SECURITY AGREEMENT

         THIS SECURITY  AGREEMENT (the "Security  Agreement") is entered into as
of April 9, 1997 among Integrated Living Communities  Holding,  Inc., a Delaware
corporation (the "Borrower"),  Integrated Living  Communities,  Inc., a Delaware
corporation (the "Parent"),  Integrated Living Communities of Sarasota,  Inc., a
Florida  corporation  ("Sarasota"),  the subsidiaries of the Borrower and Parent
identified  on the  signature  pages hereto and such other  subsidiaries  of the
Borrower as may from time to time become a Credit  Party  hereunder by execution
of a Joinder Agreement (such subsidiaries  together with the Parent and Sarasota
individually a "Guarantor" and  collectively  the  "Guarantors";  the Guarantors
together with the Borrower  individually a "Credit Party",  and collectively the
"Credit Parties") and NationsBank, N.A. (South), as agent (in such capacity, the
"Agent")  for the  lenders  from  time to time  party  to the  Credit  Agreement
described below (the "Lenders").

                                    RECITALS

         WHEREAS,  pursuant to that certain  Credit  Agreement,  dated as of the
date hereof (as amended,  modified,  extended,  renewed or replaced from time to
time, the "Credit Agreement"),  among the Borrower, the Guarantors,  the Lenders
and the Agent, the Lenders have agreed to make Loans and issue or participate in
Letters  of Credit  upon the  terms  and  subject  to the  conditions  set forth
therein; and

         WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their  respective Loans and
to issue or participate in Letters of Credit under the Credit Agreement that the
Credit Parties shall have executed and delivered this Security  Agreement to the
Agent for the ratable benefit of the Lenders.

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

         1.       Definitions.

                  (a) Unless otherwise  defined herein,  capitalized  terms used
         herein  shall have the  meanings  ascribed  to such terms in the Credit
         Agreement.  All terms used in this Security  Agreement that are defined
         in the Uniform  Commercial  Code in effect in the State of Florida (the
         "UCC")  and which  are not  otherwise  defined  herein  shall  have the
         meanings set forth  therein.  For purposes of this Security  Agreement,
         the term  "Lender"  shall include any Affiliate of any Lender which has
         entered into a Hedging Agreement with the Borrower.

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



<PAGE>


                  "Copyright Licenses": any written agreement, naming any Credit
         Party as licensor,  granting any right under any  Copyright  including,
         without limitation, any thereof referred to in Schedule 1(b) hereto.

                  "Copyrights":  (a) all registered  United States copyrights in
         all  Works,  now  existing  or  hereafter  created  or  acquired,   all
         registrations   and  recordings   thereof,   and  all  applications  in
         connection  therewith,  including,  without limitation,  registrations,
         recordings  and  applications  in the United  States  Copyright  office
         including, without limitation, any thereof referred to in Schedule 1(b)
         hereto, and (b) all renewals thereof including, without limitation, any
         thereof referred to in Schedule 1(b) hereto.

                  "Patent  License":  all  agreements,  whether written or oral,
         providing  for the  grant  by or to a  Credit  Party  of any  right  to
         manufacture,  use or sell any invention covered by a Patent, including,
         without limitation, any thereof referred to in Schedule 1(b) hereto.

                  "Patents":  (a) all letters patent of the United States or any
         other  country and all  reissues  and  extensions  thereof,  including,
         without  limitation,  any thereof  referred to in Schedule 1(b) hereto,
         and (b) all applications for letters patent of the United States or any
         other    country    and    all     divisions,     continuations     and
         continuations-in-part   thereof,  including,  without  limitation,  any
         thereof referred to in Schedule 1(b) hereto.

                  "Trademark  License":  means any  agreement,  written or oral,
         providing for the grant by or to a Credit Party of any right to use any
         Trademark,  including,  without limitation,  any thereof referred to in
         Schedule 1(b) hereto.

                  "Trademarks":  (a)  all  trademarks,  trade  names,  corporate
         names, company names, business names,  fictitious business names, trade
         styles,  service marks, logos and other source or business identifiers,
         and the  goodwill  associated  therewith,  now  existing  or  hereafter
         adopted or acquired,  all registrations and recordings thereof, and all
         applications  in  connection  therewith,  whether in the United  States
         Patent and Trademark  Office or in any similar  office or agency of the
         United States,  any State thereof or any other country or any political
         subdivision thereof, or otherwise,  including,  without limitation, any
         thereof  referred  to in Schedule  1(b)  hereto,  and (b) all  renewals
         thereof.

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

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


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<PAGE>

                  (a)  All  equipment,   including,   without  limitation,   all
         vehicles,  rolling stock,  machinery,  tools,  furniture,  furnishings,
         office equipment and trade fixtures;

                  (b) All accounts and receivables and all goods  represented by
         or securing accounts and receivables,  including,  without  limitation,
         all rents and tenant payments, if any;

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

                  (d) All contract rights,  including,  without limitation,  (i)
         all  rights  under  lease  agreements,  management  agreements  and tax
         sharing agreements and (ii) all rights to payment of money, tax refunds
         and insurance proceeds;

                  (e)      All other general intangibles;

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

                  (g) All  federal,  state and local tax  refunds  and claims of
         each  Credit  Party,  all rights in  litigation  of each  Credit  Party
         presently  or  hereafter  pending  for any cause or claim  (whether  in
         contract,  tort or  otherwise),  and all judgments of each Credit Party
         now or hereafter arising therefrom;

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

                  (i) All books, records,  ledger cards, files,  correspondence,
         computer programs,  tapes,  disks, and related data processing software
         (owned by such Credit Party or in which it has an interest) that at any
         time evidence or contain information  relating to any Collateral or are
         otherwise necessary or helpful in the collection thereof or realization
         thereupon; and

                  (j)  All  Copyrights,   Copyright  Licenses,  Patents,  Patent
         Licenses,  Trademarks,  Trademark  Licenses,  proprietary  information,
         designs,  processes,  inventions,  know-how  and trade  secrets and all
         actions of infringement,  including the right to sue for and to recover
         and retain all damages and profits arising from past infringements of a
         Credit Party concerning any of the foregoing;

                  (k) All other personal property of any kind or type whatsoever
         owned by a Credit Party;

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


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<PAGE>

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

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

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

                  (b) Subject to clause (c) of Section 27 hereof, in the case of
         the Guarantors, the prompt performance and observance by such Guarantor
         of all obligations of such Guarantor under the Credit  Agreement,  this
         Security  Agreement  and the  other  Credit  Documents  to  which  such
         Guarantor  is a party,  including,  without  limitation,  its  guaranty
         obligations arising under Section 4 of the Credit Agreement; and

                  (c)  Subject to clause  (c) of  Section  27 hereof,  all other
         indebtedness,  liabilities,  obligations  and  expenses  of any kind or
         nature  owing  from any  Credit  Party to any  Lender  or the  Agent in
         connection  with  (i)  this  Security  Agreement  or any  other  Credit
         Document,  whether now existing or hereafter arising,  due or to become
         due,  direct  or  indirect,   absolute  or  contingent,  and  howsoever
         evidenced,  held or acquired,  together with any and all modifications,
         extensions, renewals and/or substitutions of any of the foregoing, (ii)
         collecting  and  enforcing the Credit Party  Obligations  and (iii) all
         liabilities and obligations arising under any Hedging Agreements.

The Credit Parties and the Agent, on behalf of the Lenders,  hereby  acknowledge
and agree  that the  security  interest  created  hereby in the  Collateral  (i)
constitutes  continuing  collateral security for all of the Secured Obligations,
whether now existing or hereafter  arising and (ii) is not to be construed as an
assignment of any Copyrights,  Copyright  Licenses,  Patents,  Patent  Licenses,
Trademarks or Trademark Licenses.

         4.  Credit  Parties  Remain  Liable.  Anything  herein to the  contrary
notwithstanding,  (a) each Credit Party shall remain  liable under the contracts
and agreements of such Credit Party included in the Collateral to the extent set
forth therein and to perform all of the duties and obligations thereunder to the
same  extent  as if this  Security  Agreement  had not  been  executed,  (b) the
exercise by the Agent of any of the rights  hereunder shall not release a Credit
Party from any of its duties or  obligations  under the contracts and agreements
included  in the  Collateral,  and (c)  neither the Agent nor any of the Lenders
shall have any  obligation  or  liability  under the  contracts  and  agreements
included in the Collateral by reason of this Security  Agreement,  nor shall the
Agent or any of the Lenders be  obligated to perform any of the  obligations  or
duties of the  Credit  Parties  thereunder  or to take any  action to collect or
enforce any claim for payment assigned thereunder.


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<PAGE>

         5. Representations and Warranties.  Each Credit Party hereby represents
and warrants to the Agent,  for the benefit of the Lenders,  that so long as any
of the Secured  Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Loan or Letter of Credit shall remain outstanding,
and until all of the Commitments shall have been terminated:

                  (a)  Location of  Collateral.  The  location  of all  tangible
         property  included in the  Collateral  owned by each Credit Party is as
         shown on Schedule 6.21(b) to the Credit Agreement.

                  (b) Chief  Executive  Office;  Books &  Records.  Each  Credit
         Party's chief executive  office and chief place of business is (and for
         the prior four months have been)  located at the locations set forth on
         Schedule 6.21(c) to the Credit  Agreement,  and each Credit Party keeps
         its books and records at such locations.

                  (c)  Ownership.  Each Credit Party is the legal and beneficial
         owner of its  Collateral and has the right to pledge,  sell,  assign or
         transfer the same.  Each Credit  Party's legal name is as shown in this
         Security  Agreement  and no Credit  Party  has in the past  five  years
         changed its name, been party to a merger, consolidation or other change
         in structure or used any tradename except as set forth in Schedule 5(c)
         attached hereto.

                  (d)  Security   Interest/Priority.   This  Security  Agreement
         creates  a valid  security  interest  in  favor of the  Agent,  for the
         benefit of the  Lenders,  in the  Collateral  of each Credit Party and,
         when properly  perfected by filing or registration,  shall constitute a
         valid perfected  security  interest in such  Collateral,  to the extent
         such security can be perfected by filing under the UCC,  federal law or
         other applicable personal property security legislation, free and clear
         of all Liens except for Permitted Liens.

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

                  (f) Inventory. No inventory is held by a Credit Party pursuant
         to   consignment,   sale  or  return,   sale  on  approval  or  similar
         arrangement.

                  (g) Conditions Precedent. There are no conditions precedent to
         the  effectiveness  of this  Security  Agreement  that  have  not  been
         satisfied or waived.

                  (h)      Copyrights, Patents and Trademarks.


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<PAGE>

                           (i) Schedule  1(b) hereto  includes  all  Copyrights,
                  Copyright Licenses,  Patents, Patent Licenses,  Trademarks and
                  Trademark  Licenses  owned by the Credit  Parties in their own
                  names as of the date hereof.

                           (ii) To the best of each  Credit  Party's  knowledge,
                  each Copyright, Patent and Trademark of such Obligor is valid,
                  subsisting, unexpired, enforceable and has not been abandoned.

                           (iii)  Except as set forth in Schedule  1(b)  hereto,
                  none of such Copyrights, Patents and Trademarks is the subject
                  of any licensing or franchise agreement.

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

                           (v) No action or  proceeding  is  pending  seeking to
                  limit,  cancel or  question  the  validity  of any  Copyright,
                  Patent or Trademark, or which, if adversely determined,  would
                  have a material  adverse effect on the value of any Copyright,
                  Patent or Trademark.

                           (vi) All  applications  pertaining to the Copyrights,
                  Patents and Trademarks of each Credit Party have been duly and
                  properly filed, and all registrations or letters pertaining to
                  such  Copyrights,  Patents and  Trademarks  have been duly and
                  properly filed and issued, and all of such Copyrights, Patents
                  and Trademarks are valid and enforceable.

                           (vii) No  Credit  Party  has made any  assignment  or
                  agreement  in  conflict  with  the  security  interest  in the
                  Copyrights,   Patents  or  Trademarks  of  each  Credit  Party
                  hereunder.

         6.  Covenants.  Each Credit Party covenants that, so long as any of the
Secured  Obligations  remain  outstanding  or any  Credit  Document  or  Hedging
Agreement is in effect or any Loan or Letter of Credit shall remain outstanding,
and until all of the Commitments  shall have been terminated,  such Credit Party
shall:

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

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


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<PAGE>

                  (c) Instruments/Chattel  Paper. If any amount payable under or
         in connection with any of the Collateral  shall be or become  evidenced
         by any  instrument or chattel paper,  immediately  deliver to the Agent
         duly endorsed in a manner satisfactory to the Agent all instruments and
         chattel paper representing or relating to the Collateral.

                  (d) Change in Location or Name. Not, without providing 30 days
         prior written notice to the Agent and without filing such amendments to
         any previously filed financing statements as the Agent may require, (i)
         change the  location of its chief  executive  office and chief place of
         business  (as well as its books and  records)  from the  locations  set
         forth on  Schedule  6.21(c) to the Credit  Agreement,  (ii)  change the
         location of its Collateral from the locations set forth for such Credit
         Party on Schedule 6.21(b) to the Credit Agreement,  or (iii) change its
         name,  be a  party  to a  merger,  consolidation  or  other  change  in
         structure or use any tradename other than as set forth on Schedule 5(c)
         attached hereto.

                  (e) Inspection. At all times allow the Agent and any Lender or
         their representatives to visit and inspect the Collateral to the extent
         set forth in Section 7.11 of the Credit Agreement.

                  (f)  Perfection of Security  Interest.  Execute and deliver to
         the  Agent  such  agreements,  assignments  or  instruments  (including
         affidavits,  notices, reaffirmations and amendments and restatements of
         existing  documents,  as the Agent may  reasonably  request) and do all
         such  other  things as the  Agent  may  reasonably  deem  necessary  or
         appropriate (i) to assure to the Agent the  effectiveness  and priority
         of its security interests hereunder, including, but not limited to, (A)
         such financing statements  (including renewal statements) or amendments
         thereof or  supplements  thereto or other  instruments as the Agent may
         from time to time  reasonably  request in order to perfect and maintain
         the security  interests  granted  hereunder in accordance with the UCC,
         (B) with regard to Copyrights,  a Notice of Grant of Security  Interest
         in Copyrights in the form of Schedule 5(f)(i) attached hereto, (C) with
         regard to Patents,  a Notice of Grant of  Security  Interest in Patents
         for filing with the United States  Patent and  Trademark  Office in the
         form of  Schedule  5(f)(ii)  attached  hereto  and (D) with  regard  to
         Trademarks,  a Notice of Grant of Security  Interest in Trademarks  for
         filing with the United States  Patent and Trademark  Office in the form
         of Schedule  5(f)(iii)  attached hereto and any other personal property
         security legislation in the appropriate  state(s) or province(s),  (ii)
         to  consummate  the  transactions  contemplated  hereby  and  (iii)  to
         otherwise  protect  and assure  the Agent of its  rights and  interests
         hereunder.  To that end,  each Credit  Party  agrees that the Agent may
         file one or more financing  statements  disclosing the Agent's security
         interest in any or all of the  Collateral of such Credit Party without,
         to the extent permitted by law, such Credit Party's signature  thereon,
         and  further   each  Credit  Party  also  hereby   irrevocably   makes,
         constitutes  and  appoints  the Agent,  its nominee or any other Person
         whom the Agent may designate,  as such Credit Party's  attorney in fact
         with full power and for the limited purpose to sign in the name of such
         Credit  Party  any  such  financing   statements,   or  amendments  and
         supplements  to financing  statements,  renewal  financing  statements,
         notices  or any  similar  documents  which  in the  Agent's  reasonable
         discretion  would be necessary,  appropriate  or convenient in order to
         


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<PAGE>

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

                  (g) Treatment of Receivables. Not grant or extend the time for
         payment of any  receivable,  or compromise or settle any receivable for
         less than the full amount  thereof,  or release any Person or property,
         in whole or in part,  from  payment  thereof,  or allow  any  credit or
         discount  thereon,  other than as normal and  customary in the ordinary
         course of a Credit Party's business.

                  (h)      Covenants Relating to Copyrights.

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

                           (ii) Not do any act or  knowingly  omit to do any act
                  whereby any material  Copyright may become invalidated and (A)
                  not do any act, or knowingly  omit to do any act,  whereby any
                  material Copyright may become injected into the public domain;
                  (B) notify the Agent immediately if it knows, or has reason to
                  know, that any material Copyright may become injected into the
                  public domain or of any adverse  determination  or development
                  (including,  without  limitation,  the  institution of, or any
                  such determination or development in, any court or tribunal in
                  the United  States or any other  country)  regarding  a Credit
                  Party's  ownership of any such Copyright or its validity;  (C)
                  take all necessary  steps as it shall deem  appropriate  under
                  the  circumstances,  to maintain  and pursue each  application
                  (and to obtain the relevant registration) and to maintain each
                  registration  of each  material  Copyright 


                                       8
<PAGE>

                  owned by a Credit Party including, without limitation,  filing
                  of applications for renewal where necessary;  and (D) promptly
                  notify the Agent of any material  infringement of any material
                  Copyright of a Credit Party of which it becomes aware and take
                  such actions as it shall reasonably deem appropriate under the
                  circumstances  to protect  such  Copyright,  including,  where
                  appropriate,  the bringing of suit for  infringement,  seeking
                  injunctive  relief and  seeking to recover any and all damages
                  for such infringement.

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

                  (i)      Covenants Relating to Patents and Trademarks.

                           (i) (A)  Continue to use each  Trademark  on each and
                  every trademark class of goods  applicable to its current line
                  as  reflected  in its current  catalogs,  brochures  and price
                  lists in order to maintain  such  Trademark in full force free
                  from any claim of abandonment for non-use,  (B) maintain as in
                  the past the quality of products  and services  offered  under
                  such Trademark, (C) employ such Trademark with the appropriate
                  notice of registration, (D) not adopt or use any mark which is
                  confusingly similar or a colorable imitation of such Trademark
                  unless  the Agent,  for the  ratable  benefit of the  Lenders,
                  shall  obtain  a  perfected  security  interest  in such  mark
                  pursuant  to this  Security  Agreement,  and (E) not  (and not
                  permit any licensee or  sublicensee  thereof to) do any act or
                  knowingly  omit to do any act whereby any Trademark may become
                  invalidated.

                           (ii) Not do any act,  or omit to do any act,  whereby
                  any Patent may become abandoned or dedicated.

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

                           (iv)  Whenever  a Credit  Party,  either by itself or
                  through an agent, employee,  licensee or designee,  shall file
                  an application for the registration of any 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,  a Credit Party shall report such filing
                  to the Agent within five  Business  Days after the last day of
                  the fiscal quarter in which such filing  occurs.  Upon request
                  of the Agent, a Credit Party shall execute and deliver any and
                  all agreements, instruments, documents and papers as the Agent
                  may request to evidence the Agent's  security 


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<PAGE>

                  interest  in any  Patent or  Trademark  and the  goodwill  and
                  general  intangibles  of a Credit  Party  relating  thereto or
                  represented thereby.

                           (v)  Take  all   reasonable   and  necessary   steps,
                  including,  without  limitation,  in any proceeding before the
                  United  States  Patent and  Trademark  Office,  or any similar
                  office  or  agency  in any  other  country  or  any  political
                  subdivision  thereof,  to maintain and pursue each application
                  (and to obtain the relevant registration) and to maintain each
                  registration of the Patents and Trademarks, including, without
                  limitation,  filing of applications for renewal, affidavits of
                  use and affidavits of incontestability.

                           (vi)  Promptly  notify the Agent after it learns that
                  any  Patent  or  Trademark   included  in  the  Collateral  is
                  infringed,  misappropriated  or diluted  by a third  party and
                  promptly sue for infringement,  misappropriation  or dilution,
                  to seek injunctive relief where appropriate and to recover any
                  and all damages  for such  infringement,  misappropriation  or
                  dilution,  or take such other  actions as it shall  reasonably
                  deem  appropriate  under the  circumstances  to  protect  such
                  Patent or Trademark.

                           (vii)  Not  make  any   assignment  or  agreement  in
                  conflict  with  the  security   interest  in  the  Patents  or
                  Trademarks of each Credit Party hereunder.

                  (j) New Patents,  Copyrights and Trademarks.  Promptly provide
         the  Agent  with (i) a listing  of all  applications,  if any,  for new
         Copyrights,  Patents  or  Trademarks  (together  with a listing  of the
         issuance of  registrations or letters on present  applications),  which
         new applications  and issued  registrations or letters shall be subject
         to the terms and  conditions  hereunder,  and (ii) (A) with  respect to
         Copyrights,  a duly executed Notice of Security Interest in Copyrights,
         (B) with  respect  to  Patents,  a duly  executed  Notice  of  Security
         Interest in Patents,  (C) with respect to  Trademarks,  a duly executed
         Notice of  Security  Interest  in  Trademarks  or (D) such  other  duly
         executed  documents  as the Agent may request in a form  acceptable  to
         counsel  for the Agent and  suitable  for  recording  to  evidence  the
         security  interest in the Copyright,  Patent or Trademark  which is the
         subject of such new application.

                  (k) Other Additional Collateral. If, subsequent to the Closing
         Date, a Credit Party shall acquire any securities, instruments, chattel
         paper or other personal  property required to be delivered to the Agent
         as Collateral hereunder,  the Credit Party shall immediately notify the
         Agent of same and take such action (including,  but not limited to, the
         actions set forth in Section 7.13 of the Credit  Agreement as requested
         by the Agent and at its own  expense  (subject to the  limitations  set
         forth in Section 7.13 of the Credit Agreement) to ensure that the Agent
         has a first  priority  perfected  Lien in all personal  property of the
         Credit Parties whether now owned or hereafter acquired, subject only to
         Permitted Liens.


                                       10
<PAGE>

                  (l) Certificate of Title. Upon the request of the Agent at any
         time (or promptly  upon the  occurrence  of an Event of Default),  each
         Credit Party (i) will  deliver to the Agent  original  certificates  of
         title  for  any  vehicle  owned  by such  Credit  Party  along  wit the
         appropriate  instruments or certificates of transfer and delivery, duly
         completed  and  executed to evidence to the Agent's  lien and (ii) will
         take such other  action as the Agent may deem  necessary to perfect the
         security interest in the vehicles created by this Security Agreement.

         7.  Advances by Lenders.  On failure of any Credit Party to perform any
of the covenants and  agreements  contained  herein,  the Agent may, at its sole
option and in its sole  discretion,  perform the same and in so doing may expend
such sums as the Agent may reasonably deem advisable in the performance thereof,
including,  without  limitation,  the  payment of any  insurance  premiums,  the
payment of any taxes, a payment to obtain a release of a Lien or potential Lien,
expenditures  made  in  defending  against  any  adverse  claim  and  all  other
expenditures  which the Agent may make for the protection of the security hereof
or which may be compelled to make by operation of law. All such sums and amounts
so  expended  shall be  repayable  by the Credit  Parties on a joint and several
basis  (subject to Section 27 hereof)  promptly  upon notice  thereof and demand
therefor,  shall  constitute  additional  Secured  Obligations  and  shall  bear
interest from the date said amounts are expended at the default rate provided in
Section  3.1(b) of the Credit  Agreement for Revolving  Loans that are Base Rate
Loans.  No such  performance of any covenant or agreement by the Agent on behalf
of any Credit Party, and no such advance or expenditure therefor,  shall relieve
the Credit Parties of any default under the terms of this Security  Agreement or
the other Credit Documents.  The Agent may make any payment hereby authorized in
accordance  with any bill,  statement or estimate  procured from the appropriate
public office or holder of the claim to be discharged  without  inquiry into the
accuracy of such bill,  statement  or  estimate or into the  validity of any tax
assessment,  sale, forfeiture, tax lien, title or claim except to the extent the
Agent is aware that such  payment is being  contested  in good faith by a Credit
Party in appropriate  proceedings and against which adequate  reserves are being
maintained in accordance with GAAP.

         8.       Events of Default.

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

         9.       Remedies.

                  (a)  General  Remedies.  Upon  the  occurrence  of an Event of
         Default,  the Agent shall have,  in addition to the rights and remedies
         provided herein, in the Credit Documents or by law (including,  but not
         limited to, the rights and remedies set forth in the UCC or  equivalent
         legislation of the jurisdiction applicable to the affected Collateral),
         the rights and remedies of a secured  party under the UCC to the extent
         permitted  by law  (regardless  of  whether  the  UCC is the law of the
         jurisdiction  where the rights and remedies are asserted and regardless
         of whether the UCC applies to the  affected  Collateral),  and further,
         the  Agent  may,  with  or  without  judicial  process  or the  aid and
         assistance  of others,  (i) enter on any  premises  on which any of the
         Collateral may be located and,  without  resistance or  interference by
         the Credit Parties, take possession of the Collateral,  (ii) dispose of
         any 


                                       11
<PAGE>

         Collateral on any such  premises,  (iii) require the Credit  Parties to
         assemble  and make  available to the Agent at the expense of the Credit
         Parties any  Collateral  at any place and time  designated by the Agent
         which  is  reasonably  convenient  to both  parties,  (iv)  remove  any
         Collateral  from any such premises for the purpose of effecting sale or
         other  disposition  thereof,  and/or (v)  without  demand  and  without
         advertisement,  notice, hearing or process of law, all of which each of
         the Credit  Parties  hereby waives to the fullest  extent  permitted by
         law,  at any  place  and time or  times,  sell and  deliver  any or all
         Collateral  held by or for it at public or private sale, by one or more
         contracts,  in one or more parcels, for cash, upon credit or otherwise,
         at such prices and upon such terms as the Agent deems advisable, in its
         sole discretion (subject to any and all mandatory legal  requirements).
         Each  of  the  Credit  Parties   acknowledges  that  any  private  sale
         referenced  above may be at prices and on terms less  favorable  to the
         seller than the prices and other  terms which might have been  obtained
         at a public sale and,  notwithstanding the foregoing,  agrees that such
         private  sale  shall be  deemed  to have  been  made in a  commercially
         reasonable  manner. In addition to all other sums due the Agent and the
         Lenders with  respect to the Secured  Obligations,  the Credit  Parties
         shall pay the Agent and each of the  Lenders all  reasonable  costs and
         expenses incurred by the Agent or any such Lender,  including,  but not
         limited to, reasonable attorneys' fees and court costs, in obtaining or
         liquidating  the  Collateral,  in  enforcing  payment  of  the  Secured
         Obligations,  or in  the  prosecution  or  defense  of  any  action  or
         proceeding by or against the Agent or the Lenders or the Credit Parties
         concerning  any matter  arising out of or connected  with this Security
         Agreement,  any  Collateral  or  the  Secured  Obligations,  including,
         without  limitation,  any of the foregoing arising in, arising under or
         related to a case concerning a Credit Party under the Bankruptcy  Code.
         To the extent the rights of notice cannot be legally waived  hereunder,
         each Credit  Party agrees that any  requirement  of  reasonable  notice
         shall be met if such notice is personally served on or mailed,  postage
         prepaid,  to the Borrower in accordance  with the notice  provisions of
         Section  11.1 of the Credit  Agreement at least 10 days before the time
         of sale or other event giving rise to the  requirement  of such notice.
         The Agent and the Lenders  shall not be  obligated  to make any sale or
         other  disposition of the  Collateral  regardless of notice having been
         given. To the extent permitted by law, any Lender may be a purchaser at
         any such sale. To the extent  permitted by applicable  law, each of the
         Credit  Parties  hereby  waives  all of its rights of  redemption  with
         respect to any such sale.  Subject to the provisions of applicable law,
         the Agent and the Lenders may postpone or cause the postponement of the
         sale of all or any portion of the  Collateral  by  announcement  at the
         time and place of such sale, and such sale may, without further notice,
         to the extent  permitted by law, be made at the time and place to which
         the sale was  postponed,  or the  Agent  and the  Lenders  may  further
         postpone such sale by announcement made at such time and place.

                  (b) Remedies  relating to Receivables.  Upon the occurrence of
         an Event of Default,  whether or not the Agent has exercised any or all
         of its  rights  and  remedies  hereunder,  (i) each  Credit  Party will
         promptly  upon  request of the Agent  instruct  all account  debtors to
         remit all payments in respect of the receivables to a mailing  location
         selected by the Agent and (ii) the Agent or its designee (A) may notify
         any Credit Party's  customers and account  debtors that the receivables
         of such Credit Party have been  assigned to the Agent or of the Agent's
         security  interest  therein,  and (B) may (either in its own name or in
         the name 


                                       12
<PAGE>

         of  a  Credit  Party  or  both)  demand,   collect  (including  without
         limitation by way of a lockbox arrangement), receive, take receipt for,
         sell, sue for,  compound,  settle,  compromise and give acquittance for
         any and all  amounts due or to become due on  receivables,  and, in the
         Agent's  discretion,  file  any  claim  or take  any  other  action  or
         proceeding  to protect and realize  upon the  security  interest of the
         Agent in the  receivables.  Each Credit Party  acknowledges  and agrees
         that the  proceeds of its  receivables  remitted to or on behalf of the
         Agent in accordance with the provisions  hereof shall be solely for the
         Agent's own  convenience  and that such Credit Party shall not have any
         right,  title or interest in such accounts or in any such other amounts
         except as expressly  provided  herein.  The Agent and the Lenders shall
         have no liability or  responsibility to any Credit Party for acceptance
         of a check,  draft or other  order for  payment  of money  bearing  the
         legend  "payment  in  full" or words of  similar  import  or any  other
         restrictive legend or endorsement or be responsible for determining the
         correctness  of any  remittance.  Each Credit  Party  hereby  agrees to
         indemnify  the Agent and the Lenders from and against all  liabilities,
         damages, losses, actions, claims, judgments,  costs, expenses,  charges
         and reasonable attorneys' fees suffered or incurred by the Agent or the
         Lenders because of the maintenance of the foregoing arrangements except
         as  relating  to or  arising  out of the gross  negligence  or  willful
         misconduct  of the  Agent or a Lender  or its  officers,  employees  or
         agents.  The  foregoing  indemnity  shall  survive the repayment of the
         Secured Obligations and the termination of the Commitments.

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

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


                                       13
<PAGE>

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

                  (f)  Deficiency.  In the event that the  proceeds of any sale,
         collection or realization are  insufficient to pay all amounts to which
         the Agent or the Lenders are legally  entitled,  (subject to Section 27
         hereof) the Credit  Parties shall be jointly and  severally  liable for
         the  deficiency,  together  with  interest  thereon at the default rate
         specified in Section 3.1(b) of the Credit Agreement for Revolving Loans
         that are Base Rate Loans, together with the costs of collection and the
         reasonable fees of any attorneys  employed by the Agent to collect such
         deficiency.   Any  surplus   remaining   after  the  full  payment  and
         satisfaction of the Secured Obligations shall be returned to the Credit
         Parties  or to  whomsoever  a court  of  competent  jurisdiction  shall
         determine to be entitled thereto.

         10.      Rights of the Agent.

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

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

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

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

                                    (iv)  to  pay  or  discharge  taxes,  liens,
                  security interests,  or other encumbrances levied or placed on
                  or threatened against the Collateral of such Credit Party;

                                    (v) to direct  any  parties  liable  for any
                  payment under any of the Collateral to make payment of any and
                  all monies due and to become due  thereunder  directly  to the
                  Agent or as the Agent shall direct;


                                       14
<PAGE>

                                    (vi) to receive  payment of and  receipt for
                  any and all  monies,  claims,  and  other  amounts  due and to
                  become due at any time in  respect  of or  arising  out of any
                  Collateral of such Credit Party;

                                    (vii)  to  sign  and   endorse  any  drafts,
                  assignments,   verifications,   notices  and  other  documents
                  relating to the Collateral of such Credit Party;

                                    (viii) to settle,  compromise  or adjust any
                  suit, action or proceeding  described above and, in connection
                  therewith,  to give such  discharges  or releases as the Agent
                  may deem reasonably appropriate;

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

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

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

                                    (xii)  execute and deliver all  assignments,
                  conveyances,   statements,   financing   statements,   renewal
                  financing statements, security agreements, affidavits, notices
                  and other agreements, instruments and documents that the Agent
                  may  determine  necessary in order to perfect and maintain the
                  security   interests   and  liens  granted  in  this  Security
                  Agreement  and  in  order  to  fully  consummate  all  of  the
                  transactions contemplated therein;

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

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

         This power of attorney is a power coupled with an interest and shall be
         irrevocable  (A) for so long as any of the Secured  Obligations  remain
         outstanding,  any Credit Document or any Hedging Agreement is in effect
         or any Loan or Letter of Credit shall remain  outstanding and 


                                       15
<PAGE>

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

                  (b)  Performance  by the Agent of  Obligations.  If any Credit
         Party fails to perform any  agreement or obligation  contained  herein,
         the Agent itself may perform,  or cause  performance of, such agreement
         or  obligation,  and the expenses of the Agent  incurred in  connection
         therewith shall be payable by the Credit Parties on a joint and several
         basis pursuant to Section 13 hereof.

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

                  (d) The  Agent's  Duty of Care.  Other  than the  exercise  of
         reasonable  care to assure  the safe  custody of the  Collateral  while
         being  held by the Agent  hereunder,  the Agent  shall  have no duty or
         liability to preserve rights  pertaining  thereto,  it being understood
         and  agreed  that  the  Credit   Parties  shall  be   responsible   for
         preservation  of all rights in the  Collateral,  and the Agent shall be
         relieved of all  responsibility for the Collateral upon surrendering it
         or tendering the surrender of it to the Credit Parties. The Agent shall
         be  deemed  to  have  exercised  reasonable  care  in the  custody  and
         preservation  of the  Collateral in its possession if the Collateral is
         accorded  treatment  equal to that  which  the  Agent  accords  its own
         property,   it  being   understood   that  the  Agent  shall  not  have
         responsibility  for  taking  any  necessary  steps to  preserve  rights
         against any parties with respect to any of the Collateral.

         11. Rights of Required Lenders.  All rights of the Agent hereunder,  if
not  exercised by the Agent,  may be exercised by the Required  Lenders,  and in
such  event the  Required  Lenders  shall be  afforded  the  rights of the Agent
hereunder.

         12.  Application  of  Proceeds.  Upon  the  occurrence  of an  Event of
Default,  any payments in respect of the Secured Obligations and any proceeds of
the Collateral,  when received by the Agent or any of the Lenders in cash or its
equivalent, will be applied in reduction of the Secured Obligations in the order
set  forth  in  Section  9.3 of the  Credit  Agreement,  and each  Credit  Party
irrevocably  waives the right to direct the  application  of such  payments  and
proceeds and  acknowledges  and agrees that the Agent shall have the  continuing
and exclusive  right to apply and reapply any and all such payments and proceeds
in the Agent's sole discretion,  notwithstanding  any entry to the contrary upon
any of its books and records.


                                       16
<PAGE>

         13.  Costs of  Counsel.  If at any  time  hereafter,  whether  upon the
occurrence of an Event of Default or not, the Agent  employs  counsel to prepare
or  consider  amendments,  waivers or  consents  with  respect to this  Security
Agreement,  or to take action or make a response in or with respect to any legal
or arbitral  proceeding  relating to this Security  Agreement or relating to the
Collateral,  or to protect the  Collateral  or  exercise  any rights or remedies
under this Security Agreement or with respect to the Collateral, then the Credit
Parties agree to promptly pay upon demand any and all such reasonable documented
costs and expenses of the Agent or the Lenders,  all of which costs and expenses
shall constitute Secured Obligations hereunder.

         14.      Continuing Agreement.

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

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

         15. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified,  changed,  discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.

         16.  Successors  in Interest.  This Security  Agreement  shall create a
continuing  security  interest in the  Collateral and shall be binding upon each
Credit  Party,  its  successors  and assigns and shall inure,  together with the
rights and  remedies of the Agent and the Lenders  hereunder,  to the benefit of
the Agent and the Lenders and their successors and assigns;  provided,  however,
that none of the Credit  Parties  may assign its rights or  delegate  its duties
hereunder  without  the prior  written  consent of each  Lender or the  Required
Lenders, as required by the Credit Agreement.


                                       17
<PAGE>

         17.  No  Liability  to the  Agent or  Lenders.  To the  fullest  extent
permitted by law, each Credit Party hereby  releases the Agent in its individual
capacity or its  capacity  as  attorney-in-fact,  each Lender in its  individual
capacity or its capacity as  attorney-in-fact,  their respective  successors and
assigns and any party acting as attorney for the Agent or the Lenders,  from any
liability  for any act or  omission  or for any error of  judgment or mistake of
fact or law relating to this Security  Agreement or the  Collateral,  except for
any liability  arising from the gross  negligence  or willful  misconduct of the
Agent, or such Lender, or its officers, employees or agents.

         18. Notices.  All notices  required or permitted to be given under this
Security  Agreement  shall be in  conformance  with  Section  11.1 of the Credit
Agreement.

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

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

         21.      Governing Law; Submission to Jurisdiction; Venue.

                  (a) THIS SECURITY  AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
         THE  PARTIES   HEREUNDER   SHALL  BE  GOVERNED  BY  AND  CONSTRUED  AND
         INTERPRETED  IN ACCORDANCE  WITH THE LAWS OF THE STATE OF FLORIDA.  Any
         legal action or proceeding with respect to this Security  Agreement may
         be  brought  in the  courts of the State of  Florida  or of the  United
         States  located in the State of Florida and, by execution  and delivery
         of this  Security  Agreement,  each  Credit  Party  hereby  irrevocably
         accepts  for  itself  and in respect  of its  property,  generally  and
         unconditionally,  the  jurisdiction  of such courts.  Each Credit Party
         further  irrevocably  consents  to the service of process out of any of
         the  aforementioned  courts  in any such  action or  proceeding  by the
         mailing of copies  thereof by  registered  or certified  mail,  postage
         prepaid,  to it at the address for notices  pursuant to Section 11.1 of
         the Credit  Agreement,  such service to become  effective 30 days after
         such  mailing.  Nothing  herein  shall affect the right of the Agent to
         serve process in any other manner permitted by law or to commence legal
         proceedings  or to  otherwise  proceed  against any Credit Party in any
         other jurisdiction.

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


                                       18
<PAGE>

         22.  WAIVER  OF JURY  TRIAL.  EACH  OF THE  PARTIES  TO  THIS  SECURITY
AGREEMENT  HEREBY  IRREVOCABLY  WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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

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

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

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

         27.      Joint and Several Obligations of Credit Parties.

                  (a)  Subject to clause  (c) of this  Section  27,  each of the
         Credit Parties is accepting  joint and several  liability  hereunder in
         consideration  of the  financial  accommodation  to be  provided by the
         Lenders under the Credit  Agreement,  for the mutual benefit,  directly
         and indirectly,  of each of the Credit Parties and in  consideration of
         the  undertakings  of each of the Credit  Parties  to accept  joint and
         several liability for the obligations of each of them.

                  (b)  Subject to clause  (c) of this  Section  27,  each of the
         Credit   Parties   jointly  and  severally   hereby   irrevocably   and
         unconditionally  accepts,  not  merely  as  a  surety  but  also  as


                                       19
<PAGE>

         a co-debtor,  joint and several liability with the other Credit Parties
         with  respect to the  payment  and  performance  of all of the  Secured
         Obligations  arising  under this Security  Agreement,  the other Credit
         Documents  and the Hedging  Agreements,  it being the  intention of the
         parties hereto that all the Secured  Obligations shall be the joint and
         several  obligations of each of the Credit Parties without  preferences
         or distinction among them.

                  (c)  Notwithstanding  any provision to the contrary  contained
         herein or in any  other of the  Credit  Documents,  to the  extent  the
         obligations  of a  Guarantor  shall be  adjudicated  to be  invalid  or
         unenforceable for any reason (including, without limitation, because of
         any applicable state,  provincial or federal law relating to fraudulent
         conveyances  or  transfers)  then  the  obligations  of each  Guarantor
         hereunder  shall be limited to the maximum  amount that is  permissible
         under applicable law (whether  federal or state and including,  without
         limitation, the Bankruptcy Code).

                  [remainder of page intentionally left blank]




                                       20
<PAGE>

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

BORROWER:                            INTEGRATED LIVING COMMUNITIES
                                     HOLDING, INC., a Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

GUARANTORS:                          INTEGRATED LIVING COMMUNITIES, INC.,
                                     a Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED LIVING COMMUNITIES OF
                                     VIRGINIA BEACH, INC.,
                                     a Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED LIVING COMMUNITIES OF
                                     REDGATE, INC., a Delaware corporation


                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED LIVING COMMUNITIES OF
                                     PORTSMOUTH, INC., a Delaware corporation


                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                              [Signatures Continue]


                                       21
<PAGE>

                                     INTEGRATED LIVING COMMUNITIES OF
                                     GLOUCESTER, INC., a Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED LIVING COMMUNITIES OF
                                     SARASOTA, INC., a Florida corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED LIVING COMMUNITIES OF
                                     WEST PALM BEACH, INC., a
                                     Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED LIVING COMMUNITIES AT
                                     TERRACE GARDENS, INC.,
                                     a Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title: ________________________

                                     INTEGRATED MANAGEMENT-
                                     CARRINGTON POINTE, INC.,
                                     a Delaware corporation

                                     By:____________________________
                                     Name:  ________________________
                                     Title:________________________



                                       22
<PAGE>


Accepted and agreed as of the date first above written.

                                     NATIONSBANK, N.A. (SOUTH), as Agent


                                     By:___________________________
                                     Name:_________________________
                                     Title:__________________________









                                       23
<PAGE>



                                  SCHEDULE 1(b)

                                       to

                               Security Agreement

                            dated as of April 9, 1997

                     in favor of NationsBank, N.A. (South),

                                    as Agent


                              INTELLECTUAL PROPERTY





                                       24
<PAGE>


                                  SCHEDULE 5(c)

                                       to

                               Security Agreement

                            dated as of April 9, 1997

                     in favor of NationsBank, N.A. (South),

                                    as Agent


                  MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE

                              OR USE OF TRADENAMES






                                       25
<PAGE>


                                SCHEDULE 5(f)(i)

                                       to

                               Security Agreement

                            dated as of April 9, 1997

                     in favor of NationsBank, N.A. (South),

                                    as Agent


                      NOTICE OF GRANT OF SECURITY INTEREST
                                  IN COPYRIGHTS


United States Copyright Office

Ladies and Gentlemen:

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

                                   COPYRIGHTS

                                                                   Date of
       Copyright No.          Description of Copyright            Copyright



                             Copyright Applications

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




                                       26
<PAGE>


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

                                            Very truly yours,

                                            ----------------------------------
                                            [Credit Party]

                                            By:______________________________
                                            Name:____________________________
                                            Title:___________________________


Acknowledged and Accepted:

NATIONSBANK, N.A. (South), as Agent

By:_____________________________
Name:___________________________
Title:__________________________



                                       27
<PAGE>


STATE OF ___________________

COUNTY OF __________________

         I,  ______________________,  a Notary  Public of the  County  and State
aforesaid,  certify that  _____________,  personally came before me this day and
acknowledged      that      (s)he     is      ___________      Secretary      of
_____________________________,  a ________________________ corporation, and that
by  authority  duly  given  and as the  act of the  corporation,  the  foregoing
instrument was signed in its name by its ___________ President.

         Witness  my hand  and  official  stamp  or  seal,  this  ______  day of
_________________, 1997.


-----------------------------------
Notary Public

My Commission Expires:

-----------------------------------
(Notary Seal)




                                       28
<PAGE>



STATE OF ________________

COUNTY OF _______________

         I,  ______________________,  a Notary  Public of the  County  and State
aforesaid,  certify that  _____________,  personally came before me this day and
acknowledged that (s)he is ___________ of NationsBank,  N.A. (South), a national
banking  association,  and that by  authority  duly  given and as the act of the
corporation,  the foregoing instrument was signed in its name by its ___________
President.

         Witness  my hand  and  official  stamp  or  seal,  this  ______  day of
_________________, 1997.


-----------------------------------
Notary Public

My Commission Expires:

-----------------------------------
(Notary Seal)




                                       29
<PAGE>


                               SCHEDULE 5(f)(ii)

                                       to

                               Security Agreement

                            dated as of April 9, 1997

                     in favor of NationsBank, N.A. (South),

                                    as Agent



                      NOTICE OF GRANT OF SECURITY INTEREST
                                   IN PATENTS


United States Patent and Trademark Office

Ladies and Gentlemen:

         Please be advised that pursuant to the Security  Agreement  dated as of
April ___, 1997 (the "Security Agreement") by and among the Credit Parties party
thereto  (each a "Credit  Party" and  collectively,  the "Credit  Parties")  and
NationsBank,  N.A.  (South),  as Agent (the "Agent") for the lenders  referenced
therein (the "Lenders"),  the undersigned  Credit Party has granted a continuing
security   interest  in  and  continuing  lien  upon,  the  patents  and  patent
applications shown below to the Agent for the ratable benefit of the Lenders:


                                     PATENTS

                             Description of Patent                Date of
      Patent No.                         Item                     Patent



                               Patent Applications

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




                                       30
<PAGE>



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

                                            Very truly yours,

                                            ----------------------------------
                                            [Credit Party]

                                            By:_____________________________
                                            Name:___________________________
                                            Title:__________________________


Acknowledged and Accepted:

NATIONSBANK, N.A. (South), as Agent

By:_____________________________
Name:___________________________
Title:__________________________




                                       31
<PAGE>


STATE OF __________________

COUNTY OF _________________

         I,  ______________________,  a Notary  Public of the  County  and State
aforesaid,  certify that  _____________,  personally came before me this day and
acknowledged      that      (s)he     is      ___________      Secretary      of
_____________________________,  a ________________________ corporation, and that
by  authority  duly  given  and as the  act of the  corporation,  the  foregoing
instrument was signed in its name by its ___________ President.

         Witness  my hand  and  official  stamp  or  seal,  this  ______  day of
_________________, 1997.


-----------------------------------
Notary Public

My Commission Expires:

-----------------------------------
(Notary Seal)




                                       32
<PAGE>


STATE OF _________________

COUNTY OF ________________

         I,  ______________________,  a Notary  Public of the  County  and State
aforesaid,  certify that  _____________,  personally came before me this day and
acknowledged that (s)he is ___________ of NationsBank,  N.A. (South), a national
banking  association,  and that by  authority  duly  given and as the act of the
corporation,  the foregoing instrument was signed in its name by its ___________
President.

         Witness  my hand  and  official  stamp  or  seal,  this  ______  day of
_________________, 1997.


-----------------------------------
Notary Public

My Commission Expires:

-----------------------------------
(Notary Seal)





                                       33
<PAGE>


                               SCHEDULE 5(f)(iii)

                                       to

                               Security Agreement

                            dated as of April 9, 1997

                     in favor of NationsBank, N.A. (South),

                                    as Agent


                      NOTICE OF GRANT OF SECURITY INTEREST
                                  IN TRADEMARKS


United States Patent and Trademark Office

Ladies and Gentlemen:

         Please be advised that pursuant to the Security  Agreement  dated as of
April ___, 1997 (the "Security Agreement") by and among the Credit Parties party
thereto  (each a "Credit  Party" and  collectively,  the "Credit  Parties")  and
NationsBank,  N.A.  (South),  as Agent (the "Agent") for the lenders  referenced
therein (the "Lenders"),  the undersigned  Credit Party has granted a continuing
security  interest in and  continuing  lien upon,  the  trademarks and trademark
applications shown below to the Agent for the ratable benefit of the Lenders:


                                   TRADEMARKS

                               Description of Trademark         Date of
      Trademark No.                    Item                     Trademark



                             Trademark Applications

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




                                       34
<PAGE>


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

                                         Very truly yours,

                                         ----------------------------------
                                         [Credit Party]

                                         By:_____________________________
                                         Name:___________________________
                                         Title:__________________________


Acknowledged and Accepted:

NATIONSBANK, N.A. (South), as Agent

By:________________________
Name:______________________
Title:_____________________





                                       35
<PAGE>


STATE OF ___________________

COUNTY OF _____________________

         I,  ______________________,  a Notary  Public of the  County  and State
aforesaid,  certify that  _____________,  personally came before me this day and
acknowledged      that      (s)he     is      ___________      Secretary      of
_____________________________,  a ________________________ corporation, and that
by  authority  duly  given  and as the  act of the  corporation,  the  foregoing
instrument was signed in its name by its ___________ President.

         Witness  my hand  and  official  stamp  or  seal,  this  ______  day of
_________________, 1997.


-----------------------------------
Notary Public

My Commission Expires:

-----------------------------------
(Notary Seal)




                                       36
<PAGE>


STATE OF __________________

COUNTY OF _____________________

         I,  ______________________,  a Notary  Public of the  County  and State
aforesaid,  certify that  _____________,  personally came before me this day and
acknowledged that (s)he is ___________ of NationsBank,  N.A. (South), a national
banking  association,  and that by  authority  duly  given and as the act of the
corporation,  the foregoing instrument was signed in its name by its ___________
President.

         Witness  my hand  and  official  stamp  or  seal,  this  ______  day of
_________________, 1997.


-----------------------------------
Notary Public

My Commission Expires:

-----------------------------------
(Notary Seal)



                                       37