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                                                                   Exhibit 10.48


                     AMENDED AND RESTATED SECURITY AGREEMENT


      THIS AMENDED AND RESTATED SECURITY AGREEMENT is made as of February 18,
1997, by ADFLEX SOLUTIONS, INC., a Delaware corporation, ("Grantor"), THE FIRST
NATIONAL BANK OF BOSTON, a national banking association ("FNBB") and each other
lender whose name is set forth on the signature pages of that certain Credit
Agreement (as defined below) or which may hereafter execute and deliver an
instrument of assignment with respect to the Credit Agreement (each a "Bank" and
collectively, "Banks"), and FNBB as agent for Banks under the Credit Agreement
("Secured Party").

                                    RECITALS

      A. Grantor, Banks and Agent desire to amend and restate in its entirety
that certain Security Agreement dated as of June 18, 1996 (the "Original
Security Agreement"), by and among Grantor, Banks and Agent. Pursuant to that
certain Credit Agreement dated as of October 31, 1995 (as amended by that
certain First Amendment to Credit Agreement dated as of December 29, 1995, that
certain Second Amendment to Credit Agreement dated as of June 18, 1996 and that
certain Third Amendment to Credit Agreement (the "Third Amendment") dated as of
the date hereof, and as the same may be further amended, modified or
supplemented or restated from time to time, the "Credit Agreement"), by and
among Grantor, Agent and Banks named therein, Banks have agreed to make certain
advances of money and to extend certain financial accommodations to Grantor in
the amounts and manner set forth in the Credit Agreement (collectively, the
"Loans").

      B. Grantor has requested that Secured Party and the Banks agree to amend
certain provisions of the Credit Agreement pursuant to the Third Amendment.

      C. It is a condition precedent to the effectiveness of the Third Amendment
that Grantor shall have executed and delivered to Agent and Banks this Amended
and Restated Security Agreement whereby Grantor shall have granted to Agent on
behalf of Banks a security interest in the Collateral (as hereinafter defined)
securing Grantor's obligations under the Credit Agreement.

                                    AGREEMENT

      NOW, THEREFORE, in order to induce Banks to make the Loans and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, Grantor hereby represents,
warrants, covenants and agrees as follows:

      1. DEFINED TERMS. Unless otherwise defined herein, (i) the terms defined
in the Credit Agreement are used herein as therein defined and (ii) the
following terms shall have the following meanings (such meanings being equally
applicable to both the singular and plural forms of the terms defined):


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      "Account Debtor" means any "account debtor," as such term is defined in
section 9105(1)(a) of the UCC.

      "Accounts" means any "account," as such term is defined in section 9106 of
the UCC, now owned or hereafter acquired by Grantor or in which Grantor now
holds or hereafter acquires any interest and, in any event, shall include,
without limitation, all accounts receivable, book debts and other forms of
obligations (other than forms of obligations evidenced by Chattel Paper,
Documents or Instruments) now owned or hereafter received or acquired by or
belonging or owing to Grantor (including, without limitation, under any trade
name, style or division thereof) whether arising out of goods sold or services
rendered by Grantor or from any other transaction, whether or not the same
involves the sale of goods or services by Grantor (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Grantor's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Grantor's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Grantor under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Grantor (whether or not yet earned by performance on the
part of Grantor or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.

      "Chattel Paper" means any "chattel paper," as such term is defined in
section 9105(1)(b) of the UCC, now owned or hereafter acquired by Grantor or in
which Grantor now holds or hereafter acquires an interest.

      "Collateral" shall have the meaning assigned to such term in SECTION 2 of
this Security Agreement.

      "Contracts" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Grantor may now or hereafter have any right,
title or interest, including, without limitation, any and all right, title and
interest of Grantor under any customer agreements, supply agreements,
distribution agreements, rebate agreements, processing agreements, warehousing
agreements or royalty agreements and shall include, without limitation, with
respect to an Account, any agreement relating to the terms of payment or the
terms of performance thereof.

      "Copyright License" means any written agreement granting any right to use
any Copyright or Copyright registration now owned or hereafter acquired by
Grantor or in which Grantor now holds or hereafter acquires any interest.

      "Copyrights" means all of the following now owned or hereafter acquired by
Grantor or in which Grantor now holds or hereafter acquires any interest: (i)
all copyrights, whether registered or unregistered, held pursuant to the laws of
the United States, any State thereof or


                                       2.
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of any other country; (ii) registrations, applications and recordings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country; (iii) any continuations,
renewals or extensions thereof; and (iv) any registrations to be issued in any
pending applications.

      "Documents" means any "documents," as such term is defined in section
9105(1)(f) of the UCC, now owned or hereafter acquired by Grantor or in which
Grantor now holds or hereafter acquires an interest.

      "Equipment" means any "equipment," as such term is defined in section
9109(2) of the UCC, now or hereafter owned or acquired by Grantor or in which
Grantor now holds or hereafter acquires an interest, and, in any event, shall
include, without limitation, all machinery, equipment, furnishings, vehicles and
computers and other electronic data-processing and other office equipment, any
and all additions, substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.

      "Fixtures" means "fixtures," as such term is defined in section 9313(1)(a)
of the UCC, now or hereafter owned or acquired by Grantor or in which Grantor
now holds or hereafter acquires any interest and, in any event, shall include,
without limitation, regardless of where located, all of the fixtures, systems,
machinery, apparatus, equipment and fittings of every kind and nature whatsoever
and all appurtenances and additions thereto and substitutions or replacements
thereof, now or hereafter attached or affixed to or constituting a part of, or
located in or upon, real property wherever located, including, without
limitation, all heating, electrical, mechanical, lighting, lifting, plumbing,
ventilating, air-conditioning and air cooling, refrigerating, food preparation,
incinerating and power, loading and unloading, communication, sprinkler and
other fire prevention and extinguishing, fixtures, systems, machinery, apparatus
and equipment, any signs, escalators, elevators, boilers or switchboards, and
all engines, motors, dynamos, machinery, pipes, pumps, tanks, conduits and ducts
constituting a part of any of the foregoing, together with all right, title, and
interest of Grantor in and to all extensions, improvements, betterments,
renewals, substitutes, and replacements of, and all additions and appurtenances
to any of the foregoing property, and all conversions of the security
constituted thereby, immediately upon any acquisition or release thereof or any
such conversion, as the case may be.

      "General Intangibles" means any "general intangibles," as such term is
defined in section 9106 of the UCC, now owned or hereafter acquired by Grantor
or in which Grantor now holds or hereafter acquires an interest, and, in any
event, shall include, without limitation, all right, title and interest which
Grantor may now or hereafter have in or under any Contract, all customer lists,
Copyrights, Trademarks, Patents, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
recipes, experience, processes, models, drawings, materials and records,
goodwill (including, without limitation, the goodwill associated with any
Trademark,


                                       3.
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Trademark registration or Trademark licensed under any Trademark License),
claims in or under insurance policies, including unearned premiums,
uncertificated securities, deposit accounts (including as defined in Section
9105(e) of the UCC), rights to receive tax refunds and other payments and rights
of indemnification.

      "Instruments" means any "instrument," as such term is defined in section
9105(1)(i) of the UCC now owned or hereafter acquired by Grantor or in which
Grantor now holds or hereafter acquires any interest, including, without
limitation, all notes, certificated securities, and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.

      "Intellectual Property" means all intellectual property of any kind or
nature, including, without limitation, all Copyrights, Trademarks, Patents,
trade secrets, customer lists, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, software, data bases, data, skill,
expertise, recipes, experience, processes, models, drawings, materials and
records.

      "Inventory" means any "inventory," as such term is defined in section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by
Grantor or in which Grantor now holds or hereafter acquires any interest and, in
any event, shall include, without limitation, all inventory, merchandise, goods
and other personal property which are held by or on behalf of Grantor for sale
or lease or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or consumed or
to be used or consumed in Grantor's business, or the processing, packaging,
promotion, delivery or shipping of the same, and all finished goods, whether or
not such inventory is listed on any schedules, assignments or reports furnished
to Agent and Banks from time to time and whether or not the same is in transit
or in the constructive, actual or exclusive occupancy or possession of Grantor
or is held by Grantor or by others for Grantor's account, including, without
limitation, all goods covered by purchase orders and contracts with suppliers
and all goods billed and held by suppliers and all inventory which may be
located on premises of Grantor or of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents or other Persons.

      "License" means any Copyright License, Patent License, Trademark License
or other license of rights or interests now held or hereafter acquired by
Grantor or in which Grantor now holds or hereafter acquires an interest, and any
renewals or extensions thereof.

      "Lien" means any mortgage, pledge, security interest, lien or other charge
or encumbrance, including the lien or retained security title of a conditional
vendor, upon or with respect to any property or assets.

      "Patent License" means any written agreement granting any right with
respect to any invention on which a Patent is in existence, now owned or
hereafter acquired by Grantor or in which Grantor now holds or hereafter
acquires an interest.


                                       4.
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      "Patents" means all of the following now owned or hereafter acquired by
Grantor or in which Grantor now holds or hereafter acquires any interest: (i)
all letters patent of the United States or any other country, all registrations
and recordings thereof, and all applications for letters patent of the United
States or any other country, including, without limitation, registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State thereof or any
other country; (ii) all reissues, continuations, continuations-in-part or
extensions thereof; (iii) all petty patents, divisionals, and patents of
addition; and (iv) all patents to issue in such applications.

      "Permitted Liens" means Liens or encumbrances permitted by SECTION 6.4 of
the Credit Agreement.

      "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, firm, joint stock
company, estate, entity or governmental agency.

      "Proceeds" means "proceeds," as such term is defined in section 9306(1) of
the UCC, and, in any event, shall include, without limitation, (i) any and all
Accounts, Chattel Paper, Instruments, cash or other forms of money or currency
or other proceeds, payable to Grantor from time to time in respect of the
Collateral, (ii) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to Grantor from time to time with respect to any of the
Collateral, (iii) any and all payments (in any form whatsoever) made or due and
payable to Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), (iv) any claim of Grantor against
third parties (a) for past, present or future infringement of any Patent or
Patent License, (b) for past, present or future infringement of any Copyright,
or (c) for past, present or future infringement or dilution of any Trademark or
Trademark License or for injury to the goodwill associated with any Trademark,
Trademark registration or Trademark licensed under any Trademark License, and
(v) any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral or any Contract.

      "Secured Obligations" means all loans, advances, debts, liabilities and
Obligations, for monetary amounts owed by Grantor to Agent or Banks, or to Agent
on behalf of Banks, whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or noncontingent, and all covenants and
duties regarding such amounts, of any kind or nature, present or future,
evidenced by the Loan Documents. This term includes, without limitation, all
principal, interest (including interest that accrues after the commencement of a
case against Grantor or any affiliate of Grantor under the Bankruptcy Code),
fees, including, without limitation, any and all closing fees, prepayment fees,
commitment fees, loan fees, agent fees and attorneys' fees and any and all other
fees, expenses, costs or other sums chargeable to Grantor under any of the Loan
Documents.


                                       5.
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      "Trademark License" means any written agreement granting any right to use
any Trademark or Trademark registration now owned or hereafter acquired by
Grantor or in which Grantor now holds or hereafter acquires an interest.

      "Trademarks" means all of the following now owned or hereafter acquired by
Grantor or in which Grantor now holds or hereafter acquires an interest: (i) any
and all trademarks, trade names, corporate names, business names, trade styles,
service marks, logos, other source or business identifiers, prints and labels on
which any of the foregoing have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any other country or
any political subdivision thereof and (ii) any and all reissues, extensions or
renewals thereof.

      "UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Agent's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.

      2. GRANT OF SECURITY INTEREST. As collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise) of all the Secured Obligations and in order to induce
Agent and Banks to enter into the Third Amendment and to make the Loans in
accordance with the terms and conditions of the Credit Agreement as amended by
the Third Amendment, Grantor hereby assigns and transfers (for the purposes of
the creation of a security interest therein), conveys, mortgages, pledges and
hypothecates to Agent, on behalf of Banks, and hereby grants to Agent, on behalf
of Banks, a security interest in and to all of Grantor's right, title and
interest in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):

            (a)   All Accounts of Grantor;

            (b)   All Chattel Paper of Grantor;

            (c)   All Contracts of Grantor;

            (d)   All Documents of Grantor;

            (e)   All Equipment of Grantor;

            (f)   All Fixtures of Grantor;



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            (g)   All General Intangibles of Grantor;

            (h)   All Instruments of Grantor;

            (i)   All Inventory of Grantor;

            (j)   All Licenses of Grantor;

            (k) All property of Grantor held by Agent, or any other party for
whom Agent is acting as agent hereunder, including, without limitation, all
property of every description now or hereafter in the possession or custody of
or in transit to Agent or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of Grantor, or as
to which Grantor may have any right or power;

            (l) All other goods and personal property of Grantor, whether
tangible or intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Grantor and wherever located; and

            (m) To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.

Notwithstanding the foregoing, the term "Collateral" shall not include any
property or rights which are now or hereafter held by Grantor to the extent, and
solely to the extent, that such rights are not assignable or capable of being
encumbered as a matter of law or under written terms of any license or other
agreement applicable thereto (but solely to the extent that such restriction
shall be enforceable or give rise to damages under law) and, provided, further,
that, upon the elimination of any such restriction, such grant of a security
interest shall automatically extend to such Collateral.

      3.    RIGHTS OF AGENT AND BANKS; COLLECTION OF ACCOUNTS.

            (a) Notwithstanding anything contained in this Security Agreement to
the contrary, Grantor expressly agrees that it shall remain liable under each of
its Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder and that it shall
perform all of its duties and obligations thereunder, all in accordance with and
pursuant to the terms and provisions of each such Contract or License. Neither
Agent nor Banks shall have any obligation or liability under any Contract or
License by reason of or arising out of this Security Agreement or the granting
to Agent of a Lien therein or the receipt by Agent or Banks of any payment
relating to any Contract or License pursuant hereto, nor shall Agent or Banks be
required or obligated in any manner to perform or fulfill any of the obligations
of Grantor under or pursuant to any Contract or License, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of any payment
received by it or the sufficiency of any performance by any party under any
Contract or License, or to present or file any claim, or to take any action to
collect or enforce any performance or


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<PAGE>   8
the payment of any amounts which may have been assigned to it, for security
purposes, or to which it may be entitled at any time or times.

            (b) Agent authorizes Grantor to collect its Accounts in a prudent
and businesslike manner, and Agent may, upon the occurrence and during the
continuation of any Event of Default and without notice, limit or terminate such
authority at any time. If required by Agent at any time during the continuation
of any Event of Default, any Proceeds, when first collected by Grantor, received
in payment of any such Account or in payment for any of its Inventory or on
account of any of its Contracts or Licenses shall be promptly deposited by
Grantor in precisely the form received (with all necessary endorsements) in a
special bank account maintained by Agent subject to withdrawal by Agent only, as
hereinafter provided, and until so turned over shall be deemed to be held in
trust by Grantor for and as Agent's property and shall not be commingled with
Grantor's other funds or properties. Such Proceeds, when deposited, shall
continue to be collateral security for all of the Secured Obligations and shall
not constitute payment thereof until applied as hereinafter provided. Agent may,
in its sole discretion, apply, as received, all or a part of the funds on
deposit in said special account to the principal of or interest on, or both, in
respect of any of the Secured Obligations in accordance with the provisions of
SECTION 7(G) hereof, and any part of such funds which Agent elects not so to
apply, or fails to promptly elect to apply, shall be promptly paid over by Agent
to Grantor. If an Event of Default has occurred and is continuing, at the
request of Agent, Grantor shall deliver to Agent all original and other
documents evidencing, and relating to, the sale and delivery of its Inventory
and all original and other documents evidencing and relating to, the performance
of labor or service which created such Accounts, including, without limitation,
all original orders, invoices and shipping receipts.

            (c)   The Agent may at any time, upon the occurrence and during the
continuation of any Event of Default, after first notifying Grantor of its
intention to do so, notify Account Debtors of Grantor, parties to the Contracts
of Grantor, obligors in respect of Instruments of Grantor and obligors in
respect of Chattel Paper of Grantor that the Accounts and the right, title and
interest of Grantor in and under such Contracts, Instruments, and Chattel Paper
have been assigned as collateral security to the Agent, on behalf and for the
benefit of Banks, and that payments shall be made directly to Agent. Upon the
occurrence and during the continuation of any Event of Default and upon the
request of Agent, Grantor shall so notify such Account Debtors, parties to such
Contracts, obligors in respect of such Instruments and obligors in respect of
such Chattel Paper. Upon the occurrence and during the continuation of an Event
of Default, Agent may, in its name, or in the name of others communicate with
such Account Debtors, parties to such Contracts, obligors in respect of such
Instruments and obligors in respect of such Chattel Paper to verify with such
parties, to Agent's satisfaction, the existence, amount and terms of any such
Accounts, Contracts, Instruments or Chattel Paper.

      4. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and warrants
to Agent and Banks that:

            (a) Except for the security interest granted to Agent under this
Security Agreement and other Permitted Liens, Grantor is the sole legal and
equitable owner of each item


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of the Collateral in which it purports to grant a security interest hereunder,
having good and marketable title thereto, free and clear of any and all Liens.

            (b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed by Grantor in favor
of Agent pursuant to this Security Agreement or such as relate to other
Permitted Liens.

            (c) This Security Agreement creates and grants to Agent on behalf of
Banks a legal and valid security interest in and to all of the Collateral in
which Grantor now has rights and will create a legal and valid security interest
in the Collateral in which Grantor later acquires rights, when Grantor acquires
those rights.

            (d) Grantor's chief executive office, principal place of business,
and the place where Grantor maintains its records concerning the Collateral are
presently located at the addresses set forth on the Collateral Information
Certificate attached hereto as the Exhibit and incorporated herein by this
reference (the "Collateral Information Certificate"). The Collateral, other than
deposit accounts, is presently located at the addresses set forth on the
Collateral Information Certificate. Grantor shall not, during the continuance of
this Security Agreement, change such chief executive office or principal place
of business or remove or cause to be removed, except in the ordinary course of
Grantor's business, the Collateral or the records concerning the Collateral from
those premises without prior written notice to Agent.

            (e) All material Collateral of Grantor with respect to which a
security interest must be perfected by the secured party's taking possession
thereof, including, without limitation, Instruments, and all Chattel Paper are
described on the Collateral Information Certificate. All action necessary or
desirable to protect and perfect such security interest in each item set forth
on the Collateral Information Certificate, including, without limitation, the
delivery of all originals thereof to Agent, has been duly taken. The security
interest of Agent in the Collateral listed on the Collateral Information
Certificate is prior in right and interest to all other Liens on such Collateral
and is enforceable as such against creditors of and purchasers from Grantor.

            (f) The amount represented by Grantor to Agent from time to time as
owing by each Account Debtor or by all Account Debtors in respect of the
Accounts of Grantor shall at such time be the correct amount, in all material
respects, actually and unconditionally owing by such Account Debtors thereunder.

            (g) All Copyrights, material Copyright Licenses, Patents, Patent
Licenses, Trademarks and Trademark Licenses owned, held or in which Grantor
otherwise has any rights are listed on the Collateral Information Certificate.

            (h) None of the Patents, Trademarks or Copyrights has been licensed
to any third party, except for Licenses issued in the ordinary course of
business to enable Grantor to conduct its business.


                                       9.
<PAGE>   10
            (i) To the best of Grantor's knowledge, each issued Patent,
Trademark and Copyright is valid, subsisting, unexpired and enforceable, and
Grantor has (i) as soon as practicable after the issuance of each Patent been
using appropriate statutory patent marking practices in connection with its use
of issued Patents; (ii) as soon as practicable after the issuance of each
Trademark registration been using appropriate statutory notice of such
registration in connection with its use of registered Trademarks; and (iii)
placed an appropriate statutory copyright notice on all publicly distributed
copies of copyrighted materials which are material to Grantor's business.

            (j) No holding, decision, or judgment has been rendered in any
action or proceeding limiting, canceling or questioning the validity of or
Grantor's rights in any Patent, Trademark or Copyright and no such action or
proceeding is pending or, to the best of Grantor's knowledge, threatened. To the
best of Grantor's knowledge, there is no existing breach or default under any
License.

            (k) To the best of Grantor's knowledge, the conduct of Grantor's
business does not infringe upon any Patent or similar intellectual property
right owned or controlled by a third party.

            (l) The information contained in the Collateral Information
Certificate attached hereto as the EXHIBIT is true and correct.

      5. COVENANTS. Grantor covenants and agrees with Agent and Banks that from
and after the date of this Security Agreement and until the Secured Obligations
have been performed and paid in full:

            5.1 FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS. At any time and from
time to time, upon the written request of Agent, and at the sole expense of
Grantor, Grantor shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Agent may
reasonably deem desirable to obtain the full benefits of this Security Agreement
and of the rights and powers herein granted, including, without limitation, (a)
using its best efforts to secure all consents and approvals necessary or
appropriate for the assignment to Agent of any Contract or License held by
Grantor or in which Grantor has any rights not heretofore assigned, (b) filing
or cooperating with Agent in filing any financing or continuation statements
under the UCC or assignments with respect to the security interests granted
hereby, (c) filing or cooperating with Agent in filing any forms or other
documents required to be filed with the United States Patent and Trademark
Office, United States Copyright Office, or any filings in any foreign
jurisdiction or under any international treaty, required to secure or protect
Agent's interest in the Collateral, (d) transferring material Collateral to
Agent's possession (if a security interest in such Collateral can only be
perfected by possession), (e) placing the interest of Agent as lienholder on the
certificate of title (or other evidence of ownership) of any vehicle owned by
Grantor or in or with respect to which Grantor holds a beneficial interest, and
(f) using its best efforts to obtain waivers of liens from landlords and
mortgagees. Grantor also hereby authorizes Agent to file any such financing or
continuation statement without the signature of Grantor. If any amount payable
under or in connection with


                                       10.
<PAGE>   11
any of the Collateral is or shall become evidenced by any Instrument, such
Instrument, other than checks and notes received in the ordinary course of
business, shall be duly endorsed in a manner satisfactory to Agent and delivered
to Agent immediately upon Grantor's receipt thereof.

            5.2 MAINTENANCE OF RECORDS. Grantor shall keep and maintain at its
own cost and expense reasonably satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments received and
all credits granted with respect to the Collateral and all other dealings with
the Collateral. Upon the request of Agent, Grantor shall mark its books and
records pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. All Chattel Paper shall be marked with the
following legend: "THIS WRITING AND THE OBLIGATIONS EVIDENCED OR SECURED HEREBY
ARE SUBJECT TO THE SECURITY INTEREST OF THE FIRST NATIONAL BANK OF BOSTON, AS
AGENT, UNDER THAT CERTAIN AMENDED AND RESTATED SECURITY AGREEMENT IN ITS FAVOR
DATED AS OF FEBRUARY 18, 1997, AS AMENDED."

      5.3 INDEMNIFICATION.

            (a) GENERAL INDEMNITY. Borrower shall pay, indemnify, and hold each
Bank, Agent and each of their respective officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including reasonable attorneys' fees and costs) of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Security Agreement or the transactions contemplated
hereby, and with respect to any investigation, litigation or proceeding
(including any proceeding in bankruptcy or appellate proceeding) related to this
Security Agreement, whether or not any Indemnified Person is a party hereto (all
the foregoing, collectively, the "Indemnified Liabilities"); provided, that
Grantor shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities arising from the gross negligence or willful
misconduct of such Indemnified Person.

            (b) SURVIVAL; DEFENSE. The obligations in this SECTION 5.3 shall
survive payment of all Secured Obligations. At the election of any Indemnified
Person, Grantor shall defend such Indemnified Person using legal counsel
satisfactory to such Indemnified Person in such person's sole discretion, at the
sole cost and expense of Grantor. All amounts owing under this SECTION 5.3 shall
be paid within thirty (30) days after demand.

            5.4 COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all material
respects, Grantor shall perform and comply with all obligations in respect of
Accounts, Chattel Paper, Contracts, Documents, Instruments and Licenses and all
other agreements relating to the Collateral to which it is a party or by which
it is bound.

            5.5 LIMITATION ON LIENS ON COLLATERAL. Grantor shall not create,
permit or suffer to exist, and shall defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral, except (a)
Permitted Liens and (b) the Lien granted to Agent under this Security Agreement.
Grantor shall further defend the right, title and interest


                                     11.
<PAGE>   12
of Agent in and to any of Grantor's rights under the Chattel Paper, Contracts,
Documents and Instruments and to the Equipment, Fixtures and Inventory and in
and to the Proceeds thereof against the claims and demands of all Persons
whomsoever.

            5.6 LIMITATIONS ON MODIFICATIONS OF ACCOUNTS, ETC. Upon the
occurrence and during the continuation of any Event of Default, Grantor shall
not, without Agent's prior written consent, grant any extension of the time of
payment of any of the Accounts, Chattel Paper, Instruments or amounts due under
any Contract or Document, compromise, compound or settle the same for less than
the full amount thereof, release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon other than
trade discounts granted in the ordinary course of business of Grantor.

            5.7 MAINTENANCE OF INSURANCE. Grantor shall maintain, with
financially sound and reputable companies, insurance policies insuring (a) its
Equipment, Fixtures and Inventory against loss by fire, explosion, theft and
such other casualties as are usually insured against by companies engaged in the
same or similar businesses and (b) Grantor and Agent against liability for
personal injury and property damage relating to such Equipment, Fixtures and
Inventory. Such policies are to be in such amounts and against at least such
risk as are usually insured against in the same general area by companies of the
same or a similar size engaged in the same or a similar business as Grantor.
Grantor, at its expense, shall obtain a standard first mortgage endorsement
(Lenders Loss Payable Endorsement 438BFU, ISO endorsement CP12181091 or
equivalent) to each such policy for the benefit of Agent. Grantor shall, if so
requested by Agent, deliver to Agent, as often as Agent may reasonably request,
a report of a reputable insurance broker satisfactory to Agent with respect to
the insurance on its Equipment, Fixtures and Inventory. All insurance with
respect to the Equipment, Fixtures and Inventory shall provide that no
cancellation, reduction in amount or change in coverage thereof shall be
effective until at least twenty (20) days after receipt by Agent of written
notice thereof.

            5.8 TAXES, ASSESSMENTS, ETC. Grantor shall pay promptly when due all
property and other taxes, assessments and government charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment, Fixtures or Inventory, except to the extent the validity
thereof is being contested in good faith and adequate reserves are being
maintained in connection therewith.

            5.9 LIMITATIONS ON DISPOSITION. Grantor shall not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so in violation of SECTIONS 6.3 or 6.5 of the Credit Agreement except for
the licensing of Grantor's Intellectual Property rights in the ordinary course
of business.

            5.10 FURTHER IDENTIFICATION OF COLLATERAL. Grantor shall, if so
requested by Agent, furnish to Agent, as often as Agent shall reasonably
request, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Agent may
reasonably request, all in reasonable detail.


                                       12.
<PAGE>   13
            5.11 NOTICES. Grantor shall advise Agent promptly, in reasonable
detail, of (a) any material Lien, other than Permitted Liens, attaching to or
asserted against any of the Collateral, and (b) the occurrence of any other
event which would have a Material Adverse Effect.

            5.12 RIGHT OF INSPECTION AND AUDIT. Upon reasonable notice to
Grantor (unless an Event of Default has occurred and is continuing, in which
case no notice is necessary), Agent or any agents or representatives of Agent
shall at all times have full and free access during normal business hours to all
the books and records and correspondence of Grantor relating to the Collateral,
and Agent or any agents or representatives of Agent may examine the same, take
extracts therefrom and make photocopies thereof, and Grantor agrees to render to
Agent, at Grantor's cost and expense, such clerical and other assistance as may
be reasonably requested with regard thereto. Upon reasonable notice to Grantor
(unless an Event of Default has occurred and is continuing, in which case no
notice is necessary), Agent and its agents and representatives shall also have
the right to enter into and upon any premises where any of the Equipment,
Fixtures or Inventory is located for the purpose of conducting audits and making
physical verifications of such Equipment, Fixtures and Inventory and test
verifications of the Accounts in any manner and through any medium that it
considers advisable, and Grantor agrees to furnish all such assistance and
information as Agent may reasonably require in connection therewith. The cost
and expense of such audits shall be borne by Grantor. Grantor, at its own
expense, shall cause certified independent public accountants, reasonably
satisfactory to Agent, to prepare and deliver to Agent the results of any
physical verification of all or any portion of Grantor's Equipment, Fixtures or
Inventory and any test verification of Grantor's Accounts made or observed by
such accountants when and if such verification is conducted.

            5.13 MAINTENANCE AND PRESERVATION OF PROPERTIES AND FACILITIES.
Grantor shall maintain and protect its properties, assets and facilities,
including, without limitation, its Equipment and Fixtures, material to the
operation of its business, in good order and working repair and condition
(taking into consideration ordinary wear and tear) and from time to time make or
cause to be made all necessary and proper repairs, renewals and replacements
thereto and shall competently manage and care for its properties material to the
operation of its business, all portions and interests therein, including the
Collateral, in accordance with prudent industry practices applicable to the
particular property, portion or interest therein, involved.

            5.14 CONTINUOUS PERFECTION. Grantor shall not change its name,
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of section 9402(7) of the UCC (or any other then applicable
provision of the UCC) unless Grantor shall have given Agent prior written notice
thereof and shall have taken all action (or made arrangements to take such
action substantially simultaneously with such change if it is impossible to take
such action in advance) necessary or reasonably requested by Agent to amend such
financing statement or continuation statement so that it is not seriously
misleading.


                                       13.
<PAGE>   14
            5.15  COVENANTS REGARDING INTELLECTUAL PROPERTY.

                  (a) Grantor shall notify Agent promptly if it knows or has
reason to know that any application or registration relating to any Copyright,
Patent or Trademark which is material to the conduct of Grantor's business may
become abandoned, or of any adverse determination or development (including,
without limitation, the institution of, or any such determination or development
in, any proceeding in the United States Copyright Office, United States Patent
and Trademark Office or any court) regarding Grantor's ownership of any
Copyright, Patent or Trademark which is material to the conduct of Grantor's
business, its right to register the same, or to keep and maintain the same.

                  (b) Grantor shall take all commercially reasonable steps
necessary to prevent any misuse, infringement, misappropriation, unauthorized
use or abandonment of its Copyrights, Patents, Trademarks, or other Intellectual
Property where a lack of such protection would have a Material Adverse Effect.
Grantor's efforts pursuant to this section shall include, but not be limited to:
(i) establishing prudent security measures and procedures governing access to,
and use of, property protected by Copyrights, Trademarks or Patents or of
Intellectual Property owned or licensed by Grantor or developed by any Person on
behalf of Grantor; (ii) establishing and maintaining in force any agreements
with employees and consultants, or any written terms of employment, as are
customarily used in Grantor's industry for the protection of Intellectual
Property; and (iii) vigorous enforcement of Grantor's rights in any Intellectual
Property.

                  (c) In no event shall Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Copyright with the United States Copyright Office or Patent or Trademark
with the United States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision thereof unless it
promptly informs Agent and, upon request of Agent, executes and delivers any and
all agreements, instruments, documents, and papers as Agent reasonably may
request to evidence Agent's security interest in such Copyright, Patent or
Trademark, including, without limitation, with respect to Trademarks, the
goodwill of Grantor, relating thereto or represented thereby.

                  (d) Grantor shall (i) promptly make application to register
any copyrightable or patentable property or trade name or Trademark of Grantor
which is material to Grantor's business, including the most recent version of
Grantor's existing Copyrights, if not so already registered; and (ii) take all
necessary action to maintain and pursue each such application (and to obtain the
relevant registration) and to maintain the registration of each of the
Copyrights, Patents and Trademarks which is material to the conduct of Grantor's
business, including, without limitation, the filing of applications for renewal,
affidavits of use, affidavits of noncontestability and opposition and
interference and cancellation proceedings.

                  (e) In the event that any Copyright, Patent or Trademark is
infringed, misappropriated or diluted by a third party, Grantor shall notify the
Agent promptly after Grantor learns thereof and shall, unless Grantor shall
reasonably determine that such Copyright,


                                       14.
<PAGE>   15
Patent or Trademark is not material to the conduct of Grantor's business,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution and take
such other actions as Grantor shall reasonably deem appropriate under the
circumstances to protect such Copyright, Patent or Trademark.

      6.    AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.

            (a) Grantor hereby irrevocably constitutes and appoints Agent, and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Grantor and in the name of Grantor or in its own name, from time to
time at Agent's discretion, for the purpose of carrying out the terms of this
Security Agreement, to take any and all appropriate action and to execute and
deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement and, without
limiting the generality of the foregoing, hereby gives Agent the power and
right, on behalf of Grantor, without notice to or assent by Grantor, to do the
following:

                  (i) to ask, demand, collect, receive and give acquittances and
receipts for any and all monies due or to become due under any Collateral and,
in the name of Grantor, in its own name, or otherwise, to take possession of,
endorse and collect any checks, drafts, note, acceptances or other Instruments
for the payment of monies due under any Collateral and to file any claim or to
take or commence any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by Agent for the purpose of collecting any and all
such monies due under any Collateral whenever payable;

                  (ii) to pay or discharge any Lien or Liens, including, without
limitation, any tax lien, levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the terms of
this Security Agreement and to pay all or any part of the premiums therefor and
the costs thereof; and

                  (iii) to (1) direct any person liable for any payment under or
in respect of any of the Collateral to make payment of any and all monies due or
to become due thereunder directly to Agent or as Agent shall direct, (2) receive
payment of any and all monies, claims and other amounts due or to become due at
any time arising out of or in respect of any Collateral, (3) sign and endorse
any invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications and notices in
connection with Accounts and other Instruments and Documents constituting or
relating to the Collateral, (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral, (5) defend any suit, action or proceeding brought
against Grantor with respect to any Collateral, (6) settle, compromise or adjust
any suit, action or proceeding described above and, in connection therewith,
give such discharges or releases as Agent may deem appropriate, (7) license or,
to the extent permitted by an applicable license, sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive


                                       15.
<PAGE>   16
basis, any Patent or Trademark throughout the world for such term or terms, on
such conditions and in such manner as the Agent shall in its discretion
determine, and (8) sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
Agent were the absolute owner thereof for all purposes, and to do, at Agent's
option and Grantor's expense, at any time, or from time to time, all acts and
things which Agent may reasonably deem necessary to protect, preserve or realize
upon the Collateral and Agent's Lien thereon in order to effect the intent of
this Security Agreement, all as fully and effectively as Grantor might do.

            (b) Agent agrees that, except upon the occurrence and during the
continuation of an Event of Default, it shall not exercise the power of attorney
or any rights granted to Agent pursuant to this SECTION 6. Grantor hereby
ratifies, to the extent permitted by law, all that said attorney shall lawfully
do or cause to be done by virtue hereof. The power of attorney granted pursuant
to this SECTION 6 is a power coupled with an interest and shall be irrevocable
until the Secured Obligations are paid and performed in full.

            (c) The powers conferred on Agent hereunder are solely to protect
Agent's and Banks' interests in the Collateral and shall not impose any duty
upon it to exercise any such powers. Agent shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and neither
it nor any of its officers, directors, employees, agents or representatives
shall be responsible to Grantor for any act or failure to act pursuant to this
SECTION 6, except for its own gross negligence or willful misconduct.

            (d) Grantor also authorizes Agent, at any time and from time to time
upon the occurrence and during the continuation of any Event of Default, to (i)
communicate in its own name with any party to any Contract with regard to the
assignment for security purposes of the right, title and interest of Grantor in
and under the Contracts hereunder and other matters relating thereto and (ii)
execute, in connection with the sale of Collateral provided for in SECTION 7
hereof, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral.

            (e) If Grantor fails to perform or comply with any of its agreements
contained herein and Agent or any Bank, as provided for by the terms of this
Security Agreement, shall perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses, including reasonable
attorneys' fees, of Agent or such Bank incurred in connection with such
performance or compliance, together with interest thereon at the rate then in
effect in respect of the Loans, shall be payable by Grantor to Agent or such
Bank on demand and shall constitute Secured Obligations secured hereby.

      7.    RIGHTS AND REMEDIES UPON DEFAULT.

            (a) If any Event of Default shall occur and be continuing, Agent may
exercise in addition to all other rights and remedies granted to it under this
Security Agreement, the Credit Agreement, the other Loan Documents and under any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured


                                       16.
<PAGE>   17
party under the UCC. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event Agent, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon Grantor or any
other person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the UCC and other
applicable law), may (i) reclaim, take possession, recover, store, maintain,
finish, repair, prepare for sale or lease, ship, advertise for sale or lease and
sell or lease (in the manner provided for herein) the Collateral, and in
connection with liquidation of the Collateral and collection of the accounts
receivable pledged as Collateral, use any Trademark, trade name, trade style,
Copyright, or process used or owned by Grantor; and (ii) forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, assign, give an option or options to purchase or sell
or otherwise dispose of and deliver said Collateral (or contract to do so), or
any part thereof, in one or more parcels at public or private sale or sales, at
any exchange or broker's board or at any of Agent's offices or elsewhere at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.

            (b) If an Event of Default shall occur and be continuing, to the
extent Grantor has the right, Grantor authorizes Agent, on the terms set forth
in this SECTION 7, to enter the premises where the Collateral is located, to
take possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge or lien which, in the opinion of
Agent, appears to be prior or superior to its security interest in the
Collateral.

            (c) If an Event of Default shall occur and be continuing, Agent or
any Bank shall have the right upon any public sale or sales permitted under this
SECTION 7, and, to the extent permitted by law, upon any such private sale or
sales permitted under this SECTION 7, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which equity of
redemption Grantor hereby releases. Grantor further agrees, at Agent's request,
to assemble the Collateral and make it available to Agent at places which Agent
shall reasonably select, whether at Grantor's premises or elsewhere. Agent and
Banks shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale as provided in SECTION 7(G) hereof, Grantor
remaining liable for any deficiency remaining unpaid after such application, and
only after so paying over such net proceeds and after the payment by Agent of
any other amount required by any provision of law, including section 9504(1)(c)
of the UCC, need Agent account for the surplus, if any, to Grantor. To the
maximum extent permitted by applicable law, Grantor waives all claims, damages,
and demands against Agent arising out of the repossession, retention or sale of
the Collateral except such as arise out of the gross negligence or willful
misconduct of Agent or Agent's breach of any of its obligations hereunder.
Grantor agrees that Agent need not give more than ten (10) days' notice (which
notification shall be deemed given in accordance with the Credit Agreement) of
the time and place of any public sale or of the time after which a private sale
may take place and that such notice is reasonable notification of such matters.
Grantor shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which Agent
is entitled, Grantor also being liable for the reasonable fees of any attorneys
employed by Agent to collect such deficiency.


                                       17.
<PAGE>   18
            (d) Grantor also agrees to pay all reasonable fees, costs and
expenses of Agent and Banks, including, without limitation, reasonable
attorneys' fees, incurred in connection with the enforcement of any of its
rights and remedies hereunder.

            (e) If an Event of Default shall occur and be continuing, upon
Agent's request, Grantor agrees to promptly execute assignments of Grantor's
entire right, title and interest in and to each of the Patents, Trademarks,
Copyrights and Licenses. Such assignments shall be in form and content which is
recordable in the United States Patent and Trademark Office or Copyright Office,
as applicable, and otherwise reasonably acceptable to the Agent.

            (f) Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.

            (g) The Proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by Agent in the following
order of priorities:

                  First, to Agent and Banks in an amount sufficient to pay in
            full the reasonable costs of Agent and Banks in connection with such
            sale, disposition or other realization, including all reasonable
            fees, costs, expenses, liabilities and advances incurred or made by
            Agent and Banks in connection therewith, including, without
            limitation, reasonable attorneys' fees;

                  Second, to Agent for the account of Banks in an amount equal
            to the then unpaid principal of and accrued interest and prepayment
            premiums, if any, on the Secured Obligations;

                  Third, to Agent and Banks in an amount equal to any other
            Secured Obligations which are then unpaid; and

                  Finally, upon payment in full of all of the Secured
            Obligations, to Grantor or its representatives or as a court of
            competent jurisdiction may direct.

      8. GRANT OF LICENSE TO INTELLECTUAL PROPERTY. For the sole purpose of
enabling Agent to exercise its rights and remedies under SECTION 7 hereof at
such time as Agent shall be lawfully entitled to exercise such rights and
remedies, Grantor hereby grants to Agent an irrevocable (for so long as it has
the right to exercise such rights and remedies), non-exclusive license
(exercisable without payment of royalty or other compensation to Grantor) to
use, license or sublicense any Copyright, Patent or Trademark, and to exercise
any rights held by Grantor under any Copyright, Patent or Trademark license or
sublicense, now owned or hereafter acquired, by license or otherwise, by
Grantor, and wherever the same may be located, and including, without
limitation, with respect to such license, reasonable access to all media in
which any of the licensed items may be recorded or stored and to all computer
and automatic machinery software and programs used for the compilation or
printout thereof.



                                       18.
<PAGE>   19
      9. LIMITATION ON AGENT'S DUTY IN RESPECT OF COLLATERAL. Agent shall be
deemed to have acted reasonably in the custody, preservation and disposition of
any of the Collateral if it complies with the obligations of a secured party
under section 9207 of the UCC.

      10. REINSTATEMENT. This Security Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor for liquidation or reorganization, should Grantor become insolvent or
make an assignment for the benefit of creditors or should a receiver or trustee
be appointed for all or any significant part of Grantor's property and assets,
and shall continue to be effective or be reinstated, as the case may be, if at
any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.

      11.   MISCELLANEOUS.

            11.1 NOTICES. Any notice or other communication hereunder to any
party shall be addressed and delivered (and shall be deemed given) in accordance
with the Credit Agreement.

            11.2 SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

            11.3 HEADINGS. The various headings in this Security Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Security Agreement or any provisions hereof.

            11.4  NO WAIVER; CUMULATIVE REMEDIES.

                  (a) Agent shall not by any act, delay, omission or otherwise
be deemed to have waived any of its respective rights or remedies hereunder, nor
shall any single or partial exercise of any right or remedy hereunder on any one
occasion preclude the further exercise thereof or the exercise of any other
right or remedy.

                  (b) The rights and remedies hereunder provided are cumulative
and may be exercised singly or concurrently, and are not exclusive of any rights
and remedies provided by law.


                                       19.
<PAGE>   20
                  (c) None of the terms or provisions of this Security Agreement
may be waived, altered, modified or amended except by an instrument in writing,
duly executed by Grantor and Agent and Banks.

            11.5 TIME IS OF THE ESSENCE. Time is of the essence for the
performance of each of the terms and provisions of this Security Agreement.

            11.6 TERMINATION OF THIS SECURITY AGREEMENT. Subject to SECTION 10
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations other than inchoate indemnity obligations.

            11.7 SUCCESSOR AND ASSIGNS. This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the successors and
assigns of Grantor, and shall, together with the rights and remedies of Agent
and Banks, inure to the benefit of Agent and Banks, any future holder of any
Note and their respective successors and assigns permitted under the Credit
Agreement. No sales of participations in, or other sales, assignments, transfers
or other dispositions of any agreement governing or instrument evidencing, the
Secured Obligations or any portion thereof or interest therein shall in any
manner affect the Lien granted to Agent hereunder.

            11.8 FURTHER INDEMNIFICATION. Grantor agrees to pay, and to keep
Agent and each Bank harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all excise, sales or other similar
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Security Agreement.

            11.9 GOVERNING LAW. In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California applicable to contracts
made and performed in such state, without regard to the principles thereof
regarding conflict of laws.

            11.10 COUNTERPARTS. This Security Agreement may be executed in any
number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. Each such agreement shall become effective upon the execution of a
counterpart hereof or thereof by each of the parties hereto and telephonic
notification that such executed counterpart has been received by Grantor, Agent
and Banks.

            11.11 NO NOVATION. This Amended and Restated Loan Agreement is not
intended to be, and shall not be construed to create, a novation or accord and
satisfaction, and, except as otherwise provided herein, the Original Security
Agreement, as executed and delivered on June 18, 1996, shall remain in full
force and effect. Without limiting the generality of the foregoing, SECTION 5.3
of the Original Security Agreement shall survive the effectiveness of this
Amended and Restated Security Agreement and shall remain enforceable against
Grantor.


                                       20.
<PAGE>   21
      IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.

GRANTOR                                   ADFLEX SYSTEMS, INC.


                                          By: /s/ Rolando Esteverena
                                              ----------------------
                                                Rolando Esteverena,
                                                Chairman and CEO


Accepted and acknowledged by:

AGENT:

THE FIRST NATIONAL BANK OF BOSTON



By: /s/ Teresa Heller
    -----------------------------
      Teresa Heller,
      Director


BANKS:

THE FIRST NATIONAL BANK OF BOSTON



By: /s/ Teresa Heller
    -----------------------------
      Teresa Heller,
      Director


WELLS FARGO BANK, N.A.
(as successor to First Interstate Bank of Arizona, N.A.)


By: /s/ Mae Delabarre
   -----------------------------
      Mae Delabarre,
      Assistant Vice President


                                     21.
<PAGE>   22
                                     EXHIBIT


                       COLLATERAL INFORMATION CERTIFICATE


                                       22.