Security Agreement


          Security  Agreement  dated  February 26, 1997  between Disc  Graphics,
Inc., a Delaware corporation,  10 Gilpin Avenue,  Hauppauge, New York 11788 (the
"Company") and KeyBank National Association, a national banking association with
offices at 1377 Motor Parkway, Hauppauge, New York 11788 (the "Secured Party").

          Secured  Party and the Company have  entered  into a Credit  Agreement
pursuant  to  which  the  Company  will  receive   Loans  and  other   financial
accommodations from Secured Party. Under the Credit Agreement and loan and other
agreements  between  Secured  Party and the  Company,  the  Company  will  incur
Obligations to Secured Party. In addition,  Secured Party will not extend credit
to the Company unless, among other conditions, the Company executes and delivers
this Agreement.

          To induce  Secured  Party to extend credit to the Company on and after
the date hereof,  the Company  wishes to grant  Secured  Party a first  priority
perfected security interest in all its assets, as provided herein, to secure the
payment and performance of all Obligations.

          Accordingly, the parties agree as follows:

          1.   Definitions.

          (a)  Capitalized  terms used herein and not otherwise  defined  herein
shall have the meanings given in the Credit Agreement.

          (b) The following words and phrases shall have the meanings set forth
below:

               (i)  "Agreement" shall mean this Agreement as it may be amended 
from time to time.

               (ii)  "Collateral" means all of the following:

                    (A)  Equipment, Inventory and Receivables;

                    (B) All  choses in  action,  causes of  action,  any  rights
arising under any judgment, statute or rule, all corporate and business records,
customer lists, credit files,  trademarks,  trade styles, trade names,  designs,
patents,  copyrights,  licenses,  license  agreements,  and any applications for
patents or trademarks, and all amounts, claims and proceeds,  including returned
or unearned  premiums,  which may become  payable  under any policy of insurance
maintained by the Company covering the Collateral;

                    (C) All other personal property of the Company,  whether now
or hereafter  existing or now owned or hereafter  acquired and wherever located,
of every  kind and  description,  tangible  or  intangible,  including,  without
limitation,  the balance of every deposit  account now or hereafter  existing of
the Company with Secured Party,  and all goods,  equipment,  furniture,  general
intangibles,  credits,  claims,  demands and any other  obligations of any kind,
whether now or hereafter arising, of the Company; and

                    (D) Any and all  additions  and  accessions to the foregoing
Collateral,  all  substitutions  and replacements  therefor and all products and
proceeds thereof.
<PAGE>

               (iii) "Credit  Agreement" means the Credit Agreement  between the
Company and Secured Party dated the date hereof,  as it may be amended from time
to time.

               (iv)  "Equipment"  shall mean all of the Company's  machinery and
equipment  wherever  located,  and  all  additions,  accessions,  substitutions,
replacements,  parts and fuel to or for the same,  and all products and proceeds
thereof, excluding, however, the Equipment listed on Exhibit 1 hereto.

               (v)  "Inventory"  shall mean all goods now or hereafter  owned by
the Company or in which the Company now or hereafter  has an interest,  intended
for sale,  lease or other  disposition  by or consumption in the business of the
Company,  of every kind and  nature  and  wherever  located,  including  without
limitation all raw materials,  work in process,  finished goods, goods consigned
to the  Company to the extent of its  interest  therein as  consignee,  goods in
transit,  materials and supplies of any kind, nature or description which are or
might  be  used  in  connection  with  the   manufacture,   packing,   shipping,
advertising,  selling or finishing of any such goods,  all documents of title or
documents representing the same and all records, files and writings with respect
thereto.

               (vi)  "Obligations"   shall  mean  all  payment  and  performance
obligations,  liabilities  and  indebtedness of the Company or any Subsidiary to
Secured Party,  under the Notes, the Credit Agreement,  any Loan Document or any
other  agreement  or  instrument,  whether now  existing or  hereafter  created,
absolute or contingent, direct or indirect, due or not, whether
created  directly or acquired by  assignment  or  otherwise,  including  without
limitation  reimbursement of Letters of Credit and the payment of performance of
all other loans,  obligations,  liabilities,  and indebtedness of the Company or
any Subsidiary to Secured  Party,  and all fees,  costs,  expenses and indemnity
obligations hereunder or thereunder.

               (vii)  "Receivables"  shall mean all right, title and interest of
the Company in all  present and future  accounts  receivable,  contract  rights,
promissory  notes,  chattel  paper,  all tax  refunds  and rights to receive tax
refunds, bonds, rights of indemnification, contribution and subrogation, leases,
computer tapes, programs and software, deposits and claims against third parties
of every kind or nature,  investment  securities,  notes,  drafts,  acceptances,
letters  of  credit  and  rights to  receive  proceeds  of  letters  of  credit,
instruments and deposit  accounts,  book accounts,  credits and reserves and all
forms of obligations  owing to the Company,  together with all instruments,  all
documents  of title  representing  any of the  foregoing,  and all rights in any
merchandise  or goods which any of the same may represent,  all books,  ledgers,
files and records with respect to any  Collateral  or security  given to Secured
Party  hereunder by the Company,  together with all right,  title,  security and
guaranties with respect to each  Receivable,  including any right of stoppage in
transit.

               (viii)  "Uniform  Commercial  Code" means the Uniform  Commercial
Code as in effect in New York  State  from time to time  during the term of this
Agreement.

          2.   Security Interest.

          (a) Grant of Security.  As security for the  Obligations,  the Company
grants to Secured  Party a first lien priority  security  interest in all of the
Company's right,  title and interest,  whether now existing or hereafter arising
or acquired, in and to the Collateral.

<PAGE>

          (b) Security for  Obligations.  This Agreement  secures the payment or
performance  of all now existing or  hereafter  arising  Obligations  to Secured
Party, whether primary or secondary, direct or indirect, absolute or contingent,
joint or several,  secured or unsecured, due or not, liquidated or unliquidated,
arising by operation of law or otherwise.

          (c) The Company  Remains  Liable.  This Agreement shall not affect the
Company's  liability to perform all of its  obligations  under the  transactions
giving rise to the  Obligations.  The  exercise  by Secured  Party of any of the
rights hereunder shall not release the Company from any of its obligations under
the transactions giving rise to the Obligations, which shall remain unchanged as
if this  Agreement  had not been  executed.  Secured  Party  shall  not have any
obligation or liability under the transactions giving rise to the Obligations by
reason of this Agreement,  nor shall Secured Party be required to perform any of
the  obligations  of the Company  thereunder or to take any action to collect or
enforce any claim for payment assigned hereunder.

          (d)  Continuing Agreement.  This Agreement shall create a continuing 
security interest in the Collateral and shall remain in full force and effect 
until payment in full of the Obligations.

          3.   The Company's Title; Liens and Encumbrances.

          (a) The Company represents and warrants that the Company is, or to the
extent that this Agreement  covers  Collateral  that is to be acquired after the
date  hereof,  will  be,  the  owner  of the  Collateral,  having  good and
marketable title thereto, free from any and all Liens, except as permitted under
Section 9.02 of the Credit  Agreement.  The Company will not create or assume or
permit to exist any Lien on or against the Collateral  except as created by this
Agreement  or as  permitted by the Credit  Agreement.  The Company  shall notify
Secured Party promptly of any such other claim, lien, security interest or other
encumbrance  made or  asserted  against  the  Collateral  and  will  defend  the
Collateral against any such claim, lien, security interest or other encumbrance.

          (b) With respect to any personal  property  that the Company  acquires
which is subject to a purchase  money lien  permitted  under Section 9.02 of the
Credit  Agreement,  if the terms of such acquisition  prohibit the Liens granted
hereby in favor of Secured  Party,  Secured Party shall execute and deliver such
instruments  as the  purchase  money lender may  reasonably  require to waive or
release Secured Party's security  interest in such item of personal property for
so long as the purchase money security interest is in effect.

          4.   Representations, Warranties and Covenants.

          The Company represents and warrants to Secured Party as follows:

          (a) The Company has no place of business,  offices where the Company's
books of account and records are kept,  or places where the  Collateral is used,
stored or  manufactured,  except as set forth on Schedule I annexed hereto.  The
Company  shall at all times  maintain  its records as to the  Collateral  at its
chief  place of  business  at the  address  referred  to on Schedule I and at no
other.  Except as permitted  hereby,  the Company shall not store, use or locate
any of the  Collateral  at any place  other  than as listed on  Schedule  I. The
Company  shall  not  establish  any new  office or place of  business,  move its
principal  office or move any of the Collateral to any location other than those
locations  existing  on the date  hereof and listed on Schedule I unless in each
case the  Company  gives  Secured  Party 20  Banking  Days  prior  notice of its
intention  to do so,  identifying  the new  location  and  providing  such other
information as Secured Party deems reasonably necessary, and delivers to Secured
Party financing  statements and such other  documentation  in form and substance
satisfactory  to  Secured  Party  to  preserve  its  security  interest  in  the
Collateral.

<PAGE>

          (b) The Company  currently  uses the business or trade names set forth
on  Schedule  I, and has not used any other  trade  names  during  the last five
years, except as set forth on Schedule I. The Company shall not make any changes
in,  additions  to, or  deletions  from the  business or trade names used by the
Company  for  billing  purposes,  except  in  connection  with  any  Acquisition
permitted under Section 9.07 of the Credit Agreement.

          (c) The  Collateral is now and will be used in the Company's  business
and not for personal, family, household or farming use.

          (d) The  Company has paid and,  except as provided in Section  8.10 of
the Credit Agreement,  will continue to pay or otherwise provide for the payment
when due, of all taxes,  assessments or contributions required by law which have
been or may be assessed or levied  against the Company,  whether with respect to
any of  the  Collateral,  to any  wages  or  salaries  paid  by the  Company  or
otherwise,  and will deliver satisfactory proof of such payment to Secured Party
on demand.

          (e)  Assuming  it has been duly  executed  by  Secured  Party and that
Secured Party has filed the forms UCC-1  referred to on Schedule I, the security
interests and liens granted to Secured Party under this  Agreement  hereof shall
constitute valid,  perfected and first priority security interests in and to the
Collateral in each case  enforceable  against all third parties and securing the
payment of all Obligations purported to be secured thereby,  subject only to the
Liens permitted pursuant to Section 9.02 of the Credit Agreement.

          5.   Perfection of Security Interest.

          The Company shall execute all such  financing  statements  pursuant to
the Uniform  Commercial  Code or other notices  necessary or  appropriate  under
applicable  law,  including  the Federal  Assignment of Claims Act and any state
motor vehicles  registration statute, as Secured Party may require, each in form
satisfactory  to  Secured  Party.  The  Company  also  shall  pay all  filing or
recording costs with respect thereto,  and all costs of filing or recording this
Agreement or any other  agreement or document  executed and  delivered  pursuant
hereto or to the Obligations  (including the cost of all federal, state or local
mortgage,  documentary,  stamp or other  taxes),  in each  case,  in all  public
offices where filing or recording is deemed by Secured Party to be
necessary or  desirable.  The Company  authorizes  Secured Party to (a) file any
Uniform  Commercial Code financing  statements or amendments thereto without the
signature  of the  Company  or by  signing  of the  Company's  name to any  such
financing  statements  as its  attorney-in-fact,  (b) file notices of assignment
pursuant to the Federal  Assignment  of Claims Act,  (c) file  applications  for
certificates  of title or (d) take all other action which Secured Party may deem
necessary or  desirable  to perfect or otherwise  protect the liens and security
interests created hereunder and to obtain the benefits of this Agreement.

          6.   General Covenants.

          The Company  shall have the  following  obligations  to Secured  Party
until full payment and complete  performance of all  Obligations and termination
of this Agreement.

<PAGE>

          (a) Furnish Secured Party from time to time at Secured Party's request
with such  statements  and schedules  further  identifying  and  describing  the
Collateral  and all  locations  thereof  in such  detail  as  Secured  Party may
reasonably require.

          (b) Advise  Secured  Party  promptly,  in  sufficient  detail,  of any
substantial  change in the  Collateral  or of the  occurrence of any event which
would effect the value of the Collateral or Secured  Party's  security  interest
therein.

          (c)  Comply  with all  acts,  rules,  regulations  and  orders  of any
legislative,  administrative  or  judicial  body or official  applicable  to the
Company or any Collateral or to the operation of the Company's  business  except
where the  failure to comply (i) is  non-material  and (ii) has no effect on the
value of the  Collateral  or on the  ability of Secured  Party to  exercise  its
rights and remedies hereunder.

          (d) Perform and observe all  covenants,  restrictions  and  conditions
contained in the Loan Documents and any other agreement or document  executed in
connection  with the Obligations as though the same were fully set forth in this
Agreement.

          (e)  Promptly  execute  and  deliver  to Secured  Party  such  further
agreements or other  instruments  and take such further action from time to time
as Secured  Party may deem  necessary  or  appropriate  to  perfect,  protect or
enforce its  security  interests  in the  Collateral  or otherwise to effect the
intent of this Agreement.

          (f) Keep or cause the  Collateral to be kept in good working order and
marketable condition, ordinary wear and tear excepted.

          (g)  Insure  the  Collateral  against  loss or damage by fire or other
casualties,  providing extended coverage for theft, burglary,  bodily injury and
such other risks, with such companies and in such amounts,  as Secured Party may
require from time to time.

          (h) Use the Collateral for lawful purposes only in conformity with all
laws, rules and regulations.

          (i)  Allow Secured Party and its agents, (i) at all reasonable times 
on reasonable notice,  to inspect any of the  Collateral and to examine and make
extracts from the Company's  books and records  relating to the  Collateral and 
(ii) once yearly at the Company's  expense and, if requested,  more  frequently 
at Secured Party's expense, to conduct an audit of the Collateral.

          (j) Not assign,  sell,  mortgage,  lease,  transfer,  pledge,  grant a
security  interest in or Lien upon, or otherwise  dispose of or abandon any part
or all of the Collateral without the prior consent of Secured Party,  except for
the sale from time to time in the ordinary  course of business of the Company of
such items of Collateral as may constitute part of the business  Inventory,  and
except as provided in Sections 9.02 or 9.04 of the Credit Agreement.

          (k) Cause each mortgagee of any real property owned by the Company and
each  landlord  of  all  real  property  leased  by the  Company  to  waive,  by
instruments  satisfactory in form and substance to Secured Party,  any rights in
the  Collateral,  and to  acknowledge  the right of  Secured  Party to enter the
premises to remove Collateral.

          (l)  Not  take  or omit to take  any  action  adversely  affecting  or
impairing the security interest in the Collateral in favor of Secured Party.

<PAGE>

          7.   Assignment of Insurance.

          At or prior to the date hereof,  the Company  shall deliver to Secured
Party  certificates  of the issuing  companies  with  respect to all policies of
insurance maintained for or by the Company covering or in any manner relating to
the  Collateral,  in form and substance  satisfactory  to Secured Party,  naming
Secured  Party as an  additional  insured party as its interests may appear with
respect  to  liability  coverage  and as loss payee  with  respect to  property,
casualty and extended  insurance  coverage,  and indicating  that no such policy
will be  terminated  or reduced in coverage  or amount  without at least 30 days
prior  written  notice from the  insurer to Secured  Party.  The Company  hereby
assigns to Secured Party all amounts,  including  returned or unearned premiums,
which may become  payable  under or in respect of any such policy of  insurance,
and directs each  insurance  company  issuing any such policy to make payment of
sums directly to Secured Party. The Company hereby appoints Secured Party as its
attorney-in-fact  with authority to endorse any check or draft  representing any
such  payment  and to execute  any proof of claim,  subrogation  receipt and any
other  document  required  by such  insurance  company in  connection  with such
payment,  and upon the occurrence of any Event of Default, to cancel,  assign or
surrender  any such  policies.  All such sums received by Secured Party shall be
applied by Secured Party to  satisfaction  of the  Obligations or, to the extent
that such sums represent unearned premiums in respect of any policy of insurance
on the Collateral refunded by reason of cancellation, toward payment for similar
insurance  protecting the respective interests of the Company and Secured Party,
or as otherwise required by applicable law.

          8.   Fixtures.

          Except to the extent that  fixtures are included in the  definition of
Collateral,  it is the intent of the Company and Secured  Party that none of the
Collateral is or shall be regarded as fixtures,  as that term is used or defined
in Article 9 of the Uniform  Commercial  Code,  and the Company  represents  and
warrants  that it has not made and is not bound by any lease or other  agreement
which is inconsistent with such intent. If any Collateral or any part thereof is
or becomes  attached  or affixed to any real  estate,  upon  request the Company
shall  furnish  Secured  Party  with  a  disclaimer  or  subordination  in  form
satisfactory  to Secured  Party of the holder of any interest in the real estate
to which the  Collateral  is attached or  affixed,  together  with the names and
addresses of the record owners of and all other persons having  interest in such
real estate.

          9.   Collections.

          (a) Except as  provided  herein,  the  Company may collect all checks,
drafts, cash or other remittances (i) in payment of any of its Receivables, (ii)
in payment of any Inventory sold,  transferred,  leased or otherwise disposed of
or (iii) in payment of or in account of its accounts,  contracts, notes, drafts,
acceptances  and  all  other  forms  of  obligations  relating  to  any  of  the
Receivables or Inventory so sold,  transferred,  or leased or otherwise disposed
of. All of the foregoing  amounts so collected  after the occurrence of an Event
of Default  shall be held in trust by the  Company  for and as the  property  of
Secured Party,  and shall not be commingled with other funds,  money or property
of the Company.

<PAGE>

          (b) If  requested  by Secured  Party upon or after an Event of Default
occurs,  the Company  will  immediately  following  receipt of all such  checks,
drafts,  cash or other  remittances  in payment of any of its  Receivable  or in
payment for any Inventory sold,  transferred,  leased or otherwise  disposed of,
deliver any such items to Secured Party  accompanied  by a remittance  report in
form supplied or approved by Secured Party. The Company shall deliver such items
in the same form received,  endorsed or otherwise  assigned by the Company where
necessary to permit collection of such items.

          (c) If  requested  by Secured  Party upon or after an Event of Default
occurs,  the  Company  will  promptly  notify  Secured  Party of the  return  or
rejection  of any goods  represented  by any  Receivables,  and shall  forthwith
account  therefor to Secured Party in cash. Until such payment has been received
by Secured Party,  the Company shall hold all such goods separate and apart,  in
trust for and subject to Secured Party's security interest, and Secured Party is
authorized to sell,  for the Company's  account and at the Company's  sole risk,
all or any part of such goods.

          (d) In its  discretion,  upon or after an  Event  of  Default  occurs,
Secured  Party may in its name or the  Company's  notify any  account  debtor or
obligor  of  any  account,  contract,   instrument,  chattel  paper  or  general
intangible included in the Collateral to make payment to Secured Party.

          (e) All of the foregoing  remittances shall be applied and credited by
Secured  Party  in  accordance  with the  provisions  of  Section  11(c) of this
Agreement.

          10.  Events of Default.

          The  occurrence  of any  one or  more of the  following  events  shall
constitute  an event of default  ("Event of Default") by the Company  under this
Agreement:

          (a)  if a "Default" or "Event of Default" occurs under the Loan 
Documents or the terms of any agreement executed in connection with the 
Obligations;

          (b)  if at  any  time,  acting  in a  commercially  reasonable  manner
following an audit of the  Collateral,  Secured Party  considers the Obligations
insecure or any part of the Collateral unsafe, insecure or insufficient, and the
Company  does not (i) within five  Banking  Days of notice,  enter into  written
agreement to furnish  other  collateral or make payment on account in the amount
necessary to reduce the  Obligations to the extent  Secured Party  considers the
Obligations insecure or the Collateral unsafe, insecure or insufficient and (ii)
within 30 days of entering into such agreement, fulfill the obligations required
of it thereunder;

          (c)  if  any  obligor,  guarantor  of or  any  party  to  any  of  the
Obligations  or  the  Collateral  (the  same,  excluding  the  Company  and  the
Guarantors, collectively the "Obligors") defaults in the punctual payment of any
sum payable with respect to, or in the  observance or  performance of any of the
terms and conditions of any  Obligations or of any other  agreement  between any
Obligor and Secured Party;

          (d) if any warranty or  representation  made to Secured Party by or on
behalf of the Company,  any  Guarantor or any Obligor is false or  misleading in
any material respect when made or, with respect to the Company, when deemed made
under the terms of the Credit Agreement;

          (e) if there is any loss, theft,  substantial damage to or destruction
of any Collateral,  or the making or filing of any lien,  levy, or execution on,
or seizure, attachment or garnishment of any of the Collateral;

<PAGE>

          (f)  if any Obligor is dissolved or fails to maintain its existence in
good standing under the laws of the states of its formation and qualification;

          (g) if any of the  Obligors  becomes  insolvent  (however  defined  or
evidenced),  makes an  assignment  for the benefit of  creditors,  makes or send
notice of an  intended  bulk  transfer,  if there is  convened  a meeting of the
creditors  or  principal  creditors  of any of the Obligors or if a committee of
creditors is appointed for any of them;

          (h) if there is filed by or against any of the  Obligors  any petition
for any relief under the  bankruptcy  laws of the United States now or hereafter
in  effect  or  under  any  insolvency,  readjustment  of debt,  dissolution  or
liquidation law or statute of any jurisdiction now or hereafter in effect;

          (i)  if the usual business of any of the Obligors shall be terminated 
or suspended;

          (j)  if any proceedings or procedure supplementary to or in 
enforcement of any judgment is commenced against any Obligor or with respect to 
any of their property; or

          (k) if any petition or application to any court is filed by or against
any of the  Obligors for the  appointment  of any receiver or trustee for any of
the Obligors or any part of the property of any of them.

          11.  Rights and Remedies.

          (a) If any Event of Default occurs,  Secured Party  thereafter may, to
the extent permitted by applicable law, without notice to the Company, as to any
or  all of the  Collateral,  by any  available  judicial  procedure  or  without
judicial  process,  take possession of the Collateral and without  liability for
trespass  enter any premises where the Collateral may be located for the purpose
of taking possession of or removing the Collateral,  and generally  exercise any
rights  afforded to a secured party under the Uniform  Commercial  Code or other
applicable law. Secured Party shall have the right to sell, otherwise dispose of
all or any  part of the  Collateral,  whether  in its  then  condition  or after
further  preparation or  processing,  either at public or private sale or at any
broker's  board,  in lots or in bulk,  for cash or for  credit,  with or without
warranties  or  representations,  and upon  such  terms and  conditions,  all as
Secured Party in its sole discretion may deem advisable, and Secured Party shall
have the right to purchase at any such sale.  If any  Collateral  shall  require
rebuilding,  repairing,  maintenance,  preparation,  or is in  process  or other
unfinished state, Secured Party may do so to put the Collateral in such saleable
or disposable form as it shall deem appropriate. At Secured Party's request, the
Company shall  assemble the Collateral and make it available to Secured Party at
places which Secured Party shall  select,  whether at the Company's  premises or
elsewhere,  and make  available  to  Secured  Party,  without  rent,  all of the
Company's  premises and  facilities  for the purpose of Secured  Party's  taking
possession  of,  removing or putting the  Collateral  in saleable or  disposable
form. If any of the Collateral consists of motor vehicles, Secured Party may use
the Company's license plates.

<PAGE>

          (b) Any sale,  lease or other  disposition  of Collateral  may be made
without demand for  performance or notice of  advertisement  except that,  where
applicable law requires  reasonable  notice of sale or other  disposition,  five
days notice by  overnight  courier or personal  delivery,  to the Company of the
place and time of any public  sale or of the time at which any  private  sale or
other intended  disposition  is to be made,  shall be deemed  reasonable  notice
thereof.  Notwithstanding the foregoing,  if any of the Collateral is perishable
and may be materially  diminished in value during such five day period,  Secured
Party shall provide the Company with such shorter notice as it deems  reasonable
in the circumstances.

          (c) The  proceeds  of any  sale,  lease  or other  disposition  of the
Collateral  shall  be  applied  first  to the  expenses  of  retaking,  storing,
processing  and preparing for sale,  selling and the like and to the  reasonable
attorneys'  fees  and  legal  expenses   incurred  by  Secured  Party,  next  to
satisfaction  of the  Obligations,  and then to the payment of any other amounts
required by  applicable  law,  after which  Secured  Party shall  account to the
Company for any surplus.  If the proceeds are insufficient to pay all amounts to
which Secured Party is entitled, the Company shall be liable for the deficiency,
together with interest thereon,  at the rate prescribed in the agreements giving
rise to the  Obligations,  and the reasonable fees of any attorneys  employed by
Secured Party to collect such deficiency. The Company waives all claims, damages
and demands  against  Secured  Party arising out of the  repossession,  removal,
retention or sale of the Collateral.

          (d)  Secured  Party  has  no  obligation  to  preserve  rights  to any
Collateral against prior parties,  to proceed first against any Collateral or to
marshall any  collateral  of any kind for the benefit of any other  creditors of
the Company or any other Person.  Upon the occurrence of an Event of Default and
as long as it  continues,  Secured  Party shall have a license and right to use,
without charge, the Company's labels, patents, copyrights, and all its rights of
use of any name, trade secrets, trade names,  trademarks and advertising matter,
or any property of a similar nature pertaining to the Collateral,  in completing
production of, advertising for sale, and selling any Collateral,  and the 
Company's  rights under all licenses and any franchise, sales or distribution 
agreements shall inure to Secured Party's benefit.

          12.  Costs and Expenses.

          The Company  shall pay on demand any and all of Secured  Party's fees,
costs and expenses, including the reasonable attorneys' fees and legal expenses,
paid or  incurred  in  connection  with the  filing or  recording  of  financing
statements  and  other  documents  in  public  offices  (including  all taxes in
connection  therewith),  the  payment  or  discharge  of  any  taxes,  insurance
premiums,  encumbrances or otherwise  protecting,  maintaining or preserving the
Collateral and Secured Party's  security  interest  therein,  or in defending or
prosecuting  any  actions  or  proceedings  arising  out  of or  related  to the
transaction  to which this  Agreement  relates.  Until so paid, all such amounts
shall be  added to the  principal  amount  of the  Obligations  and  shall  bear
interest  at  the  rate  prescribed  in  the  agreements   giving  rise  to  the
Obligations.

<PAGE>

          13.  Power of Attorney.

          (a) The  Company  authorizes  Secured  Party  and  does  hereby  make,
constitute and appoint Secured Party, and any officer or agent of Secured Party,
with  full   power  of   substitution,   as  the   Company's   true  and  lawful
attorney-in-fact,  with power, in its own name or in the name of the Company (a)
to endorse any notes,  checks,  drafts,  money orders,  or other  instruments of
payment  (including  payments  payable  under or in  respect  of any  policy  of
insurance) in respect of the Collateral that may come into possession of Secured
Party,  (b) to sign and endorse any invoice,  freight or express  bill,  bill of
lading,  storage or warehouse  receipts,  drafts against  debtors,  assignments,
verifications and notices in connection with accounts, and other documents
relating to  Collateral,  (c) to pay or  discharge  any taxes,  liens,  security
interest or other  encumbrances  at any time  levied or placed on or  threatened
against the Collateral, (d) to demand, collect, receipt for, compromise,  settle
and sue for monies due in respect of the  Collateral,  (e) to receive,  open and
dispose of all mail  addressed  to the  Company  and to notify  the Post  Office
authorities  to change the address for delivery of mail addressed to the Company
to such address as Secured  Party may designate and (f) generally to do all acts
and things which Secured Party deems necessary to protect,  preserve and realize
upon the Collateral and Secured Party's security interest  therein.  The Company
hereby  approves and ratifies all acts of said  attorney or designee,  who shall
not be  liable  for any acts of  commission  or  omission,  nor for any error or
judgment or mistake of fact or law except for its own gross negligence or wilful
misconduct.  This power of attorney  shall be  irrevocable as long as any of the
Obligations shall be outstanding.

          (b) Secured  Party  shall not  exercise  any rights  under or take any
actions  pursuant to the foregoing  power of attorney unless an Event of Default
has occurred.

          14.  Notices.

          All notices, consents,  approvals and other communications required or
permitted  to be given to a party under this  Agreement  shall be in writing and
shall be  delivered  personally  to the party,  sent by any  national  overnight
courier or mailed first class certified mail, return receipt  requested,  to the
party at the address indicated on page one, to the attention of Joseph Burns for
Secured  Party and to the  attention of Margaret  Krumholz for the Company.  Any
item delivered in accordance with the provisions of this Section shall be deemed
to have  been  delivered  (i) on the  date  of  personal  delivery,  (ii) on the
business day following the date sent by overnight  courier or (iii) on the fifth
day following the date on which it was so mailed, as the case may be.

<PAGE>

          15.  Other Security.

          Secured Party's rights and remedies hereunder shall not be diminished,
impaired or otherwise  affected if the Obligations are now or hereafter  secured
by property  other than the  Collateral,  or by the  guarantee,  endorsement  or
property  of any other  Person.  Secured  Party shall have the right in its sole
discretion to take any other action with respect thereto,  concurrently  with or
separately from any action hereunder.

          16.  Further Security.

          The Company grants,  pledges and assigns to Secured Party a continuing
lien on, security interest in and rights of set-off in all money, securities and
other  property  of  the  Company,   and  the  proceeds  thereof,   actually  or
constructively  held or  received by or for Secured  Party or any  Affiliate  of
Secured Party.  The Company  authorizes  Secured Party to deliver a copy of this
Agreement to give others notice of the Company's transfer of a security interest
in such property. Upon or after an Event of Default, Secured Party may from time
to time without notice apply all or part of such moneys,  securities,  property,
proceeds,  deposits  or credits  to any of the  Obligations  in such  amounts as
Secured Party may elect in its discretion,  even though the Obligations may then
be contingent or unmatured, whether or not the Collateral is adequate security.

          17.  Miscellaneous.

          (a) Beyond the safe custody thereof,  Secured Party shall have no duty
as to the  collection of any  Collateral in its  possession or control or in the
possession  or control of any agent or nominee of Secured  Party,  or any income
thereon or as to the  preservation  of rights against prior parties or any other
rights pertaining thereto.

          (b) No course of dealing  between the Company  and Secured  Party,  or
Secured Party's  failure to exercise or delay in exercising any right,  power or
privilege  hereunder  shall operate as a waiver  thereof.  Any single or partial
exercise of any right, power or privilege hereunder shall not preclude any other
or  further  exercise  thereof  or the  exercise  of any other  right,  power or
privilege.

          (c) All of Secured  Party's  rights and  remedies  with respect to the
Collateral,  whether established hereby or by any other agreements,  instruments
or  documents or by law,  shall be  cumulative  and may be  exercised  singly or
concurrently.

          (d) This Agreement may be amended or modified,  and a provision hereof
may be waived, only by a writing signed by all of the parties hereto.

          (e) The provisions of this Agreement are severable,  and if any clause
or provision shall be held invalid or  unenforceable  in whole or in part in any
jurisdiction,  then such invalidity or  unenforceability  shall affect only such
clause or provision,  or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other  jurisdiction,  or any other
clause or provision of this Agreement in any jurisdiction.

          (f) The benefits of this  Agreement  shall inure to the benefit of the
successors  and  assigns of Secured  Party.  The rights and  obligations  of the
Company  under this  Agreement  shall not be assigned or  delegated  without the
prior consent of Secured Party.

          (g) This  Agreement  shall be governed by and  construed in accordance
with the laws of the State of New York,  without regard to its conflicts of laws
principles.

<PAGE>

          (h) The Company hereby irrevocably  submits to the jurisdiction of any
New York  State or United  States  Federal  court  sitting  in Suffolk or Nassau
County  over  any  action  or  proceeding  arising  out of or  relating  to this
Agreement,  and the Company hereby irrevocably agrees that all claims in respect
of such action or proceeding  may be heard and determined in such New York State
of Federal  court.  To the extent  permitted  by  applicable  law,  the  Company
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing (by  certified or  registered  mail) of copies of such
process to it. The Company  agrees  that a final  judgment in any such action or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit  on the  judgment  or any  other  manner  provided  by law.  To the  extent
permitted by applicable  law, the Company  waives any objection to venue in such
State of Federal  Court and any  objection  to an action or  proceeding  in such
State of Federal Court on the basis of forum non conveniens.  The Company agrees
that any action or  proceeding  brought  against  Secured Party shall be brought
only in New York  State or United  States  Federal  court  sitting in Suffolk or
Nassau County.

          (i)  THE PARTIES WAIVE ANY RIGHT TO A JURY TRIAL.

          (j) The Company  shall  indemnify  Secured  Party and hold it harmless
from and against any and all claims, damages, judgments,  liabilities, costs and
expenses ("Loss") (including reasonable fees and disbursements of counsel) which
may be incurred by or  asserted  against  Secured  Party in  connection  with or
arising  out of  Secured  Party's  exercise  of its rights or  assertion  of its
security  interest under the provisions of this Agreement,  any Loan Document or
any agreement relating to the Obligations which permit Secured Party to collect,
settle or adjust  Receivables or to deal with  Collateral in any way,  except to
the  extent  that  such  Loss  resulted  from the gross  negligence  or  without
misconduct of Secured Party. This indemnity  includes Secured Party's activities
in connection  with the  realization,  repossession,  safeguarding,  insuring or
other  protection  of  Collateral or  collecting,  perfecting or protecting  the
Secured  Party's  liens  and  security  interests  hereunder  or under  any Loan
Document.

          IN WITNESS WHEREOF, the parties have executed this Agreement.

KeyBank National Association            Disc Graphics, Inc.

By:                                     By:
    Name:   Joseph Burns                Name:   Donald Sinkin
    Title:  Vice President              Title:  President and Chief
                                                Executive Officer

<PAGE>




                                   SCHEDULE I

                                       TO

                               DISC GRAPHICS, INC.


                               SECURITY AGREEMENT


                                Principal Office*

                                10 Gilpin Avenue
                            Hauppauge, New York 11788



                      Other Offices Where Records Are Kept*

                  25 Hoffman Avenue, Hauppauge, New York 11788
                 3116 Vanowen Street, Burbank, California 91505



                           Locations Where Collateral
                           Is Stored, Used or Located*

                   10 Gilpin Avenue, Hauppauge, New York 11788
                 198 Greenpond Road, Rockaway, New Jersey 07866
                  25 Hoffman Avenue, Hauppauge, New York 11788
                 3116 Vanowen Street, Burbank, California 91505



                            Business and Trade Names
                                 Used by Debtor


          Current Names*                Discontinued Names
          ---------------               ------------------    
          Disc Graphics                 Four Seasons Litho



* Forms UCC-1 shall be filed in all  jurisdictions  where  Debtor has offices or
stores,  uses or places  Collateral,  under  each  actual and trade name used by
Debtor.