            Plastic hinged and       
                                            corrugated paper             foodservice              two-piece containers,    
                                            liners and specialty         distributors, fast       trays for deli foods,    
                                            paper products, OPS          food chains, bakery      salads, cookies, berries 
                                            sheet and film, HIPS         and confectionery        and cakes, film for      
                                            sheet, PET sheet, PP         companies, food          envelope and box         
                                            sheet, PVC sheet,            processors, plastic      windows, plastic trays   
                                            HDPE sheet                   converters, envelope     for medical packaging,   
                                                                         and folding carton       protective plastic              
                                                                         manufacturers, medical   packaging for electronics 
                                                                         device and supply        applications, paper liners   
                                                                         companies and            for cookies, susceptor   
                                                                         electronics              materials for microwave  
                                                                         manufacturers            applications, fluted       
                                                                                                  bakery cups and          
                                                                                                  specialty paper products 

Industrial Packaging ..    217,223     48%  Protective packaging,        Automotive              Paper and film           
                                            including coated paper       companies,              protective masking       
                                            and plastic, single face     consumer durables       materials, cohesive      
                                            corrugated paper and         manufacturers,          self-sealing packaging   
                                            shippers and mailers         other industrial        papers, coated papers    
                                                                         manufacturers,          for stamps, labels and   
                                                                         paper distributors      business forms, and      
                                                                         and manufacturers       single face corrugated   
                                                                         of postage stamps       paper for packaging,     
                                                                         and business forms      shippers and mailers     

                                            Manufactured paper,          Paper converters        Grocery and food
                                            including kraft                                      bags, specialty       
                                            papers and specialty                                 lightweight papers for
                                            lightweight virgin                                   fast food and candy   
                                            papers                                               wrappers     
                          --------    ----

Total .................   $451,807    100%
                          ========    ====
</TABLE>






                                      3



<PAGE>   6


CONSUMER PACKAGING

     General.  Consumer Packaging is an integrated manufacturer of  plastic and
paper products for use in a wide array of food applications and, since its
acquisition of Plastofilm, medical and electronics packaging applications.  The
food packaging products are typically used to package food products sold in
supermarkets, wholesale and retail bakeries, fast-food restaurants and
institutional foodservice outlets.  Plastofilm's medical packaging products are
typically used by the major medical supply companies for sterility packaging
and the electronics packaging products are generally  used as cushioning
materials.

     Products.  Consumer Packaging's products consist primarily of thermoformed
plastic containers used in food, medical and electronics markets and single
face corrugated paper liners and other paper products used in food packaging
applications.  Thermoformed plastic packaging includes hinged and two-piece
containers, trays for deli foods, salads, cookies, cakes and other
items, trays for medical applications and cushioning products for the
electronics industry.  Paper products consist of single face corrugated paper
liners for cookies and candy, susceptor materials for microwave applications,
fluted cups for baking and other specialty paper products.

     As part of its integrated operations, the Company is the largest
manufacturer of OPS sheet in North America, and also produces OPS film, HIPS
sheet and PET sheet, and since its acquisition of Plastofilm and Trio, PP
sheet, HDPE sheet and PVC sheet.  OPS sheet is widely used in packaging
applications where clarity, rigidity and material yield are significant
considerations.  HIPS sheet is used in similar applications where clarity is
not as important, but where additional stress or crack resistance is required.
PET, PP, HDPE and PVC sheet are also typically used in applications that
require stress or crack resistance.  The Company's OPS sheet and film, HIPS
sheet, PET sheet, PP sheet, HDPE sheet and PVC sheet are marketed under the
Company's Kama(R) brand name.

     Markets.  The principal markets for the Company's food packaging products
include supermarkets, particularly in-store bakery, delicatessen, and prepared
food sections; national wholesale bakeries; and foodservice outlets,
particularly fast-food restaurants and institutions such as schools, hospitals
and corporate cafeterias.  Customers include major wholesale bakeries, major
national supermarket chains, institutional foodservice distributors, and fast
food chains.  The Company holds a leading position in the wholesale bakery
market.  The Company's position in this market results from the quality of its
OPS sheet, its customized product development capabilities, its ability to
provide both plastic and paper products and its long-term relationships with
key accounts.  The supermarket and food service segments have been two of the
fastest growing markets for food packaging products over the past several
years.  This growth has been fueled by the expansions of bakery, deli and
take-out departments and by increased merchandising efforts by supermarkets in
other areas such as produce and floral.  Growing customer demand for freshness
and convenience has  increased the use of plastic packaging.  In addition, in
the food service area, the Company's historical relationships with fast food
operators enable it to leverage its reputation as new packaging opportunities
arise in this market segment.

     The principal markets for Plastofilm's medical and electronics packaging
include medical device and supply manufacturers and electronics manufacturers.

     The Company is also a manufacturer of OPS film, a thinner gauge version of
OPS sheet, with applications primarily in windows for envelopes and folding
cartons as well as labels.  The Company and Dow Chemical Company are the major
producers of OPS film in North America.  Management believes that it is the
only company in North America to manufacture OPS film to a thickness of
one-thousandth of an inch.

     The Company employs a national sales force to service each of the specific
market segments that it targets.  Approximately half of the packaging customers
are serviced through distributors, with the balance serviced directly by the
Company's national account sales representatives.  The Company markets to
end-users served by its distributors, such as small and regional supermarkets
and convenience food outlets, in order to establish "pull-through" demand
through this distribution channel.  Brokers are also used to penetrate further
specific geographic markets and access prospective customers.



                                      4



<PAGE>   7


     Manufacturing.  The OPS utilized in the Company's plastic packaging
products is manufactured internally at the Company's two polystyrene
polymerization, four extrusion and eight thermoforming facilities (not
including the facilities acquired during the first quarter of 1997).
Polystyrene polymerization is the process of converting liquid styrene monomer
into polystyrene through heat and agitation under high pressure.  The Company
produces high quality polystyrene as measured by the polystyrene's low residual
monomer levels.  The Company believes that its low residual monomer OPS affords
it a quality advantage in certain areas of the food packaging industry where
undesirable odor and taste transfer associated with high residual monomer
levels are a concern.

     Extrusion is the process of converting plastic resin into plastic sheet
and film used in the thermoforming process.  In 1996, the Company produced
approximately 79 million pounds of polystyrene and purchased approximately 107
million pounds of polystyrene and approximately 15 million pounds of other
plastic resin from third-party sources.  The Company is one of only two OPS
producers that have polystyrene polymerization manufacturing facilities.  This
capability results in a competitive cost and quality advantage.  Because of the
Company's vertical integration and the technology employed in its extrusion
operations, the Company believes it is one of the industry's lowest cost
producers of OPS in North America.

     The Company's plastic thermoforming and paper converting operations are
principally conducted in ten facilities located throughout North America and
Europe (not including the facilities acquired during the first quarter of
1997).  The Company's broad geographic coverage enables the Company to provide
better customer service and reduce transportation costs.  The Company's
flexible manufacturing and engineering capabilities enable it to work
cooperatively with its customers to design custom packages.  The Company
believes that it has advantages in the specialty packaging industry through its
strategically located manufacturing facilities, flexible manufacturing
capabilities, in-house product engineering services and quality production
expertise.

     Competition.  The Company's main competitor in the supermarket and
foodservice segments is Tenneco Packaging.  In the bakery area, the Company
competes primarily with Detroit Forming, Inc. in plastic products and James
River Corporation of Virginia in paper products.  The Company competes with
several manufacturers of OPS sheet, including Detroit Forming and Plastic
Suppliers, Inc.  In the medical and electronics markets, the Company competes
with many regional thermoformers, including Prent Corporation, Placon and
Crystal Thermoplastics, Inc.

INDUSTRIAL PACKAGING

     General.  Industrial Packaging is an integrated manufacturer and coater of
a variety of film, paper and  foil products for protective packaging and a
manufacturer and coater of various grades of papers.

     Products.  Protective packaging products include protective paper and film
maskings; self-sealing coated packaging papers, films and corrugated paper; and
heavy-duty mailing envelopes marketed under the brand names Jet-Lite(R),
Jet-Cor(TM)  and Jet-Pak(R).  The Company's manufactured papers include
post-consumer and post-industrial recycled paper products (including
lightweight kraft paper for grocery and food bags and heavyweight crepe kraft
paper for bag closures), and specialty lightweight papers from virgin pulp used
in the flexible packaging and food packaging industries, and the Company's
coated papers include water-activated gummed papers used for postage stamps,
labels, and envelopes, release papers used for high-pressure decorative
laminates, and  laminations used for lottery ticket stock and decorative
labels.

     Markets.  The Company's industrial packaging products are used in a wide
variety of commercial and industrial applications.

     The Company believes that it is one of the largest producers of industrial
protective masking materials in North America.  Management believes its strong
position within the industrial protective masking market is a result of its
chemical adhesive formulations and production technology.  The Company's
products in this market range from adhesive coated paper and films to
coextruded films with adhesive properties.  These paper and film maskings are
used to protect surfaces during fabrication, handling, storage and shipping.
The Company's products must meet 


                                      5



<PAGE>   8


specifications for a broad array of surfaces requiring protection, including
glass, plastic, wood, polished and painted metals, automotive trim, plastic
laminates, furniture and marble.

     The Company applies adhesive and cohesive coatings to paper, films and
single face corrugated paper products for high-speed, high-volume self-sealing
packaging applications.  A cohesive package is designed to stick to itself and
not to the contents.  The Company uses proprietary formulations of adhesive and
cohesive materials to meet specialized customer requirements.  Typical
end-users of self-sealing packaging systems are the major U.S. automotive parts
manufacturers and book publishers.  The Company also produces water-activated
gummed printing papers used for labels, commercial and postage stamps and
business forms and release papers that are used in the manufacture of high
pressure decorative laminates.

     The Company produces mailing envelopes and padded envelopes marketed under
the brand names Jet-Lite(R), Jet-Cor(TM) and Jet-Pak(R).  Jet-Lite(R) is a
lightweight nylon-reinforced kraft paper mailer.  Jet-Cor(TM) is a single face
corrugated mailer with a self-sealing closure.  Jet-Pak(R) is a heavyweight,
padded mailer manufactured entirely from recycled materials, and includes a
self-sealing Jet-Pak(R) mailer line.  The Jet-Cor(TM) and Jet-Pak(R) mailers
can be customized with printed addresses and other decorative items.

     The Company believes that it is one of the largest producers in North
America of single face corrugated paper products.  Single face corrugated paper
is used primarily as shock absorbing packaging to protect goods such as
glassware, furniture and automobile parts during shipment, and for a variety of
consumer goods applications such as light bulb and cosmetics packaging.

     All of the Company's low density polyethylene film is used internally
in the production of its film masking and self-sealing packaging products and a
portion of the Company's post-consumer and post-industrial recycled paper is
used internally in the production of single face corrugated paper, cohesive     
coated paper and mailing envelopes.  Principal third-party markets for the
Company's manufactured paper products are food packaging, industrial packaging,
bag converting and industrial converting, including grocery and food bags;
envelopes; bag closures in pet food, seed, and fertilizer packaging; and
fast-food and candy wrappers.  These markets require high service levels,
including fast delivery and the ability to produce a variety of colors, weights
and formulations.  Customers for the Company's manufactured paper products
include large, integrated paper producers as well as packaging companies.

     Manufacturing.  The Company's primary raw materials for protective
packaging products, principally low density polyethylene, specialty chemicals
and paper, are obtained from external sources as well as from the Company's low
density polyethelyne extrusion facility and recycled paper mill operations.

     The Company's coating and paper converting operations are conducted at ten
facilities throughout the U.S. and Canada (not including the facilities
acquired during the first quarter of 1997).  The Company believes that its
extensive geographic coverage reduces transportation costs and contributes to
the cost competitiveness of the Company's packaging products.

     All of the paper produced at three of the Company's paper mills is made
entirely from post-consumer and post-industrial fibers, including old
corrugated containers ("OCC") and doublelined kraft clippings ("DLK").  The
Company was among the first to use 100% recycled post-industrial fibers at one
of its mills.  Recycled paper accounts for approximately 65% of the total
output of the Company's paper operations.  The products at the Company's fourth
mill in Detroit, Michigan are principally produced from virgin pulp and
post-industrial recycled fiber.  The Company has installed recycling equipment
at its mill in Detroit, Michigan which enables the mill to substitute recycled
material for a portion of the higher-cost virgin pulp.

     The Company's four paper mills are located in the Midwestern U.S. The
recycled paper mills' central location represents a competitive advantage for
the Company because the majority of their raw material needs (comprised of
post-consumer OCC, DLK, reject envelopes and office waste) comes from the
Chicago metropolitan area and because many of their customers for recycled
paper are located in the Chicago area and the Midwest.  Thus, the Company



                                      6



<PAGE>   9

believes that it enjoys certain freight advantages over some of its competitors
in both purchasing its raw material and selling its products.  Additionally,
the Company believes that its equipment provides greater flexibility than many
larger competitors' machinery enabling it to serve a large number of relatively
small, niche markets.

     Competition.  The Company believes that its technologies, application
engineering capabilities, manufacturing expertise, national sales and
distribution coverage and flexible production capacity have enabled it to
achieve strong positions in a number of its industrial product markets.
Principal competitors include a joint venture between Minnesota Mining and
Manufacturing Company and Sealed Air Corporation, American Biltrite, Inc. and
Main Tape Company, Inc. (protective masking); Nashua Corporation and
Brown-Bridge (water-activated gummed papers); Sealed Air Corporation and AVI
Products, Inc. (mailing envelopes); and S.D. Warren Company (release papers).

COMPETITION

     The Company operates in markets that are highly competitive and faces
substantial competition throughout all of its product lines from numerous
national and regional companies.  Many of these competitors are considerably
larger and more established than the Company and have substantially greater
financial and other resources than the Company, while others are significantly
smaller with lower fixed costs and greater operating flexibility.  In addition
to price, competition for many of the Company's products is based on quality,
supplier response time, service and timely and complete order fulfillment.  See
"Business--Consumer Packaging--Competition" and "--Industrial
Packaging--Competition" for a more detailed discussion of the Company's
competitors.

EMPLOYEES

     As of December 31, 1996 the Company had 26 employees at its Lincolnshire,
Illinois corporate headquarters and had 2,603 employees at plant locations, of
which 580 were salaried and 2,023 were hourly.  Of the hourly workers,
approximately 898 were members of unions.  The Company has collective
bargaining agreements with seven unions in effect with respect to certain
hourly employees at the Company's Joliet, Peoria, Chagrin Falls, Detroit, Troy,
Newton, Avenel,  Grove City and Elyria facilities.  There have been no
significant interruptions or curtailments of operations due to labor disputes
since 1986 and the Company believes that relations with its employees are
satisfactory.  The collective bargaining agreements at the Company's Newton,
Chagrin Falls and Avenel facilities will expire in 1998;  the collective
bargaining agreement at the Company's Troy facility will expire in 1999; the
collective bargaining agreements at the Company's facilities in Joliet, Peoria
and Elyria will expire in 2000; and the collective bargaining agreement at the
Company's facilities in Grove City and Detroit will expire in 2001.  The
employees at the Company's Grant Park, Illinois facility recently voted against
union representation at this facility.




                                      7



<PAGE>   10


RAW MATERIALS

     Styrene monomer, polystyrene, polyethylene, polypropylene, polyvinyl
chloride and various paper-based commodities (including recycled and virgin
fiber) constitute the principal raw materials used in the manufacture of the
Company's products.  Generally, these raw materials are readily available from
a wide variety of suppliers.  Costs for all of the significant raw materials
used by the Company tend to fluctuate with various economic factors which
generally affect the Company and its competitors.  The availability of raw
materials was adequate in fiscal 1996 and is expected to remain generally
adequate throughout fiscal 1997, although prices for certain items such as
styrene monomer, polystyrene, OCC, DLK and virgin fiber have been volatile and
may continue to fluctuate, in some instances adversely to the Company.

TRADEMARKS, PATENTS AND LICENSES

     While the Company has registered and unregistered trademarks for many of
its product lines, these trademarks, other than the Company's rights to the
trademarks "Ivex(R)", "Plastofilm(R)" and "Kama(R)", are not considered
material to the conduct of the Company's business.  The Company owns or
licenses a number of patents but such patents and licenses are not considered
material to the conduct of the Company's business and the Company does not
believe that any of its businesses are substantially dependent on patent
protection.

CUSTOMERS, SALES AND BACKLOG

     No material portion of the Company's business is dependent upon a single
or very few customers, except that the Company's extruded OPS film is sold
principally to one customer with which the Company believes that it has a
satisfactory relationship.  No one customer accounted for more than 10% of the
Company's aggregate net sales.  In general, the backlog of orders is not deemed
by the Company to be significant or material for an understanding of the
Company's businesses.

ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION

     The past and present business operations of the Company and the past and
present ownership and operations of real property by the Company are subject to
extensive and changing federal, state, local and foreign environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes (including solid and hazardous wastes) or
otherwise relating to the protection of the environment.  As is the case with
manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or any associated offsite disposal location, or
if contamination from prior activities is discovered at any of the Company's
properties, the Company may be held liable.  From time to time the Company is
involved in regulatory proceedings and inquiries relating to compliance with
environmental laws, permits and other environmental matters.

     The Company is currently involved with environmental remediation at
certain of its facilities.  The Company believes that the costs of such
remediation have been adequately reserved for and that such costs are unlikely
to have a material adverse effect on the Company.  No assurance can be given,
however, that additional environmental issues relating to the presently known
remediation matters or identified sites or to other sites or matters will not
require additional investigation, assessment or expenditures.  The Company has
a reserve of approximately  $2.1 million as of December 31, 1996 for its known
future environmental remediation costs.  Because an environmental reserve is
not established until a liability is determined to be probable and reasonably
estimable, all potential future remedial costs may not be covered by this
reserve.  The Company has made and will continue to make capital expenditures
to maintain compliance with environmental requirements.  The Company does not
expect its 1997 spending on environmental capital projects to be material.

     During 1993, the Company was named a potentially responsible party ("PRP")
at the Delta Chemicals, Pennsylvania Superfund site and in 1995 the Company
paid a de minimis settlement of less than $20,000 at that site.  The Company
also has responded to an information request regarding the Global Landfill, New
Jersey site and believes 


                                      8



<PAGE>   11


that any Superfund liability it may have at that site will be de minimis.  Over
the past few years, the Company has also received notices of potential
liability relating to three other Superfund sites for which the Company
believes a former owner of the facilities subject to such notices will be
responsible.  The Company forwarded such notices to such former owner and has
had no further involvement at those sites.  In addition, during 1996 the
Company  answered a complaint regarding the Huth Oil, Ohio Superfund site and
believes that any liability at this site will be minimal.  Although the Company
endeavors to carefully manage its waste, because Superfund liability is strict
and retroactive, it is possible that in the future the Company may be
identified as a PRP with respect to other waste disposal sites.

     The plastics industry, in general, and the Company also are subject to
existing and potential federal, state, local and foreign legislation designed
to reduce solid wastes by requiring, among other things, plastics to be
degradable in landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products.  In
addition, various consumer and special interest groups have lobbied from time
to time for the implementation of these and other such similar measures.
Although the Company believes that the legislation promulgated to date and such
initiatives to date have not had a material adverse effect on the Company,
there can be no assurance that any such future legislative or regulatory
efforts or future initiatives would not have a material adverse effect on the
Company.

     The Food and Drug Administration (the "FDA") regulates the content of
direct-contact food containers and packages, including containers and packages
made from recycled OPS and paper products.  The FDA currently limits the amount
of recycled materials that can be used in such containers and packages.  To
comply with these regulations, the Company has instituted various compliance
programs.



                                      9



<PAGE>   12


ITEM 2. PROPERTIES

     The Company and its subsidiaries use various owned and leased plants,
warehouses, and other facilities in their operations.  The facilities are
considered to be suitable and adequate for the conduct of the businesses
involved although the machinery, plant and equipment at such facilities are,
from time to time, subject to scheduled and unscheduled maintenance.  As of
December 31, 1996, the Company had twenty-two non-warehouse facilities,
nineteen of which are located in the U.S., two in Canada and one in the United
Kingdom and, except as noted below, all are owned by IPC or a subsidiary of
IPC. With certain limited exceptions, all of the owned real estate is subject
to mortgages securing IPC's indebtedness under its senior credit facility.


<TABLE>
<CAPTION>
              LOCATION                             FUNCTION               SQUARE FOOTAGE
------------------------------------  ----------------------------------  --------------
<S>                                   <C>                                 <C>

Avenel, NJ(1) ......................  Extrusion                                   55,000
Bellwood, IL(2) ....................  Paper and Film Converting, Coating          56,000
Bellwood, IL(3) ....................  Paper Converting                            41,000
Bridgeview, IL .....................  Paper Converting                           115,000
Chagrin Falls, OH ..................  Paper Mill                                 120,000
Detroit, MI ........................  Paper Mill                                 255,000
Elyria, OH (4) .....................  Extrusion                                   80,000
Enniskillen, Northern Ireland (5) ..  Thermoforming                               16,000
Grant Park, IL .....................  Thermoforming/Engineering                  184,000
Grove City, PA(6) ..................  Thermoforming/Paper Converting             236,000
Hazleton, PA(7) ....................  Polymerization/Extrusion                   166,000
Joliet, IL .........................  Paper Mill                                 410,000
Madison, GA ........................  Thermoforming/Paper Converting             141,000
Manteno, IL ........................  Extrusion                                  105,000
Newton, MA(8) ......................  Paper and Film Converting/Coating          225,000
Peoria, IL .........................  Paper Mill                                 234,000
Sparks, NV(9) ......................  Thermoforming                               40,000
Troy, OH ...........................  Paper Converting/Coating                   320,000
Visalia, CA ........................  Thermoforming/Paper Converting             144,000
Longueuil, Quebec ..................  Thermoforming/Paper Converting              32,000
Toronto, Ontario ...................  Paper Converting                            54,000
Wheaton, IL ........................  Thermoforming                              120,000
</TABLE>

-----------------

(1) Leased facility, with its lease expiring on December 31, 2003, subject to
    IPC's right to extend the lease for two successive 5 year periods upon
    IPC's written notice to the lessor thereof not more than 12 nor less than 6
    months prior to the end of the then current lease term.

(2) Leased facility, with its lease expiring on December 31, 1997, subject to
    IPC's right to extend the lease for an additional two year period until
    December 31, 1999, subject to landlord's right to terminate under certain
    circumstances on or after July 1, 1997 upon six months prior written
    notice.

(3) Leased facility, with its lease expiring on December 31, 1997, subject to
    IPC's right to extend the lease for an additional two year period until
    December 31, 1999.

(4) Leased facility, with its lease expiring on September 30, 2001, subject to
    IPC's right to extend the lease for an additional 5 year period and,
    upon specified terms and conditions, to purchase the property.

(5) Leased facility, with its lease expiring on May 10, 2016.



                                      10



<PAGE>   13



(6) This facility is held subject to an installment sales contract with
    Pennsylvania Industrial Development Authority that holds title to the 
    facility.

(7) Leased facility, with its lease expiring on October 4, 1998, subject to
    IPC's right to extend the lease for two successive 5 year periods upon
    IPC's written notice to lessor not more than 24 nor less than 6 months
    prior to the end of the then current lease term.

(8) Leased facility, with its lease expiring on December 5, 2001 with three one
    year options to extend.

(9) Leased facility, with its lease expiring on December 31, 1999.


ITEM 3. LEGAL PROCEEDINGS

     From time to time the Company and its subsidiaries are involved in various
litigation matters arising in the ordinary course of business. The Company
believes that none of the matters in which the Company or its subsidiaries are
currently involved, either individually or in the aggregate, is material to the
Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.



                                      11



<PAGE>   14


                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's common stock, par value $0.01 per share, is owned entirely
by Acadia Partners, L.P. ("Acadia"), certain related investors and certain
executive officers. In addition, certain executive officers also hold options
exercisable into shares of IPC's common stock that are exchangeable for
shares and options of the Company's common stock.  Therefore, there is no 
established public trading market for the Company's common stock. See 
"Security Ownership of Certain Beneficial Owners and Management."  The Company 
has never paid cash dividends on its common stock. Any payment of cash 
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon the financial condition, capital requirements
and earnings of the Company as well as other factors that the Company's Board
of Directors may deem relevant.  The indenture under which the Company's
13-1/4% Company Discount Debentures were issued restricts the payment of
dividends on the Company's capital stock or any other distributions of any sort
in respect to the Company's capital stock.

     IPC's common stock, par value $0.01 per share, is owned entirely by the
Company (other than the options exercisable into IPC's common shares held by
certain of the Company's executive officers) and therefore there is no
established public trading market for IPC's common stock. IPC has never paid
cash dividends on its common stock. Any payment of cash dividends in the future
will be at the discretion of IPC's Board of Directors and will depend upon the
financial condition, capital requirements and earnings of IPC as well as other
factors that IPC's Board of Directors may deem relevant.  IPC's senior credit
facility prohibits and the indenture under which the 12-1/2% IPC Notes were
issued (the "12-1/2% Subordinated Note Indenture") restricts, the payment of
dividends on IPC's capital stock or any other distributions of any sort in
respect of IPC's capital stock.

ITEM 6. SELECTED FINANCIAL DATA

     The selected financial data presented below for, and as of the end of,
each of the years in the five year period ended December 31, 1996, are derived
from the consolidated audited financial statements of the Company.  The
selected financial data should be read in conjunction with the consolidated
financial statements and notes thereto.


<TABLE>
<CAPTION>
                                      1996        1995        1994        1993       1992
                                   ----------  ----------  ----------  ----------  ---------
<S>                                <C>         <C>         <C>         <C>         <C>
                                               (dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales .......................  $ 451,807   $ 451,569   $ 390,975   $ 366,851   $367,649
Net income (loss) before
 extraordinary item .............      8,668     (22,125)     (9,293)   (129,098)   (24,840)
BALANCE SHEET DATA:
Total assets ....................  $ 315,901   $ 294,911   $ 304,246   $ 297,674   $423,051
Long-term debt ..................    352,893     353,717     330,768     330,201    278,369
Redeemable preferred stock ......          -           -           -           -     50,313
Stockholders' equity (deficit) ..   (127,344)   (136,332)   (111,266)   (101,579)    23,899
</TABLE>


SUPPLEMENTAL FINANCIAL DATA

     The unaudited supplemental financial data below are presented to
illustrate the historical results of operations and selected financial data of
the Company for, and as of the end of, each of the years in the three year
period ended December 31, 1996 for the purposes of the statement of operations
and other operating data, and as of the dates presented below for the purposes
of the balance sheet data.




                                      12



<PAGE>   15



<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             -------------------------------
                                                                 1996     1995       1994
                                                             --------   ---------  ---------
                                                                  (dollars in thousands)
<S>                                                          <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net sales .................................................  $451,807   $451,569   $390,975
Gross profit ..............................................   100,383     85,160     74,271
Selling and administrative ................................    47,462     42,567     41,662
Amortization of intangibles (1) ...........................       621      1,904      1,140
Write-off of goodwill (1) .................................         -     13,471          -
Special charges (2) .......................................         -      4,960          -
                                                             --------   --------   --------
Income from operations ....................................    52,300     22,258     31,469
Interest expense ..........................................    42,732     43,270     39,820
                                                             --------   --------   --------
Income (loss) before income taxes and extraordinary item ..     9,568    (21,012)    (8,351)
Income tax provision ......................................      (900)    (1,113)      (942)
                                                             --------   --------   --------
Income (loss) before extraordinary item ...................     8,668    (22,125)    (9,293)
Extraordinary item (3) ....................................         -     (2,359)         -
                                                             --------   --------   --------
Net income (loss) .........................................  $  8,668   $(24,484)  $ (9,293)
                                                             ========   ========   ========

OTHER OPERATING DATA:
EBITDA (before nonrecurring charges)(4) ...................  $ 75,024   $ 63,089   $ 53,658
EBITDA (before nonrecurring charges) margin(4) ............      16.6%      14.0%      13.7%
Depreciation and amortization (1) .........................  $ 22,724   $ 35,871   $ 22,189
Capital expenditures ......................................  $ 17,633   $ 19,385   $ 16,769

<CAPTION>
                                                                      DECEMBER 31,
                                                                      ------------
                                                                1996       1995        1994
                                                             ---------   ---------   ---------
                                                                 (dollars in thousands)
<S>                                                          <C>         <C>         <C>
BALANCE SHEET DATA:
Working capital(5) ........................................  $  32,539   $  38,090   $  32,853
Total assets ..............................................    315,901     294,911     304,246
Long-term debt ............................................    352,893     353,717     330,768
Stockholders' deficit .....................................   (127,344)   (136,332)   (111,266)
</TABLE>

--------

(1) Depreciation and amortization for the year ended December 31, 1995 includes
    the accelerated write-off of goodwill associated with a portion of the
    Company's Industrial Packaging product group of $13,471 and the accelerated
    write-off of a non-compete agreement of $1,139.

(2) Operating results for the year ended December 31, 1995 include the
    following special charges: $2,250 associated with IPC's special incentive 
    agreement with certain executive officers, $1,950 of costs related to an 
    attempted initial public equity offering and a reduction of land value
    of $760 associated with a donation of certain land to the Village of Chagrin
    Falls, Ohio.

(3) In connection with the refinancing of IPC's credit facility, the Company
    wrote-off deferred financing costs of $2,359.

(4) EBITDA (before nonrecurring charges) includes income from operations
    adjusted to exclude depreciation and amortization expenses, goodwill
    write-off and special charges.  The Company believes that EBITDA (before
    nonrecurring charges) provides additional information for determining its
    ability to meet future debt service requirements.  However, EBITDA (before
    nonrecurring charges) is not a defined term under generally accepted
    accounting principles ("GAAP") and is not indicative of operating income or
    cash flow from operations as determined under GAAP.



                                      13



<PAGE>   16


(5) Working capital is determined to be the excess of current assets over
    current liabilities (including the current portion of long-term debt).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion addresses the information and financial data
contained in "Supplemental Financial Data" presented in Item 6.

     The Company is the sole stockholder of its operating subsidiary, IPC.  The
Company is a holding company with no operations of its own and is dependent on
the operating cash flow of IPC and its subsidiaries in order to pay principal
and interest on its debt; however, IPC has no contractual obligations to
distribute any such cash flow to the Company.  References to the Company or
Ivex herein reflect the consolidated results of Ivex Packaging Corporation.

RECENT DEVELOPMENTS

     On January 17, 1997, IPC purchased substantially all of the assets,
excluding accounts receivable, of the OPS business of Viskase Limited located
in Sedgefield, England for approximately $12.5 million and on February 21,
1997, IPC purchased all of the outstanding common stock of M&R Plastics, Inc.
located in Laval, Quebec for approximately $19.5 million.  The acquired
businesses were financed through cash flow from operations and revolving credit
borrowings under IPC's senior credit facility.  As a result of these
borrowings, IPC amended and restated its senior credit facility on March 24,
1997 to, among other things, increase its revolving credit facility from $55
million to $105 million.  As of March 24, 1997, $59.2 million was available
under the revolving credit portion of IPC's amended and restated credit
facility.

RESULTS OF OPERATIONS -- FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

     Net Sales

     The following table sets forth information with respect to net sales of
the Company's product groups for the periods presented.


<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,
                         ------------------------------------------------------------
                                     % OF               % OF                % OF
                           1996    NET SALES  1995    NET SALES    1994    NET SALES
                         --------  ---------  ----    ---------   -----    ----------  
                                              (dollars in thousands)
<S>                      <C>       <C>      <C>        <C>       <C>       <C>

Consumer Packaging ....  $234,584    51.9   $219,806    48.7    $189,089     48.4
Industrial Packaging ..   217,223    48.1    231,763    51.3     201,886     51.6
                         --------   -----   --------   -----    --------    -----
 Total ................  $451,807   100.0   $451,569   100.0    $390,975    100.0
                         ========   =====   ========   =====    ========    =====
</TABLE>


     Consumer Packaging's net sales increased by 6.7% in 1996 from 1995 levels
and 16.2% in 1995 from 1994 levels.  The increase in 1996 compared to the prior
year is the result of increased unit sales volume of extruded sheet and film
and the third quarter 1996 acquisitions of Plastofilm and Trio partially offset
by a decrease in average selling price of substantially all products (primarily
related to lower raw material costs during 1996). Near the end of 1995,
Consumer Packaging increased OPS extrusion capacity with the completion of a
new extrusion line in Manteno, Illinois.  The increased capacity resulted in a
16.9% increase in pounds of extruded sheet and film sold during 1996 over the
prior year.   The increases in volume were partially offset by a decrease of
15.5% in the average selling price per pound of OPS in 1996 compared to 1995
(primarily related to lower raw material costs during 1996).  Net sales of
converted plastic and paper products were consistent during 1996 compared to
1995 reflecting slightly increased unit volume offset by decreased average 
selling price (primarily related to lower raw material costs during 1996).   
The 1995 increase from the prior year is the result of increased unit sales 
volume of extruded sheet and film and increased selling prices of substantially
all products (primarily related to significantly higher raw material costs 
during 1995).   During the third



                                      14



<PAGE>   17

quarter of 1994, Consumer Packaging increased OPS extrusion capacity with the
completion of a new extrusion line in Hazleton, Pennsylvania.  Principally as a
result of this extrusion capacity expansion, pounds of extruded sheet and film
sold increased 15.4% during 1995 compared to 1994.  Compared to the prior year,
the average selling price per pound of extruded sheet increased 12.7% during
1995.  Net sales of converted plastic and paper products increased 7.9% during
1995, principally as a result of higher selling prices.

     Industrial Packaging's net sales decreased by 6.3% in 1996 from 1995 and
increased by 14.8% in 1995 from 1994.   The decrease in 1996 from 1995 is
primarily attributable to a decrease in recycled and specialty lightweight
paper unit sales volume and average selling price and a significant decrease in
net sales of coated paper for stamp applications, partially offset by increased
net sales of protective packaging products.  During 1996, the unit sales volume
of recycled and specialty lightweight paper sold decreased 9.1% and the average
selling price decreased 13.0% due to declining raw material costs and
aggressive competitive pricing in the industry.  The 1996 decrease in net sales
was partially offset by increased net sales of protective packaging products
primarily associated with the third quarter 1995 acquisition of Packaging
Products, Inc. ("PPI") and increased net sales of masking and cohesive products
for applications in the automotive, housing and mail order industries. The
increase in net sales in 1995 from 1994, in part, is due to the PPI acquisition
and unit sales volume increases of recycled paper and coated paper for stamp
applications.  The 1995 increase in net sales also is attributable to increases
during 1995 in the average selling prices (primarily related to significantly
higher raw material costs during 1995) in materials such as polyethylene,
virgin pulp, old corrugated containers ("OCC") and doublelined kraft clippings
("DLK").

     Gross Profit

     The Company's gross profit increased 17.9% during 1996 compared to 1995
primarily as a result of the increased unit sales volume discussed above, the
increased profitability of the Company's converted plastic and converted paper
operations, the incremental effects of the Trio, Plastofilm and PPI
acquisitions and decreased raw material costs (including styrene monomer,
polystyrene, OCC, DLK and virgin pulp).  These increases were offset, in part,
by the decreased profitability of the Company's polymerization operations and
specialty and lightweight paper operations.  Gross profit margin increased to
22.2% in 1996 from 18.9% in 1995.  The gross profit margin increase during 1996
is primarily attributable to cost decreases for certain of the Company's raw
materials and improved operational efficiencies as a result of greater unit
volume of extruded sheet and film.

     The Company's gross profit increased 14.7% during 1995 compared to 1994
primarily as a result of the increased net sales discussed above and the
significantly increased profitability of the Company's polymerization
operations.  However, gross profit margin decreased slightly to 18.9% in 1995
from 19.0% in 1994.  The gross profit margin decrease during 1995 is primarily
attributable to significant cost increases for the Company's raw materials
(including styrene monomer, polystyrene, polyethylene, OCC, DLK and virgin
pulp).  The decrease in the Company's gross profit margin was partially offset
by improved operational efficiencies as a result of greater unit volume of
extruded sheet and film and recycled paper and by the significantly increased
profitability of the Company's polymerization operations due to, among other
things, the Company's favorable styrene monomer purchases during 1995.

     Operating Expenses

     Selling and administrative expenses increased 11.5% during 1996 compared
to the prior year and as a percentage of net sales increased to 10.5% during
1996 compared to 9.4% in 1995.  The increase in selling and administrative
expenses is primarily attributable to the PPI, Plastofilm and Trio
acquisitions.  The increase as a percentage of net sales is attributable to the
decreases in the Company's average selling price as discussed above.

     Selling and administrative expenses increased 2.2% during 1995 compared to
the prior year but as a percentage of net sales declined to 9.4% in 1995
compared to 10.7% in 1994.  The decrease as a percentage of net sales is
attributable to the significant increases in net sales dollars as discussed
above without a comparable increase in operating expenses and a cost reduction
plan implemented by management during the third quarter of 1994.


                                      15



<PAGE>   18




     Amortization of intangibles decreased during 1996 as compared to 1995 and
increased in 1995 compared to 1994 as a result of the accelerated write-off of
a non-compete agreement of $1.1 million during 1995.

     During 1995, the Company wrote off $13.5 million of the goodwill
associated with a portion of its Industrial Packaging businesses.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - For the Years Ended December 31, 1996,
1995 and 1994 - Goodwill Write-off."

     The $5.0 million of special charges taken in 1995 is comprised of the
following: a $2.3 million charge associated with  IPC's long-term special
incentive agreement with senior management; a $2.0 million charge associated
with the costs related to the Company's attempted public equity offering during
the fourth quarter of 1995; and a reduction of land value of $760,000
associated with the Company's donation of a portion of its Chagrin Falls, Ohio
paper mill site to the Village of Chagrin Falls.

     Goodwill Write-off

     During 1995, a portion of the Industrial Packaging businesses (such
portion having been acquired primarily in the 1989 acquisition of L&CP
Corporation) had experienced less sales volume growth and lower profitability
than anticipated.  As a consequence, and in response to dynamic market
conditions, during the second quarter of 1995 the Company realigned the
management of these businesses based on three distinct operating units -
masking, graphics and other protective products.

     Consistent with its accounting policy for goodwill and long-lived assets
at that time, the Company made a reassessment of its remaining goodwill, all of
which pertained to the above operating units, during the second quarter of 1995
and revised its projections to more accurately reflect expected future results.
The Company segregated the assets and cash flows of these three operating
units to the lowest level for which cash flows are identifiable and independent
of one another at that time.  In order to evaluate its goodwill impairment ,
the Company projected the cash flows allocable to these businesses over the
estimated remaining goodwill amortization periods of approximately 34 years.
The Company then discounted such cash flows at a rate which it believed was
commensurate with the risk involved.  The Company selected a pre-tax weighted
average cost of capital (reflective of  comparable companies within its
industry) for purposes of discounting its cash flows.  The discounted cash
flows of each business were then compared to the sum of the business groups'
working capital and net book value of fixed assets.  Impairment of goodwill was
then measured by comparing the remaining discounted cash flow to the net book
value of the business groups' goodwill.  Upon comparison, the discounted cash
flows for the graphics and other protective products businesses were
insufficient to recover each of such businesses' goodwill.  Accordingly, the
Company recorded an impairment of $13.5 million during the second quarter of
1995.

     The 1995 revised projections for this portion of the Company's business
were extrapolated from market conditions and competitive pressures existing at
that time and were based upon, among other things, the assumptions that growth
of operating income before depreciation and amortization would range from 2-6%
per year through 1999, from 1-3% per year from 2000-2010 and 0% per year from
2011-2029.  The growth assumptions for the graphics and other protective
products businesses were lower than the masking business.  The projections
assumed that capital expenditures would generally be consistent with
depreciation over the long term.  The Company believes that its revised
projections based on the June 1995 existing historic financial trends and
market conditions were its best estimate at that time of its future performance
and that the Company's performance at such projected levels will not
substantially detract from the Company's future earnings.  However, there can
be no assurances that such estimates will be indicative of future results,
which ultimately may be less than or greater than these estimates.



                                      16





<PAGE>   19
     Income from Operations

     Income from operations and operating margin were $52.3 million and 11.6%,
respectively, during 1996, compared to $22.3 million and 4.9%, respectively,
during 1995 and $31.5 million and 8.0%, respectively, during 1994.  The
increase in 1996  income from operations and operating margin compared to 1995
primarily results from the $13.5 million goodwill write-off and $5.0 million of
special charges recorded during 1995.  Without these special charges during
1995, operating income and operating margin would have been $40.7 million and
9.0%, respectively, in 1995.   The increase in 1996 income from operations and
operating margin over 1995 income from operations and operating margin (before
the 1995 write-off of goodwill and the special charges) was attributable to the
improved gross profit and gross profit margin discussed above.  The 1995
decrease in income from operations and operating margin compared to 1994 is
primarily due to the write-off of goodwill and the special charges recorded
during 1995.  The increase in 1995 operating income and margin (before the 1995
write-off of goodwill and the special charges) compared to the 1994 operating
income and margin was attributable to the Company's increased gross profit and
reduced operating expenses as a percentage of net sales.

     Interest Expense

     Interest expense during 1996 was $42.7 million compared to $43.3 million
and $39.8 million during 1995 and 1994, respectively.  The decrease in 1996
from 1995 primarily results from lower interest rates during 1996 as a result
of the Company's refinancing of its senior credit facility during the fourth
quarter of 1995.  The increase in 1995 from 1994 resulted from a larger amount
of outstanding indebtedness during 1995 as a result of accretion on the 13-1/4%
Company Discount Debentures and increased borrowings on IPC's revolving credit
facility which were primarily related to the Company's acquisition of the
assets of PPI.

     Income Taxes

     The Company's tax provisions for 1996, 1995 and 1994 primarily reflect
provisions for federal alternative minimum tax and state taxes.

     Extraordinary Item

     The extraordinary item in 1995 reflects the write-off of deferred loan
costs of $2.4 million written off in connection with the refinancing of IPC's
existing credit facility with a new $160 million senior credit facility during
the fourth quarter of 1995.

     Net Income/Loss

     Net income was $8.7 million in 1996 compared to a net loss of $24.5
million in 1995.  The improved net income during 1996 is primarily the result
of the Company's  improved gross profit during 1996 and the $13.5 million
goodwill write-off and $5.0 million of special charges recorded during 1995.

     Net loss increased to $24.5 million in 1995 compared to $9.3 million in
1994.  The $15.2 million increase in net loss during 1995 is primarily the
result of the write-off of  goodwill and  special charges recorded during 1995.




                                      17



<PAGE>   20


     EBITDA (before nonrecurring charges)

     EBITDA (before nonrecurring charges) includes income from operations
adjusted to exclude depreciation and amortization expenses, goodwill write-off
and special charges.  The Company believes that EBITDA (before nonrecurring
charges) provides additional information for determining its ability to meet
future debt service requirements.  However, EBITDA (before nonrecurring
charges) is not a defined term under GAAP and is not indicative of operating
income or cash flow from operations as determined under GAAP.

     The following table sets forth information with respect to EBITDA (before
nonrecurring charges) of the Company's product groups for the periods
presented.


<TABLE>
<CAPTION>
                                            YEAR ENDED DECEMBER 31,
                         -------------------------------------------------------------
                                     % OF                 % OF                 % OF
                           1996    NET SALES    1995    NET SALES    1994    NET SALES
                         --------  ---------  --------  ---------  --------  ---------
                                            (dollars in thousands)
<S>                      <C>       <C>        <C>       <C>        <C>       <C>

Consumer Packaging ....  $43,776     18.7     $36,954     16.8     $34,506     18.2
Industrial Packaging ..   37,694     17.4      31,744     13.7      25,695     12.7
Corporate expenses ....   (6,446)       -      (5,609)       -      (6,543)       -
                         -------              -------              -------
 Total ................  $75,024     16.6     $63,089     14.0     $53,658     13.7
                         =======              =======              =======
</TABLE>


     The Company's EBITDA (before nonrecurring charges) increased by $11.9
million to $75.0 million in 1996, an EBITDA (before nonrecurring charges)
margin of 16.6%, compared to 1995 EBITDA (before nonrecurring charges) of $63.1
million and an EBITDA (before nonrecurring charges) margin of 14.0%.  The
increase in Consumer Packaging's EBITDA (before nonrecurring charges) during
1996 is primarily  attributable to the increased gross profit associated with
the extruded sheet and film volume increases, improved operating performance of
converted plastic and paper operations, and incremental EBITDA from Plastofilm.
Such increases were partially offset by decreased profitability of the
Company's polymerization operations.  The increase in Industrial Packaging's
EBITDA (before nonrecurring charges) during 1996 is primarily the result of the
incremental EBITDA from PPI and the improved sales volume of protective
packaging products.  Corporate expenses increased 14.9% from $5.6 million to
$6.4 million primarily as the result of increased incentive compensation.

     The Company's EBITDA (before nonrecurring charges) increased by $9.4
million to $63.1 million in 1995, an EBITDA (before nonrecurring charges)
margin of 14.0%, compared to 1994 EBITDA (before nonrecurring charges) of $53.7
million and an EBITDA (before nonrecurring charges) margin of 13.7%.  The
increase in Consumer Packaging's EBITDA (before nonrecurring charges) during
1995 is primarily  attributable to the increased gross profit associated with
the extruded sheet and film volume increases and significantly increased
profitability of the Company's polymerization operations.  The increase in
Industrial Packaging's EBITDA (before nonrecurring charges) during 1995 is
primarily the result of the increased unit sales of recycled kraft paper and
the incremental EBITDA from PPI during the fourth quarter of 1995.  Corporate
expense decreased 14.3% from $6.5 million to $5.6 million as a result of cost
improvement actions taken by the Company in the third quarter of 1994.

     Liquidity and Capital Resources

     The Company conducts business through IPC and has no operations of its
own.  The primary asset of the Company is the common stock of IPC which has
been pledged to secure the Company's guarantee of IPC's obligations under IPC's
senior credit facility.  The Company is dependent on the cash flow of IPC and
its subsidiaries in order to pay the principal and interest on the 13-1/4%
Company Discount Debentures; however, IPC has no contractual obligations to
distribute any such cash flow to the Company.  In addition, IPC's senior credit
facility contains provisions that (except for certain limited exceptions)
prohibit the payment of dividends and distributions by IPC to the Company.
Moreover, the 12-1/2% Subordinated Note Indenture contains provisions that 
limit IPC's ability to pay dividends and make distributions to the Company.




                                      18



<PAGE>   21



     The Company's long-term debt, less current installments, decreased to
$352.9 million at December 31, 1996 from $353.7 million at December 31, 1995
primarily reflecting decreases to the revolving credit facility borrowings of
$8.5 million and $5.0 million of scheduled debt reductions offset by $12.8
million of accretion on the 13-1/4% Company Discount Debentures.  The Company's
long-term debt consists primarily of the 13-1/4% Company Discount Debentures,
with an accreted value of $106.1 million at December 31, 1996.  The long-term
debt, less current installments, of the Company's wholly-owned subsidiary, IPC,
at December 31, 1996 consists primarily of the $157.3 million of the 12-1/2%
IPC Notes , term loans of $49.4 million under IPC's senior credit facility,
$38.3 million of industrial revenue bonds and other debt of  $1.8 million

     At December 31, 1996, IPC had cash and cash equivalents of $2.8 million
and $52.8 million was available under the revolving credit portion of IPC's
senior credit facility.  IPC's working capital at December 31, 1996 was $32.5
million.

     The Company's primary long-term cash requirements are for the debt service
relating to the 13-1/4% Company Discount Debentures.  Commencing on September
15, 2000, cash interest on the 13-1/4% Company Discount Debentures will be
payable semi-annually, and on March 15, 2005 the 13-1/4% Company Discount
Debentures will mature and the aggregate principal amount then outstanding will
become due and payable.  The Company will be dependent on the cash flow of IPC
and IPC's subsidiaries in order to meet its debt service obligations.
Significant contractual and other restrictions exist on the payment of
dividends and the making of loans by IPC to the Company.  In addition, as a
result of the goodwill write-offs in 1993 and 1995, IPC's ability to make
distributions to the Company under the 12-1/2% Subordinated Note Indenture has
been impaired; consequently this Indenture will require modification before any
such distributions to the Company can be made.  Regardless, IPC and IPC's
subsidiaries may not generate sufficient cash flows to distribute to the
Company in order for the Company to service the cash interest payments on the
13-1/4% Company Discount Debentures that commence in September 2000 or to
retire the $160 million principal amount of 13-1/4% Company Discount Debentures
upon their maturity in March 2005.  Consequently, all or a portion of the
13-1/4% Company Discount Debentures may require refinancing prior to such
dates.  The Company believes that distributions from IPC and its access to debt
financing in the public and private markets should be sufficient to enable it
to retire all or a portion of the principal amount of the 13-1/4% Company
Discount Debentures and to refinance any remaining principal amount of the
13-1/4% Company Discount Debentures upon their maturity in 2005, although there
can be no assurance that this will be the case.  In the event that the Company
is unable to service the cash interest payments on or to retire or refinance
the 13-1/4% Company Discount Debentures or unable to obtain any required
consents from the holders of the 12-1/2% IPC Notes to make interest payments on
the 13-1/4% Company Discount Debentures, the Company may be required to, among
other things, seek appropriate waivers from such creditors or recapitalize its
capital structure.  During the period prior to September 15, 2000, the Company
does not expect to have significant cash requirements.

     The primary short-term and long-term operating cash requirements for
IPC, the Company's wholly- owned operating subsidiary, are for debt service,
working capital and capital expenditures.  The Company expects IPC to rely on
cash generated from IPC's and IPC's subsidiaries' operations, supplemented by
revolving credit facility borrowings under IPC's senior credit facility (at
December 31, 1996, $52.8 million was available under the revolving credit
portion of IPC's senior credit facility), to fund IPC's principal short-term
and long-term cash requirements.  The Company believes that IPC and IPC's
subsidiaries should generate sufficient cash flows to service the cash interest
payments on the 12-1/2% IPC Notes from 1996 to their maturity in 2002, although
there can be no assurances that such cash flows, if any, will be adequate to
service these interest payments.  However, IPC and IPC's subsidiaries may not
generate sufficient cash flows to retire the $158.0 million principal amount of
the 12-1/2% IPC Notes prior to or upon their maturity in 2002.  Consequently,
all or a portion of the 12-1/2% IPC Notes may require refinancing prior to the
maturity thereof.  IPC believes that its consolidated cash flow from operations
and access to debt financing in the public and private markets should be
sufficient to enable it to retire all or a portion of the principal amount of
the 12-1/2% IPC Notes and to refinance any remaining principal amount of the
12-1/2% IPC Notes prior to or upon their maturity, 


                                      19



<PAGE>   22

although there can be no assurance that this will be the case.  In
the event that IPC is unable to retire or refinance the 12-1/2% IPC Notes, IPC
may be required to, among other things, seek appropriate waivers from such
creditors or recapitalize its capital structure.  IPC is required to maintain
certain financial ratios and levels of net worth and, among other things,
future indebtedness and dividends are restricted under these facilities.

     The 12-1/2% IPC Notes require semi-annual interest payments on June 15 and
December 15 and are subordinated in right of payment to all existing and future
senior indebtedness of IPC.  The 12-1/2% IPC Notes are redeemable at the option
of IPC, in whole or in part, on or after December 15, 1997 at the following
redemption prices (expressed in percentages of the principal amount thereof),
plus accrued interest to the date of redemption.

     If redeemed during the twelve-month period beginning December 15,


<TABLE>
<CAPTION>
                       YEAR                    PERCENTAGE
                       ----                    ----------
                       <S>                     <C>
                       1997 .................   106.250%
                       1998 .................   103.125%
                       1999 and thereafter ..   100.000%
</TABLE>


     Each holder of the 12-1/2% IPC Notes may require IPC to repurchase such
holders' 12-1/2% Subordinated Notes in the event of a change of control at 101%
of principal amount thereof, plus accrued interest to the date of repurchase.
The indenture under which the 12-1/2% IPC Notes are issued contains certain
covenants that, among other things, will limit the ability of IPC to incur
additional indebtedness, pay dividends or repurchase stock.

     Prior to March 24, 1997, IPC's senior credit facility was comprised of
$55.0 million in term loans, a $45.0 million letter of credit facility and a
$55.0 million revolving credit facility of which approximately $52.8 million
was available at December 31, 1996.  On March 24, 1997, IPC amended and
restated this credit facility to, among other things, increase the revolving
credit facility to $105.0 million.  Currently, IPC's amended and restated
credit facility is comprised of $55.0 million in term loans, a $45.0 million
letter of credit facility and a $105.0 million revolving credit facility of
which approximately $59.2 million was available as of March 24, 1997.  The term
loans under the amended and restated credit facility require quarterly payments
of $1.3 million from March 31, 1997 through September 30, 1997; $1.9 million
from December 31, 1997 through September 30, 1998; $3.0 million from December
31, 1998 through September 30, 1999; $3.5 million from December 31, 1999
through September 30, 2000; $4.1 million from December 31, 2000 through June
30, 2001; and $5.4 million on September 30, 2001.  At the option of IPC, the
term loans and borrowings on the revolving credit facility accrue interest at
the LIBOR reserve adjusted rate, as defined in IPC's amended and restated
senior credit facility, plus 2.25% or the prime rate plus 1.0%.  Such rates are
subject to change based on IPC's ability to achieve certain financial ratios as
defined in IPC's senior credit facility.  The Company's actual interest rate on
the term loans and the revolving credit facility at December 31, 1996 was the
LIBOR reserve adjusted rate, as defined, plus 1.75% or prime rate plus 0.75%. 
Borrowings are secured by substantially all the assets of IPC and its
subsidiaries and the stock of IPC and IPC's subsidiaries. The revolving credit
facility and letter of credit facility terminate on September 30, 2001.  Under
the amended and restated credit facility, IPC is required to maintain certain
financial ratios and levels of net worth and, among other things, future
indebtedness and dividends are restricted.
        
     During 1996, IPC entered into interest rate swap agreements for the term
loans for notional amounts totaling $60.0 million through January 19, 1999.
Such agreements effectively fix IPC's LIBOR base rate at 5.33% and income or
expense related to settlements under the swap agreements are recorded as
adjustments to interest expense in IPC's financial statements.

     IPC's industrial revenue bonds require monthly interest payments and are
due in varying amounts and dates through 2009.  Certain letters of credit under
IPC's senior credit facility provide credit enhancement for IPC's industrial
revenue bonds.

     Primarily as a consequence of the Company's 1993 and 1995 goodwill
write-offs, as of December 31, 1996, the Company's recorded assets are less
than its recorded liabilities by approximately $127.3 million.  The Company



                                      20



<PAGE>   23


believes that its negative net worth will not have any material consequences on
its operations or its ability to obtain trade credit or financing.

     The Company made capital expenditures of $17.6 million, $19.4 million and
$16.8 million in 1996, 1995 and 1994, respectively.  The 1996 spending was
directed, in part, to new stock thermoforming tooling and thermoforming
machines at one of its converting facilities, a coextrusion line at one of the
Company's extrusion facilities, and de-inking equipment at one of the Company's
paper mill facilities.  The spending in 1995 and 1994 was directed, in part, to
the Company's new OPS extrusion line at the Company's Hazleton, Pennsylvania
facility that was completed in 1994 and to the construction of a second OPS
extrusion line at its Manteno, Illinois facility that was completed during the
fourth quarter of 1995.  The Company was not committed under any material
contractual obligations for capital expenditures as of December 31, 1996.

     SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements in "Management's Discussion and Analysis of Financial
Condition And Results of Operations - Liquidity and Capital Resources" and "-
Goodwill Write-Off"  constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the "Reform Act").
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  Such factors include, among others, the following: raw material
costs and availability (see "Business - Raw Materials"); competition (see
"Business - Competition"); environmental matters and government regulation
(see "Business - Environmental Matters and Government Regulation"); and the
Company's actual performance and highly leveraged financial condition (see "-
Goodwill Write-Off" and " - Liquidity and Capital Resources" above).



                                      21



<PAGE>   24


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Ivex Packaging Corporation:

     In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 53 present fairly, in all
material respects, the financial position of Ivex Packaging Corporation ("the
Company") and its subsidiaries at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.




PRICE WATERHOUSE LLP
Chicago, Illinois
January 21, 1997, except as to Notes 5 and 14,
which are as of March 24, 1997





                                      22



<PAGE>   25


                           IVEX PACKAGING CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                          ASSETS
                                                                  DECEMBER 31,
                                                             ----------------------
                                                                1996        1995
                                                             ----------  ----------
<S>                                                          <C>         <C>    
Current Assets:
  Cash and cash equivalents ...............................  $   2,822   $   4,830
  Accounts receivable trade, net of allowance .............     51,638      46,077
  Inventories .............................................     49,023      44,050
  Prepaid expenses and other ..............................      5,395       5,417
                                                             ---------   ---------
    Total current assets ..................................    108,878     100,374
                                                             ---------   ---------
Property, Plant and Equipment:
  Buildings and improvements ..............................     49,038      47,108   
  Machinery and equipment .................................    231,526     208,820
  Construction in progress ................................      8,069       4,159
                                                             ---------   ---------
                                                               288,633     260,087
  Less - Accumulated depreciation .........................   (123,957)   (102,098)
                                                             ---------   ---------
                                                               164,676     157,989
  Land ....................................................      8,304       7,504
                                                             ---------   ---------
    Total property, plant and equipment ...................    172,980     165,493
                                                             ---------   ---------
Other assets:
  Goodwill, net of accumulated amortization ...............     20,506      13,938
  Miscellaneous ...........................................     13,537      15,106
                                                             ---------   ---------
    Total other assets ....................................     34,043      29,044
                                                             ---------   ---------
Total Assets ..............................................  $ 315,901   $ 294,911
                                                             =========   =========

           LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Current installments of long-term debt ..................  $   5,921   $   5,128
  Accounts payable ........................................     36,748      31,934
  Accrued salary and wages ................................      8,603       7,781
  Self insurance reserves .................................      7,453       6,339
  Accrued rebates and discounts ...........................      3,824       2,817
  Accrued interest ........................................      1,680       1,747
  Other accrued expenses ..................................     12,110       6,538
                                                             ---------   ---------
    Total current liabilities .............................     76,339      62,284
                                                             ---------   ---------
Long-Term Debt ............................................    352,893     353,717
                                                             ---------   ---------
Other Long-Term Liabilities ...............................      5,243       6,472
                                                             ---------   ---------
Deferred Income Taxes .....................................      8,770       8,770
                                                             ---------   ---------
Commitments................................................
                                                             ----------  ----------

Stockholders' Deficit:
  Ivex Packaging Corporation common stock, $.01 par value -
    2,000,000 shares authorized; 1,072,246 shares
    issued and outstanding ................................         11          11
  Paid in capital in excess of par value ..................    177,375     177,375
  Accumulated deficit .....................................   (303,566)   (312,234)
  Foreign currency translation adjustment .................     (1,164)     (1,484)
                                                             ---------   ---------
    Total stockholders' deficit ...........................   (127,344)   (136,332)
                                                             ---------   ---------
Total Liabilities and Stockholders' Deficit ...............  $ 315,901   $ 294,911
                                                             =========   =========
</TABLE>


         The accompanying notes are an integral part of this statement.



                                      23



<PAGE>   26


                           IVEX PACKAGING CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                             ------------------------------ 
                                                               1996       1995       1994
                                                             ---------  ---------  -------- 
<S>                                                          <C>        <C>        <C>

Gross sales ...............................................  $485,039   $483,689   $418,502
Freight out ...............................................    16,229     16,001     15,875
Discounts and returns .....................................    17,003     16,119     11,652
                                                             --------   --------   --------
Net sales .................................................   451,807    451,569    390,975
Cost of goods sold ........................................   351,424    366,409    316,704
                                                             --------   --------   --------
Gross profit ..............................................   100,383     85,160     74,271
                                                             --------   --------   --------
Operating expenses:
 Selling ..................................................    20,306     18,027     18,166
 Administrative ...........................................    27,156     24,540     23,496
 Amortization of intangibles ..............................       621      1,904      1,140
 Write-off of goodwill ....................................               13,471
 Special charges ..........................................                4,960
                                                             --------   --------   -------- 
    Total operating expenses ..............................    48,083     62,902     42,802
                                                             --------   --------   --------
Income from operations ....................................    52,300     22,258     31,469
Interest expense ..........................................    42,732     43,270     39,820
                                                             --------   --------   --------
Income (loss) before income taxes and extraordinary item ..     9,568    (21,012)    (8,351)
Income tax provision ......................................      (900)    (1,113)      (942)
                                                             --------   --------   --------
Income (loss) before extraordinary item ...................     8,668    (22,125)    (9,293)
Extraordinary loss ........................................               (2,359)
                                                             --------   --------   -------- 
Net income (loss) .........................................  $  8,668   $(24,484)  $ (9,293)
                                                             ========   ========   ========
</TABLE>




        The accompanying notes are an integral part of this statement.



                                      24



<PAGE>   27


                           IVEX PACKAGING CORPORATION
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                 Ivex Packaging      
                                                  Corporation        Paid in                    Foreign
                                                  Common Stock       Capital                   Currency
                                               ------------------  In Excess of  Accumulated  Translation  Stockholders'
                                                Shares    Amount    Par Value      Deficit    Adjustment      Deficit
                                               ---------  -------  ------------  -----------  -----------  -------------
<S>                                            <C>        <C>      <C>           <C>          <C>          <C>

Balance at December 31, 1993 ................  1,072,246      $11      $177,375   $(278,457)     $  (508)     $(101,579)
   Foreign currency translation adjustment ..                                                       (394)          (394)
   Net loss .................................                                        (9,293)                     (9,293)
                                               ---------  -------      --------   ---------      --------     ---------
Balance at December 31, 1994 ................  1,072,246       11       177,375    (287,750)        (902)      (111,266)
   Foreign currency translation adjustment ..                                                       (582)          (582)
   Net loss .................................                                       (24,484)                    (24,484)
                                               ---------  -------      --------   ---------      --------     ---------
Balance at December 31, 1995 ................  1,072,246       11       177,375    (312,234)      (1,484)      (136,332)
   Foreign currency translation adjustment ..                                                        320            320
   Net income ...............................                                         8,668                       8,668
                                               ---------  -------      --------   ---------      --------     ---------
Balance at December 31, 1996 ................  1,072,246      $11      $177,375   $(303,566)     $(1,164)     $(127,344)
                                               =========  =======      ========   =========      =======      =========
</TABLE>






         The accompanying notes are an integral part of this statement.



                                      25



<PAGE>   28


                           IVEX PACKAGING CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)




<TABLE>
<CAPTION>
                                                                                              YEAR ENDED DECEMBER 31,
                                                                                            -------------------------
                                                                                            1996       1995      1994
                                                                                            -------------------------  
<S>                                                                                       <C>       <C>         <C>
Cash flows from operating activities:
     Net income (loss) .......................................................            $  8,668  $ (24,484)  $ (9,293)
     Adjustments to reconcile net income (loss)  to net cash from                     
       operating activities:                                                          
          Depreciation of properties .........................................              22,103     20,496     21,049
          Amortization of intangibles and debt issue costs ...................               2,028     19,689      3,058
          Deferred income taxes ..............................................                                      (106)
          Write-down of property, plant and equipment, net ...................                            760
          Non-cash interest ..................................................              12,801     11,232      9,916
                                                                                          --------  ---------   --------
                                                                                            45,600     27,693     24,624
       Change in operating assets and liabilities:                                    
         Accounts receivable .................................................                 528       (550)    (9,461)
         Inventories .........................................................                (743)     4,371    (10,871)
         Prepaid expenses and other ..........................................                 621       (930)      (719)
         Accounts payable ....................................................               1,516     (8,486)    10,322
         Accrued expenses and other liabilities ..............................               1,680        648      1,752
                                                                                          --------  ---------   --------
           Net cash from operating activities ................................              49,202     22,746     15,647
                                                                                          --------  ---------   --------
Cash flows from financing activities:                                                 
     Proceeds from senior credit facilities ..................................                         60,000
     Payment of senior credit facilities .....................................              (5,000)   (59,870)    (5,342)
     Proceeds from revolving credit facility .................................                          8,500
     Payment of revolving credit facility ....................................              (8,500)
     Payment of debt issue costs .............................................                (296)    (2,779)      (569)
     Other, net ..............................................................                 722       (185)      (191)
                                                                                          --------  ---------   --------
           Net cash from (used by) financing activities ......................             (13,074)     5,666     (6,102)
                                                                                          --------  ---------   --------
Cash flows from investing activities:                                                 
     Purchase of property, plant and equipment ...............................             (17,633)   (19,385)   (16,769)
     Proceeds from the sale of real estate ...................................                          1,034      1,305
     Acquisition of CFI Industries, Inc., net of cash acquired ...............             (17,262)
     Acquisition of the net assets of Trio Products ..........................              (3,524)
     Acquisition of the net assets of Packaging Products, Inc. ...............                        (11,735)
     Other, net ..............................................................                 283        215      2,407
                                                                                          --------  ---------   --------
           Net cash used by investing activities .............................             (38,136)   (29,871)   (13,057)
                                                                                          --------  ---------   --------
Net decrease in cash and cash equivalents ....................................              (2,008)    (1,459)    (3,512)
Cash and cash equivalents at beginning of year ...............................               4,830      6,289      9,801
                                                                                          --------  ---------   --------
Cash and cash equivalents at end of year .....................................            $  2,822  $   4,830   $  6,289
                                                                                          ========  =========   ========
                                                                                      
Supplemental cash flow disclosures:                                                   
     Cash paid during the year for:                                                   
       Interest ..............................................................            $ 28,592  $  30,004   $ 27,740
       Income taxes ..........................................................               1,199      1,052        935
                                                                                      
Supplemental schedule of non-cash investing and financing activities:                 
       Issuance of non-current note for accounts receivable ..................                          1,000      2,000
       The Company purchased all of the capital stock of CFI Industries, Inc.  In     
        conjunction with the acquisition, liabilities were assumed as follows:        
         Fair value of assets acquired .......................................            $ 27,127
         Cash paid for the capital stock .....................................             (18,423)
                                                                                          --------
         Liabilities assumed .................................................            $  8,704
                                                                                          ========
</TABLE>



        The accompanying notes are an integral part of this statement.



                                      26



<PAGE>   29


                           IVEX PACKAGING CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)


NOTE 1 - ORGANIZATION:

     Ivex Packaging Corporation (the "Company") owns 100% of the common stock
of IPC, Inc.  ("IPC").  The Company is a holding company with no operations of
its own and is dependent on the operating cash flow of IPC and IPC's
subsidiaries in order to pay principal and interest on its debt; however, IPC
has no contractual obligations to distribute any such cash flow to the Company.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.

     Nature of operations

     The Company's subsidiary, IPC, engages in the business of manufacturing
plastic and paper packaging products for different end-use packaging
applications principally with customers in North America.  These applications
include: (i) the integrated production and conversion of oriented polystyrene
sheet and other plastic sheet into thermoformed packaging products and the sale
of such sheet to other packaging thermoformers; (ii) the manufacture and sale
of coated and laminated unbleached kraft paper and plastic materials and single
face corrugated products as protective materials in the packaging of industrial
products; and (iii) the manufacture and sale of unbleached kraft paper and
various lightweight specialty grades of paper for industrial and food service
packaging applications.  Accordingly, the accompanying financial data are
reported as a single segment.

     Principles of consolidation

     All the accounts of the wholly-owned subsidiaries of the Company have been
consolidated.  All significant intercompany transactions and accounts have been
eliminated.

     Revenue recognition

     The Company recognizes revenue upon shipment of products.

     Cash and cash equivalents

     The Company considers all short-term deposits with initial maturities of
three months or less to be cash equivalents.




                                      27



<PAGE>   30

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



     Accounts receivable

     Accounts receivable at December 31, 1996 and 1995 consist of the
following:

<TABLE>
<CAPTION>
                                                                1996            1995
                                                                ----            ----
<S>                                                            <C>            <C>   
   Accounts receivable ......................................  $53,718        $48,089
   Less - Allowance for doubtful accounts ...................   (2,080)        (2,012)
                                                               -------        -------
                                                               $51,638        $46,077
                                                               =======        =======
</TABLE>

   Accounts receivable from sales to customers are unsecured.

     Inventories

     Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method to determine the cost of raw materials and finished
goods.

   Inventories at December 31, 1996 and 1995 consist of the following:

<TABLE>
<CAPTION>
                                                                 1996          1995
                                                                 ----          ----
<S>                                                            <C>            <C>   
   Raw materials ............................................  $26,483        $24,148
   Finished goods ...........................................   22,540         19,902
                                                               -------        -------
                                                               $49,023        $44,050
                                                               =======        =======
</TABLE>

     Property, plant and equipment

     Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the assets.
Expenditures for maintenance and repairs are charged to operations as incurred;
major improvements are capitalized.

     During the first quarter of 1995, IPC revised the estimated remaining
useful lives of certain machinery and equipment to more closely reflect
expected remaining lives.  The effect of this change in accounting estimate
resulted in a decrease in IPC's annual depreciation of $1,800 in 1995 and in
each year thereafter until the assets are fully depreciated.

     Income taxes

     The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.  In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax law or rates.

     Employee benefit plans

     IPC and its subsidiaries have defined contribution and defined benefit
plans covering substantially all employees.  IPC's contributions to the defined
contribution plans are determined by matching employee contributions and by
discretionary contributions.  Defined benefit plan contributions are determined
by independent actuaries and are generally funded in the minimum amount
required by the Internal Revenue Service in a given year.

     IPC provides limited post retirement benefits to a select group of
employees.  The current period cost and reserves related to these benefits are
not material.




                                      28



<PAGE>   31

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



     Goodwill and other long-lived assets

     Goodwill represents the excess purchase price over fair value of net
assets acquired and is being amortized using the straight-line method over a
forty year period. Accumulated amortization was $18,781 and $18,315 as of
December 31, 1996 and 1995, respectively.

     During 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable.  If the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset an impairment
loss is recognized.  Otherwise, an impairment loss is not recognized.  The
effect of adopting this new accounting standard did not have an impact on the
financial position of the Company.  Prior to 1996, an impairment was recognized
if it was probable that the present value of expected future cash flows
(discounted and with interest charges) was less than the carrying amounts of
goodwill and other long-lived assets.

     Earnings per share

     An earnings per share calculation has not been presented because the
Company is wholly-owned by Acadia, the Company's management and certain related
investors.

     Foreign currency translation

     The financial statements of the Company's foreign subsidiaries are
maintained in local currency which is the functional currency.  The balance
sheets of these subsidiaries are translated at exchange rates in effect at the
balance sheet date and the related statements of operations are translated at
weighted average rates of exchange for the year.  Translation adjustments
resulting from this process are reflected as a separate component of
stockholders' deficit.  Gains and losses resulting from foreign exchange
transactions are recorded in the results from operations.  Such amounts were
not significant in 1996, 1995 and 1994.

     Fair value of financial instruments

     At December 31, 1996, the effective yield of the Company's 13-1/4% Senior
Discount Debentures due 2005 (the "13 1/4 Discount Debentures") was 10.7%.  At
December 31, 1996, the effective yield of IPC's 12-1/2% Subordinated Notes due
December 15, 2002 (the "12-1/2% Subordinated Notes") was 9.3%.  The carrying
amount of IPC's other financial instruments approximates their estimated fair
value based on market prices for the same or similar type of financial
instruments.

     Reclassifications

     Certain amounts in the consolidated balance sheets for 1995 have been
reclassified to conform to the 1996 presentation.




                                      29



<PAGE>   32

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  -- (CONTINUED)



NOTE 3 - GOODWILL:

     During 1995, a portion of the Industrial Packaging businesses (such
portion having been acquired primarily in the 1989 acquisition of L&CP
Corporation) had experienced less sales volume growth and lower profitability
than anticipated.  As a consequence, and in response to dynamic market
conditions, during the second quarter of 1995 the Company realigned the
management of these businesses based on three distinct operating units -
masking, graphics and other protective products.

     Consistent with its accounting policy for goodwill and long-lived assets
at that time, the Company made a reassessment of its remaining goodwill, all of
which pertained to the above operating units, during the second quarter of 1995
and revised its projections to more accurately reflect expected future results.
The Company segregated the assets and cash flows of these three operating
units to the lowest level for which cash flows are identifiable and independent
of one another at that time.  In order to evaluate its goodwill impairment ,
the Company projected the cash flows allocable to these businesses over the
estimated remaining goodwill amortization periods of approximately 34 years.
The Company then discounted such cash flows at a rate of 16-1/2% which it
believed was commensurate with the risk involved.  The Company selected a
pre-tax weighted average cost of capital (reflective of comparable companies
within its industry) for purposes of discounting its cash flows.  The
discounted cash flows of each business were then compared to the sum of the
business groups' working capital and net book value of fixed assets.
Impairment of goodwill was then measured by comparing the remaining discounted
cash flow to the net book value of the business groups' goodwill.  Upon
comparison, the discounted cash flows for the graphics and other protective
products businesses were insufficient to recover each of such businesses'
goodwill.  Accordingly, the Company recorded an impairment of $13,471 during
the second quarter of 1995.

     The 1995 revised projections for this portion of the Company's business
were extrapolated from market conditions and competitive pressures existing at
that time and were based upon, among other things, the assumptions that growth
of operating income before depreciation and amortization would range from 2-6%
per year through 1999, from 1-3% per year from 2000-2010 and 0% per year from
2011-2029.  The growth assumptions for the graphics and other protective
products businesses were lower than the masking business.  The projections
assumed that capital expenditures would generally be consistent with
depreciation over the long term.  The Company believes that its revised
projections based on the June 1995 existing historic financial trends and
market conditions were its best estimate at that time of its future performance
and that the Company's performance at such projected levels will not
substantially detract from the Company's future earnings.  However, there can
be no assurances that such estimates will be indicative of future results,
which ultimately may be less than or greater than these estimates.





                                      30



<PAGE>   33

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE 4 - MISCELLANEOUS OTHER ASSETS:

     Miscellaneous other assets at December 31, 1996 and 1995 consist of the
following:


<TABLE>
<CAPTION>
                                                       1996        1995
                                                       ----        ----
           <S>                                        <C>        <C>
           Deferred financing costs ................  $13,416    $13,121
           Less - Accumulated amortization .........   (4,370)    (2,966)
                                                      -------    -------
                                                        9,046     10,155
           Other ...................................    4,491      4,951
                                                      -------    -------
                                                      $13,537    $15,106
                                                      =======    =======
</TABLE>

     Deferred financing costs are being amortized over the term of the related
debt.  During 1995, IPC recorded a write-off of a non-compete agreement with a
net book value of $1,139.

NOTE 5 - LONG-TERM DEBT:

     Long-term debt comprised the following at December 31, 1996 and 1995:


<TABLE>
<CAPTION>
                                                          1996      1995
                                                          ----      ----
      <S>                                              <C>       <C>
      Senior credit facility (A) .....................  $ 55,000  $ 68,500
      Industrial revenue bonds (B) ...................    38,293    38,293
      12-1/2% Subordinated Notes, net
       of discount  (C) ..............................   157,340   157,229
      13-1/4% Discount Debentures, net
       of discount (D) ...............................   106,139    93,338
      Other ..........................................     2,042     1,485
                                                        --------  --------
          Total debt outstanding .....................   358,814   358,845
      Less - Current installments of long-term debt ..    (5,921)   (5,128)
                                                        --------  --------
          Long-term debt .............................  $352,893  $353,717
                                                        ========  ========
</TABLE>

     A. Senior Credit Facility -  IPC's senior credit facility  (the "Credit
Facility") is comprised of $55,000 in term loans, a $45,000 letter of credit
facility and a $55,000 revolving credit facility of which approximately $52,798
was available at December 31, 1996.  On March 24, 1997, IPC amended the Credit
Facility to, among other things, increase the revolving credit facility to
$105,000.  The term loans require quarterly payments of $1,250 from March 31,
1997 through September 30, 1997; $1,875 from December 31, 1997 through
September 30, 1998; $3,000 from December 31, 1998 through September 30, 1999;
$3,500 from December 31, 1999 through September 30, 2000; $4,125 from December
31, 2000 through June 30, 2001; and $5,375 on September 30, 2001.  At the
option of IPC, the term loans and borrowings on the revolving credit facility
bear interest at the LIBOR reserve adjusted rate, as defined, plus 2.25% or the
prime rate plus 1.0%.  Such rates are subject to change based on IPC's ability
to achieve certain financial ratios as defined in the Credit Facility.  The
Company's actual interest rate on the term loans and the revolving credit
facility at December 31, 1996 was the LIBOR reserve adjusted rate, as defined,
plus 1.75% or prime rate plus 0.75%.  IPC pays a fee of 0.5% on the unused
portion of the revolving credit facility.  The effective interest rate per
annum under the Credit Facility was 7.67% during 1996.  Borrowings are secured
by substantially all the assets of IPC and its subsidiaries and the stock of
IPC and IPC's subsidiaries.  Under the Credit Facility, IPC is required to
maintain certain financial ratios and levels of net worth while future
indebtedness and dividends are restricted.




                                      31



<PAGE>   34

                          IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



     Beginning January 6, 1996, IPC entered into interest rate swap agreements
for the term loans for notional amounts totaling $60,000 through January 19,
1999.  Such agreements effectively fix IPC's LIBOR base rate at 5.33% and
income or expense related to settlements under the swap agreements are recorded
as adjustments to interest expense in IPC's financial statements.

     B.  Industrial Revenue Bonds - Industrial Revenue Bonds requiring monthly
interest payments with average effective rates during 1996 and 1995 of 5.8% and
6.2%, respectively, are due in varying amounts and dates through 2009 and are
secured by certain assets of IPC.  IPC's letter of credit facility provides
credit enhancement for the Industrial Revenue Bonds.

     C.  12-1/2% Subordinated Notes - On December 17, 1992, IPC issued $158,000
of 12-1/2% Senior Subordinated Notes due December 15, 2002 (the "12-1/2%
Subordinated Notes").  The 12-1/2% Subordinated Notes require semi-annual
interest payments on June 15 and December 15 and are subordinated in right of
payment to all existing and future senior indebtedness of IPC.  The 12-1/2%
Subordinated Notes are redeemable at the option of IPC, in whole or in part, on
or after December 15, 1997 at the following redemption prices (expressed in
percentages of the principal amount thereof), plus accrued interest to the date
of redemption.

     If redeemed during the twelve-month period beginning December 15,


<TABLE>
<CAPTION>
                       YEAR                    PERCENTAGE
                       ----                    ----------
                       <S>                     <C>
                       1997 .................  106.250%
                       1998 .................  103.125%
                       1999 and thereafter ..  100.000%
</TABLE>

     Each holder of the 12-1/2% Subordinated Notes may require IPC to
repurchase such holders' 12-1/2% Subordinated Notes in the event of a change of
control at 101% of principal amount thereof, plus accrued interest to the date
of repurchase. The indenture under which the 12-1/2% Subordinated Notes are
issued contains certain covenants that, among other things, will limit the
ability of IPC to incur additional indebtedness, pay dividends or repurchase
stock.

   D.  13-1/4% Discount Debentures - On March 8, 1993, the Company issued
$160,000 of 13-1/4% Series A Senior Discount Debentures due 2005 (the "13-1/4%
Discount Debentures") for an aggregate consideration of approximately $65,000
(the "1993 13-1/4% Discount Debenture Offering").  Commencing on September 15,
2000, cash interest on the 13-1/4% Company Discount Debentures will be payable
semi-annually, and on March 15, 2005, the 13-1/4% Company Discount Debentures
will mature and the aggregate principal amount then outstanding will become due
and payable.  The Company is  dependent on the cash flow of IPC and IPC's
subsidiaries in order to meet its debt service obligations.  Significant
contractual and other restrictions exist on the payment of dividends and the
making of loans by IPC to the Company.  In addition, as a result of a goodwill
writeoff in 1993, IPC's ability to make distributions to the Company under the
indenture relating to IPC's 12-1/2% Subordinated Notes has been impaired and
such indenture will require modification before any such distributions to the
Company can be made.  Consequently, all or a portion of the 13-1/4% Discount
Debentures may require refinancing prior to the maturity thereof.  During the
period prior to September 15, 2000, the Company does not expect to have
significant cash requirements.




                                      32



<PAGE>   35

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



Long-term debt principal maturities are as follows:


<TABLE>
<S>                                                  <C>
     1997 .......................................... $  5,921
     1998 ..........................................   10,267
     1999 ..........................................   15,148
     2000 ..........................................   17,279
     2001 ..........................................   16,115
     Thereafter ....................................  347,945
                                                     --------
                                                      412,675
     Discount on 13-1/4% Senior Discount 
       Debentures...................................  (53,861)
                                                     --------
                                                     $358,814
                                                     ========
</TABLE>


NOTE 6 - INCOME TAXES:

        The components of the income tax provision shown in the statement of
operations  are as follows:

<TABLE>
<CAPTION>
                                       1996       1995      1994
                                       ----       -----     ----  
<S>                                 <C>        <C>        <C> 
 Current provision:                    
  Federal .......................   $  (415)   $  (142)   $ (106)
  State .........................      (485)      (971)     (942)
 Deferred (provision) benefit:
  Federal .......................    (9,029)                 106
 Benefit of net operating loss
  carryovers.....................     9,029
                                    -------    -------    ------
                                    $  (900)   $(1,113)   $ (942)
                                    =======    =======    ======
</TABLE>

     The provision recognized for income taxes differs from the amount
determined by applying the U.S. federal income tax rate of 35% due to the
following:


<TABLE>
<CAPTION>
                                                       1996             1995           1994
                                                       ----             ----           ----
<S>                                                 <C>              <C>             <C>
Income (loss) before income taxes ..........        $  9,568         $(21,012)       $(8,351)
                                                    ========         ========        =======
Computed expected (provision) benefit at the
 statutory rate ............................        $ (3,349)        $  7,354        $ 2,923
Adjustments to the computed expected
 (provision) benefit resulting from:
 Amortization of goodwill ..................             (77)          (4,862)          (214)
 Net operating loss carryover adjustments ..           3,077           (2,701)        (3,108)
 State income taxes, net ...................            (417)            (610)          (608)
 Other, net ................................            (134)            (294)            65
                                                    --------         --------        -------
                                                    $   (900)        $ (1,113)       $  (942)
                                                    ========         ========        =======
</TABLE>





                                      33



<PAGE>   36

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


Deferred tax liabilities (assets) are comprised of the following:


<TABLE>
<CAPTION>
                                                1996     1995
                                                ----     ----

<S>                                           <C>       <C>
Depreciation ...............................  $ 33,449   $ 33,581
Basis differences of acquired assets .......     3,969      4,737
                                              --------   --------
Deferred tax liabilities ...................    37,418     38,318
                                              --------   --------
Environmental reserves .....................      (330)      (478)
Non-compete agreements .....................      (613)      (963)
Self insurance reserves ....................    (1,979)    (1,731)
Original issue discount accretion ..........   (14,394)    (9,921)
Other ......................................    (2,727)    (2,709)
Net operating loss carryover ...............   (26,795)   (37,646)
                                              --------   --------  
Deferred tax assets ........................   (46,838)   (53,448)
                                              --------   --------  
Deferred tax asset valuation allowance .....    18,190     23,900
                                              --------   --------  
                                              $  8,770   $  8,770
                                              ========   ========  
</TABLE>


     At December 31, 1996, the Company has net operating loss carryovers,
including the net operating loss carryovers of IPC, for income tax reporting
purposes of approximately $76,556.  These carryovers expire between 2005 and
2008.  In the event of a change in ownership of the Company these net operating
loss carryovers may be limited.  A valuation allowance has been recorded
against certain of the net operating loss carryovers for which utilization is
uncertain.




                                      34



<PAGE>   37

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE 7 - EMPLOYEE BENEFIT PLANS:

     Net periodic pension expense related to the defined benefit plans for the
years ended December 31, 1996, 1995 and 1994 is comprised of the following
components:


<TABLE>
<CAPTION>
                                                          1996   1995    1994
                                                          ----   ----    -----
      <S>                                               <C>      <C>      <C>
      Service cost component - benefits earned by
       employees for services during this period ...... $  290   $  265   $  274
      Interest cost component - increase in projected
       benefit obligation due to the passage of time ..  1,208    1,070    1,029
      Return on plan assets, net of administrative
       expense ........................................ (1,317)  (1,926)     (79)
      Net amortization and deferral ...................    372    1,084     (866)
                                                        ------   ------   ------
      Net periodic pension cost ....................... $  553   $  493   $  358
                                                        ======   ======   ======
</TABLE>


     Plan assets are invested in a deposit administration contract with an
insurance company and money market, equity and bond funds.  The following table
sets forth the funded status of these plans as of the date of the latest
available actuarial valuation.


<TABLE>
<CAPTION>
                                                              1996     1995
                                                              ----     ----
 <S>                                                         <C>       <C>

 Actuarial present value of vested benefit obligation .....  $15,139   $14,228
                                                             =======   =======
 Actuarial present value of accumulated benefit
  obligation ..............................................  $15,252   $14,333
                                                             =======   =======
 Fair value of the plans' assets ..........................  $14,202   $12,873
 Actuarial present value of projected benefit obligation ..   15,357    14,417
                                                             -------   -------
 Fair value of the plans' assets less than the projected
  benefit obligation ......................................   (1,155)   (1,544)
 Unrecognized net transition obligation ...................      398       463
 Unrecognized prior service cost ..........................      952     1,070
 Unrecognized net loss ....................................      650       243
                                                             -------   -------
 Prepaid pension expense ..................................  $   845   $   232
                                                             =======   =======
</TABLE>


     The following table sets forth significant assumptions utilized in the
actuarial valuation.

<TABLE>
<CAPTION>
                                                                1996   1995
                                                                ----   ----
   <S>                                                          <C>    <C>
   Discount rate used to adjust for the time value of money ..   8.5%   8.5%
   Expected rate of increase in employee compensation costs ..  0%-5%  0%-5%
   Expected long-term rate of return on assets ...............   9.0%   9.0%
</TABLE>


     The charge to operations under IPC's defined benefit and defined
contribution plans was approximately $2,351, $2,063 and $1,900 for the years
ended December 31, 1996, 1995 and 1994, respectively.



                                      35



<PAGE>   38

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)




NOTE 8 - STOCK OPTION AND INCENTIVE PLANS:

     IPC and Ivex established a stock option plan (the "Plan") for certain key
executives, effective January 1, 1993. Pursuant to the Plan, IPC irrevocably
granted options to purchase 17,270 shares of its common stock at an exercise
price of $619.56 per share approximating fair market value.  The options are
exercisable at any time, once vested and earned, prior to January 1, 2003.  At
December 31, 1996, 9,413 of these options were vested and earned by the Plan
participants and 7,857 of the options were canceled.  The Plan also provides
IPC and the participants with certain rights to exchange options to purchase
IPC's common stock for options to purchase the Company's common stock.

     On January 1, 1996, the option plan was amended and extended to grant an
additional 6,908 options subject to vesting over three years from January 1,
1996, and such options will be available to be earned in 1996 and 1997 based on
EBITDA results.  The provisions of the options are substantially the same as
the previously issued options.  During 1996, 3,454 of such options were earned.

     The Company adopted the disclosure - only provisions of  SFAS No. 123,
"Accounting for Stock-Based Compensation."  Under the provisions of such
statement, the Company is required to at least disclose the pro forma impact of
recognizing compensation expense for the fair value of those options granted
since January 1, 1996.  Under the provisions of SFAS No. 123, the Company has
not recognized any compensation cost for stock option plans.  Had compensation
cost for the Company's stock option plan been determined based on the fair
value at the grant date for awards  during 1996 consistent with the provisions
of SFAS No. 123, the Company's net income would have been reduced to $8,548.

     The Company's pro forma net income was determined under the assumption
that all applicable options were earned when available with equal vesting over
the three years from January 1, 1996.  The fair value of the options granted
was estimated on the date earned using the Black-Scholes option-pricing model
and utilized the following weighted-average assumptions for options earned in
1996:  dividend yield of 0.00%; expected volatility of 22.63%; risk-free
interest rate of 5.28%; and expected lives of 3 years.

     IPC also entered into a special incentive agreement (the "Agreement") with
certain key executives, effective January 1, 1993. The Agreement provided for a
special incentive payment of up to $2,250 upon the occurrence of certain events
as defined in the Agreement.  During 1995, management earned all of the special
incentive payment and, accordingly, IPC recorded expense of $2,250.  As of
December 31, 1996, all amounts to be paid pursuant to the terms of the
Agreement have been paid.  See Note 9 - Special Charges.

NOTE 9 - SPECIAL CHARGES:

     During the fourth quarter of 1995, the Company recorded the following
special charges: $2,250 associated with the  Agreement (see Note 8 - Stock
Option and Incentive Plans), $1,950 of costs related to an attempted initial
public equity offering and a reduction of land value of $760 associated with a
donation of land to the Village of Chagrin Falls, Ohio.

NOTE 10 - RELATED PARTY TRANSACTIONS:

     IPC recorded management fee expense to Acadia of  $400 in 1996 which was
unpaid as of December 31, 1996.  IPC paid management fees to Acadia of $400 in
1995 and 1994.




                                      36



<PAGE>   39

                           IVEX PACKAGING CORPORATION

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



NOTE 11 - COMMITMENTS:

     IPC leases certain of its facilities and equipment under non-cancelable
operating leases, some of which contain renewal options, escalation clauses and
requirements that IPC pay taxes, insurance and maintenance costs. Approximate
future minimum annual rental payments under non-cancelable operating lease
agreements are as follows:


<TABLE>
                             <S>            <C>
                             1997 ........  $4,151
                             1998 ........   3,438
                             1999 ........   3,163
                             2000 ........   2,350
                             2001 ........   7,553
                             Thereafter ..     588
</TABLE>


     Rent expense under operating leases included in the accompanying statement
of operations aggregated approximately $4,954, $4,339 and $3,576 during 1996,
1995 and 1994, respectively.

NOTE 12 - EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT:

     Deferred financing costs of $2,359 written off in connection with the
refinancing of IPC's senior credit facility are presented as an extraordinary
item in the consolidated statements of operations for the year ended December
31, 1995.

NOTE 13 - PLASTOFILM ACQUISITION

     On August 16, 1996, IPC acquired CFI Industries, Inc. ("CFI" or
"Plastofilm") for an aggregate purchase price of $18,423, including the
repayment of certain indebtedness of CFI and related acquisition fees and
expenses.  Through its subsidiary, Plastofilm Industries, CFI is a fully
integrated custom thermoformer of plastic packaging products for the medical,
electronic and personal care industries.  The acquisition was accounted for as
a purchase; accordingly, the purchase price was allocated to the specific
assets acquired and liabilities assumed based upon their fair value at date of
acquisition.  The Company's 1996 consolidated financial statements include the
results of operations and cash flows of Plastofilm from August 16, 1996.

     The following unaudited pro forma summary presents the consolidated
results of operations as if the acquisition of Plastofilm had occurred at the
beginning of 1995, after giving effect for certain adjustments.  These
unaudited pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of what would have occurred had the
acquisition been made as of that date or of results which may occur in the
future.


<TABLE>
<CAPTION>
                                                         1996      1995
                                                       --------  ---------
      <S>                                              <C>       <C>
      Net Sales .....................................  $472,414  $483,259
                                                       ========  ========
      Net income (loss) before extraordinary items ..  $  8,545  $(22,089)
                                                       ========  ========
      Net income (loss) .............................  $  8,545  $(24,448)
                                                       ========  ========
</TABLE>


NOTE 14 - SUBSEQUENT EVENTS

     On January 17, 1997, IPC purchased substantially all of the assets,        
excluding accounts receivable, of the OPS business of Viskase Limited located
in Sedgefield, England for approximately $12,500 and on February 21, 1997, IPC
purchased all of the outstanding common stock of M&R Plastics, Inc. located in
Laval, Quebec for approximately $19,500.  The acquired businesses were financed
through cash flow from operations and revolving credit borrowings under IPC's
senior credit facility.  As a result of these borrowings, IPC amended and
restated its  senior credit facility on March 24, 1997, to, among other things,
increase its revolving credit facility from $55,000 to $105,000.

                                      37



<PAGE>   40




                           IVEX PACKAGING CORPORATION

                 SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)

                                 BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                             December 31,
                                                                         ---------------------
                                                                            1996       1995
                                                                         ----------  ---------
<S>                                                                      <C>         <C>
                        ASSETS

Current Assets:
  Cash and cash equivalents ...........................................  $      27   $     37
                                                                         ---------   --------
   Total current assets ...............................................         27         37
Investment in subsidiary ..............................................     73,418     73,418
Debt issue costs, net .................................................      2,419      2,683
                                                                         ---------   --------
   Total assets .......................................................  $  75,864   $ 76,138
                                                                         =========   ========

       LIABILITIES AND STOCKHOLDERS' DEFICIT

Long-term debt ........................................................  $ 106,139   $ 93,338
                                                                         ---------   --------
Stockholders' deficit:
  Ivex Packaging Corporation common stock, $0.01 par value -- 2,000,000
   shares authorized; 1,072,246 shares issued and outstanding
   at December 31, 1996 and 1995 ......................................         11         11
  Paid in capital in excess of par value ..............................    177,375    177,375
  Accumulated deficit .................................................   (207,661)  (194,586)
                                                                         ---------   --------
   Total stockholders' deficit ........................................    (30,275)   (17,200)
                                                                         ---------   --------
  Total liabilities and stockholders' deficit .........................  $  75,864   $ 76,138
                                                                         =========   ========
</TABLE>



















           See Notes to Consolidated Financial Statements in Item 8.



                                      38


<PAGE>   41




                           IVEX PACKAGING CORPORATION

                 SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)

                            STATEMENT OF OPERATIONS
                             (DOLLARS IN THOUSANDS)




<TABLE>
<CAPTION>
                                   For the year ended
                                      December 31,
                             --------------------------------
                               1996        1995       1994
                             ---------  ----------  ---------
<S>                          <C>        <C>         <C>

Interest expense ..........  $ 13,075    $ 11,508   $ 10,217
                             --------    --------   --------
Loss before income taxes ..   (13,075)    (11,508)   (10,217)
Income tax provision ......                               (6)
                             --------    --------   --------
Net loss ..................  $(13,075)   $(11,508)  $(10,223)
                             ========    =========  ========
</TABLE>







           See Notes to Consolidated Financial Statements in Item 8.



                                      39


<PAGE>   42




                           IVEX PACKAGING CORPORATION

                 SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)

             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                    
                                   COMMON STOCK     PAID IN CAPITAL               STOCKHOLDERS' 
                                 -----------------   IN EXCESS OF    ACCUMULATED     EQUITY
                                  SHARES    AMOUNT     PAR VALUE       DEFICIT      (DEFICIT)
                                 ---------  ------  ---------------  -----------  -------------
<S>                              <C>        <C>     <C>              <C>          <C>

Balance at December 31, 1993 ..  1,072,246    $11      $177,375       $(172,855)     $  4,531     
Net loss ......................                                         (10,223)      (10,223)    
                                 ---------    ---      --------      ----------      --------     
Balance at December 31, 1994 ..  1,072,246     11       177,375        (183,078)       (5,692)    
Net loss ......................                                         (11,508)      (11,508)    
                                 ---------    ---      --------      ----------      --------     
Balance at December 31, 1995 ..  1,072,246     11       177,375        (194,586)      (17,200)    
Net loss ......................                                         (13,075)      (13,075)    
                                 ---------    ---      --------      ----------      --------     
Balance at December 31, 1996 ..  1,072,246    $11      $177,375       $(207,661)     $(30,275)    
                                 =========    ===      ========      ==========      ========     
</TABLE>                                                 











           See Notes to Consolidated Financial Statements in Item 8.



                                      40



<PAGE>   43




                           IVEX PACKAGING CORPORATION

                 SCHEDULE I - CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)

                            STATEMENT OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                      FOR THE YEAR ENDED
                                                                                         DECEMBER 31,
                                                                                -------------------------------
                                                                                  1996       1995       1994
                                                                                ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>

Cash flows used by operating activities:
   Net loss ..................................................................  $(13,075)  $(11,508)  $(10,223)

   Adjustments to reconcile net loss to net cash used by operating activities:
       Amortization of debt issue costs ......................................       264        264        263
       Non-cash interest .....................................................    12,801     11,232      9,916
                                                                                --------   --------   --------
          Net cash used by operating activities ..............................       (10)       (12)       (44)
                                                                                --------   --------   --------

Net decrease in cash and cash equivalents ....................................       (10)       (12)       (44)
Cash and cash equivalents at beginning of year ...............................        37         49         93
                                                                                --------   --------   --------
Cash and cash equivalents at end of year .....................................  $     27   $     37   $     49
                                                                                ========   ========   ========
</TABLE>








           See Notes to Consolidated Financial Statements in Item 8.



                                      41



<PAGE>   44

                           IVEX PACKAGING CORPORATION

         SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                             BEGINNING                           ENDING
  DESCRIPTION                                 BALANCE   ADDITIONS  DEDUCTIONS    BALANCE
  -----------                                ---------  ---------  ----------    -------
<S>                                          <C>         <C>       <C>         <C>      
Accounts receivable -- allowance for                                                    
  doubtful accounts:                                                                    
    1994 .............................         $ 1,272     $ 594     $ (421)(1)  $ 1,445    
    1995 .............................           1,445       943       (376)(1)    2,012    
    1996 .............................           2,012       281       (213)(1)    2,080    
                                                                                            
Income Taxes -- valuation allowance:                                                      
                                                                                            
    1994 .............................         $19,563     $ 309     $    -      $19,872    
    1995 .............................          19,872     4,028          -       23,900    
    1996 .............................          23,900         -     (5,710)      18,190    
</TABLE>


----------------

(1) Accounts charged off, less recoveries.




                                      42



<PAGE>   45




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Set forth below are the names, ages, positions and offices held (as of the
date hereof) and a brief account of the business experience for each director
and executive officer of the Company and IPC.

<TABLE>
<CAPTION>

     NAME                    AGE                                     POSITION                                                
     ----                    ---                                     --------
<S>                         <C>            <C>                                                                               
George V. Bayly ........      54            Director, Chairman of the Board, President and Chief                             
                                            Executive Officer of the Company since January 1991 and of IPC since its         
                                            organization in December 1992.                                                   
                                                                                                                             
Frank V. Tannura .......      40            Director of the Company since August 1995 and of IPC since                       
                                            its organization in December of 1992. Vice President and Chief Financial         
                                            Officer of the Company since October 1989 and of IPC since its organization in   
                                            December 1992.                                                                   
                                                                                                                             
Richard R. Cote ........      45            Vice President and Treasurer of the Company since August                         
                                            1994 and of IPC since August 1995.  Mr. Cote was Assistant Vice President and    
                                            Treasurer of the Company from March 1993 to August 1994, Treasurer of IPC from   
                                            December 1992 to August 1994 and Assistant Treasurer of IPC from 1991 to 1992.   
                                                                                                                             
Donald C. Devine .......      37            Vice President and General Manager of the Company and IPC since     
                                            March 1996.  From 1993 to 1996, Mr. Devine was Vice President and General        
                                            Manager of the Bag Division of Gaylord Container Corp. and from 1989 to 1993,    
                                            General Manager of James River Corporation's Folding Carton Group.               
                                                                                                                             
Thomas S. Ellsworth ....      52            Vice President and General Manager of the Company and of                         
                                            IPC since August 1994. Mr. Ellsworth was Vice President of the Company's paper   
                                            mill operations from 1992 to 1994 and Chief Financial Officer of the Company's   
                                            paper mill operations from March 1991 to 1992.                                   
                                                                                                                             
Jeremy S. Lawrence .....      46            Vice President of Human Resources of the Company since                           
                                            May 1991 and IPC since its organization in December 1992.                        
                                                                                                                             
G. Douglas Patterson ...      39            Vice President and General Counsel of the Company since                          
                                            June 1991 and of IPC since its organization in December 1992.                    
                                                                                                                             
David E. Wartner .......      30            Corporate Controller of the Company and IPC since October 1994. Mr. Wartner   
                                            was previously associated with Price Waterhouse from 1988 to 1994.               
                                                                                                                             
Eugene M. Whitacre .....      41            Vice President and General Manager of the Company since                          
                                            February 1991 and of IPC since its organization in December 1992.                

</TABLE>



                                      43


<PAGE>   46

<TABLE>
<CAPTION>
NAME                    AGE                          POSITION
----                    ---                          --------
<S>                     <C>     <C>
Glenn R. August........ 35      Director of the Company since March 1993 and a Managing Director of Oak Hill Partners, Inc.
                                (Acadia's investment advisor) and its predecessor since 1987.  Since August 1996, Mr. August has
                                served as President of Oak Hill Advisors, Inc., the exclusive advisor to the Oak Hill
                                Securities Fund, L.P., a $1.75 billion investment partnership.

David G. Offensend..... 43      Director of IPC since its organization in December 1992
                                to August 1995 and a director of  the Company since August 1995.  Founder of
                                Evercore Partners LLC (a private investment firm) since October 1995 and a
                                Managing Director of Oak Hill Partners, Inc. (Acadia's investment advisor) and
                                its predecessor from April 1990 to September 1995.  Mr. Offensend also is a
                                director of Specialty Foods Corporation.

Anthony P. Scotto...... 50      Director of IPC since its organization in December 1992 to
                                August 1995 and a director of  the Company since August 1995.  Managing
                                Director of Oak Hill Partners, Inc. (Acadia's investment advisor) and its
                                predecessor since March 1988.  Mr. Scotto is also a director of Specialty Foods
                                Corporation and Holophane Corporation.

</TABLE>

     All members of the Board of Directors of the Company serve until a
successor is elected. All members of the Board of Directors of IPC serve until
a successor is elected by the Company (as the sole stockholder of IPC). All
officers of the Company and IPC serve at the pleasure of the Company's and
IPC's Boards of Directors.


                                      44


<PAGE>   47
ITEM 11. EXECUTIVE COMPENSATION


<TABLE>
<CAPTION>
                                                   SUMMARY COMPENSATION TABLE
                             ------------------------------------------------------------------------
                                                                        LONG-TERM
                                                                     COMPENSATION(4)
                                                                  ---------------------
                                  ANNUAL COMPENSATION(3)             AWARDS      PAYOUTS
                             -----------------------------------  ----------    ---------
                                                                    NUMBER OF
                                                                   SECURITIES
                                                                   UNDERLYING     LTIP      ALL OTHER
      NAME AND                                                      OPTIONS/    PAYOUTS    COMPENSATION
  PRINCIPAL POSITION          YEAR      SALARY($)(1)  BONUS($)(2)  SARS(#)(5)    ($)(6)       ($)(7)
---------------------------  --------  ------------  -----------  ----------  ---------   ------------
<S>                          <C>           <C>           <C>           <C>      <C>          <C>
George V. Bayly ...........  1996           420,000      600,000       2,072    765,938       314,721
 President and Chief ......  1995           400,000      400,000       1,586    237,500        14,938
 Executive Officer ........  1994           400,000       50,000         400          -         5,667

Frank V. Tannura ..........  1996           249,100      290,000         967    282,188        40,368
 Vice President and .......  1995           211,667      235,000         640     87,500        28,885
 Chief Financial Officer ..  1994           191,667       25,000         160          -        10,894

Eugene M. Whitacre ........  1996           236,250      230,000         691    201,563         7,500
 Vice President and .......  1995           225,000      168,750         435     62,500        13,741
 General Manager ..........  1994           175,000      100,000         110          -         8,744

Thomas S. Ellsworth .......  1996           250,000      100,000         691          -        25,813
 Vice President and .......  1995           229,000      168,750         435          -        16,185
 General Manager ..........  1994           163,000       20,000         610          -         7,325

Donald C. Devine ..........  1996           195,000      175,000         553          -         2,965
 Vice President and
 General Manager
</TABLE>

-----------------

(1) Includes amounts deferred pursuant to IPC's Section 401-k Pension and
    Profit Sharing Plan and under IPC's Executive Deferred Compensation Plan.

(2) Includes annual bonus awards for services rendered in 1996, 1995 and 1994
    that were paid under IPC's Executive Incentive Compensation Plan. The
    Executive Incentive Compensation Plan provides the executive officers of IPC
    with annual awards for outstanding individual performance  contributing to
    the present and future success of the Company. This Plan is administered by
    the President in consultation with the Board of Directors and awards are
    based upon IPC's achievement of certain  predetermined financial objectives
    such as minimum EBITDA and cash flow targets. Under the provisions of the
    Plan, participants have target incentive compensation of 40% to 50% of that
    year's base salary, although the actual incentive compensation paid in any
    given year may be significantly less than or greater than the target level
    based upon the extent of the Company's under-achievement or over-achievement
    of such predetermined financial objectives.

(3) The column designated by the SEC pursuant to applicable regulations for the
    reporting of "Other Annual Compensation" has been deleted because the 
    dollar amount of perquisites and other personal benefits received by the
    named executive officers falls below the reporting threshold established by
    the Commission.





                                      45


<PAGE>   48

(4) The column designated by the SEC pursuant to the applicable regulations for
    the reporting of "Restricted Stock Awards" has been deleted because no
    restricted stock was awarded to any of the named executive officers in any
    of the reported calendar years.  The dollar value of such stock as of
    December 31, 1996 is not readily or accurately calculable because there is
    no closing market price for such stock as such stock is privately held. 
    The number of shares of the Company's common stock held by the named
    executive officers is as follows:  Mr. Bayly - 2,000; Mr. Tannura - 3,375;
    Mr. Ellsworth - 1,050; and Mr. Whitacre - 1,350.  All of such shares of the
    Company's common stock are vested and the Company has no present
    intentions to pay dividends on such shares.

(5) The options reported for 1995 and 1994 as specified in this column were
    granted under IPC's Stock Option and Purchase Agreement, dated as of
    January 1, 1993 (the "Stock Option and Purchase Agreement"), pursuant to
    which options exercisable into an aggregate of 17,270 shares of IPC's
    common stock were originally granted to certain executive officers of IPC
    (including the named executive officers), 9,413 of such options were earned
    and vested (the "IPC Options") during 1993, 1994 and 1995 and 7,857 of such
    options were not earned during such period and were canceled.

    During the first quarter of 1996, the Stock Option and Purchase Agreement
    was amended and restated (the "Restated Stock Option and Purchase
    Agreement") and pursuant to the terms thereof options exercisable into an
    aggregate of 6,908 shares of IPC's common stock (the "IPC Performance
    Options") were granted to certain executive officers of IPC (including
    the number of options reported for 1996 as specified in the Summary
    Compensation Table for the named executive officers), subject to vesting
    33-1/3% in each of 1996, 1997 and 1998 and subject to being earned in 1996
    and 1997 based upon IPC's attainment of certain growth objectives.  During
    1996, 3,454 of the IPC Performance Options were earned and as of December
    31, 1996, one third of such earned amount, or 1,151, became vested.  See
    "Executive Compensation - Option/SAR Grants Table" and - "Aggregated
    Options/SAR Exercise Table."

(6) The amounts in this column represent the amounts paid to the named
    executive officers during the years ended December 31, 1995 and 1996 under
    IPC's Special Incentive Plan, dated as of January 1, 1993 (the "Special
    Incentive Plan" or the "Plan"). Pursuant to the Special Incentive Plan, upon
    the occurrence of certain "Payment Events" (therein defined), IPC was
    obligated to pay to certain executive officers an aggregate cash award up
    to a maximum amount of $2.25 million.  During 1995 and 1996, IPC paid to 
    certain executive officers (including the named executive officers) 
    $550,000 and $1.7 million, respectively, under the Plan.  The 1995 and the 
    1996 payments under the Plan were made by IPC notwithstanding the fact that
    there was not a Payment Event during 1995 or 1996, this condition having
    been waived by IPC.

(7) The 1996 All Other Compensation column reported includes (i) IPC's
    contributions (excluding employee earnings reduction contributions) under
    the IPC Section 401-K Pension and Profit Sharing Plan and under IPC's
    Executive Deferred Compensation Plan during fiscal 1996 as follows: $7,500
    to Mr. Bayly; $21,038 to Mr. Ellsworth; $0 to Mr. Devine; $38,314 to Mr.
    Tannura; and $7,500 to Mr. Whitacre; (ii) insurance premiums with respect
    to IPC's Executive  Disability Income Coverage paid by IPC as follows:
    $7,221 for Mr. Bayly; $4,775 for Mr. Ellsworth;  $2,965 for Mr. Devine; and
    $2,054 for Mr. Tannura; and (iii) IPC's payment during 1996 of $300,000 of
    non-qualified retirement benefits to Mr. Bayly pursuant to the terms of his
    Amended and Restated Employment Agreement, dated as of May 30, 1996.




                                      46


<PAGE>   49







<TABLE>
<CAPTION>
                                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------------------------------------
                                                                                   POTENTIAL REALIZABLE VALUE AT
                                                                                        ASSUMED ANNUAL RATE OF
                                                                                       STOCK PRICE APPRECIATION
                                INDIVIDUAL GRANTS                                          FOR OPTION TERM(2)
-------------------------------------------------------------------------------   --------------------------
                            NUMBER OF
                           SECURITIES    % OF TOTAL
                           UNDERLYING   OPTIONS/SARS    EXERCISE
                          OPTIONS/SARS   GRANTED TO     OR BASE
                             GRANTED    EMPLOYEES IN     PRICE       EXPIRATION
       NAME                  (#)(1)      FISCAL YEAR     ($/SH)          DATE     0%($)    5%($)         10%($)
----------------------    ------------  ------------    --------     ----------   -----    -----         ------
<S>                        <C>            <C>           <C>            <C>        <C>     <C>          <C>
George V. Bayly ......        2,072         30.0        619.56          1/1/03      0      436,590      990,475
 President and Chief       
 Executive Officer         
                           
Frank V. Tannura .....          967         14.0        619.56          1/1/03      0      203,756      462,253
 Vice President            
                           
Eugene M. Whitacre ...          691         10.0        619.56          1/1/03      0      145,600      330,318
 Vice President            
                           
Thomas S. Ellsworth ..          691         10.0        619.56          1/1/03      0      145,600      330,318
 Vice President            
                           
Donald C. Devine .....          553          8.0        619.56          1/1/03      0      116,522      264,350
 Vice President            
</TABLE>

(1) The portion of the IPC Performance Options specified in this column were
    granted during the year ended December 31, 1996 under IPC's Restated
    Stock Option and Purchase Agreement pursuant to which options to purchase an
    aggregate of 6,908 shares of IPC's common stock were granted to certain
    executive officers (including the named executive officers), 3,454 of such
    options were earned during 1996 and one third of such earned options (1,151)
    became vested during 1996.  The 1,151 earned and vested IPC Performance
    Options are fully vested and are exercisable at any time, in whole or in
    part, prior to January 1, 2003 upon payment of an exercise price of $619.56
    per share. The IPC Performance Options vest over a 3-year period, 33-1/3% on
    each of December 31, 1996, 1997 and 1998.  Upon the occurrence of certain
    events (including certain public equity offerings, changes of control and
    exercises by management), IPC and the option holders have the right in
    certain circumstances to exchange both the IPC Options and the IPC
    Performance Options for an equivalent value of the Company's common stock
    plus options exercisable for up to 4.0% of the fully diluted common stock of
    the Company.

(2) The dollar amounts under these columns are the result of calculations at
    0% and of the 5% and 10% rates established by the Commission and 
    therefore are not intended to forecast possible future appreciation, if 
    any, of the stock price of IPC.



                                      47

<PAGE>   50

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END 
OPTION/SAR VALUES 
<TABLE>
<CAPTION>

                              AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                                         AND FY-END OPTION/SAR VALUES
                              ---------------------------------------------------
                                                                           VALUE OF
                                               NUMBER OF SECURITIES       UNEXERCISED
                                              UNDERLYING UNEXERCISED      IN-THE-MONEY
                          SHARES                  OPTIONS/SARS AT       OPTIONS/SARS AT
                         ACQUIRED                    FY-END (#)           FY-END ($)
                            ON         VALUE
                         EXERCISE    REALIZED       EXERCISABLE/         EXERCISABLE/
       NAME                (#)         ($)        UNEXERCISABLE(1)     UNEXERCISABLE(1)
----------------------   --------    -------- ----------------------   ----------------  
<S>                     <C>          <C>          <C>                    <C>                
George V. Bayly ......      -           -           4,151/1,727              $0
 President and Chief
 Executive Officer

Frank V. Tannura .....      -           -             1,696/806               0
 Vice President

Eugene M. Whitacre ...      -           -             1,160/576               0
 Vice President

Thomas S. Ellsworth ..      -           -             1,160/576               0
 Vice President

Donald C. Devine .....      -           -                92/461               0
 Vice President
</TABLE>

---------------

(1) The specified portion of the IPC Options and the IPC Performance Options
    listed in this table are currently exercisable (subject to IPC's right
    to exchange them, in certain circumstances, for an equivalent value of the
    Company's common stock plus options exercisable for up to 4.0% of the fully
    diluted common stock of the Company).  IPC believes that the shares of IPC's
    common stock have a value approximating the exercise price as of December
    31, 1996 although there can be no assurances that such approximation is
    accurate because there is no market price for the stock as such stock is
    privately held.




                                      48


<PAGE>   51




DIRECTORS' COMPENSATION

     Directors of the Company and IPC do not receive any compensation for
serving as such.

CERTAIN EMPLOYMENT ARRANGEMENTS

     Mr. Bayly has an amended and restated employment agreement with IPC,
pursuant to which (i) IPC agrees to employ Mr. Bayly through December 31, 2000
(provided that beginning on January 1, 1998, the term thereof is automatically
extended for one additional day for each day which has then elapsed since
December 31, 1997 unless on or after December 31, 1997 either IPC's Board of
Directors or Mr. Bayly gives notice that the automatic extension shall cease)
as President and Chief Executive Officer, (ii) Mr. Bayly receives a base salary
of $441,000 during 1997, $463,000 during 1998, $486,000 during 1999 and
$510,000 during 2000 (subject to increase at the discretion of the Board of
Directors), (iii) Mr. Bayly will be entitled to an aggregate of $150,000 per
year for life insurance, disability insurance and non-qualified retirement
benefits, (iv) is eligible for an annual performance bonus based upon the
achievement of predetermined financial objectives, and (v) Mr. Bayly will
receive salary protection if his employment is terminated without cause or if
Mr. Bayly terminates the agreement for good reason (including the giving of
notice by the Board of Directors of IPC to stop the automatic extension of the
term thereof and a termination by Mr. Bayly for any reason during the period of
three months which begins six months after a change of control (as therein
defined)) in a lump sum equal to four times the sum of (x) the annual salary
then in effect and (y) the target amount of the annual performance bonus for
the year in which the termination occurs, plus the continuation of all benefits
and supplemental benefits for four years after the date of termination.  The
agreement restricts Mr. Bayly from competing with the Company during his
employment.  In addition, IPC has agreed to gross-up Mr. Bayly for certain
payments, interest and penalties that may be imposed by certain sections of the
Internal Revenue Code of 1996, as amended.

     Mr. Tannura has an employment agreement with IPC, effective January 1,
1993, as amended September 11, 1995, and May 30, 1996 pursuant to which (i) IPC
agrees to employ Mr. Tannura through May 31, 1999 (provided that beginning on
June 1, 1996, the term thereof is automatically extended for one additional day
for each day which has then elapsed since May 31, 1996 unless either the Board
of Directors of IPC or Mr. Tannura gives notice that the automatic extension
shall cease) as Vice President and Chief Financial Officer, (ii) Mr. Tannura is
entitled to receive a base salary of $263,000 per year (subject to increase at
the discretion of the Board of Directors), (iii) Mr. Tannura is eligible to
receive an annual performance bonus based upon the achievement of predetermined
financial objectives, and (iv) Mr. Tannura will receive salary and benefit
protection if his employment is terminated without cause or if Mr. Tannura
terminates the agreement for good reason (including the giving of notice by the
Board of Directors of IPC to stop the automatic extension of the term thereof)
in an amount equal to (i) at Mr. Tannura's option, either (A) his annual salary
for the remaining term thereof or (B) the present value (based upon a 10%
interest rate) of the aggregate unpaid annual salary for the full term thereof,
plus (ii) at Mr. Tannura's option, either (C) an annual bonus for each year
remaining in the term in an amount equal to the target amount of his
performance bonus for the year in which his termination of employment occurs,
or (D) the present value of three times the target amount of his performance
bonus for the year in which the termination of his employment occurs.

     Under provisions of their severance agreements with IPC, the other named
executive officers have been afforded salary protection for one year if their
employment is terminated other than for death, disability or cause.

     Under the Special Incentive Plan, IPC paid to certain executive officers
an aggregate cash award of  $1,687,000 including $1,250,000 to the named
executive officers.  See "Executive Compensation Summary Compensation Table."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     During 1996, the Company's Board of Directors did not have a compensation
committee (or other board committee performing equivalent functions).  The
members of the Board of Directors of the Company, in consultation with Mr.
Bayly, the President of the Company, performed the functions normally performed
by a compensation committee and participated in deliberations concerning 
executive officer compensation.  No executive officer of the Company served as
a member of the compensation committee (or other board committee performing 
equivalent functions) or as a member of the Board of another entity, one of 
whose executive officers served on the Board of Directors of the Company.


                                      49



<PAGE>   52




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     As of March 26, 1997, the Company owned 100% of the outstanding capital
stock of IPC (other than the IPC Options and IPC Performance Options
exercisable into IPC's common stock held by certain executive officers -- see
table below), and all issued and outstanding shares of capital stock of the
Company were beneficially owned by Acadia and certain related investors
(including certain members of management). The following tables sets forth
certain information regarding the beneficial ownership of the common stock, par
value $0.01 per share, of IPC and of the common stock, par value $0.01 per
share, of the Company, as of March 26, 1997 by (i) each person known by the
Company to be the beneficial owner of more than 5% of any class of IPC's or the
Company's voting securities, (ii) each of the directors of IPC and the Company,
and (iii) each of the named executive officers listed in Item 11, and (iv) all
executive officers and directors of IPC and the Company as a group.



                                      50


<PAGE>   53







<TABLE>
<CAPTION>
                                                NUMBER OF SHARES
                                                    OF IPC'S       PERCENTAGE
      NAME AND ADDRESS OF BENEFICIAL OWNER       COMMON STOCK(1)    OF CLASS
      -----------------------------------------  ---------------   ----------
      <S>                                        <C>               <C>
      Ivex Packaging Corporation(2) ...........     120,890           92.0%
      George V. Bayly .........................       4,151(3)         3.2
      Frank V. Tannura ........................       1,696(3)         1.3
      Thomas S. Ellsworth .....................       1,160(3)           *
      Eugene M. Whitacre ......................       1,160(3)           *
      Donald C. Devine ........................          92(3)           *
      Glenn R. August .........................           -              -
      David G. Offensend ......................           -              -
      Anthony P. Scotto .......................           -              -
       All directors and officers as a group ..      10,564(3)         8.0
</TABLE>


<TABLE>
<CAPTION>
                                                NUMBER OF SHARES
                                                OF THE COMPANY'S  PERCENTAGE
      NAME AND ADDRESS OF BENEFICIAL OWNER       COMMON STOCK(4)   OF CLASS
      -----------------------------------------  ---------------  ----------
      <S>                                        <C>               <C>
      Acadia Partners, L.P. ...................       994,676(5)     92.8%
      George V. Bayly .........................         2,000           *
      Frank V. Tannura ........................         3,375           *
      Thomas S. Ellsworth .....................         1,050           *
      Eugene M. Whitacre ......................         1,350           *
      Donald C. Devine ........................             -           *
      Glenn R. August (6)(7) ..................             -           -
      David G. Offensend(8) ...................             -           -
      Anthony P. Scotto(7) ....................             -           -
       All directors and officers as a group ..        12,000         1.1
</TABLE>


--------------
  * Represents less than 1% of such common stock.

(1) Upon the occurrence of certain events (including certain public equity
    offerings and changes of control), IPC and the option holders have the
    right in certain circumstances to exchange the IPC Options and the IPC
    Performance Options for an equivalent value of the Company's common stock
    plus options exercisable for up to four percent of the fully diluted common
    stock of the Company.

(2) The Company's common stock is beneficially owned by the individuals and
    entities listed in the Company's security ownership table.

(3) Represents vested options that are currently exercisable (subject to IPC's
    right to exchange them, in certain circumstances, for an equivalent
    value of the Company's common stock plus options exercisable for up to four
    percent of the fully diluted common stock of the Company.)

(4) To the knowledge of the Company, each of such stockholders has sole voting
    and investment power as to the shares shown unless otherwise noted.



                                      51



<PAGE>   54





(5) Includes shares held by Acadia and shares held by Acadia Electra Partners,
    

    L.P. ("Electra"), an affiliate of Acadia. Acadia is the general partner of
    Electra. The general partner of Acadia is Acadia FW Partners, L.P. ("Acadia
    FW"), the managing general partner of which is Acadia MGP, Inc. ("Acadia
    MGP"), a corporation controlled by J. Taylor Crandall, an executive officer
    of Keystone, Inc. (an associate of Acadia). As such, Acadia FW, Acadia MGP
    and Mr. Crandall may be deemed to beneficially own the shares of the
    Company's common stock held by Acadia and Electra.  Excludes an aggregate of
    65,570 shares (approximately 6.0%) of the Company's Common Stock owned by 
    FWHY Coinvestments I Partners, L.P. ("FCP-I"), FWHY Coinvestments III 
    Partners, L.P. ("FCP-III"), Rosecliff-Ivex Packaging 1990 Partners, L.P.
    ("RIP") and Rosecliff-IPMC 1991 Partners, L.P. ("RIPMC").  Certain
    investors in FCP-I, FCP-II, RIP and RIPMC are employees of, or are
    otherwise associated with, Acadia or Oak Hill Partners, Inc., which is the
    investment advisor to Acadia.  The address of Acadia, Electra, Acadia FW,
    Acadia MGP, FCP-I, FCP-III and Mr. Crandall is 3100 Texas Commerce Tower,
    201 Main Street, Fort Worth, Texas 76102.  The address of RIP and RIPMC is
    65 East 55th Street, New York, New York 10022-3219.

(6) Mr. August is an officer and director of Acadia MGP (see footnote 5 above).

(7) The address of such individuals is c/o Oak Hill Partners, Inc., 65 East
    55th Street, New York, New York 10022-3219.

(8) The address of such individual is c/o Evercore Partners LLC, 1325 Avenue of
    the Americas, 20th Floor, New York, New York 10019.

     In connection with IPC's December 1995 refinancing of its senior credit
facility, the Company pledged to the lenders under such senior credit facility
all of IPC's common stock, par value $0.01 per share, to collateralize the
repayment of IPC's obligations thereunder.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On or about December 17, 1992, Penobscot-MB Partners (an affiliate of
Acadia) ("Penobscot-MB") and IPC entered into a consulting agreement. Under
this consulting agreement, IPC has agreed to pay Penobscot-MB $400,000 per year
and Penobscot-MB will provide to IPC certain general financial advisory and
other consulting services customarily provided by merchant banks. In addition,
IPC has agreed to pay Penobscot-MB certain customary fees in connection with
future acquisitions, divestitures, credit arrangements and corporate finance
advice and to indemnify Penobscot-MB against certain liabilities in connection
with its services to IPC.

     On or about December 17, 1992, IPC, its subsidiaries and the Company
entered into a tax sharing agreement pursuant to which IPC and its subsidiaries
will pay to the Company their respective shares of the Company's consolidated
tax liability.

     Mr. Bayly and IPC are parties to an Employment Agreement, which provides
for, among other things, the employment of Mr. Bayly by IPC and a Stock Option
Agreement pursuant to which, among other things, Mr. Bayly has the option to
purchase certain shares of IPC's common stock.  See "Executive Compensation -
Summary Compensation Table."

     Mr. Tannura and IPC are parties to an Employment Agreement, which provides
for, among other things, the employment of Mr. Tannura by IPC and a Stock
Option Agreement pursuant to which, among other things, Mr. Tannura has the
option to purchase certain shares of IPC's common stock.  See "Executive
Compensation - Summary Compensation Table."


                                      52












                                      



<PAGE>   55
     On October 29, 1996, certain executive officers and directors of the      
Company together with certain members of management of Oakhill Partners, Inc.  
(Acadia's investment advisor) acquired all of the outstanding common stock of  
Nicolaus Paper Inc. ("Nicolaus") after the Company had previously determined   
not to proceed with the aquisition of Nicolaus.  Pursuant to a consulting      
agreement, Nicolaus will pay IPC a performance-based consulting fee in an      
annual amount between $250,000 and $500,000 for certain services to be rendered
to Nicolaus by IPC.  Also, it is expected that IPC will purchase certain grades
of paper from Nicolaus for use in IPC's paper converting operations at market  
prices.                                                                        

     See "Executive Compensation - Compensation Committee Interlocks and
Insider Participation" for certain information relating to Mr. Bayly.


                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)(1) THE FOLLOWING FINANCIAL STATEMENTS OF THE COMPANY ARE INCLUDED IN
ITEM 8.


-    Report of Independent Accountants

-    Consolidated Balance Sheets at December 31, 1996 and 1995

-    Consolidated Statements of Operations for the years ended December 31, 
     1996, 1995 and 1994

-    Consolidated Statements of Changes in Stockholders' Deficit for
     the years ended December 31, 1996, 1995 and 1994


-    Consolidated Statements of Cash Flows for the years ended December 31, 
     1996, 1995 and 1994

-    Notes to Consolidated Financial Statements

(a)(2) FINANCIAL STATEMENT SCHEDULES FOR THE YEAR ENDED DECEMBER 31, 1996
ARE INCLUDED IN ITEM 8.

-    Schedule I - Condensed Financial Information

-    Schedule II - Valuation and Qualifying Accounts and Reserves

     All other schedules of the Company for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required, are inapplicable or have been disclosed in the notes to the
consolidated financial statements and therefore have been omitted.



                                      53


<PAGE>   56




     (a)(3) EXHIBITS.



<TABLE>
<CAPTION>
                                                                                      INCORPORATED
                                                                                   BY REFERENCE FROM
                                                                            ------------------------------------
EXHIBIT                                                                     EXHIBIT    REGISTRATION NUMBER
 NUMBER              DESCRIPTION OF DOCUMENT                                NUMBER           OR REPORT
-------  -------------------------------------------------------            -------  ---------------------------
<S>      <C>                                                                <C>      <C>
    3.1  Certificate of Incorporation of IPC, Inc. ("IPC")..........            3.1  IPC Form S-1
                                                                                     (Registration No. 33-52150)

    3.2  By-Laws of IPC.............................................            3.2  IPC Form S-1
                                                                                     (Registration No. 33-52150)

    3.3  Form of Amended Certificate of Incorporation of                             IPC Form S-1
         IPC, dated December 8, 1992................................            3.3  (Registration No. 33-52150)

    3.4  Certificate of Amendment of the Certificate of                              IPC 1992 Form 10-K
         Incorporation of IPC, dated as of February 2, 1993.........            3.4  (File No. 33-52150)

    3.5  Certificate of Amendment to the Certificate of                              IPC 9/30/95 Form 10-Q
         Incorporation of IPC, dated August 2, 1995.................            3.7  (File No. 33-52150)

    3.6  Amended and Restated Certificate of Incorporation                           Ivex Form S-4
         of Ivex Packaging Corporation ("Holdings" or "Ivex").......            3.1  (Registration No. 33-60714)

    3.7  By-Laws of Ivex............................................            3.2  Ivex Form S-4
                                                                                     (Registration No. 33-60714)
    3.8  Certificate of Amendment to Amended and Restated
         Certificate of Incorporation of Ivex, dated                                 IPC 9/30/95 Form 10-Q
         August 2, 1995.............................................            3.8  (File No. 33-52150)

    4.1  Indenture relating to IPC's 12-1/2% Senior Subordinated
         Notes (including form of 12-1/2% Senior Subordinated                        Ivex Form S-4
         Notes).....................................................            4.1  (Registration No. 33-60714)

    4.2  Indenture relating to Ivex's 13-1/4% Senior Discount
         Debentures (including form of 13-1/4% Senior                                IPC 1992 Form 10-K
         Discount Debentures).......................................            4.2  (File No. 33-52150)

   10.1  Form of Senior Management Incentive Compensation                            IPC 1994 Form 10-K
         Plan for 1996 (1)..........................................                 (File No. 33-52150)

   10.2  Form of Executive Deferred Compensation Plan (1)...........           10.3  IPC 1994 Form 10-K
                                                                                     (File No. 33-52150)

  *10.3  Form of Trust Agreement, dated October 17, 1996,
         between IPC, Inc. and the trustee thereof relating to
         executive deferred compensation (1)........................
</TABLE>




                                      54


<PAGE>   57
<TABLE>
<CAPTION>
                                                                                                  INCORPORATED
                                                                                                BY REFERENCE FROM
                                                                                 ---------------------------------------------
EXHIBIT                                                                          EXHIBIT              REGISTRATION NUMBER
NUMBER                   DESCRIPTION OF DOCUMENT                                  NUMBER                  OR REPORT
--------                 -----------------------                                 --------       ------------------------------
<S>            <C>                                                                  <C>         <C>
  10.4         Form of IPC Stock Purchase and Option Agreement,                                
               dated as of January 1, 1993, among IPC, Ivex, Acadia                            
               Partners, L.P. and each of certain senior managers of                           
               IPC with the Ivex Stock Purchase and Option                                      IPC 1993 Form 10-K
               Agreement attached thereto (1) ....................................  10.2        (Registration No. 33-52150)
                                                                                               
  10.5         Form of Amended and Restated IPC, Inc. Stock Option                             
               and Purchase Agreement and Amended Restated Ivex                                
               Packaging Corporation Stock Option and Purchase                                  Ivex 6/30/96 Form 10-Q
               Agreement, each dated as of January 1, 1996 (1) ...................  10.16       (File No. 33-60714)
                                                                                               
  10.6         IPC Retirement Plan and Trust, as amended and                                    IPC Form S-1
               Restated May 1, 1992 (1) ..........................................  10.3        (Registration No. 33-52150)
                                                                                               
  10.7         Form of IPC Special Incentive Agreement, dated as                                IPC 1993 Form 10-K
               of January 1, 1993 (1) ............................................  10.4        (File No. 33-52150)
                                                                                               
  10.8         Amended and Restated Employment Agreement, dated as                              Ivex 6/30/96 Form 10-Q
               of May 30, 1996, between George V. Bayly and IPC (1) ..............  10.14       (File No. 33-60714)
                                                                                               
  10.9         Employment Agreement, dated as of December 31,                                   IPC 6/30/93 Form 10-Q
               1992, between IPC and Frank V. Tannura (1) ........................  10.30       (File No. 33-52150)
                                                                                               
 10.10         Amendment No. 1, dated as of September 11, 1995,                                
               to the Employment Agreement, dated as of December                                IPC 6/30/95 Form 10-Q
               31, 1992, between IPC and Frank V. Tannura (1) ....................  10.59       (File No. 33-52150)
                                                                                               
 10.11         Amendment No. 2 to Employment Agreement, dated                                   Ivex 6/30/96 Form 10-Q
               May 30, 1996, between IPC and Frank V. Tannura (1) ................  10.15       (File No. 33-60714)
                                                                                               
 10.12         Stock Option Agreement, dated as of January 22,                                 
               1991, among Ivex, Acadia Partners, L.P. and                                      IPC Form S-1
               George V. Bayly (1) ...............................................  10.30       (Registration No. 33-52150)
                                                                                               
 10.13         Form of Severance Agreement between the Company                                  IPC 1994 Form 10-K
               and certain named executive officers (1) ..........................   1.1        (File No. 33-52150)
                                                                                               
 10.30         Credit Agreement, dated as of December 7, 1995 (the                             
               "1995 Credit Agreement"), among Ivex, IPC, certain                              
               of IPC's subsidiaries, the lenders listed therein, and                           Ivex 1995 Form 10-K
               NationsBank, N.A., as agent .......................................  10.30       (File No. 33-60714)
                                                                                               
 10.31         Pledge Agreement, dated as of December 7, 1995,                                 
               among Ivex, IPC, IPC's subsidiaries and NationsBank,                             Ivex 1995 Form 10-K
               N.A., as agent ....................................................  10.31       (File No. 33-60714)

</TABLE>



                                      55


<PAGE>   58
<TABLE>
<CAPTION>
                                                                                                  INCORPORATED
                                                                                                BY REFERENCE FROM
                                                                                 ---------------------------------------------
EXHIBIT                                                                          EXHIBIT              REGISTRATION NUMBER
NUMBER                   DESCRIPTION OF DOCUMENT                                  NUMBER                  OR REPORT
--------                 -----------------------                                 --------       ------------------------------
<S>            <C>                                                                  <C>         <C>
 10.32         Security Agreement, dated as of December 7, 1995,                         
               among Ivex, IPC, IPC's subsidiaries and NationsBank,                                    Ivex 1995 Form 10-K
               N.A., as agent .....................................................  10.32             (File No. 33-60714)
                                                                                         
 10.33         Form of Mortgage and Security Agreement in favor of                                     Ivex 1995 Form 10-K
               NationsBank, N.A., as agent ........................................  10.33             (File No. 33-60714)
                                                                                         
*10.34         Amendment No. 1 to Credit Agreement, dated as of August                   
               16, 1996, by and among IPC, NationsBank, N.A., as agent,                  
               and the guarantors and lenders identified on the signature                
               pages thereto ......................................................      
                                                                                         
*10.35         Amendment No. 2 to Credit Agreement, dated as of November                 
               21, 1996, by and among IPC, NationsBank, N.A., as agent,                  
               and the guarantors and lenders identified on the signature                
               pages thereto.......................................................
                                                                                         
*10.36         Form of Amended and Restated Credit Agreement, dated as                   
               of March 24, 1997, by and among IPC, NationsBank, N.A.,                   
               as agent, and the guarantors and lenders identified on the                
               signature pages thereto ............................................      
                                                                                         
*10.37         Form of Amended and Restated Pledge Agreement among IPC,                  
               Ivex, certain of IPC's subsidiaries and NationsBank, N.A., as             
               agent ..............................................................      
                                                                                         
*10.38         Form of Amended and Restated Security Agreement among IPC,                
               Ivex, and certain of IPC's subsidiaries and NationsBank, N.A.,            
               as agent ...........................................................      
                                                                                         
 10.39         Loan Agreement, dated as of December 1, 1987,                             
               between the County of Kankakee, Illinois and Ivex                                       IPC Form S-1
               of Delaware, Inc (n/k/a IPC, Inc.)..................................  10.11             (Registration No. 33-52150)
                                                                                         
 10.40         Loan Agreement, dated as of June 1, 1988, between                         
               the Development Authority of Morgan County and                                          IPC Form S-1
               Ivex of Delaware, Inc (n/k/a IPC, Inc.).............................  10.13             (Registration No. 33-52150)
                                                                                         
 10.41         Loan Agreement, dated as of October 1, 1987,                                            IPC Form S-1
               between the County of Will, Illinois and LPX, Inc...................  10.15             (Registration No. 33-52150)
                                                                                         
 10.42         Loan Agreement, dated as of April 1, 1988, between                        
               the Illinois Development Finance Authority and                                          IPC Form S-1
               Ivex of Delaware, Inc. (n/k/a IPC, Inc.)............................  10.17             (Registration No. 33-52150)


</TABLE>

                                      56


<PAGE>   59
<TABLE>
<CAPTION>
                                                                                                  INCORPORATED
                                                                                                BY REFERENCE FROM
                                                                                 ---------------------------------------------
EXHIBIT                                                                          EXHIBIT              REGISTRATION NUMBER
NUMBER                   DESCRIPTION OF DOCUMENT                                  NUMBER                  OR REPORT
--------                 -----------------------                                 --------       ------------------------------
<S>           <C>                                                                  <C>         <C>
 10.43        Indenture of Trust, dated as of March 1, 1989,                             
              between Marine Midland Bank, N.A. and Ivex of                                     IPC Form S-1
              Delaware, Inc (n/k/a IPC, Inc.)....................................   10.19       (Registration No. 33-52150)
                                                                                                
 10.44        Loan Agreement, dated November 1, 1985, between                                   
              the Village of Bridgeview, Illinois and L&CP                                      IPC Form S-1
              Corporation........................................................   10.21       (Registration No. 33-52150)
                                                                                                
 10.45        Loan Agreement, dated as of June 1, 1988, between                                 
              City of Troy, Ohio and L&CP Corporation                                           IPC Form S-1
              (n/k/a IPC, Inc.).................................................    10.23       (Registration No. 33-52150)
                                                                                                
*10.46        Lease Agreement, dated as of December 5, 1996, between                            
              State Street Bank and Trust Company and IPC.......................                
                                                                                                
 10.47        Lease, dated as of October 4, 1988, between                                       
              Seymour C. Graham and Kama Corporation                                            IPC Form S-1
              (n/k/a IPC, Inc)..................................................    10.33       (Registration No. 33-52150)
                                                                                                
 10.48        Amendment to Lease, dated as of December 20,                                      
              1988, between Seymour C. Graham and Kama                                          IPC Form S-1
              Corporation (n/k/a IPC, Inc)......................................    10.34       (Registration No. 33-52150)
                                                                                                
 10.49        Lease, dated June 20, 1995, between Howard H.                                     
              Gelb and Eunice Gelb and Kama Corporation                                         Ivex 1995 Form 10-K
              Corporation (n/k/a IPC, Inc.).....................................    10.44       (File No. 33-60714)
                                                                                                
 10.50        Industrial Building Lease, dated October 19, 1992,                                
              between Telegraph Road Properties, Inc. and                                       Ivex 1995 Form 10-K
              Packaging Products, Inc...........................................    10.45       (File No. 33-60714)
                                                                                                
 10.51        Industrial Building Lease, dated October 23, 1985,                                Ivex 1995 Form 10-K
              between IMAC Realty, Inc. and Packaging Products, Inc.............    10.46       (File No. 33-60714)
                                                                                                
 10.52        Letter Agreement, dated March 10, 1995, between                                   Ivex 1995 Form 10-K
              Packaging Products, Inc. and LeWa Company ........................    10.47       (File No. 33-60714)
                                                                                                
 10.53        Tri-Party Agreement, dated September 11, 1995,                                    
              among Packaging Products, Inc. and Telegraph                                      Ivex 1995 Form 10-K
              Road Properties, Inc..............................................    10.48       (File No. 33-60714)
                                                                                                
*10.54        Lease, dated as of September 11, 1996, by and between                             
              Joseph P. Bennett and Trio Products, Inc..........................                
                                                                                         

</TABLE>



                                      57



<PAGE>   60


<TABLE>
<CAPTION>
                                                                                      INCORPORATED
                                                                                    BY REFERENCE FROM
                                                                     ----------------------------------------
 EXHIBIT                                                             EXHIBIT        REGISTRATION NUMBER
 NUMBER              DESCRIPTION OF DOCUMENT                         NUMBER             OR REPORT
--------             -----------------------                         -------        -------------------------
<S>     <C>                                                          <C>        <C>
 10.55  Installment Sales Agreement, dated as of December
        12, 1990, between Grove City Industrial Development                     IPC Form S-1
        Corporation and Ivex Converted Products Corporation                     (Registration No. 33-52150)
        (n/k/a IPC, Inc.)........................................... 10.39

 10.56  Consulting Agreement, dated as of December 17,                          IPC Form S-4
        1992, between IPC and Penobscot-MB Partners................. 10.39      (Registration No. 33-60714)

 10.57  Tax Sharing Agreement, dated as of December 17,
        1992, between Ivex and IPC and certain of IPC's                         Ivex Form S-4
        subsidiaries................................................ 10.40      (Registration No. 33-60714)

 10.58  Transfer and Noncompete Agreement, dated as of
        October 14, 1992, between Ivex Converted Products                       IPC Form S-1
        Corporation (n/k/a IPC, Inc.)  and MaxPack S.A. de C.V...... 10.46      (Registration No. 33-52150)

 10.59  Stockholders Agreement, dated as of October 14,
        1992, by and among MaxPack S.A. de C.V. and                             IPC Form S-1
        the stockholders thereof.................................... 10.46      (Registration No. 33-52150)

 10.60  Agreement and Plan of Merger, dated as of May 17,
        1996 (as amended), among IPC, CFI Industries, Inc.                      CFI Industries, Inc.'s Proxy
        and Equity Partners......................................... A-1        Statement dated 7/22/96

 *21.1  Subsidiaries of Ivex........................................

 *21.2  Subsidiaries of IPC.........................................

 *24.1  Powers of Attorney..........................................

  27    Financial Data Schedule, which is submitted electronically to
        the Securities and Exchange Commission for information only
        and not filed.
</TABLE>
--------------

* Filed herewith.

(1) Management contract or compensatory plan or arrangement required to be
    filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.

    (B) REPORTS ON FORM 8-K.
        None.


                                   * * * * *



                                      58
<PAGE>   61
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED ON MARCH 26, 1997.


                                             IVEX PACKAGING CORPORATION
                                           
                                             By: /s/ GEORGE V. BAYLY
                                                 ----------------------------
                                                 Name: George V. Bayly
                                                 Title: President and Chief
                                                          Executive Officer

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON
MARCH 26, 1997.


         Signature                                Title
         ---------                                -----
/s/ GEORGE V. BAYLY
------------------------------
  George V. Bayly               Director, Chairman of the Board,
                                President and Chief Executive Officer
                                (Principal Executive Officer)
/s/ FRANK V. TANNURA
------------------------------
  Frank V. Tannura              Director, Vice President and Chief Financial 
                                Officer
                                (Principal Financial Officer)
/s/ DAVID E. WARTNER
------------------------------
  David E. Wartner              Corporate Controller
                                (Principal Accounting Officer)
         *
------------------------------
 David G. Offensend             Director

         *
------------------------------
 Anthony P. Scotto              Director

         *
------------------------------
 Glenn R. August                Director

*By:  /s/ G. DOUGLAS PATTERSON  Attorney-In-Fact
------------------------------
       G. Douglas Patterson

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT

     No annual report or proxy material has been or will be sent to security
holders.



                                      59


<PAGE>   62






                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    EXHIBITS
                                      TO
                                  FORM 10-K
                                    UNDER
                     THE SECURITIES EXCHANGE ACT OF 1934
                                      
                          IVEX PACKAGING CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)




                                      60


<PAGE>   63




                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                       SEQUENTIALLY
 EXHIBIT                                                                                  NUMBERED
 NUMBER                             DESCRIPTION OF DOCUMENT                                 PAGE
-------  -------------------------------------------------------------------------------  --------
<S>      <C>                                                                              <C>
    3.1  Certificate of Incorporation of IPC, Inc. ("IPC")

    3.2  By-Laws of IPC

    3.3  Form of Amended Certificate of Incorporation of IPC, dated December 8, 1992

    3.4  Certificate of Amendment of the Certificate of Incorporation of IPC, dated
         as of February 2, 1993

    3.5  Certificate of Amendment to the Certificate of Incorporation of IPC, dated
         August 2, 1995

    3.6  Amended and Restated Certificate of Incorporation of Ivex Packaging Corporation
         ("Holdings" or "Ivex")

    3.7  By-Laws of Ivex

    3.8  Certificate of Amendment to Amended and Restated Certificate of
         Incorporation of Ivex, dated August 2, 1995

    4.1  Indenture relating to IPC's 12-1/2% Senior Subordinated Notes (including form
         of 12-1/2% Senior Subordinated Notes)

    4.2  Indenture relating to Ivex's 13-1/4% Senior Discount Debentures (including form
         of 13-1/4% Senior Discount Debentures)

   10.1  Form of Senior Management Incentive Compensation Plan for 1996 (1)

   10.2  Form of Executive Deferred Compensation Plan (1)

  *10.3  Form of Trust Agreement, dated October 17, 1996, between IPC, Inc.
         and the trustee thereof relating to executive deferred compensation (1)

   10.4  Form of IPC Stock Option and Purchase Agreement, dated as of January 1, 1993,
         among IPC, Ivex, Acadia Partners, L.P. and each of certain senior managers of
         IPC with the Ivex Stock Purchase and Option  Agreement attached thereto (1)

   10.5  Form of Amended and Restated IPC, Inc. Stock Option and Purchase Agreement
         and Amended Restated Ivex Packaging Corporation Stock Option and Purchase
         Agreement, each dated as of January 1, 1996 (1)

   10.6  IPC Retirement Plan and Trust, as amended and Restated  May 1, 1992 (1)

   10.7  Form of IPC Special Incentive Agreement, dated as of January 1, 1993 (1)
</TABLE>




                                      61






<PAGE>   64
              
<TABLE>
                                                                                            Sequentially
Exhibit                                                                                       Numbered
Number                         Description Of Document                                          Page
-------                        -----------------------                                      ------------
<S>     <C>                                                                                  <C>
  10.8  Amended and Restated Employment Agreement, dated as of May 30, 1996,
        between George V. Bayly and IPC (1)

  10.9  Employment Agreement, dated as of December 31, 1992, between IPC and
        Frank V. Tannura (1)

 10.10  Amendment No. 1, dated as of September 11, 1995, to the Employment Agreement,
        dated as of December 31, 1992, between IPC and Frank V. Tannura (1)

 10.11  Amendment No. 2 to Employment Agreement, dated May 30, 1996, between
        IPC and Frank V. Tannura (1)

 10.12  Stock Option Agreement, dated as of January 22, 1991, among Ivex, Acadia
        Partners, L.P. and George V. Bayly (1)

 10.13  Form of Severance Agreement between the Company and certain named executive
        officers (1)

 10.30  Credit Agreement, dated as of December 7, 1995 (the "1995 Credit Agreement"),
        among Ivex, IPC, certain of IPC's subsidiaries, the lenders listed therein, and
        NationsBank, N.A., as agent

 10.31  Pledge Agreement, dated as of December 7, 1995,  among Ivex, IPC, IPC's
        subsidiaries and NationsBank, N.A., as agent

 10.32  Security Agreement, dated as of December 7, 1995, among Ivex, IPC, IPC's
        subsidiaries and NationsBank,  N.A., as agent

 10.33  Form of Mortgage and Security Agreement in favor of  NationsBank, N.A.,
        as agent

*10.34  Amendment No. 1 to Credit Agreement, dated as of August 16, 1996, by and
        among IPC, NationsBank, N.A., as agent, and the guarantors and lenders
        identified on the signature pages thereto

*10.35  Amendment No. 2 to Credit Agreement, dated as of November 21, 1996, by and
        among IPC, NationsBank, N.A., as agent, and the guarantors and lenders
        identified on the signature pages thereto

*10.36  Form of Amended and Restated Credit Agreement, dated as of March, 1997
        by and among IPC, NationsBank, N.A., as agent, and the guarantors and lenders
        identified on the signature pages thereto

*10.37  Form of Amended and Restated Pledge Agreement among IPC, Ivex, certain of
        IPC's subsidiaries and NationsBank, N.A., as agent

</TABLE>





                                      62


<PAGE>   65

<TABLE>
<CAPTION>
                                                                                                   Sequentially
Exhibit                                                                                              Numbered
Number                    Description of Document                                                      Page
-------                   -----------------------                                                  ------------
<S>     <C>                                                                                        <C>
*10.38  Form of Amended and Restated Security Agreement among IPC, Ivex, certain of
        IPC's subsidiaries and NationsBank, N.A., as agent

 10.39  Loan Agreement, dated as of December 1, 1987, between the County of Kankakee,
        Illinois and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)

 10.40  Loan Agreement, dated as of June 1, 1988, between the Development Authority
        of Morgan County and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)

 10.41  Loan Agreement, dated as of October 1, 1987, between the County of Will,
        Illinois and LPX, Inc.

 10.42  Loan Agreement, dated as of April 1, 1988, between the Illinois Development
        Finance Authority and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)

 10.43  Indenture of Trust, dated as of March 1, 1989, between Marine Midland Bank, N.A.
        and Ivex of Delaware, Inc. (n/k/a IPC, Inc.)

 10.44  Loan Agreement, dated November 1, 1985, between the Village of Bridgeview,
        Illinois and L&CP Corporation

 10.45  Loan Agreement, dated as of June 1, 1988, between
        City of Troy, Ohio and L&CP Corporation (n/k/a IPC, Inc.)

*10.46  Lease Agreement, dated as of December 5, 1996, between State Street Bank and
        Trust Company and IPC

 10.47  Lease, dated as of October 4, 1988, between Seymour C. Graham and Kama
        Corporation (n/k/a IPC, Inc.)

 10.48  Amendment to Lease, dated as of December 20, 1988, between Seymour C. Graham
        and Kama Corporation (n/k/a IPC, Inc.)

 10.49  Lease, dated June 20, 1995, between Howard H. Gelb and Eunice Gelb and Kama
        Corporation (n/k/a IPC, Inc.)

 10.50  Industrial Building Lease, dated October 19, 1992, between Telegraph Road
        Properties, Inc. and Packaging Products, Inc.

 10.51  Industrial Building Lease, dated October 23, 1985, between IMAC Realty, Inc. and
        Packaging Products, Inc.

 10.52  Letter Agreement, dated March 10, 1995, between Packaging Products, Inc. and
        LeWa Company

 10.53  Tri-Party Agreement, dated September 11, 1995, among Packaging Products, Inc. and
        Telegraph Road Properties, Inc.


</TABLE>



                                      63

<PAGE>   66

<TABLE>
<CAPTION>                                                                                            
                                                                                                    Sequentially
Exhibit                                                                                               Numbered
Number                        Description of Document                                                   Page
-------                       ---------------------------                                            -----------
<S>     <C>                                                                                         <C>
*10.54  Lease, dated as of September 11, 1996, by and between Joseph P. Bennett and Trio
        Products, Inc.

 10.55  Installment Sales Agreement, dated as of December 12, 1990, between Grove City
        Industrial Development Corporation and Ivex Converted Products Corporation
        (n/k/a IPC, Inc.)

 10.56  Consulting Agreement, dated as of December 17, 1992, between IPC and Penobscot-MB
        Partners

 10.57  Tax Sharing Agreement, dated as of December 17, 1992, between Ivex and IPC and
        certain of IPC's subsidiaries

 10.58  Transfer and Noncompete Agreement, dated as of October 14, 1992, between
        Ivex Converted Products Corporation (n/k/a IPC, Inc.)  and MaxPack S.A. de C.V.

 10.59  Stockholders Agreement, dated as of October 14, 1992, by and among MaxPack S.A.
        de C.V. and the stockholders thereof

 10.60  Agreement and Plan of Merger, dated as of May 17, 1996 (as amended), among IPC, CFI
        Industries, Inc. and Equity Partners

 *21.1  Subsidiaries of Ivex

 *21.2  Subsidiaries of IPC

 *24.1  Powers of Attorney

    27  Financial Data Schedule, which is submitted electronically to the Securities and Exchange
        Commission for information only and not filed.
</TABLE>

----------------


* Filed herewith.

(1) Management contract or compensatory plan or arrangement required to be
    filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.








                                   * * * * *



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