Document:

<PAGE>   1

                                                                     EXHIBIT 4.9
Record and return to:
Baker Botts LLP
2001 Ross Avenue, Suite 600
Dallas, Texas  75201
Attention:  R. Christian Brose, Esq.

===============================================================================

              STERLING PULP CHEMICALS, INC., a Debtor-in-Possession

                                    Grantor,

                                       to

          THE CIT GROUP/BUSINESS CREDIT, INC., as Administrative Agent

                                       and

                                    , as Georgia co-agent
                          ----------

                                   ----------

  CURRENT ASSETS SECURED PARTIES LEASEHOLD DEED TO SECURE DEBT, ASSIGNMENT AND
                               SECURITY AGREEMENT

                                   ----------

                           Dated as of July 19, 2001

           This instrument affects certain real and personal property
                           located in Lowndes County,
                                State of Georgia.

This instrument was prepared by the above named attorney.
Notice:  This instrument contains inter alia obligations which may provide for:

                  (a)      a variable rate of interest and/or

                  (b)      future and/or revolving credit advances or
                           readvances, which when made, shall have the same
                           priority as advances or readvances made on the date
                           hereof whether or not (i) any advances or readvances
                           were made on the date hereof and (ii) any
                           indebtedness is outstanding at the time any advance
                           or re-advance is made.

<PAGE>   2

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                      Page
                                                                                      ----
<S>              <C>                                                                <C>
SECTION 1.1.     Payment of Secured Obligations.....................................I-2-B-5
SECTION 1.2.     Title to Collateral, etc...........................................I-2-B-5
SECTION 1.3.     Intentionally Omitted..............................................I-2-B-6
SECTION 1.4.     Recordation........................................................I-2-B-6
SECTION 1.5.     Payment of Impositions, etc........................................I-2-B-7
SECTION 1.6.     Insurance and Legal Requirements...................................I-2-B-7
SECTION 1.7.     Security Interests, etc............................................I-2-B-7
SECTION 1.8.     Permitted Contests.................................................I-2-B-8
SECTION 1.9.     Leases.............................................................I-2-B-8
SECTION 1.10.    Compliance with Instruments........................................I-2-B-8
SECTION 1.11.    Maintenance and Repair, etc........................................I-2-B-9
SECTION 1.12.    Alterations, Additions, etc........................................I-2-B-9
SECTION 1.13.    Acquired Property Subject to Security Title/Security Interest......I-2-B-9
SECTION 1.14.    Assignment of Rents, Proceeds. etc.................................I-2-B-9
SECTION 1.15.    No Claims Against the Grantee.....................................I-2-B-10
SECTION 1.16.    Indemnification...................................................I-2-B-11
SECTION 1.17.    No Credit for Payment of Taxes....................................I-2-B-12
SECTION 1.18.    Intentionally Omitted.............................................I-2-B-12
SECTION 1.19.    No Transfer of the Property.......................................I-2-B-12
SECTION 1.20.    Security Agreement................................................I-2-B-12
SECTION 1.21.    Representations and Warranties....................................I-2-B-13
SECTION 1.22.    Grantor's Covenants...............................................I-2-B-13
SECTION 1.23.    Attornment........................................................I-2-B-13
SECTION 2.1.     Insurance.........................................................I-2-B-13
SECTION 2.1.1.   Risks to be Insured...............................................I-2-B-13
SECTION 2.1.2.   Policy Provisions.................................................I-2-B-14
SECTION 2.1.3.   Delivery of Policies, etc.........................................I-2-B-15
SECTION 2.1.4.   Separate Insurance................................................I-2-B-15
SECTION 2.2.     Damage, Destruction or Taking; Grantor to Give Notice;
                 Assignment of Awards..............................................I-2-B-15
SECTION 2.3.     Application of Proceeds and Awards................................I-2-B-16
SECTION 2.4.     Total Taking and Total Destruction................................I-2-B-17
SECTION 3.1.     Events of Default; Acceleration...................................I-2-B-17
SECTION 3.2.     Legal Proceedings; Judicial Foreclosure...........................I-2-B-17
SECTION 3.3      Power of Sale.....................................................I-2-B-17
SECTION 3.4.     Uniform Commercial Code Remedies..................................I-2-B-18
SECTION 3.5.     Grantee Authorized to Execute Deeds, etc..........................I-2-B-19
SECTION 3.6.     Purchase of Collateral by Grantee.................................I-2-B-19
SECTION 3.7.     Receipt a Sufficient Discharge to Purchaser.......................I-2-B-19
SECTION 3.8.     Waiver of Appraisement. Valuation, etc............................I-2-B-19
SECTION 3.9.     Sale a Bar Against Grantor........................................I-2-B-19
SECTION 3.11.    Application of Proceeds of Sale and Other Moneys..................I-2-B-20
</Table>

                                        i

<PAGE>   3

<Table>

<S>              <C>                                                               <C>
SECTION 3.12.    Appointment of Receiver...........................................I-2-B-20
SECTION 3.14.    Right of Grantee to Perform Grantor's Covenants, etc..............I-2-B-21
SECTION 3.15.    Subrogation.......................................................I-2-B-21
SECTION 3.16.    Remedies, etc., Cumulative........................................I-2-B-22
SECTION 3.17.    Provisions Subject to Applicable Law..............................I-2-B-22
SECTION 3.18.    No Waiver, etc....................................................I-2-B-22
SECTION 3.19.    Compromise of Actions, etc........................................I-2-B-22
SECTION 3.20     Foreclosure - Authority Lease.....................................I-2-B-22
SECTION 4.1.     Terms Defined in this Deed........................................I-2-B-23
SECTION 4.2.     Use of Defined Terms..............................................I-2-B-24
SECTION 4.3.     Credit Agreement Definitions......................................I-2-B-25
SECTION 5.1.     Further Assurances; Financing Statements..........................I-2-B-25
SECTION 5.1.1.   Further Assurances................................................I-2-B-25
SECTION 5.1.2.   Financing Statements..............................................I-2-B-25
SECTION 5.2.     Additional Security...............................................I-2-B-25
SECTION 5.3.     Satisfaction; Partial Release, etc................................I-2-B-26
SECTION 5.3.1.   Satisfaction......................................................I-2-B-26
SECTION 5.3.2.   Partial Release, etc..............................................I-2-B-26
SECTION 5.4.     Notices, etc......................................................I-2-B-26
SECTION 5.5.     Waivers, Amendments, etc..........................................I-2-B-26
SECTION 5.6.     Cross-References..................................................I-2-B-26
SECTION 5.7.     Headings..........................................................I-2-B-27
SECTION 5.8.     Currency..........................................................I-2-B-27
SECTION 5.9.     Governing Law.....................................................I-2-B-27
SECTION 5.10.    Successors and Assigns. etc.......................................I-2-B-27
SECTION 5.11.    Waiver of Jury Trial; Submission to Jurisdiction..................I-2-B-27
SECTION 5.12.    Severability; Conflicts...........................................I-2-B-28
SECTION 5.13.    Loan Document.....................................................I-2-B-28
SECTION 5.14.    Usury Savings Clause..............................................I-2-B-28
SECTION 5.15.    Future Advances...................................................I-2-B-28
SECTION 5.16.    Co-Agent..........................................................I-2-B-29
SECTION 5.17.    Deed Subject to Revolver Intercreditor Agreement..................I-2-B-29
</Table>

                                       ii

<PAGE>   4

          CURRENT ASSETS SECURED PARTIES LEASEHOLD DEED TO SECURE DEBT,
                        ASSIGNMENT AND SECURITY AGREEMENT

         THIS CURRENT ASSETS SECURED PARTIES LEASEHOLD DEED TO SECURE DEBT,
ASSIGNMENT AND SECURITY AGREEMENT, dated as of July 19, 2001 (this "Deed"), made
by STERLING PULP CHEMICALS, INC., a Georgia corporation (the "Grantor"), having
an address at 1200 Smith Street, Suite 1900, Houston, Texas 77002-4312, to THE
CIT GROUP/BUSINESS CREDIT, INC. ("CIT"), having an address at 5420 LBJ Freeway,
Suite 200, Dallas, Texas 75240, as the Administrative Agent under the Credit
Agreement referred to below (together with its successors and assigns from time
to time acting as Administrative Agent for each of the Current Assets Secured
Parties under such Credit Agreement, the "Administrative Agent") and
______________________, a _______________ having an address at
______________________________________________, as Georgia co-agent (together
with its successors and assigns from time to time acting as Georgia co-agent and
the Administrative Agent, the "Grantee").

                                WITNESSETH THAT:

         WHEREAS, Grantor has elected to file a voluntary petition with the
United States Bankruptcy Court for the Southern District of Texas and has
continued in possession of its assets and in the management of its business
pursuant to Sections 1107 and 1108 of the Bankruptcy Code.

         WHEREAS, the Grantor is on the date of delivery hereof the owner of an
easement or leasehold estate as indicated herein or on Schedule 1 hereto to the
parcel of land (and any easements or other rights or interests) described in
Schedule 1 hereto (the "Land") and of the Improvements (such term and other
capitalized terms used in this Mortgage having the respective meanings specified
or referred to in Article IV);

         WHEREAS, pursuant to the terms, conditions and provisions of the
Revolving Credit Agreement, dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement'),
among Sterling Chemicals, Inc., Sterling Canada, Inc., Sterling Pulp Chemicals
U.S., Inc., Grantor, Sterling Fibers, Inc., Sterling Chemicals Energy, Inc. and
Sterling Chemicals International, Inc., as Borrowers (collectively, the
"Borrowers", the financial institutions from time to time parties thereto (the
"Lenders") and The CIT Group/Business Credit, Inc., as the Administrative Agent,
the Lenders and the Issuer have agreed, subject to the conditions and
limitations set forth therein, to make Loans to, and to issue Letters of Credit
for the account of, the Borrowers in the maximum original principal amount not
to exceed One Hundred Ninety-Five Million Dollars ($195,000,000) (such Loans and
Letters of Credit are hereinafter referred to collectively as the "Credit
Extensions").

         WHEREAS, the Credit Extensions consist of, inter alia, Current Assets
Loans in a maximum principal amount not to exceed One Hundred Twenty-Five
Million Dollars ($125,000,000) having a Maturity Date of the earlier to occur of
(i) the thirtieth (30th) day after the date of the entry of the Interim Order if
the Final Order has not been entered prior to such date (unless the Maturity
Date has been extended pursuant to Section 10.1(e)(i) of the Credit

                                    I-2-B-1
<PAGE>   5

Agreement), (ii) the date on which the Bankruptcy Court enters an order denying
approval of the transactions contemplated in the Credit Agreement, and (iii) the
second anniversary of the Effective Date (unless the Maturity Date has been
extended pursuant to Section 10.1(e)(i) of the Credit Agreement); and

         WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Deed.

                                     GRANT:

         NOW, THEREFORE, for and in consideration of the premises, and of the
mutual covenants herein contained, and in order to induce the Current Assets
Lenders to make the Current Assets Loans pursuant to the Credit Agreement, and
in order to secure the full, timely and proper payment and performance of and
compliance with each and every one of the Secured Obligations (as hereinafter
defined), effective upon the entry of the Interim Order the Grantor hereby
irrevocably grants, bargains, sells, sets over, warrants, aliens, demises,
releases, hypothecates, pledges, assigns, transfers and conveys to the Grantee
and its successors, successors-in-title and assigns, forever, all of the
following (the "Collateral"):

                  (a) Real Estate. All of Grantor's estate, interest, rights,
         privileges and benefits (including, without limitation, any option to
         purchase fee simple title) existing under or created by that certain
         Indenture of Lease by and between Valdosta-Lowndes County Industrial
         Authority (as Lessor) and Sterling Pulp Chemicals US, Inc. (as Lessee)
         dated October 1, 1995, and recorded in Deed Book 1331, Page 27, Lowndes
         County, Georgia Records, with a Memorandum of Lease Agreement dated as
         of October 1, 1995, being recorded in Deed Book 1240, page 1, aforesaid
         records, as assigned by Sterling Pulp Chemicals US, Inc. to Grantor by
         instrument dated August 6, 1996, and recorded in Deed Book 1333, Page
         123, and re-recorded in Deed Book 1349, Page 83, aforesaid records
         (collectively, the "Authority Lease") covering and affecting the Land,
         and all of Grantor's interest in and to all of the Land and all
         additional lands and estates therein now owned or hereafter-acquired by
         the Grantor for use or development with the Land or any portion
         thereof, together with all and singular the tenements, rights,
         easements, hereditaments, rights of way, privileges, liberties,
         appendages and appurtenances now or hereafter belonging or in any way
         pertaining to the Land and such additional lands and estates therein
         (including, without limitation, all rights relating to storm and
         sanitary sewer, water, gas, electric, railway and telephone services);
         all development rights, air rights, riparian rights, water, water
         rights, water stock, all rights in, to and with respect to any and all
         oil, gas, coal, minerals and other substances of any kind or character
         underlying or relating to the Land and such additional lands and
         estates therein and any interest therein; all estate, claim, demand,
         right, title or interest of the Grantor in and to any street, road,
         highway or alley, vacated or other, adjoining the Land or any part
         thereof and such additional lands and estates therein; all strips and
         gores belonging, adjacent or pertaining to the Land or such additional
         lands and estates; and any after-acquired property (herein collectively
         referred to as the "Real Estate");

                                    I-2-B-2
<PAGE>   6

                  (b) Improvements. All of Grantor's right, title and interest
         in and to all buildings, structures and other improvements and any
         additions and alterations thereto or replacements thereof, now or
         hereafter built, constructed or located upon the Real Estate; and, to
         the extent that any of the following items of property constitutes
         fixtures under applicable laws, all furnishings, fixtures, fittings,
         appliances, apparatus, equipment, machinery, building and construction
         materials and other articles of every kind and nature whatsoever and
         all replacements thereof, now or hereafter affixed or attached to,
         placed upon or used in any way in connection with the complete and
         comfortable use, enjoyment, occupation, operation, development and/or
         maintenance of the Real Estate or such buildings, structures and other
         improvements, including, but not limited to, partitions, furnaces,
         boilers, oil burners, radiators and piping, plumbing and bathroom
         fixtures, refrigeration, heating, ventilating, air conditioning and
         sprinkler systems, other fire prevention and extinguishing apparatus
         and materials, vacuum cleaning systems, gas and electric fixtures,
         incinerators, compactors, elevators, engines, motors, generators and
         all other articles of property which are considered fixtures under
         applicable law (such buildings, structures and other improvements and
         such other property are herein collectively referred to as the
         "Improvements"; the Real Estate and the Improvements are herein
         collectively referred to as the "Property");

                  (c) Goods. All of Grantor's right, title and interest in and
         to all building materials, construction materials, appliances
         (including, without limitation, stoves, ranges, ovens, disposals,
         refrigerators, water fountains and coolers, fans, heaters, dishwashers,
         clothes washers and dryers, water heaters, hood and fan combinations,
         kitchen equipment, laundry equipment, kitchen cabinets and other
         similar equipment), stocks, supplies, blinds, window shades, drapes,
         carpets, floor coverings, manufacturing equipment and machinery, office
         equipment, growing plants and shrubbery, control devices, equipment
         (including window cleaning, building cleaning, swimming pool,
         recreational, monitoring, garbage, pest control and other equipment),
         motor vehicles, tools, furnishings, furniture, lighting, non-structural
         additions to the Real Estate and Improvements and all other tangible
         property of any kind or character, together with all replacements
         thereof, now or hereafter located on or in or used or useful in
         connection with the complete and comfortable use, enjoyment,
         occupation, operation, development and/or maintenance of the Property,
         regardless of whether or not located on or in the Property or located
         elsewhere for purposes of storage, fabrication or otherwise, but
         excluding inventory (as defined in the U.C.C.) (herein collectively
         referred to as the "Goods");

                  (d) Intangibles. All goodwill, trademarks, trade names, option
         rights, purchase contracts, real and personal property tax refunds,
         books and records and general intangibles of the Mortgagor relating to
         the Property and all accounts, contract rights, instruments, chattel
         paper and other rights of the Mortgagor for the payment of money for
         property sold or lent, for services rendered, for money lent, or for
         advances or deposits made, and any other intangible property of the
         Mortgagor relating to the Property (herein collectively referred to as
         the "Intangibles");

                  (e) Leases. All rights of the Grantor in, to and under all
         leases (other than the Authority Lease), licenses, occupancy
         agreements, concessions and other arrangements,

                                    I-2-B-3
<PAGE>   7

         oral or written, now existing or hereafter entered into, whereby any
         Person agrees to pay money or any other consideration for the use,
         possession or occupancy of, or any estate in, the Property or any
         portion thereof or interest therein (herein collectively referred to as
         the "Leases"), and the right, subject to applicable law, upon the
         occurrence of any Event of Default hereunder, to receive and collect
         the Rents (as hereinafter defined) paid or payable thereunder,

                  (f) Plans. All rights of the Grantor in and to all plans and
         specifications, designs, drawings and other information, materials and
         matters heretofore or hereafter prepared relating to the Improvements
         or any construction on the Real Estate (herein collectively referred to
         as the "Plans");

                  (g) Permits. All rights of the Grantor, to the extent
         assignable, in, to and under all permits, franchises, licenses,
         approvals and other authorizations respecting the use, occupation and
         operation of the Property and every part thereof and respecting any
         business or other activity conducted on or from the Property, and any
         product or proceed thereof or therefrom, including, without limitation,
         all building permits, certificates of occupancy and other licenses,
         permits and approvals issued by governmental authorities having
         jurisdiction (herein collectively referred to as the "Permits");

                  (h) Contracts. All right, title and interest of the Grantor,
         to the extent assignable, in and to all certificates, warranties,
         appraisals, engineering, environmental, soils, insurance and other
         reports and studies, books, records, correspondence, files and
         advertising materials, and other documents, now or hereafter obtained
         or entered into, as the case may be, pertaining to the construction,
         use, occupancy, possession, operation, management, leasing, maintenance
         and/or ownership of the Property and all right, title and interest of
         the Grantor therein (herein collectively referred to as the
         "Contracts");

                  (i) Leases of Furniture Furnishings and Equipment. All right,
         title and interest of the Grantor as lessee in, to and under any leases
         of furniture, furnishings, equipment and any other Goods now or
         hereafter installed in or at any time used in connection with the
         Property;

                  (j) Rents. All rents, issues, profits, royalties, avails,
         income and other benefits derived or owned, directly or indirectly, by
         the Grantor from the Property, including, without limitation, all rents
         and other consideration deposited in any Lockbox Account and all rents
         and other consideration payable by tenants, claims against guarantors,
         and any cash or other securities deposited to secure performance by
         tenants, under the Leases (herein collectively referred to as "Rents");

                  (k) Proceeds. All proceeds of the conversion, voluntary or
         involuntary of any of the foregoing into cash or liquidated claims,
         including, without limitation, proceeds of insurance and condemnation
         awards (herein collectively referred to as "Proceeds"); and

                  (1) Other Property. All other property and rights of the
         Grantor of every kind and character relating to the Property, and all
         proceeds and products of any of the

                                    I-2-B-4
<PAGE>   8

         foregoing, provided however, the Collateral shall not include any
         general intangibles or other rights arising under any contracts,
         instruments, licenses, or other documents as to which the grant of
         alien and/or security interest would constitute a violation of a valid
         and enforceable restriction in favor of a third party on such grant,
         unless and until any required consents shall have been obtained;

         AND, without limiting any of the other provisions of this Deed, the
Grantor expressly grants to the Grantee, as secured party, a security interest
in all of those portions of the Collateral which are or may be subject to the
State Uniform Commercial Code provisions applicable to secured transactions,
subject, however, to the Permitted Encumbrances;

         TO HAVE AND TO HOLD the Collateral to the use, benefit and behoof of
the Grantee, its successors, successors-in-title and assigns, forever, subject,
however, to the Permitted Encumbrances. This Deed is intended to operate and is
to be construed as a deed passing the title to the Collateral to Grantee and is
made under those provisions of the existing laws of the State relating to deeds
to secure debt and not as a mortgage, and is given to secure the payment of the
Secured Obligations.

         FURTHER to secure the full, timely and proper payment and performance
of the Secured Obligations, the Grantor hereby covenants and agrees with and
warrants to the Grantee as follows:

                                    ARTICLE I

                     COVENANTS AND AGREEMENTS OF THE GRANTOR

         SECTION 1.1. Payment of Secured Obligations. (i) The Grantor agrees
that:

                  (a) Grantor will duly and punctually pay and perform or cause
         to be paid and performed the Current Assets Loans (some or all of which
         Current Assets Loans are evidenced by Current Assets Notes) at the time
         and in accordance with the Loan Documents pertaining to the Current
         Assets Loans, which Current Assets Loans shall not exceed the maximum
         principal amount of One Hundred Twenty-Five Million and 00/100 Dollars
         ($125,000,000) and all of which Current Assets Loans have a Maturity
         Date as described in the fourth recital (WHEREAS clause) above; and

                  (b) when and as due and payable from time to time in
         accordance with the terms of this Deed or of any other Loan Documents
         pertaining to the Current Assets Loans, pay and perform, or cause to be
         paid and performed, all other Secured Obligations.

         SECTION 1.2. Title to Collateral, etc. The Grantor represents and
warrants to and covenants with the Grantee that:

                  (a) except as otherwise permitted by the terms of the Credit
         Agreement, as of the date hereof and at all times hereafter while this
         Deed is outstanding, the Grantor (1) is

                                    I-2-B-5
<PAGE>   9

         and shall be the absolute owner of the legal and beneficial title to
         the applicable interest in the Property and to all other property
         included in the Collateral, and (2) has and shall have good and
         sufficient easement or leasehold estate, as currently represented in
         the granting clause as of the date hereof, to the Property, subject in
         each case only to this Deed, the Permitted Liens (as defined in the
         Credit Agreement) and the encumbrances set forth in Schedule 2 hereto
         (collectively, the "Permitted Encumbrances");

                  (b) the Grantor has good and lawful right, power and authority
         to execute this Deed and to convey, transfer, assign, set over and
         grant the security title to and a security interest in the Collateral,
         all as provided herein;

                  (c) this Deed has been duly executed, acknowledged and
         delivered on behalf of the Grantor, all consents and other actions
         required to be taken by the officers, directors, shareholders and
         partners, as the case may be, of the Grantor have been duly and fully
         given and performed and this Deed constitutes the legal, valid and
         binding obligation of the Grantor, enforceable against the Grantor in
         accordance with its tenors;

                  (d) upon entry of the Interim Order, the Grantor shall have a
         security title on the Property and a perfected security interest in the
         Collateral other than the Property, senior in priority to all Liens
         other than the then applicable Priority Liens; and

                  (e) the Grantor, at its expense, will warrant and defend to
         the Grantee and any purchaser under the power of sale herein or at any
         foreclosure sale such title to the Collateral and the security title
         and perfected security interest of this Deed thereon and therein
         against all claims and demands and will maintain, preserve and protect
         such security title and security interest and will keep this Deed a
         valid, direct security title of record on the Property and a perfected
         security interest in the Collateral other than the Property, in each
         case senior in priority to all Liens other than the then applicable
         Priority Liens and subject only to the Permitted Encumbrances.

         SECTION 1.3. Intentionally Omitted.

         SECTION 1.4. Recordation. The Grantor, at its expense, will at all
times cause this Deed and any instruments amendatory hereof or supplemental
hereto and any instruments of assignment hereof or thereof (and any appropriate
financing statements or other instruments and continuations thereof), and each
other instrument delivered in connection with the Current Assets Loans, the
Credit Agreement or any other Loan Document pertaining to the Current Assets
Loans and intended thereunder to be recorded, registered and filed, to be kept
recorded, registered and filed, in such manner and in such places, and will pay
all such recording, registration, filing fees, taxes and other charges, and will
comply with all such statutes and regulations as may be required by law in order
to establish, preserve, perfect and protect the security title and security
interest of this Deed as a valid, direct security title on the Property and
perfected security interest in the Collateral other than the Property, senior in
priority to all Liens other than the then applicable Priority Liens. The Grantor
will pay or cause to be paid, and will indemnify the Grantee in respect of, all
taxes (including interest and penalties) at any time

                                    I-2-B-6
<PAGE>   10

payable in connection with the filing and recording of this Deed and any and all
supplements and amendments hereto.

         SECTION 1.5. Payment of Impositions, etc. Subject to Section 1.8
(relating to permitted contests), the Grantor will pay or cause to be paid
before the same would become delinquent and before any fine, penalty, interest
or cost may be added for non-payment, all taxes, assessments, water and sewer
rates, charges, license fees, inspection fees and other governmental levies or
payments, of every kind and nature whatsoever, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, which at any time may be
assessed, levied, confirmed, imposed or which may become a lien upon the
Collateral, or any portion thereof, or which are payable with respect thereto,
or upon the rents, issues, income or profits thereof, or on the occupancy,
operation, use, possession or activities thereof, whether any or all of the same
be levied directly or indirectly or as excise taxes or as income taxes, and all
taxes, assessments or charges which may be levied on the Secured Obligations, or
the interest thereon (collectively, the "Impositions"). The Grantor will deliver
to the Grantee, upon request, copies of official receipts or other satisfactory
proof evidencing such payments.

         SECTION 1.6. Insurance and Legal Requirements. Subject to Section 1.8
(relating to permitted contests), the Grantor, at its expense, will comply in
all material respects, or cause compliance in all material respects with

                  (a) all provisions of any insurance policy covering or
         applicable to the Collateral or any part thereof, all requirements of
         the issuer of any such policy, and all orders, rules, regulations and
         other requirements of the National Board of Fire Underwriters (or any
         other body exercising similar functions) applicable to or affecting the
         Collateral or any part thereof or any use or condition of the
         Collateral or any part thereof (collectively, the "Insurance
         Requirements"); and

                  (b) all laws, including Environmental Laws, statutes, codes,
         acts, ordinances, orders, judgments, decrees, injunctions, rules,
         regulations, permits, licenses, authorizations, directions and
         requirements of all governments, departments, commissions, boards,
         courts, authorities, agencies, officials and officers, foreseen or
         unforeseen, ordinary or extraordinary, which now or at any time
         hereafter may be applicable to the Collateral or any part thereof, or
         any of the adjoining sidewalks, curbs, vaults and vault space, if any,
         streets or ways, or any use or condition of the Collateral or any part
         thereof (collectively, the "Legal Requirements");

noncompliance of which could reasonably be expected to cause a Material Adverse
Effect whether or not compliance therewith shall require structural changes in
or interference with the use and enjoyment of the Collateral or any part
thereof.

         SECTION 1.7. Security Interests, etc. The Grantor will not directly or
indirectly create or permit or suffer to be created or to remain, and will
promptly discharge or cause to be discharged, any deed to secure debt, deed of
trust, mortgage, encumbrance or charge on, pledge of, security interest in or
conditional sale or other title retention agreement with respect to or any other
lien or security interest or security title on or in the Collateral or any part
thereof or the

                                    I-2-B-7
<PAGE>   11

interest of the Grantor or the Grantee therein, of any Proceeds thereof or Rents
or other sums arising therefrom, other than (a) Permitted Encumbrances, and (b)
liens of mechanics, materialmen, suppliers or vendors or rights thereto incurred
in the ordinary course of the business of the Grantor for sums not yet due or
any such liens or rights thereto which are at the time being contested as
permitted by Section 1.8. The Grantor will not postpone the payment of any sums
for which liens of mechanics, materialmen, suppliers or vendors or rights
thereto have been incurred (unless such liens or rights thereto are at the time
being contested as permitted by Section 1.8), for more than 60 days after the
completion of the action giving rise to such liens or rights thereto.

         SECTION 1.8. Permitted Contests. The Grantor at its expense may
contest, or cause to be contested, by appropriate legal proceedings conducted in
good faith and with due diligence, the amount or validity or application, in
whole or in part, of any Imposition, Legal Requirement or Insurance Requirement
or lien of a mechanic, materialman, supplier or vendor, provided that, (a) in
the case of an unpaid Imposition, lien, encumbrance or charge, such proceedings
shall suspend the collection thereof from the Grantor, the Grantee, and the
Collateral (including any rent or other income therefrom) and shall not
materially interfere with the payment of any such rent or income, (b) neither
the Collateral nor any rent or other income therefrom nor any part thereof or
interest therein would be in any material danger of being sold, forfeited, lost,
impaired or interfered with, (c) in the case of a Legal Requirement, neither the
Grantor nor the Grantee would be in material danger of any civil or criminal
liability for failure to comply therewith, (d) the Grantor shall have furnished
such security, if any, as may be required in the proceedings or as may be
reasonably requested by the Grantee, (e) the non-payment of the whole or any
part of any Imposition will not result in the delivery of a tax deed to the
Collateral or any part thereof because of such non-payment, (f) the payment of
any sums required to be paid with respect to any of the Current Asset Notes or
under this Deed (other than any unpaid Imposition, lien, encumbrance or charge
at the time being contested in accordance with this Section 1.8) shall not be
interfered with or otherwise affected, (g) in the case of any Insurance
Requirement, the failure of the Grantor to comply therewith shall not affect the
validity of any insurance required to be maintained by the Grantor under Section
2.1, and (h) that adequate reserves, determined in accordance with GAAP, shall
have been set aside on the Grantor's books.

         SECTION 1.9. Leases. The Grantor represents and warrants to the Grantee
that, as of the date hereof, there are no written or oral leases or other
agreements of any kind or nature relating to the occupancy of any portion of the
Property by any Person other than the Grantor other than the Permitted
Encumbrances. Except as is permitted by the Credit Agreement, the Grantor will
not enter into any such written or oral lease or other agreement with respect to
any portion of the Property without first obtaining the written consent of the
Grantee.

         SECTION 1.10. Compliance with Instruments. The Grantor at its expense
will promptly comply in all material respects with all rights of way or use,
privileges, franchises, servitudes, licenses, easements, tenements,
hereditaments and appurtenances forming a part of the Property and all
instruments creating or evidencing the same, in each case, to the extent
compliance therewith is required of the Grantor under the terms thereof. Except
as is permitted by the Credit Agreement, the Grantor will not take any action
which may result in a forfeiture or termination of the rights afforded to the
Grantor under any such instruments and will not, without the prior

                                    I-2-B-8
<PAGE>   12

written consent of the Grantee, amend any of such instruments in any manner
adverse to the Current Assets Lenders in any material respect.

         SECTION 1.11. Maintenance and Repair, etc. Subject to the provisions of
Section 1.12 the Grantor will keep or cause to be kept all presently and
subsequently erected or acquired Improvements and the sidewalks, curbs, vaults
and vault space, if any, located on or adjoining the same, and the streets and
the ways adjoining the same, in good and substantial order and repair and in
such a fashion that neither the value nor utility of the Collateral will be
diminished, and, at its sole cost and expense, will promptly make or cause to be
made all necessary and appropriate repairs, replacements and renewals thereof,
whether interior or exterior, structural or nonstructural, ordinary or
extraordinary, foreseen or unforeseen, so that its business carried on in
connection therewith may be properly conducted at all times. The Grantor at its
expense will do or cause to be done all shoring of foundations and walls of any
building or other Improvements on the Property and (to the extent permitted by
law) of the ground adjacent thereto, and every other act necessary or
appropriate for the preservation and safety of the Property by reason of or in
connection with any excavation or other building operation upon the Property and
upon any adjoining property, whether or not the Grantor shall, by any Legal
Requirement, be required to take such action or be liable for failure to do so.

         SECTION 1.12. Alterations, Additions, etc. So long as no Event of
Default shall have occurred and be continuing, the Grantor shall have the right
at any time and from time to time to make or cause to be made reasonable
alterations of and additions to the Property or any part thereof, provided that
any alteration or addition: (a) shall not change the general character or the
use of the Property or reduce the fair market value thereof below its value
immediately before such alteration or addition, or impair the usefulness of the
Property; (b) is effected with due diligence, in a good and workmanlike manner
and in compliance in all material respects with all Legal Requirements and
Insurance Requirements; (c) subject to Section 1.8 is promptly and fully paid
for, or caused to be paid for, by the Grantor; and (d) is made, in case the
estimated cost of such alteration or addition exceeds U.S. $1,000,000, under the
supervision of a qualified architect or engineer or another professional.

         SECTION 1.13. Acquired Property Subject to Security Title/Security
Interest. Subject to the Permitted Encumbrances and except as otherwise
permitted by the Credit Agreement, all property at any time acquired by the
Grantor and provided or required by this Deed to be or become subject to the
security title and security interest hereof, whether such property is acquired
by exchange, purchase, construction or otherwise, shall forthwith become subject
to the security title and security interest of this Deed without further action
on the part of the Grantor or the Grantee. The Grantor, at its expense, will
execute and deliver to the Grantee (and will record and file as provided in
Section 1.4) an instrument supplemental to this Deed reasonably satisfactory in
substance and form to the Grantee, whenever such an instrument is necessary
under applicable law to subject to the security title and security interest of
this Deed all right, title and interest of the Grantor in and to all property
provided or required by this Deed to be subject to the security title and
security interest hereof.

         SECTION 1.14. Assignment of Rents, Proceeds. etc. The assignment, grant
and conveyance of the Leases, Rents, Proceeds and other rents, income, proceeds
and benefits of the

                                    I-2-B-9
<PAGE>   13

Collateral contained in the granting clause of this Deed constitutes an
absolute, present and irrevocable assignment, grant and conveyance, provided,
however, that a revocable license is hereby given to the Grantor, so long as no
Event of Default has occurred and be continuing hereunder, to collect, receive
and apply such Rents, Proceeds and other rents, income, proceeds and benefits as
they become due and payable, but not further in advance thereof than is
customary, and in accordance with all of the other terms, conditions and
provisions hereof, of the Loan Documents, and of the Leases, contracts,
agreements and other instruments with respect to which such payments are made or
such other benefits are conferred; provided, further, however, that, to the
extent required by the Credit Agreement, all such Leases, Rents, Proceeds and
other rents, income, proceeds and benefits shall be deposited directly into the
Lockbox Accounts. Upon the occurrence and continuance of an Event of Default,
such license shall terminate immediately and automatically, without notice to
the Grantor or any other Person except as required by law, and shall not be
reinstated upon a cure of such Event of Default without the express written
consent of the Grantee. Such assignment shall be fully effective without any
further action on the part of the Grantor or the Grantee and the Grantee shall
be entitled, at its option without further order of or application to the
Bankruptcy Court, upon the occurrence and continuance of an Event of Default
hereunder, to collect, receive and apply all Rents, Proceeds and all other
rents, income, proceeds and benefits from the Collateral, including all right,
title and interest of the Grantor in any escrowed sums or deposits or any
portion thereof or interest therein, whether or not the Grantee takes possession
of the Collateral or any part thereof. The Grantor further grants to the Grantee
the right, at the Grantee's option without further order of or application to
the Bankruptcy Court, upon the occurrence and continuance of an Event of Default
hereunder, to:

                  (a) enter upon and take possession of the Property for the
         purpose of collecting Rents, Proceeds and said rents, income, proceeds
         and other benefits;

                  (b) dispossess by the customary summary proceedings any
         tenant, purchaser or other Person defaulting in the payment of any
         amount when and as due and payable, or in the performance of any other
         obligation, under any Lease, contract or other instrument to which said
         Rents, Proceeds or other rents, income, proceeds or benefits relate;

                  (c) let or convey the Collateral or any portion thereof or any
         interest therein; and

                  (d) apply Rents, Proceeds and such rents, income, proceeds and
         other benefits, after the payment of all necessary fees, charges and
         expenses, on account of the Secured Obligations in accordance with
         Section 3.11.

         SECTION 1.15. No Claims Against the Grantee. Nothing contained in this
Deed shall constitute any consent or request by the Grantee, express or implied,
for the performance of any labor or the furnishing of any materials or other
property in respect of the Property or any part thereof, or be construed to
permit the making of any claim against the Grantee in respect of labor or
services or the furnishing of any materials or other property or any claim that
any lien based on the performance of such labor or the furnishing of any such
materials or other property

                                    I-2-B-10
<PAGE>   14

is prior to the security title and security interest of this Deed. ALL
CONTRACTORS, SUBCONTRACTORS, VENDORS AND OTHER PERSONS DEALING WITH THE
PROPERTY, OR WITH ANY PERSONS INTERESTED THEREIN, ARE HEREBY REQUIRED TO TAKE
NOTICE OF THE PROVISIONS OF THIS SECTION.

         SECTION 1.16. Indemnification. The Grantor will protect, indemnify,
save harmless and defend the Grantee, the Current Assets Lenders, and each of
their respective officers, directors, shareholders, employees, representatives
and agents (collectively, the "Indemnified Parties" and individually, as
"Indemnified Party"), from and against any and all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against any Indemnified Party by reason of (a) ownership
of an interest in this Deed, any other Loan Document pertaining to the Current
Assets Loans or the Property, (b) any accident; injury to or death of persons or
loss of or damage to or loss of the use of property occurring on or about the
Property or any part thereof or the adjoining sidewalks, curbs, vaults and vault
spaces, if any, streets, alleys or ways, (c) any use, non-use or condition of
the Property or any part thereof or the adjoining sidewalks, curbs, vaults and
vault spaces, if any, streets, alleys or ways, (d) any failure on the part of
the Grantor to perform or comply with any of the terms of this Deed or any Loan
Document pertaining to the Current Assets Loans, (e) performance of any labor or
services or the furnishing of any materials or other property in respect of the
Collateral or any part thereof made or suffered to be made by or on behalf of
the Grantor, (f) any negligence or tortious act on the part of the Grantor or
any of its agents, contractors, lessees, licensees or invitees, (g) any work in
connection with any alterations, changes, new construction or demolition of or
additions to the Property, or (h) (i) any Hazardous Material on, in, under or
affecting all or any portion of the Property, the groundwater, or any
surrounding areas; (ii) any misrepresentation, inaccuracy or breach of any
warranty, covenant or agreement contained or referred to in Sections 1.21 and
1.22, (iii) any violation or claim of violation by the Grantor of any
Environmental Laws, or (iv) the imposition of any lien for damages caused by or
the recovery of any costs for the cleanup, release or threatened release of any
Hazardous Material, except to the extent that any of the matters described in
subsections (a)-(h) arise out of the gross negligence or willful misconduct of
any Indemnified Party. If any action or proceeding be commenced, to which action
or proceeding any Indemnified Party is made a party by reason of the execution
of this Deed or any other Loan Document pertaining to the Current Assets Loans,
or in which it becomes necessary to defend or uphold the lien of this Deed, all
sums paid by the Indemnified Parties, for the expense of any litigation to
prosecute or defend the rights and lien created hereby or otherwise, shall be
paid by the Grantor to such Indemnified Parties, as the case may be, as
hereinafter provided. The Grantor will pay and save the Indemnified Parties
harmless against any and all liability with respect to any intangible personal
property tax or similar imposition of the State or any subdivision or authority
thereof now or hereafter in effect, to the extent that the same may be payable
by the Indemnified Parties in respect of this Deed, any Loan Document pertaining
to the Current Assets Loans or any Secured Obligation. All amounts payable to
the Indemnified Parties under this Section 1.16 shall be deemed indebtedness
secured by this Deed and any such amounts which are not paid within ten (10)
days after written demand therefor by any Indemnified Party shall bear interest
at the rate provided for in Section 3.2.2 of the Credit Agreement from the date
of such demand. In case any action, suit or proceeding is brought against any
Indemnified Party by reason of any such occurrence, the Grantor, upon request of
such Indemnified Party, will, at the Grantor's expense, resist and defend such
action, suit or

                                    I-2-B-11
<PAGE>   15

proceeding or cause the same to be resisted or defended by counsel designated by
the Grantor and approved by such Indemnified Party. The obligations of the
Grantor under this Section 1.16 shall survive any cancellation and surrender of
this Deed.

         SECTION 1.17. No Credit for Payment of Taxes. The Grantor shall not be
entitled to any credit against the Secured Obligations by reason of the payment
of any tax on the Property or any part thereof or by reason of the payment of
any other Imposition, and shall not apply for or claim any deduction from the
taxable value of the Property or any part thereof by reason of this Deed.

         SECTION 1.18. Intentionally Omitted

         SECTION 1.19. No Transfer of the Property. Except as is provided in the
Credit Agreement, and except for the Permitted Encumbrances, the Grantor shall
not, without the prior written consent of the Grantee, which consent may be
granted or withheld in the sole and absolute discretion of the Grantee (i) sell,
convey, assign or otherwise transfer the Property or any portion of the
Grantor's interest therein or (ii) further encumber the Property or permit the
Property to become encumbered by any lien, claim, security title, security
interest or other indebtedness of any kind or nature other than the Permitted
Encumbrances.

         SECTION 1.20. Security Agreement. With respect to the items of personal
property and fixtures referred to and described in the granting clause of this
Deed and included as part of the Collateral, this Deed is hereby made and
declared to be a security agreement encumbering each and every item of personal
property and fixtures now or hereafter owned by Grantor and included herein as a
part of the Collateral, in compliance with the provisions of the Uniform
Commercial Code as enacted in the State. In this respect, Grantor, as "Debtor",
expressly grants to Grantee, as "Secured Party", a security interest in and to
all of the property now or hereafter owned by Grantor which constitutes the
personal property and fixtures hereinabove referred to and described in this
Deed, including all extensions, accessions, additions, improvements,
betterments, renewals, replacements and substitutions thereof or thereto, and
all proceeds from the sale or other disposition thereof. Grantor agrees to
execute and deliver to Grantee, upon Grantee's request, any other security
agreement and financing statements, as well as extensions, renewals, and
amendments thereof, in such form as Grantee may reasonably require to perfect a
security interest with respect to said items. Grantor shall pay all costs of
filing such financing statements and any extensions, renewals, amendments and
releases thereof, and shall pay all reasonable costs and expenses of any record
searches for financing statements Grantee may reasonably require. Except as is
provided in the Credit Agreement, and except for the Permitted Encumbrances,
without the prior written consent of Grantee, Grantor shall not create or suffer
to be created pursuant to the Uniform Commercial Code any other security
interest in the above-described personal property and fixtures, including any
replacements and additions thereto. Upon the occurrence and continuance of an
Event of Default under this Deed, the Grantee shall have and shall be entitled
to exercise any and all of the rights and remedies (i) as prescribed in this
Deed, or (ii) as prescribed by general law, or (iii) as prescribed by the
specific statutory provisions now or hereafter enacted and specified in said
Uniform Commercial Code, all at Grantee's sole election. Grantor and Grantee
agree that the filing of any financing statements in the records normally having
to do with personal property shall not in any way affect the

                                    I-2-B-12
<PAGE>   16

agreement of Grantor and Grantee that everything located in, on or about, or
used or intended to be used with or in connection with the use, operation or
enjoyment of, the Collateral, which is described or reflected as a fixture in
this Deed, is, and at all times and for all purposes and in all proceedings,
both legal and equitable, shall be, regarded as part of the Real Estate conveyed
hereby. Grantor warrants that Grantor's name, identity and address are as set
forth herein. The mailing address of the Grantee from which information may be
obtained concerning the security interest created herein is also set forth
herein.

         SECTION 1.21. Representations and Warranties. In order to induce the
Grantee to enter into this Deed, the Credit Agreement and the other Loan
Documents pertaining to the Current Assets Loans, the Grantor agrees that all of
the representations and warranties of Grantor set forth in the Credit Agreement
are incorporated into this Deed by reference as if fully set forth herein.

         SECTION 1.22. Grantor's Covenants. In order to induce the Grantee to
enter into this Deed, the Credit Agreement and the other Loan Documents, the
Grantor agrees that all of the covenants of Grantor set forth in the Credit
Agreement are incorporated into this Deed by reference as if fully set forth
herein.

         SECTION 1.23. Attornment. Grantee hereby acknowledges and agrees that
the liens granted herein are subject to the rights of certain lessees under the
Leases as disclosed in the Credit Agreement and will be subject to the rights of
lessees under any Leases entered into by Grantor after the date hereof which are
permitted as Permitted Real Estate Liens pursuant to the Credit Agreement,
subject to the express rights contained in the applicable Lease. The rights of
the tenants under the Leases to the leased premises shall not be adversely
affected by the exercise by Grantee of any of its rights hereunder, nor shall
any such tenant be in any way deprived of its rights under the applicable Lease
except in accordance with the terms of such Lease. In the event that Grantee
succeeds to the interest of Grantor under a Lease, such Lease shall not be
terminated or affected thereby except as set forth therein, and any sale of the
applicable leased premises by Grantee or pursuant to the judgment of any court
in an action to enforce the remedies provided for in this Deed shall be made
subject to such Lease and the rights of such tenant expressly set forth
thereunder. If Grantee succeeds to the interests of Grantor in and to the
applicable leased premises or under such Lease or enters into possession of such
leased premises, the Grantee, and such tenants, shall be bound to each other
under all of the express terms, covenants and conditions of such Lease, as if
the Grantee was originally the Grantor as lessor thereunder.

                                   ARTICLE II

                 INSURANCE: DAMAGE, DESTRUCTION OR TAKING, ETC.

         SECTION 2.1. Insurance.

         SECTION 2.1.1. Risks to be Insured. The Grantor will, at its expense,
maintain or cause to be maintained with insurance carriers approved by the
Grantee (a) insurance with respect to the Improvements against loss or damage by
fire, lightning and such other risks as are included

                                    I-2-B-13
<PAGE>   17

in standard "all-risk" policies, in amounts sufficient to prevent the Grantor
and the Grantee from becoming a co-insurer of any partial loss under the
applicable policies, but in any event in amounts not less than the then full
insurable value (actual replacement value) of the Improvements, as determined by
the Grantor in accordance with generally accepted insurance practice and
approved by the Grantee or, at the request of the Grantee, as determined at the
Grantor's expense by the insurer or insurers or by an expert approved by the
Grantee, (b) comprehensive public liability, including bodily injury and product
liability and property damage, insurance, with personal injury endorsements,
applicable to the Property in such amounts as are customarily carried by Persons
operating similar properties in the same general locality, but in any event with
a combined single limit of not less than Twenty Million Dollars ($20,000,000)
per occurrence, (c) explosion insurance in respect of any steam and pressure
boilers and similar apparatus located in the Property in such amounts as are
usually carried by persons operating similar properties in the same general
locality, but in any event in an amount not less than Twenty Million Dollars
($20,000,000), (d) business interruption insurance (including added expense
coverage) against all insurable perils for a period of not fewer than twelve
(12) months (subject to a reasonable aggregate deductible not exceeding ten (10)
days per any occurrence or, if an aggregate deductible not exceeding ten (10)
days per occurrence is not then available, the lowest aggregate deductible then
available), (e) worker's compensation insurance to the full extent required by
applicable law for all employees of the Grantor engaged in any work on or about
the Property and employer's liability insurance with a limit of not less than
Ten Million Dollars ($10,000,000) for each occurrence, (f) all-risk, builders'
risk insurance with respect to the Property during any period during which there
is any construction work being performed, against loss or damage by fire or
other risks, including vandalism, malicious mischief and sprinkler leakage, as
are included in so-called "extended coverage" clauses at the time available and
(g) such other insurance with respect to the Property in such amounts and
against such insurable hazards as the Grantee from time to time may reasonably
require by written notice to the Grantor.

         SECTION 2.1.2. Policy Provisions. All insurance maintained by the
Grantor pursuant to Section 2.1.1 shall (a) (except for worker's compensation
insurance) list the Grantee as an additional insured as its interests may
appear, (b) (except for worker's compensation and public liability insurance)
provide that the proceeds for any losses shall be adjusted by the Grantor
subject to the approval of the Grantee in the event the proceeds shall exceed
$1,000,000, and shall be payable to the Grantee, to be held and applied as
provided in Section 2.3, (c) include effective waivers by the insurer of all
rights of subrogation against any named insured, the indebtedness secured by
this Deed and the Property and all claims for insurance premiums against the
Grantee, (d) (except for worker's compensation and public liability insurance)
provide that any losses shall be payable notwithstanding (i) any act, failure to
act or negligence of or violation of warranties, declarations or conditions
contained in such policy by any named insured, (ii) the occupation or use of the
Property for purposes more hazardous than permitted by the terms thereof, (iii)
any foreclosure or other action or proceeding taken by the Grantee pursuant to
any provision of this Deed, or (iv) any change in title or ownership of the
Property, (e) provide that no cancellation, reduction in amount or material
change in coverage thereof or any portion thereof shall be effective until at
least thirty (30) days after receipt by the Grantee of written notice thereof,
(f) provide that any notice under such policies shall be simultaneously
delivered to the Grantee, and (g) be satisfactory in all other reasonable
respects to the Grantee.

                                    I-2-B-14
<PAGE>   18

Any insurance maintained pursuant to this Section 2.1 may be evidenced by
blanket insurance policies covering the Property and other properties or assets
of the Grantor, provided that any such policy shall specify the portion, if less
than all, of the total coverage of such policy that is allocated to the Property
and shall in all other respects comply with the requirements of this Section
2.1.

         SECTION 2.1.3. Delivery of Policies, etc. The Grantor will deliver to
the Grantee, promptly upon request, (a) certificates of all policies evidencing
all insurance required to be maintained under Section 2.1.1 (or, in the case of
blanket policies, certificates thereof by the insurers together with a
counterpart of each blanket policy), and (b) evidence as to the payment of all
premiums due thereon (with respect to public liability insurance policies, all
installments for the current year due thereon to such date), provided that
Grantee shall not be deemed by reason of its custody of such policies to have
knowledge of the contents thereof. The Grantor will also deliver to the Grantee
prior to the expiration of any policy a binder or certificate of the insurer
evidencing the replacement thereof and when the new policy is issued a
certificate of the new policy (or, in the case of a replacement blanket policy,
a certificate thereof of the insurer together with a counterpart of the blanket
policy). In the event the Grantor shall fail to effect or maintain any insurance
required to be effected or maintained pursuant to the provisions of this Section
2.1, the Grantor will indemnify the Grantee against damage, loss or liability
resulting from all risks for which such insurance should have been effected or
maintained.

         SECTION 2.1.4. Separate Insurance. The Grantor will not take out
separate insurance concurrent in form or contributing in the event of loss with
that required to be maintained pursuant to this Section 2.1.

         SECTION 2.2. Damage, Destruction or Taking; Grantor to Give Notice;
Assignment of Awards. In case of

                  (a) any material damage to or destruction of the Collateral or
         any material part thereof, or

                  (b) any taking, whether for permanent or temporary use, of all
          or any material part of the Collateral or any material interest
          therein or material right accruing thereto, as the result of the
          exercise of the right of condemnation or eminent domain, or a change
          of grade affecting the Collateral or any portion thereof (a "Taking"),
          or the commencement of any proceedings or negotiations which may
          result in a Taking,

the Grantor will promptly give written notice thereof to the Grantee, generally
describing the nature and extent of such damage or destruction and the Grantor's
best estimate of the cost of restoring the Collateral, or the nature of such
proceedings or negotiations and the nature and extent of the Taking which might
result therefrom, as the case may be. The Grantee shall be entitled to all
insurance proceeds payable on account of such damage or destruction and to all
awards or payments allocable to the Collateral on account of such Taking up to
the amount of the Secured Obligations, and the Grantor hereby irrevocably
assigns, transfers and sets over to the Grantee all rights of the Grantor to any
such proceeds, awards or payments and irrevocably authorizes and empowers the
Grantee, at its option, in the name of the Grantor or otherwise, to

                                    I-2-B-15
<PAGE>   19

file and prosecute what would otherwise be the Grantor's claim for any such
proceeds, award or payment and to collect, receipt for and retain the same for
disposition in accordance with Section 2.3. The Grantor will pay all reasonable
costs and expenses incurred by the Grantee in connection with any such damage,
destruction or Taking and seeking and obtaining any insurance proceeds, awards
or payments in respect thereof.

         SECTION 2.3. Application of Proceeds and Awards. Subject to any
applicable requirements of the Financing Order, the Credit Agreement and the
Revolver Intercreditor Agreement, all amounts recovered under any insurance
policy required to be maintained by the Grantor hereunder and all awards
received by it on account of any Taking shall be deposited in a Lockbox Account
maintained by the Grantor to be applied pursuant to the provisions of the Credit
Agreement.

         Notwithstanding the foregoing provisions of this Section 2.3 to the
contrary (but subject to the provisions of Section 2.4), and if each of the
following conditions is satisfied, the Grantee, upon request of the Grantor, may
apply up to $2,500,000 of insurance proceeds or condemnation awards received by
it toward the restoration or replacement of the affected Collateral, to the
extent necessary for the restoration or replacement thereof; provided that:

                           (i) no Default or Event of Default then exists;

                           (ii) the Grantor shall have furnished to the Grantee
                  a certificate of an architect or engineer reasonably
                  acceptable to the Grantee stating (x) that the Collateral is
                  capable of being restored, prior to the maturity of the Credit
                  Agreement, to substantially the same condition as existed
                  prior to the casualty, (y) the aggregate estimated direct and
                  indirect costs of such restoration and (z) as to any Taking,
                  that the property taken in such Taking, or sold under threat
                  thereof, is not necessary to the Grantor's customary use or
                  occupancy of the Property or Grantor otherwise provides
                  Grantee adequate assurance that the Collateral can be
                  restored; and

                           (iii) in the event that the estimated cost of
                  restoration set forth in the certificate of such architect or
                  engineer (and such revisions to such estimate as are from time
                  to time made) exceeds maximum amount of insurance proceeds or
                  condemnation awards that would be permitted to be applied to
                  the restoration or replacement of the Collateral pursuant to
                  the foregoing, the Grantor shall deposit the amount of such
                  excess with the Grantee.

         In the event that, after the restoration or replacement of the
Collateral, any insurance or condemnation awards shall remain, such amount shall
be deposited in a Lockbox Account to be applied pursuant to the provisions of
the Credit Agreement. If, prior to the receipt by the Grantee of such insurance
proceeds or condemnation awards, the Collateral shall have been sold on
foreclosure, the Grantee shall have the right to receive said insurance proceeds
or condemnation awards to the extent of any deficiency found to be due upon such
sale, with legal interest thereon, whether or not a deficiency judgment shall
have been sought or recovered or

                                    I-2-B-16
<PAGE>   20

denied, and the reasonable attorneys' fees, costs and disbursements incurred by
the Grantee in connection with the collection of such award or payment.

         SECTION 2.4. Total Taking and Total Destruction. Subject to any
applicable requirements of the Financing Order, the Credit Agreement and the
Revolver Intercreditor Agreement, in the event of a Total Destruction or a Total
Taking, the Grantee shall apply all amounts recovered under any insurance policy
referred to in Section 2.1.1 and all awards received by it on account of any
such Taking shall be deposited in a Lockbox Account maintained by the Grantor to
be applied pursuant to the provisions of the Credit Agreement.

                                   ARTICLE III

                        EVENTS OF DEFAULT; REMEDIES, ETC.

         SECTION 3.1 Events of Default; Acceleration. If an "Event of Default"
(pursuant to and as defined in the Credit Agreement) shall have occurred and be
continuing, then and in any such event the Grantee may, subject to any
applicable requirements of the Financing Order, the Credit Agreement and the
Revolver Intercreditor Agreement, at any time thereafter (unless all Events of
Default shall theretofore have been remedied and all costs and expenses,
including, without limitation, attorneys' fees and expenses incurred by or on
behalf of the Grantee, shall have been paid in full by the Grantor) declare, by
written notice to the Grantor, the Current Assets Loans and all other Secured
Obligations to be due and payable immediately or on a date specified in such
notice, and on such date the same shall be and become due and payable, together
with interest accrued thereon, without presentment, demand, protest or notice,
all of which the Grantor hereby waives. The Grantor will pay on demand all costs
and expenses, including, without limitation, attorneys' fees and expenses,
incurred by or on behalf of the Grantee in enforcing this Deed, or any other
Loan Document evidencing or securing the Current Assets Loans, or occasioned by
any default hereunder or thereunder.

          SECTION 3.2. Legal Proceedings; Judicial Foreclosure. If an Event of
Default shall have occurred and be continuing, the Grantee at any time may, at
its election and without further order of or application to the Bankruptcy
Court, but subject to any applicable requirements of the Financing Order, the
Credit Agreement and the Revolver Intercreditor Agreement, proceed at law or in
equity or otherwise to enforce the payment and performance of the Secured
Obligations in accordance with the terms hereof and thereof and to foreclose the
security title of this Deed as against all or any part of the Collateral and to
have the same sold under the judgment or decree of a court of competent
jurisdiction. The Grantee shall be entitled to recover in such proceedings all
costs incident thereto, including attorneys' fees and expenses in such amounts
as may be fixed by the court.

          SECTION 3.3. Power of Sale. If an Event of Default shall have occurred
and be continuing, Grantee, at its option, may, without further order of or
application to the Bankruptcy Court, sell the Collateral or any part of the
Collateral at one or more public sale or sales before the door of the courthouse
of the county in which the Land or any part of the Land is situated, to the
highest bidder for cash, in order to pay the Secured Obligations, and all
expenses of sale and of all proceedings in connection therewith, including
attorney's fees, after advertising the time,

                                    I-2-B-17
<PAGE>   21

place and terms of sale once a week for four (4) weeks immediately preceding
such sale (but without regard to the number of days) in a newspaper in which
Sheriff's sales are advertised in said county. At any such public sale, Grantee
may execute and deliver to the purchaser a conveyance of the Collateral or any
part of the Collateral, and to this end, Grantor hereby constitutes and appoints
Grantee the agent and attorney-in-fact of Grantor to make such sale and
conveyance, and thereby to divest Grantor of all right, title and equity that
Grantor may have in and to the Collateral and to vest the same in the purchaser
or purchasers at such sale or sales, and all the acts and doings of said agent
and attorney-in-fact are hereby ratified and confirmed and any recitals in said
conveyance or conveyances as to facts essential to a valid sale shall be binding
upon Grantor. The aforesaid power of sale and agency hereby granted are coupled
with an interest and are irrevocable by death or otherwise, are granted as
cumulative of the other remedies provided hereby or by law for collection of the
Secured Obligations and shall not be exhausted by one exercise thereof but may
be exercised until full payment of all of the Secured Obligations. In the event
of any sale under this Deed by virtue of the exercise of the powers herein
granted, or pursuant to any order in any judicial proceeding or otherwise, the
Collateral may be sold as an entirety or in separate parcels and in such manner
or order as Grantee in its sole discretion may elect. One or more exercises of
the powers herein granted shall not extinguish nor exhaust such powers, until
the entire Collateral is sold or the Secured Obligations paid in full. If the
Secured Obligations are now or hereafter further secured by any chattel
mortgages, pledges, contracts of guaranty, assignments of lease or other
security instruments, Grantee may, at its option and without further order of or
application to the Bankruptcy Court, but subject to any applicable requirements
of the Financing Order, the Credit Agreement and the Revolver Intercreditor
Agreement, exhaust the remedies granted under any of said security instruments
either concurrently or independently, and in such order as Grantee may
determine. Upon any public foreclosure sale or sales of all or any portion of
the Collateral under the power herein granted, Grantee may bid for and purchase
the Collateral and shall be entitled to apply all or any part of the Secured
Obligations as a credit to the purchase price. In the event of any such public
foreclosure sale or sales under the power herein granted, Grantor shall be
deemed a tenant holding over and shall forthwith deliver possession to the
purchaser or purchasers at such sale or be summarily dispossessed according to
provisions of law applicable to tenants holding over.

          SECTION 3.4. Uniform Commercial Code Remedies. If an Event of Default
shall have occurred and be continuing, the Grantee may, without further order of
or application to the Bankruptcy Court, but subject to any applicable
requirements of the Financing Order, the Credit Agreement and the Revolver
Intercreditor Agreement, exercise from time to time and at any time any rights
and remedies available to it under applicable law upon default in the payment of
indebtedness, including, without limitation, any right or remedy available to it
as a secured party under the Uniform Commercial Code of the State. The Grantor
shall, promptly upon request by the Grantee, assemble the Collateral, or any
portion thereof generally described in such request, and make it available to
the Grantee at such place or places designated by the Grantee and reasonably
convenient to the Grantee or the Grantor. If the Grantee elects to proceed under
the Uniform Commercial Code of the State to dispose of portions of the
Collateral, the Grantee, at its option, may give the Grantor notice of the time
and place of any public sale of any such property, or of the date after which
any private sale or other disposition thereof is to be made, by sending notice
by registered or certified first class mail, postage prepaid, to the Grantor at
least ten (10) days before the time of the sale or other disposition. If any
notice of any proposed sale,

                                    I-2-B-18
<PAGE>   22

assignment or transfer by the Grantee of any portion of the Collateral or any
interest therein is required by law, the Grantor conclusively agrees that ten
(10) days notice to the Grantor of the date, time and place (and, in the case of
a private sale, the terms) thereof is reasonable.

         SECTION 3.5. Grantee Authorized to Execute Deeds, etc. The Grantor
irrevocably appoints the Grantee (which appointment is coupled with an interest
and is irrevocable by death or otherwise) the true and lawful attorney-in-fact
of the Grantor, in its name and stead and on its behalf, for the purpose of
effectuating any sale, assignment, transfer or delivery for the enforcement
hereof, whether pursuant to power of sale, foreclosure or otherwise, to execute
and deliver all such deeds, bills of sale, assignments, releases and other
instruments as may be designated in any such request.

         SECTION 3.6. Purchase of Collateral by Grantee. The Grantee may be a
purchaser of the Collateral or of any part thereof or of any interest therein at
any public sale thereof, whether pursuant to power of sale, foreclosure or
otherwise, and the Grantee may apply upon the purchase price thereof the
indebtedness secured hereby owing to the Grantee. Such purchaser shall, upon any
such purchase, acquire good title to the properties so purchased, free of the
security interest and lien of this Deed and free of all rights of redemption in
the Grantor.

         SECTION 3.7. Receipt a Sufficient Discharge to Purchaser. Upon any sale
of the Collateral or any part thereof or any interest therein, whether pursuant
to power of sale, foreclosure or otherwise, the receipt of the Grantee or the
officer making the sale under judicial proceedings shall be a sufficient
discharge to the purchaser for the purchase money, and such purchaser shall not
be obliged to see to the application thereof.

         SECTION 3.8. Waiver of Appraisement, Valuation, etc. The Grantor hereby
waives, to the fullest extent it may lawfully do so, the benefit of all
appraisement, valuation, stay, extension and redemption laws now or hereafter in
force and all rights of marshaling in the event of any sale of the Collateral or
any part thereof or any interest therein.

         SECTION 3.9. Sale a Bar Against Grantor. Any sale of the Collateral or
any part thereof or any interest therein under or by virtue of this Deed,
whether pursuant to power of sale, foreclosure or otherwise, shall forever be a
bar against the Grantor.

         SECTION 3.10. Secured Obligations to Become Due on Sale. Except as
otherwise provided in the Credit Agreement, upon any sale of the Collateral or
any portion thereof or interest therein by virtue of the exercise of any remedy
by the Grantee under or by virtue of this Deed, whether pursuant to power of
sale, foreclosure or otherwise in accordance with this Deed or by virtue of any
other remedy available at law or in equity or by statute or otherwise, at the
option of the Grantee, any sums or monies due and payable pursuant to the Credit
Agreement pertaining to the Current Assets Loans, the Loan Documents pertaining
to the Current Assets Loans and in connection with the Current Assets Loans
and/or the Secured Obligations shall, if not previously declared due and
payable, immediately become due and payable, together with interest accrued
thereon, and all other indebtedness which this Deed by its terms secures.

                                    I-2-B-19
<PAGE>   23

         SECTION 3.11. Application of Proceeds of Sale and Other Moneys. Subject
to any applicable requirements of the Financing Order, the Credit Agreement or
the Revolver Intercreditor Agreement, the proceeds of any sale of the Collateral
or any part thereof or any interest therein under or by virtue of this Deed,
whether pursuant to power of sale, foreclosure or otherwise, and all other
moneys at any time held by the Grantee as part of the Collateral, shall be
applied in such order of priority as the Grantee shall determine in its sole and
absolute discretion including, without limitation, as follows:

                  (a) first, to the payment of the reasonable costs and expenses
         of such sale (including, without limitation, the cost of evidence of
         title and the costs and expenses, if any, of taking possession of,
         retaining custody over, repairing, managing, operating, maintaining and
         preserving the Collateral or any part thereof prior to such sale), all
         reasonable costs and expenses incurred by the Grantee or any other
         Person in obtaining or collecting any insurance proceeds, condemnation
         awards or other amounts received by the Grantee, all reasonable costs
         and expenses of any receiver of the Collateral or any part thereof, and
         any Impositions or other charges or expenses prior to the security
         interest or security title of this Deed, which the Grantee may consider
         it necessary or desirable to pay;

                  (b) second, to the payment of any Secured Obligation (other
         than those set forth in Section 3.11(c) below);

                  (c) third, to the payment of all amounts of principal of and
         interest (including Post-Petition Interest to the extent such interest
         is a Secured Obligation) at the time due and payable under the Credit
         Agreement pertaining to the Current Assets Loans at the time
         outstanding (whether due by reason of maturity or by reason of any
         prepayment requirement or by declaration or acceleration or otherwise),
         including interest at the rate provided for in the Credit Agreement on
         any overdue principal and (to the extent permitted under applicable
         law) on any overdue interest; and, in case such moneys shall be
         insufficient to pay in full such principal and interest, then, first,
         to the payment of all amounts of interest (including Post-Petition
         Interest to the extent such interest is a Secured Obligation) at the
         time due and payable and, second, to the payment of all amounts of
         principal at the time due and payable under the Current Assets Loans;
         and

                  (d) fourth, the balance, if any, held by the Grantee after
         payment in full of all amounts referred to in subdivisions Sections
         3.11(a), (b) and (c) above, shall, unless a court of competent
         jurisdiction may otherwise direct by final order not subject to appeal,
         be paid to or upon the direction of the Grantor.

         SECTION 3.12. Appointment of Receiver. If an Event of Default shall
have occurred and be continuing, the Grantee shall, as a matter of right,
without notice, and without regard to the adequacy of any security for the
indebtedness secured hereby or the solvency of the Grantor, be entitled to,
without further order of or application to the Bankruptcy Court, but subject to
any applicable requirements of the Financing Order, the Credit Agreement and the
Revolver Intercreditor Agreement, the appointment of a receiver for all or any
part of the Collateral, whether such receivership be incidental to a proposed
sale of the Collateral or otherwise, and the

                                    I-2-B-20
<PAGE>   24

Grantor hereby consents to the appointment of such a receiver and will not
oppose any such appointment.

         SECTION 3.13. Possession, Management and Income. If an Event of Default
shall have occurred and be continuing, in addition to, and not in limitation of,
the rights and remedies provided in Section 1.14, the Grantee, upon five (5)
days written notice to the Grantor, may, without further order of or application
to the Bankruptcy Court, but subject to any applicable requirements of the
Financing Order, the Credit Agreement and the Revolver Intercreditor Agreement,
enter upon and take possession of the Collateral or any part thereof by force,
summary proceeding, ejectment or otherwise and may remove the Grantor and all
other Persons and any and all property therefrom and may hold, operate,
maintain, repair, preserve and manage the same and receive all earnings, income,
Rents, issues and Proceeds accruing with respect thereto or any part thereof.
The Grantee shall be under no liability for or by reason of any such taking of
possession, entry, removal or holding, operation or management, except that any
amounts so received by the Grantee shall be applied to pay all costs and
expenses of so entering upon, taking possession of, holding, operating,
maintaining, repairing, preserving and managing the Collateral or any part
thereof, and any Impositions or other charges prior to the security title and
security interest of this Deed which the Grantee may consider it necessary or
desirable to pay, and any balance of such amounts shall be applied as provided
in Section 3.11.

         SECTION 3.14. Right of Grantee to Perform Grantor's Covenants, etc. If
the Grantor shall fail to make any payment or perform any act required to be
made or performed hereunder or under the Credit Agreement pertaining to the
Current Assets Loans or any other Loan Document pertaining to the Current Assets
Loans, the Grantee, without further order of or application to the Bankruptcy
Court, without notice to or demand upon the Grantor and without waiving or
releasing any obligation or Event of Default, may (but shall be under no
obligation to) at any time thereafter make such payment or perform such act for
the account and at the expense of the Grantor, and may enter upon the Collateral
for such purpose and take all such action thereon as, in the Grantee's opinion,
may be necessary or appropriate therefor. No such entry and no such action shall
be deemed an eviction of any lessee of the Property or any part thereof. All
sums so paid by the Grantee and all costs and expenses (including, without
limitation, attorneys' fees and expenses) so incurred, together with interest
thereon at the rate provided for in Section 3.2.2 of the Credit Agreement from
the date of payment or incurring, shall constitute additional indebtedness under
the Credit Agreement secured by this Deed and shall be paid by the Grantor to
the Grantee on demand.

         SECTION 3.15. Subrogation. To the extent that the Grantee, on or after
the date hereof, pays any sum due under any provision of any Legal Requirement
or any instrument creating any lien or security title prior or superior to the
lien or security title of this Deed, or the Grantor or any other Person pays any
such sum with the proceeds of the Current Assets Loans, the Grantee shall have
and be entitled to a lien or security title on the Collateral equal in priority
to the lien or security title discharged, and the Grantee shall be subrogated
to, and receive and enjoy all rights and liens or security titles possessed,
held or enjoyed by, the holder of such lien or security title, which shall
remain in existence and benefit the Grantee in securing the Secured Obligations.

                                    I-2-B-21
<PAGE>   25

         SECTION 3.16. Remedies, etc., Cumulative. Each right, power and remedy
of the Grantee provided for in this Deed, the Credit Agreement or any other Loan
Document pertaining to the Current Assets Loans, or now or hereafter existing at
law or in equity or by statute or otherwise shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in
this Deed, the Credit Agreement or any other Loan Document pertaining to the
Current Assets Loans, or now or hereafter existing at law or in equity or by
statute or otherwise, and the exercise or beginning of the exercise by the
Grantee of any one or more of the rights, powers or remedies provided for in
this Deed, the Credit Agreement, or any other Loan Document pertaining to the
Current Assets Loans, or now or hereafter existing at law or in equity or by
statute or otherwise shall not preclude the simultaneous or later exercise by
the Grantee of any or all such other rights, powers or remedies.

         SECTION 3.17. Provisions Subject to Applicable Law. All rights, powers
and remedies provided in this Deed may be exercised only to the extent that the
exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Deed invalid, unenforceable or not entitled to be recorded, registered or filed
under the provisions of any applicable law. If any term of this Deed or any
application thereof shall be invalid or unenforceable, the remainder of this
Deed and any other application of such term shall not be affected thereby.

         SECTION 3.18. No Waiver, etc. No failure by the Grantee to insist upon
the strict performance of any term hereof or of the Credit Agreement, or of any
other Loan Document, or to exercise any right, power or remedy consequent upon a
breach hereof or thereof, shall constitute a waiver of any such term or of any
such breach. No waiver of any breach shall affect or alter this Deed, which
shall continue in full force and effect with respect to any other then existing
or subsequent breach. By accepting payment or performance of any amount or other
Secured Obligations secured hereby before or after its due date, the Grantee
shall not be deemed to have waived its right either to require prompt payment or
performance when due of all other amounts and Secured Obligations payable
hereunder or to declare a default for failure to effect such prompt payment.

         SECTION 3.19. Compromise of Actions, etc. Any action, suit or
proceeding brought by the Grantee pursuant to any of the terms of this Deed, the
Credit Agreement pertaining to the Current Assets Loans, any other Loan Document
pertaining to the Current Assets Loans, or otherwise, and any claim made by the
Grantee hereunder or thereunder, may be compromised, withdrawn or otherwise
dealt with by the Grantee without any notice to or approval of the Grantor.

         SECTION 3.20 Foreclosure - Authority Lease. If action is brought to
foreclose this Deed, the rents, income and profits issuing from the Land and the
Improvements shall be collected either through a receiver appointed by the court
after notice of application for such appointment has been given to the Lessor
under the Authority Lease or by Grantee. Notwithstanding anything to the
contrary contained in this Deed, all such money collected shall be first applied
for the payment of the rent due and owing under the Authority Lease or to become
due and owing to the Lessor under the Authority Lease, then for any ad valorem
taxes, insurance premiums or other charges due and payable under the Authority
Lease and for all other

                                    I-2-B-22
<PAGE>   26

maintenance and operating charges and disbursements incurred in connection with
the operation and maintenance of the Land and the Improvements. The balance of
such monies shall be applied pursuant to the terms of this Deed.

                                   ARTICLE IV

                                   DEFINITIONS

         SECTION 4.1. Terms Defined in this Deed. When used herein the following
terms have the following meanings:

         "Borrowers" shall have the meaning set forth in the third recital.

         "Collateral" shall have the meaning set forth in the granting clause.

         "Contracts" shall have the meaning set forth in clause (h) of the
granting clause.

         "Credit Agreement" shall have the meaning set forth in the third
recital.

         "Credit Extensions" shall have the meaning set forth in the third
recital.

         "Default" means any Event of Default or any condition or event which,
after notice or lapse of time, or both, would constitute an Event of Default

         "Goods" shall have the meaning set forth in clause (c) of the granting
clause.

         "Herein", "hereof", "hereto", and "hereunder" and similar terms refer
to this Deed and not to any particular Section, paragraph or provision of this
Deed.

         "Impositions" shall have the meaning set forth in Section 1.5.

         "Improvements" shall have the meaning set forth in clause (b) of the
granting clause.

         "Indemnified Parties" shall have the meaning set forth in Section 1.16.

         "Insurance Requirements" shall have the meaning set forth in paragraph
(a) of Section 1.6.

         "Land" shall have the meaning set forth in the second recital.

         "Leases" shall have the meaning set forth in clause (e) of the granting
clause.

         "Legal Requirements" shall have the meaning set forth in paragraph (b)
of Section 1.6.

         "Deed" shall have the meaning set forth in the preamble.

                                    I-2-B-23
<PAGE>   27

         "Grantee" shall have the meaning set forth in the preamble.

         "Grantor" shall have the meaning set forth in the preamble.

         "Permits" shall have the meaning set forth in clause (g) of the
granting clause.

         "Permitted Encumbrances" shall have the meaning set forth in Section
1.2.

         "Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency or officer.

         "Plans" shall have the meaning set forth in clause (f) of the granting
clause.

         "Post-Petition Interest" shall have the meaning set forth in Section
2.3.

         "Proceeds" shall have the meaning set forth in clause (k) of the
granting clause.

         "Property" shall have the meaning set forth in clause (b) of the
granting clause.

         "Real Estate" shall have the meaning set forth in clause (a) of the
granting clause.

         "Rents" shall have the meaning set forth in clause (i) of the granting
clause.

         "Secured Obligations" means the Current Assets Obligations and all
Obligations with respect to the Current Assets Loans now or hereafter existing
under the Credit Agreement or any Loan Document pertaining to the Current Assets
Loans, and all obligations (monetary or otherwise) arising under or in
connection with the Current Assets Notes or the Current Assets Loans, whether
for principal, interest, costs, fees, expenses or otherwise and all other
Current Assets Obligations, all advances, if any, made by Grantee pursuant to
the terms of this Deed, and all duties and obligations of Grantor under this
Deed.

         "State" means the State of Georgia.

         "Total Destruction" means any damage to or destruction of the
Improvements or any part thereof which, in the reasonable estimation of the
Grantee shall require the expenditure of an amount in excess of Ten Million
Dollars ($10,000,000) to restore the Improvements to substantially the same
condition of the Improvements immediately prior to such damage or destruction.

         "Total Taking" means a Taking, whether permanent or for temporary use,
which, in the reasonable judgment of the Grantee, shall substantially interfere
with and adversely affect the normal operation of the Property by the Grantor to
such an extent as would reasonably be anticipated to cause a Material Adverse
Effect.

          SECTION 4.2. Use of Defined Terms. Terms for which meanings are
provided in this Deed shall, unless otherwise defined or the context otherwise
requires, have such meanings when

                                    I-2-B-24
<PAGE>   28

used in any certificate and any opinion, notice or other communication delivered
from time to time in connection with this Deed or pursuant hereto.

          SECTION 4.3. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in this Deed,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION 5.1. Further Assurances; Financing Statements.

         SECTION 5.1.1. Further Assurances. The Grantor, at its expense, will
execute, acknowledge and deliver all such instruments and take all such other
action as the Grantee from time to time may reasonably request:

                  (a) to better subject to the security title and security
         interest of this Deed all or any portion of the Collateral,

                  (b) to perfect, publish notice or protect the validity of the
         security title and security interest of this Deed,

                  (c) to preserve and defend the title to the Collateral and the
         rights of the Grantee therein against the claims of all Persons as long
         as this Deed shall remain undischarged,

                  (d) to better subject to the security title and security
         interest of this Deed or to maintain or preserve the lien and security
         interest of this Deed with respect to any replacement or substitution
         for any Collateral or any other after-acquired property except as
         provided in the Credit Agreement, or

                  (e) in order to further effectuate the purposes of this Deed
         and to carry out the terms hereof and to better assure and confirm to
         the Grantee its rights, powers and remedies hereunder.

          SECTION 5.1.2. Financing Statements. Notwithstanding any other
provision of this Deed, the Grantor hereby agrees that, without notice to or the
consent of the Grantor, the Grantee may file with the appropriate public
officials such financing statements, continuation statements, amendments and
similar documents as are or may become necessary to perfect, preserve or protect
the security interest granted by this Deed

          SECTION 5.2. Additional Security. Without notice to or consent of the
Grantor, and without impairment of the security interest and security title and
rights created by this Deed, the Grantee and the Lenders may, without further
order of or application to the Bankruptcy Court, accept from the Grantor or any
other Person additional security for the Secured Obligations.

                                    I-2-B-25
<PAGE>   29

Neither the giving of this Deed nor the acceptance of any such additional
security shall prevent the Grantee from resorting, first, to such additional
security, or, first, to the security created by this Deed, or concurrently to
both, in any case without affecting the Grantee's security title and rights
under this Deed.

         SECTION 5.3. Satisfaction; Partial Release, etc.

         SECTION 5.3.1. Satisfaction. If the Current Assets Loans and all other
amounts owing pursuant to the Credit Agreement pertaining to the Current Assets
Loans and the other Loan Documents pertaining to the Current Assets Loans shall
be repaid in full in accordance with the terms thereof, and if the Grantor shall
pay, in full, the principal of and premium, if any, and interest on the Secured
Obligations in accordance with the terms thereof and hereof and all other sums
payable hereunder by the Grantor and shall comply with all the terms, conditions
and requirements hereof and of the Secured Obligations, or otherwise as may be
provided in the Credit Agreement, then on such date, the Grantee shall, upon the
request of the Grantor and at the Grantor's sole cost and expense, execute and
deliver such instruments, in form and substance reasonably satisfactory to the
Grantee, as may be necessary to effectively cancel and surrender this Deed;
provided, however, this Deed secures a revolving credit facility pursuant to the
Credit Agreement and there may be repayment and disbursements of principal from
time to time as provided in the Credit Agreement. It is expressly agreed that
the outstanding principal balance of the Secured Obligations may, from time to
time, be reduced to a zero balance without such repayment operating to
extinguish and release the security title and security interest created by this
Deed. This Deed shall remain in full force and effect as to any subsequent
future advances made after the zero balance without loss of priority until the
Secured Obligations have been paid in full and satisfied and all agreements
between Grantee and Grantor for further advances pursuant to the Credit
Agreement have been terminated and this Deed is cancelled of record. To the
extent it can legally do so, Grantor hereby waives the operation of any
applicable statute, law or regulation having a contrary effect.

         SECTION 5.3.2. Partial Release, etc. The Grantee may, at any time and
from time to time, without liability therefor, and without prior notice to the
Grantor, release or reconvey any part of the Collateral, consent to the making
of any map or plat of the Property, join in granting any easement thereon or
join in any extension agreement or agreement subordinating the security title
and security interest of this Deed.

         SECTION 5.4. Notices, etc. All notices and other communications
provided to any of the parties hereto shall be in writing and addressed,
delivered or transmitted to such party as set forth in the Credit Agreement

         SECTION 5.5. Waivers, Amendments, etc. The provisions of this Deed may
be amended, discharged or terminated and the observance or performance of any
provision of this Deed may be waived, either generally or in a particular
instance and either retroactively or prospectively, only by an instrument in
writing executed by the Grantor and the Grantee.

         SECTION 5.6. Cross-References. References in this Deed and in each
instrument executed pursuant hereto to any Section or Article are, unless
otherwise specified, to such

                                    I-2-B-26
<PAGE>   30

Section or Article of this Deed or such instrument, as the case may be, and
references in any Section, Article or definition to any clause are, unless
otherwise specified, to such clause of such Section, Article or definition.

         SECTION 5.7. Headings. The various headings of this Deed and of each
instrument executed pursuant hereto are inserted for convenience only and shall
not affect the meaning or interpretation of this Deed or such instrument or any
provisions hereof or thereof.

         SECTION 5.8. Currency. Unless otherwise expressly stated, all
references to any currency or money, or any dollar amount, or amounts
denominated in "Dollars" herein will be deemed to refer to the lawful currency
of the United States.

         SECTION 5.9. Governing Law. THIS DEED SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE.

         SECTION 5.10. Successors and Assigns. etc. This Deed shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, successors-in-title and assigns.

         SECTION 5.11. Waiver of Jury Trial; Submission to Jurisdiction.

                  (a) EACH OF THE GRANTOR AND THE GRANTEE HEREBY KNOWINGLY,
         VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL
         BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF,
         UNDER OR IN CONNECTION WITH THIS DEED, THE CREDIT AGREEMENT, ANY LOAN
         DOCUMENT OR ANY OTHER RELATED INSTRUMENT, OR ANY COURSE OF CONDUCT,
         COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
         THE GRANTOR OR THE GRANTEE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
         THE GRANTEE AND THE CURRENT ASSETS LENDERS TO ENTER INTO THE
         TRANSACTIONS PROVIDED FOR IN THE CREDIT AGREEMENT AND TO MAKE THE
         CURRENT ASSETS LOANS.

                  (b) FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INVOLVING THIS
         DEED, THE CREDIT AGREEMENT AS PERTAINS TO THE CURRENT ASSETS LOANS OR
         ANY OTHER LOAN DOCUMENT AS PERTAINS TO THE CURRENT ASSETS LOANS, THE
         GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
         JURISDICTION OF ALL FEDERAL AND STATE COURTS LOCATED IN THE STATE AND
         CONSENTS THAT IT MAY BE SERVED WITH ANY PROCESS OR PAPER BY REGISTERED
         MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE IN ACCORDANCE
         WITH APPLICABLE LAW, PROVIDED A REASONABLE TIME FOR APPEARANCE IS
         ALLOWED. THE GRANTOR AND GRANTEE EACH EXPRESSLY WAIVES, TO THE EXTENT
         IT MAY LAWFULLY DO SO, ANY OBJECTION, CLAIM OR DEFENSE WHICH IT MAY
         HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR
         PROCEEDING

                                    I-2-B-27
<PAGE>   31

         ARISING OUT OF THIS DEED, THE CREDIT AGREEMENT OR ANY OTHER LOAN
         DOCUMENT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
         SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
         IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY WAIVES THE RIGHT TO
         OBJECT, WITH RESPECT TO ANY SUCH CLAIM, SUIT, ACTION OR PROCEEDING
         BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION
         OVER THE PERSON OF THE GRANTOR NOTHING CONTAINED HEREIN WILL BE DEEMED
         TO PRECLUDE THE GRANTEE FROM BRINGING AN ACTION AGAINST THE GRANTOR IN
         ANY OTHER JURISDICTION.

         SECTION 5.12. Severability; Conflicts. Any provision of this Deed, the
Credit Agreement or any other Loan Document which is prohibited or unenforceable
in any jurisdiction shall as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Deed, the Credit Agreement or such
Loan Document or affecting the validity or enforceability of such provision in
any other jurisdiction. In the event of any conflict between the terms of this
Deed and the terms of the Credit Agreement, the terms of the Credit Agreement
shall control.

         SECTION 5.13. Loan Document. This Deed is a Loan Document executed
pursuant to the Credit Agreement and, unless otherwise expressly indicated
herein, shall be construed, administered and applied in accordance with the
terms and provisions thereof.

         SECTION 5.14. Usury Savings Clause. It is the intention of the Grantor
and the Grantee to conform strictly to the usury laws governing the Loan
Documents, and any interest payable under the Loan Documents shall be subject to
reduction to the amount not in excess of the maximum non-usurious amount allowed
under such laws, as construed by the courts having jurisdiction over such
matters. In the event the maturity of the Secured Obligations is accelerated by
reason of any provision of the Loan Documents, or by reason of an election by
the Grantee resulting from an Event of Default, then earned interest may never
include more than the maximum amount permitted by law, computed from the dates
of each advance of loan proceeds under the Credit Agreement until payment, and
any interest in excess of the maximum amount permitted by law shall be canceled
automatically or, if theretofore paid, at the option of the Grantee, shall be
rebated to the Grantor, or shall be credited on the principal amount of the
Secured Obligations or, if all principal has been repaid, then the excess shall
be rebated to the Grantor. If any interest is canceled, credited against
principal or rebated to the Grantor in accordance with the foregoing sentence
and, if thereafter the interest payable hereunder is less than the maximum
amount permitted by applicable law, the rate hereunder shall automatically be
increased to the maximum extent possible to permit repayment to the Grantee and
the Lenders as soon as possible of any interest in excess of the maximum amount
permitted by law which was earlier canceled, credited against principal or
rebated to the Grantor pursuant to the provisions of the foregoing sentence.

         SECTION 5.15. Future Advances. This Deed is a "Future Advance Deed"
under the laws of the State. Any and all future advances under this Deed and the
Loan Documents pertaining to the Current Assets Loans shall have the same
priority as if the future advance was

                                    I-2-B-28
<PAGE>   32

made on the date that this Deed was recorded. This Deed shall secure the Secured
Obligations, whenever incurred, such Secured Obligations to be due at the times
provided in the Loan Documents pertaining to the Current Assets Loans. Notice is
hereby given that the Secured Obligations may increase as a result of any
defaults hereunder by Grantor due to, for example, and without limitation,
unpaid interest or late charges, unpaid taxes or insurance premiums which the
Grantee elects to advance, defaults under leases that the Grantee elects to
cure, attorney fees or costs incurred in enforcing the Loan Documents pertaining
to the Current Assets Loans or other expenses incurred by the Grantee in
protecting the Collateral, the security of this Deed or the Grantee's rights and
interests.

         SECTION 5.16. Co-Agent. The rights, powers, duties and obligations
conferred or imposed upon CIT under the Credit Agreement pursuant to this Deed
with respect to the Collateral (including, without limitation, holding the
security title hereunder) are hereby conferred and imposed upon the Georgia
Agent to the extent, but only to the extent, that pursuant to the laws of the
State in effect from time to time CIT shall be incompetent or unqualified to
exercise or perform such rights, power, duties and obligations.

         SECTION 5.17. Deed Subject to Revolver Intercreditor Agreement.
Notwithstanding anything to the contrary contained herein, it is expressly
understood and agreed by the parties hereto that this Deed shall be subject to
the terms of the Revolver Intercreditor Agreement.

              [REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                    I-2-B-29
<PAGE>   33

         IN WITNESS WHEREOF, the undersigned, by its duly elected officers and
pursuant to proper authority of its board of directors has duly executed,
sealed, acknowledged and delivered this Current Assets Secured Parties Leasehold
Deed to Secure Debt, Assignment and Security Agreement as of the day and year
first above written.

                                           STERLING PULP CHEMICALS, INC.,
                                           a Georgia corporation

                                           By:
                                              ----------------------------------
                                              Name:
                                                    ----------------------------
                                              Title:
                                                    ----------------------------

                                                       [CORPORATE SEAL]

Signed, sealed and delivered in the presence of:

-----------------------------------
Unofficial Witness

                                   DRAFTED BY:

                                 Baker Botts LLP
                           2001 Ross Avenue, Suite 600
                               Dallas, Texas 75201
                       Attention: R. Christian Brose, Esq.

<PAGE>   34

[CORPORATION NOTARY PAGE]

STATE OF                            )
         ------------               )
COUNTY OF                           )
          -----------               )

         BEFORE ME, the undersigned, a notary public in and for the State of
____________, on this day personally appeared ___________________________ as
_______________________ of STERLING PULP CHEMICALS, INC., a Georgia corporation,
and, being known to me to be the person whose name is subscribed to the
foregoing instrument, acknowledged to me that he executed the same for the
purpose and consideration therein expressed and on behalf of said corporation.

         Given under my hand and seal of office this ___ day of July, 2001.

                                    Notary Public, State of
                                                            --------------------
                                    Date commission expires:<PAGE>   1
                                                                    EXHIBIT 4.10

                 FIXED ASSETS SECURED PARTIES SECURITY AGREEMENT

         THIS FIXED ASSETS SECURED PARTIES SECURITY AGREEMENT (as amended,
supplemented, amended and restated or otherwise modified from time to time, this
"Agreement"), dated as of July 19, 2001, is among STERLING CHEMICALS, INC., a
Delaware corporation, STERLING CANADA, INC., a Delaware corporation, STERLING
PULP CHEMICALS US, INC., a Delaware corporation, STERLING PULP CHEMICALS, INC.,
a Georgia corporation, STERLING FIBERS, INC., a Delaware corporation, STERLING
CHEMICALS ENERGY, INC., a Delaware corporation, and STERLING CHEMICALS
INTERNATIONAL, INC., a Delaware corporation (each individually a "Borrower" and
collectively the "Borrowers"), and each other Person (such capitalized term and
all other capitalized terms not otherwise defined herein shall have the meanings
provided for or incorporated by reference in Article I below) that may, from
time to time become, pursuant to the terms of the Credit Agreement, a party to
this Agreement (individually referred to as a "Grantor", and collectively
referred to as the "Grantors"), and THE CIT GROUP/BUSINESS CREDIT, INC., as
Administrative Agent for each of the Fixed Assets Secured Parties.

                                    RECITALS:

         A. The Borrowers are Wholly-Owned Subsidiaries of Sterling Chemicals
Holdings, Inc., a Delaware corporation (the "Parent").

         B. The Parent and the Borrowers have elected to file voluntary
petitions with the United States Bankruptcy Court for the Southern District of
Texas and have continued in possession of their respective assets and in the
management of their respective businesses pursuant to Sections 1107 and 1108 of
the Bankruptcy Code.

         C. Pursuant to a Revolving Credit Agreement, dated as of even date
herewith (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among the Borrowers, the various
financial institutions as are, or may from time to time become, parties thereto
(the "Lenders"), and the Administrative Agent, the Lenders and the Issuer have
extended Commitments to make Credit Extensions to the Borrowers.

         D. As a condition precedent to the making of each Credit Extension
(including the initial Credit Extension) under the Credit Agreement, each
Grantor is required to execute and deliver this Agreement.

         E. Each Grantor has duly authorized the execution, delivery and
performance of this Agreement.

         F. It is in the best interests of each Grantor to execute this
Agreement inasmuch as such Grantor will derive substantial direct and indirect
benefits from the Credit Extensions made from time to time to the Borrowers by
the Lenders and the Issuer pursuant to the Credit

<PAGE>   2

Agreement and the execution and delivery of Rate Protection Agreements between
the Borrowers and certain Fixed Assets Secured Parties.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce (i) the
Fixed Assets Lenders to make each Fixed Asset Loan (including the initial Fixed
Assets Loans) to the Borrowers pursuant to the Credit Agreement and (ii) the
Fixed Assets Secured Parties to enter into Rate Protection Agreement(s), each
Grantor jointly and severally agrees, for the benefit of each Fixed Assets
Secured Party, as follows:

                                    ARTICLE I
                                   DEFINITIONS

         SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):

         "Administrative Agent" is defined in the preamble.

         "Agreement" is defined in the preamble.

         "Borrower" and "Borrowers" are defined in the preamble.

         "CIT" is defined in the preamble.

         "Collateral" is defined in Section 2.1.

         "Computer Hardware and Software Collateral" means:

                  (a) all computer and other electronic data processing
         hardware, integrated computer systems, central processing units, memory
         units, display terminals, printers, features, computer elements, card
         readers, tape drives, hard and soft disk drives, cables, electrical
         supply hardware, generators, power equalizers, accessories and all
         peripheral devices and other related computer hardware;

                  (b) all software programs (including both source code, object
         code and all related applications and data files), whether now owned,
         licensed or leased or hereafter acquired by any Grantor, designed for
         use on the computers and electronic data processing hardware described
         in clause (a) above;

                  (c) all firmware associated therewith;

                  (d) all documentation (including flow charts, logic diagrams,
         manuals, guides and specifications) with respect to such hardware,
         software and firmware described in the preceding clauses (a) through
         (c); and

                                       2
<PAGE>   3

                  (e) all rights with respect to all of the foregoing, including
         any and all copyrights, licenses, options, warranties, service
         contracts, program services, test rights, maintenance rights, support
         rights, improvement rights, renewal rights and indemnifications and any
         substitutions, replacements, additions or model conversions of any of
         the foregoing.

         "Copyright Collateral" means all copyrights of each Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
in the United States including all of such Grantor's right, title and interest
in and to all copyrights registered in the United States Copyright Office and
also including the copyrights referred to in Item A of Schedule IV attached
hereto, and all applications for registration thereof, whether pending or in
preparation, all copyright licenses in the United States, including each
copyright license referred to in Item B of Schedule IV attached hereto, the
right to sue for past, present and future infringements of any thereof, all
rights corresponding thereto, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and proceeds of suit.

         "Credit Agreement" is defined in the recital C.

         "Equipment" is defined in clause (a) of Section 2.1.

         "Fixed Assets Termination Date" means the date on which all Fixed
Assets Obligations have been paid in full in cash, all Rate Protection
Agreements where the counterparty is a Fixed Assets Lender (or its Affiliate)
have been terminated and the Fixed Assets Loan Commitment shall have terminated.

         "Grantor" and "Grantors" are defined in the preamble.

         "Intellectual Property Collateral" means, collectively, the Computer
Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.

         "Inventory" is defined in clause (b) of Section 2.1.

         "Lenders" is defined in the recital C.

         "Material Contracts" is defined in clause (c) of Section 2.1.

         "Patent Collateral" means:

                  (a) all letters patent and applications for letters patent in
         the United States, including all patent applications in preparation for
         filing in the United States and including each patent and patent
         application referred to in Item A of Schedule II attached hereto;

                  (b) all reissues, divisions, continuations,
         continuations-in-part, extensions, renewals and reexaminations of any
         of the items described in clause (a);

                                       3
<PAGE>   4
                  (c) all patent licenses in the United States, including each
         patent license referred to in Item B of Schedule II attached hereto;
         and

                  (d) all proceeds of, and rights associated with, the foregoing
         (including license royalties and proceeds of infringement suits), the
         right to sue third parties for past, present or future infringements of
         any patent or patent application, referred to in clauses (a) or (b)
         above, and for breach or enforcement of any patent license referred to
         in clause (c) above.

         "Receivables" is defined in clause (c) of Section 2.1.

         "Related Contracts" is defined in clause (c) of Section 2.1.

         "Trademark Collateral" means:

                  (a) all trademarks, trade names, corporate names, company
         names, business names, fictitious business names, trade styles, service
         marks, certification marks, collective marks, logos, other source of
         business identifiers, prints and labels on which any of the foregoing
         have appeared or appear, designs and general intangibles of a like
         nature (all of the foregoing items in this clause (a) being
         collectively called a "Trademark"), now existing anywhere in the United
         States or hereafter adopted or acquired in the United States, whether
         currently in use or not, all registrations and recordings thereof and
         all applications in connection therewith, whether pending or in
         preparation for filing, including registrations, recordings and
         applications in the United States Patent and Trademark Office or in any
         office or agency of the United States of America or any State,
         including those referred to in Item A of Schedule III attached hereto;

                  (b) all Trademark licenses in the United States, including
         each Trademark license referred to in Item B of Schedule III attached
         hereto;

                  (c) all reissues, extensions or renewals of any of the items
         described in clause (a) and (b);

                  (d) all of the goodwill of the business connected with the
         use of, and symbolized by the items described in, clauses (a) and (b);
         and

                  (e) all proceeds of, and rights associated with, the
         foregoing, including any claim by any Grantor against third parties for
         past, present or future infringement or dilution of any Trademark,
         Trademark registration or Trademark license, including any Trademark,
         Trademark registration or Trademark license referred to in clauses (a)
         through (c) above, or for any injury to the goodwill associated with
         the use of any such Trademark or for breach or enforcement of any such
         Trademark license.

                                       4
<PAGE>   5

         "Trade Secrets Collateral" means all common law and statutory trade
secrets and all other confidential or proprietary or useful information and all
know-how obtained by or used in or contemplated at any time for use in the
business of any Grantor (all of the foregoing being collectively called a "Trade
Secret"), whether or not such Trade Secret has been reduced to a writing or
other tangible form, including all documents and things embodying, incorporating
or referring in any way to such Trade Secret, all Trade Secret licenses,
including each Trade Secret license referred to in Schedule V attached hereto,
and including the right to sue for and to enjoin and to collect damages for the
actual or threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.

         SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

         SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Agreement, including its preamble and recitals, with such
meanings; provided, that, (a) in the event any term that is used herein is not
defined in Article 9 of the U.C.C., as in effect on the date hereof, but is
thereafter defined in Article 9 of the U.C.C., such term shall have the meaning
ascribed to such term in Article 9 of the U.C.C. as thereafter defined, and (b)
in the event that any term that is used herein is defined in both Article 9 of
the U.C.C., as in effect on or after the date hereof and Article 9 of the U.C.C.
as in force at any relevant time hereafter, the meaning to be ascribed to such
term herein shall be the most encompassing of such definitions.

                                   ARTICLE II
                                SECURITY INTEREST

         SECTION 2.1. Grant of Security. Effective upon the entry of the Interim
Order, each Grantor hereby assigns, pledges, hypothecates, charges, delivers,
and transfers to the Administrative Agent, for its benefit and the ratable
benefit of each of the Fixed Assets Secured Parties, and hereby grants to the
Administrative Agent, for its benefit and the ratable benefit of each of the
Fixed Assets Secured Parties, a continuing security interest in all of the
following, whether now or hereafter existing or acquired by such Grantor (the
"Collateral"):

                  (a) all equipment in all of its forms of such Grantor
         (including, without limitation, all machinery, storage tanks, valves,
         pipelines, furniture, trucks, trailers, other motor vehicles, rolling
         stock, aircraft, vessels, barges and boats), wherever located,
         including all parts thereof and all accessions, additions, attachments,
         improvements, substitutions and replacements thereto and therefor and
         all accessories related thereto (any and all of the foregoing being the
         "Equipment");

                  (b) all inventory in all of its forms of such Grantor,
         wherever located, including

                           (i) all raw materials and work in process therefor,
                  finished goods thereof and materials used or consumed in the
                  manufacture or production thereof,

                                       5
<PAGE>   6

                           (ii) all goods in which such Grantor has an interest
                  in mass or a joint or other interest or right of any kind
                  (including goods in which such Grantor has an interest or
                  right as consignee), and

                           (iii) all goods which are returned to or repossessed
                  by such Grantor,

         and all accessions thereto, products thereof and documents therefor
         (any and all such inventory, materials, goods, accessions, products and
         documents being the "Inventory");

                  (c) all accounts (including, but not limited to, all rights to
         payment arising out of the sale, lease, license or other transfer of
         tangible and intangible property or the rendering of services and all
         credit card receivables), contracts (including, but not limited to, all
         service contracts, supply contracts and marketing agreements (all such
         service contracts, supply contracts and marketing agreements,
         collectively, the "Material Contracts")), contract rights, chattel
         paper, documents, instruments, letter-of-credit rights, general
         intangibles, including Tax refunds of such Grantor, whether or not
         arising out of or in connection with the sale, lease, license or other
         transfer of tangible and intangible property or the rendering of
         services, and all rights of such Grantor now or hereafter existing in
         and to all security agreements, guaranties, letters of credit, leases
         and other contracts or supporting obligations securing or otherwise
         relating to any such accounts, contracts, contract rights, chattel
         paper, documents, instruments, letter-of-credit rights, and general
         intangibles (any and all such accounts, contracts, contract rights,
         chattel paper, documents, instruments, warehouse receipts, bills of
         lading, Material Contracts, and general intangibles being the
         "Receivables", and any and all such security agreements, guaranties,
         leases and other contracts being the "Related Contracts");

                  (d) in furtherance of, and not in limitation of, clause (c),
         all Material Contracts, together with (i) all rights of such Grantor to
         receive monies due and to become due under or pursuant to each Material
         Contract, (ii) all rights of such Grantor to receive proceeds of any
         insurance, indemnity, warranty, guaranty or collateral security with
         respect to each Material Contract, (iii) all claims of such Grantor for
         damages arising out of or for breach or default under each Material
         Contract, (iv) all rights of such Grantor to terminate a Material
         Contract, to perform thereunder and to compel performance and otherwise
         exercise all remedies thereunder and (v) to the extent not included in
         the foregoing, all proceeds of any and all of the foregoing;

                  (e) all Intellectual Property Collateral of such Grantor;

                  (f) all deposit accounts, including, but not limited to each
         Lockbox Account (including all deposits and investments therein and
         all earnings thereon);

                  (g) all books, records, writings, data bases, information and
         other property relating to, used or useful in connection with,
         evidencing, embodying, incorporating or referring to, any of the
         foregoing in this Section 2.1;

                  (h) all investment property in which such Grantor has an
         interest;

                                       6
<PAGE>   7

                  (i) all interest and other payments and rights with respect
         to all investment property in which such Grantor has an interest;

                  (j) all of such Grantor's other property and rights of every
         kind and description and interests therein; and

                  (k) all products, offspring, rents, issues, profits, returns,
         income and proceeds of and from any and all of the foregoing Collateral
         (including proceeds which constitute property of the types described in
         clauses (a) through (j), and, to the extent not otherwise included, all
         payments under insurance (whether or not the Administrative Agent is
         the loss payee thereof) or any indemnity, warranty or guaranty, payable
         by reason of loss or damage to or otherwise with respect to any of the
         foregoing Collateral).

Notwithstanding the foregoing, "Collateral" shall not include any general
intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would constitute
a violation of a valid and enforceable restriction in favor of a third party on
such grant, unless and until any required consents shall have been obtained.
Each Grantor agrees to use its best efforts to obtain any such required consent
with respect to any material item of such Collateral.

         SECTION 2.2. Security for Fixed Assets Obligations. This Agreement
secures the payment in cash in full of all Fixed Assets Obligations.

         SECTION 2.3. Intentionally deleted.

         SECTION 2.4. Intentionally deleted.

         SECTION 2.5. Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall:

                  (a)  remain in full force and effect until the Fixed Assets
         Termination Date;

                  (b)  be binding upon each Grantor, its successors,
         transferees and assigns; and

                  (c) inure, together with the rights and remedies of the
         Administrative Agent hereunder, to the benefit of the Administrative
         Agent and each other Secured Party.

Without limiting the generality of the foregoing clause (c), any Fixed Assets
Secured Party may assign or otherwise transfer (in whole or in part) any Fixed
Assets Loan Commitment or Fixed Assets Loan held by it to any other Person, and
such other Person shall thereupon become vested with all the rights and benefits
in respect thereof granted to such Fixed Assets Security Party under any Loan
Document (including this Agreement) or otherwise, subject, however, to any
contrary provisions in such assignment or transfer, and to the provisions of
Section 10.11 of the Credit Agreement. Upon (i) the sale, transfer or other
disposition of Collateral in accordance with the Credit Agreement or (ii) the
Fixed Assets Termination Date, the security interests

                                       7
<PAGE>   8

granted herein shall automatically terminate and all rights to the applicable
Collateral shall revert to the applicable Grantor with respect to (A) such
Collateral, but not the proceeds thereof (in the case of clause (i)), or (B) all
Collateral (in the case of clause (ii)). Upon any such sale, transfer,
disposition or termination, the Administrative Agent will, at such Grantor's
sole expense, execute and deliver to such Grantor, without any representations,
warranties or recourse, such documents as such Grantor shall reasonably request
to evidence such termination or release.

         SECTION 2.6. Grantor Remains Liable. Anything herein to the contrary
notwithstanding:

                  (a) each Grantor will remain liable under the contracts and
         agreements included in the Collateral to the extent set forth therein,
         and will perform all of its duties and obligations under such contracts
         and agreements to the same extent as if this Agreement had not been
         executed;

                  (b) the exercise by the Administrative Agent of any of its
         rights hereunder will not release any Grantor from any of its duties or
         obligations under any such contracts or agreements included in the
         Collateral; and

                  (c) neither the Administrative Agent nor any other Fixed
         Assets Secured Party will have any obligation or liability under any
         such contracts or agreements included in the Collateral by reason of
         this Agreement, nor will the Administrative Agent or any other Fixed
         Assets Secured Party be obligated to perform any of the obligations or
         duties of any Grantor thereunder or to take any action to collect or
         enforce any claim for payment assigned hereunder.

         SECTION 2.7. Security Interest Absolute. All rights of the
Administrative Agent and the security interests granted to the Administrative
Agent hereunder, and all obligations of each Grantor hereunder, shall be
absolute and unconditional, irrespective of:

                  (a) any lack of validity or enforceability of any Loan
         Document;

                  (b) the failure of any Fixed Assets Secured Party

                           (i) to assert any claim or demand or to enforce any
                  right or remedy against the Borrowers, any other Obligor or
                  any other Person under the provisions of any Loan Document or
                  otherwise or

                           (ii) to exercise any right or remedy against any
                  guarantor of, or collateral  securing,  any Fixed Assets
                  Obligations;

                  (c) any change in the time, manner or place of payment of, or
         in any other term of, all or any of the Fixed Assets Obligations or any
         other extension, compromise or renewal of any Fixed Assets Obligations;

                  (d) any reduction, limitation, impairment or termination of
         any Fixed Assets Obligations for any reason (other than the repayment
         in full and in cash of all Fixed

                                       8
<PAGE>   9

         Assets Obligations), including any claim of waiver, release,
         surrender, alteration or compromise, and shall not be subject to (and
         each Grantor hereby waives any right to or claim of) any defense or
         set-off, counterclaim, recoupment or termination whatsoever by reason
         of the invalidity, illegality, nongenuineness, irregularity,
         compromise or unenforceability of, or any other event or occurrence
         affecting, any Fixed Assets Obligations or otherwise;

                  (e) any amendment to, rescission, waiver or other
         modification of, or any consent to departure from, any of the terms of
         any Loan Document;

                  (f) any addition, exchange, release, surrender or
         non-perfection of any collateral (including the Collateral), or any
         amendment to or waiver or release of or addition to or consent to
         departure from any guaranty, for any of the Fixed Assets Obligations;
         or

                  (g) any other circumstances which might otherwise constitute a
         defense available to, or a legal or equitable discharge of, any
         Borrower, any other Obligor, any surety or any guarantor.

         SECTION 2.8. Postponement of Subrogation, etc. Each Grantor hereby
agrees that it will not exercise any rights which it may acquire by reason of
any payment made hereunder, whether by way of subrogation, reimbursement or
otherwise, until the Fixed Assets Termination Date. Any amount paid to any
Grantor on account of any payment made hereunder prior to the Fixed Assets
Termination Date shall be held in trust for the benefit of the Fixed Assets
Secured Parties and shall immediately be paid to the Administrative Agent for
the ratable benefit of the Fixed Assets Secured Parties and credited and applied
against the Fixed Assets Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement; provided, however, that if:

                  (a) such Grantor has made payment to the Administrative Agent
         for the ratable benefit of the Fixed Assets Secured Parties of all or
         any part of the Fixed Assets Obligations; and

                  (b) the Fixed Assets Termination Date has occurred,

each Fixed Assets Secured Party agrees that, at the requesting Grantor's
request, the Administrative Agent, on behalf of the Fixed Assets Secured
Parties, will execute and deliver to such Grantor appropriate documents (without
recourse and without representation or warranty) necessary to evidence the
transfer by subrogation to such Grantor of an interest in the Fixed Assets
Obligations resulting from such payment by such Grantor. In furtherance of the
foregoing, prior to the Fixed Assets Termination Date, each Grantor shall
refrain from taking any action or commencing any proceeding against any Borrower
or any other Obligor (or its successors or assigns, whether in connection with a
bankruptcy proceeding or otherwise) to recover any amounts in respect of
payments made under this Agreement to the Administrative Agent or any other
Fixed Assets Secured Party.

                                       9
<PAGE>   10

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         SECTION 3.1. Representations and Warranties. Each Grantor represents
and warrants to each Fixed Assets Secured Party as set forth in this Article
III.

         SECTION 3.2. Location of Collateral, etc. All of the Equipment,
Inventory and deposit accounts of such Grantor are respectively located at the
places specified in Item 3 of the Perfection Certificate. None of the Equipment
or Inventory has, within the four months preceding the date of this Agreement if
then owned by such Grantor, been located at any place other than the places
specified in Item 3 of the Perfection Certificate. The place of business and
chief executive office of such Grantor and the office where such Grantor keeps
its records concerning the Receivables, and all originals of all chattel paper
which evidence Receivables are located at the address set forth in Item 3 of the
Perfection Certificate. Such Grantor has no trade names other than those
specified in Item 1 of the Perfection Certificate. During the four months
preceding the date hereof, such Grantor has not been known by any legal name nor
has it had a federal taxpayer identification number different from the one set
forth on Item 2 of the Perfection Certificate, nor has such Grantor been the
subject of any merger or other corporate reorganization, except as set forth in
Item 1 of the Perfection Certificate. If the Collateral includes any Inventory
located in the State of California, such Grantor is not a "retail merchant"
within the meaning of Section 9102 of the California U.C.C. All Receivables
evidenced by a promissory note or other instrument, negotiable document or
chattel paper have been duly endorsed and accompanied by duly executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to the Administrative Agent and delivered and pledged to the
Administrative Agent pursuant to Section 4.6. Such Grantor is not a party to any
Federal, State or local government contract except as set forth in Item 13 of
the Perfection Certificate.

         SECTION 3.3. Ownership, No Liens, etc. Such Grantor owns its Collateral
free and clear of any Lien, except for the security interest created by this
Agreement and Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral is on
file in any recording office, except such as may have been filed in favor of the
Administrative Agent relating to this Agreement or as have been filed in
connection with Permitted Liens.

         SECTION 3.4. Possession and Control. Such Grantor has exclusive
possession and control of its Equipment and Inventory except where the absence
of possession and control results from actions of such Grantor in the ordinary
course of business.

         SECTION 3.5. Negotiable Documents, Instruments and Chattel Paper. Such
Grantor has, contemporaneously herewith, delivered to the Administrative Agent
possession of all originals of all negotiable documents, instruments and chattel
paper currently owned or held by such Grantor (duly endorsed in blank, if
requested by the Administrative Agent).

         SECTION 3.6. Intellectual Property Collateral. With respect to any
Intellectual Property Collateral owned by such Grantor the loss, impairment or
infringement of which might have a Material Adverse Effect, except as set forth
in Item 6.18 of the Disclosure Schedule:

                                       10
<PAGE>   11

                  (a) such Intellectual Property Collateral is subsisting and
         has not been adjudged invalid or unenforceable, in whole or in part;

                  (b) such Intellectual Property Collateral is valid and
         enforceable;

                  (c) such Grantor has made all necessary filings and
         recordations to protect its interest in such Intellectual Property
         Collateral, including (if permissible) recordations of all of its
         interests in the Patent Collateral and Trademark Collateral in the
         United States Patent and Trademark Office and its claims to the
         Copyright Collateral in the United States Copyright Office;

                  (d) such Grantor is the owner of the unencumbered right, title
         and interest in and to such Intellectual Property Collateral (except
         for (i) Liens created under the Loan Documents, and (ii) the second
         priority Lien on such Intellectual Property in favor of the Trustee to
         secure the obligations of the Borrowers related to the Senior Secured
         Notes (if any), and (iii) Permitted Liens and except for rights of
         licensees under licenses of such Intellectual Property Collateral in
         the ordinary course of business) and no claim has been made that the
         use of such Intellectual Property Collateral does or may violate the
         asserted rights of any third party except for claims that could not
         reasonably be expected to have a Material Adverse Effect ; and

                  (e) such Grantor has performed all acts and has paid all
         required fees and taxes required to maintain any Intellectual Property
         Collateral that is material or necessary to pay Borrower's business.

Such Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, licenses, technology, know-how,
processes and rights with respect to any of the foregoing necessary for or of
importance to the conduct of such Grantor's business as currently conducted.

         SECTION 3.7. Validity, etc. Upon entry of the Interim Order, this
Agreement will create a valid, perfected security interest in and Lien on the
Collateral senior to all Liens other than the then applicable Priority Liens.

         SECTION 3.8. Authorization, Approval, etc. Upon the entry of the
Interim Order, no material authorization, material approval or other action by,
and no material notice to or material filing with, any Governmental Authority or
regulatory body is required either (a) for the grant by such Grantor of the
security interest granted hereby, the pledge by such Grantor of any Collateral
pursuant hereto or for the execution, delivery and performance of this Agreement
by such Grantor or (b) for the perfection of or the exercise by the
Administrative Agent of its rights and remedies hereunder.

         SECTION 3.9. Compliance with Laws. Such Grantor is in compliance with
the requirements of all applicable laws (including the provisions of the Fair
Labor Standards Act), rules, regulations and orders of every Governmental
Authority, the non-compliance with which

                                       11
<PAGE>   12

could reasonably be expected to have a Material Adverse Effect or which could
reasonably be expected to materially adversely affect the value of the
Collateral.

                                   ARTICLE IV
                                    COVENANTS

         SECTION 4.1. Certain Covenants. Each Grantor covenants and agrees that,
at all times prior to the Fixed Assets Termination Date, such Grantor will,
unless the Fixed Assets Required Lenders shall otherwise consent in writing,
perform, comply with and be bound by the obligations set forth in this Article
IV.

         SECTION 4.2. As to Equipment and Inventory. Such Grantor hereby agrees
that it will:

                  (a) keep all the Equipment and Inventory (other than Inventory
         sold in the ordinary course of business) at the places therefor
         specified in Section 3.2 or, upon 30 days' prior written notice to the
         Administrative Agent, at such other places in a jurisdiction where all
         representations and warranties set forth in Article III shall be true
         and correct in all material respects, and all action required pursuant
         to the first sentence of Section 4.6 shall have been taken with respect
         to the Equipment and Inventory;

                  (b) cause the Equipment to be maintained and preserved in its
         existing condition, ordinary wear and tear excepted, or in the case of
         any loss or damage to any of the Equipment, as soon as practicable
         after the occurrence thereof, make or cause to be made all repairs,
         replacements and other improvements in connection therewith which are
         necessary or desirable to such end; and promptly furnish to the
         Administrative Agent a statement respecting any loss or damage to any
         of the Equipment which is material in amount; and

                  (c) pay when due all Taxes, assessments and governmental
         charges imposed upon, the Equipment and Inventory, except to the extent
         the validity thereof is being contested in good faith by appropriate
         proceedings and for which adequate reserves in accordance with GAAP
         have been set aside.

         SECTION 4.3. As to Receivables. (a) Such Grantor will keep its chief
executive office and the office(s) where it keeps its records concerning the
Receivables, and all originals of all chattel paper which evidences Receivables,
located at the address(es) set forth in Section 3.2 and shall keep its other
places of business at the addresses set forth in Item 3 of the Perfection
Certificate, or, upon 30 days' prior written notice to the Administrative Agent,
at such other locations in a jurisdiction where all actions required by the
first sentence of Section 4.6 shall have been taken with respect to the
Receivables and such other Collateral; not change its name, corporate identity
or jurisdiction of organization or federal taxpayer identification number except
upon 30 days' prior written notice to the Administrative Agent; hold and
preserve such records; and permit representatives of the Administrative Agent,
at reasonable times and intervals and upon reasonable notice, during normal
business hours to inspect (and photocopy extracts from) such records.

                                       12
<PAGE>   13

         (b) Such Grantor shall have the right to collect, demand, receive,
receipt for, sue for, compound and give acquittances for any and all amounts due
or to become due on Receivables and settle and adjust disputes and claims with
its customers and account debtors, handle returns and recoveries and grant
discounts, credits and allowances with respect to Receivables in the ordinary
course of business so long as no Event of Default shall have occurred and be
continuing.

         (c) All proceeds of Collateral received by such Grantor shall be
delivered in kind for deposit to the appropriate Lockbox Account. Such proceeds
of Collateral received by such Grantor shall, prior to deposit in the Lockbox
Account, be held separate and apart from, and not commingled with, any other
property and in express trust for the benefit of the Administrative Agent until
delivery thereof is made to the Lockbox Account.

         (d) The Administrative Agent shall have the right, without further
order of or application to the Bankruptcy Court, to apply any amount in any
Lockbox Account and/or the Concentration Account as set forth in the Credit
Agreement, and subject to applicable provisions of the Revolver Intercreditor
Agreement and any applicable requirements of the Financing Order.

         (e) With respect to each Lockbox Account and the Concentration Account,
it is hereby confirmed and agreed that (i) deposits in each such account are
subject to a security interest as contemplated hereby, (ii) each such account
shall be under the sole dominion and control of the Administrative Agent and
(iii) the Administrative Agent shall have the sole right of withdrawal over such
Collateral.

         (f) Such Grantor will not create any chattel paper without placing a
legend on such chattel paper acceptable to the Administrative Agent indicating
that the Administrative Agent has a security interest in such chattel paper.

         SECTION 4.4. As to Collateral. (a) Until the occurrence and continuance
of an Event of Default, and such time as the Administrative Agent shall notify
such Grantor of the revocation of such power and authority, such Grantor (i) may
in the ordinary course of its business (except to the extent prohibited under
any Loan Document) at its own expense, refine, process, store, transport, sell,
lease or furnish under the contracts of service any of the Inventory normally
held by such Grantor for such purpose, and use and consume, in the ordinary
course of its business (except to the extent prohibited under the Credit
Agreement or any other Loan Document), any raw materials, including work in
process or materials normally held by such Grantor for such purpose, (ii) will,
at its own expense, endeavor to collect, as and when due, all amounts due with
respect to any Collateral, including the taking of such action with respect to
such collection as the Administrative Agent may reasonably request upon the
occurrence and during the continuance of an Event of Default or, in the absence
of such request, as such Grantor may deem advisable, and (iii) may grant, in the
ordinary course of business (except to the extent prohibited under any Loan
Document), to any party obligated on any of the Collateral, any rebate, refund
or allowance to which such party may be lawfully entitled, and may accept, in
connection therewith, the return of goods, the sale or lease of which shall have
given rise to such Collateral. The Administrative Agent, however, may, without
further order of or application to the

                                       13
<PAGE>   14

Bankruptcy Court, at any time upon the occurrence and during the continuance of
an Event of Default, notify any parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amounts due or to become due
thereunder and enforce collection of any of the Collateral by suit or otherwise
and surrender, release or exchange all or any part thereof, or compromise or
extend or renew for any period (whether or not longer than the original period)
any indebtedness thereunder or evidenced thereby. Upon request of the
Administrative Agent, upon the occurrence and during the continuance of an Event
of Default, such Grantor will, at its own expense, notify any parties obligated
on any of the Collateral to make payment to the Administrative Agent of any
amounts due or to become due thereunder.

         (b) The Administrative Agent is authorized, without further order of or
application to the Bankruptcy Court, to endorse, in the name of such Grantor,
any item, howsoever received by the Administrative Agent, representing any
payment on or other proceeds of any of the Collateral.

         SECTION 4.5. As to Intellectual Property Collateral. Each Grantor
covenants and agrees to comply with the following provisions as such provisions
relate to any Intellectual Property Collateral of such Grantor:

                  (a) such Grantor will not (i) do any act, or omit to do any
         act, whereby any of the Patent Collateral may lapse or become abandoned
         or dedicated to the public or unenforceable, (ii) permit any of its
         licensees to, (A) fail to continue to use any of the Trademark
         Collateral in order to maintain all of the Trademark Collateral in full
         force free from any claim of abandonment for non-use, (B) fail to
         maintain as in the past the quality of products and services offered
         under all of the Trademark Collateral, (C) fail to employ all of the
         Trademark Collateral registered with any Federal or State authority
         with an appropriate notice of such registration, (D) adopt or use any
         other Trademark which is confusingly similar or a colorable imitation
         of any of the Trademark Collateral, (E) use any of the Trademark
         Collateral registered with any Federal or State authority except for
         the uses for which registration or application for registration of all
         of the Trademark Collateral has been made, or (F) do or permit any act
         or knowingly omit to do any act whereby any of the Trademark Collateral
         may lapse or become invalid or unenforceable or (iii) do or permit any
         act or knowingly omit to do any act whereby any of the Copyright
         Collateral or any of the Trade Secrets Collateral may lapse or become
         invalid or unenforceable or placed in the public domain except upon
         expiration of the end of an unrenewable term of a registration thereof,
         unless such Grantor shall either (x) reasonably and in good faith
         determine (and notice of such determination shall have been delivered
         to the Administrative Agent) that any of the Intellectual Property
         Collateral is not of material economic value to such Grantor, or (y) in
         the exercise of its reasonable business judgment determines to do
         otherwise;

                  (b) such Grantor shall notify the Administrative Agent as soon
         as practicable if it knows, or has reason to know, that any application
         or registration relating to any material item of the Intellectual
         Property Collateral may become abandoned or dedicated to the public or
         placed in the public domain or invalid or unenforceable other than upon
         the natural expiration of protective periods under applicable law, or
         of any adverse determination or development (including the institution
         of, or any such determination or

                                       14
<PAGE>   15

         development in, any proceeding in the United States Patent and
         Trademark Office, the United States Copyright Office or any U.S.
         court) regarding such Grantor's ownership of any material item of the
         Intellectual Property Collateral, its right to register the same or to
         keep and maintain and enforce the same;

                  (c) in no event will such Grantor or any of its agents,
         employees, designees or licensees file an application for the
         registration of any Intellectual Property Collateral with the United
         States Patent and Trademark Office or the United States Copyright
         Office, unless it promptly informs the Administrative Agent, and upon
         request of the Administrative Agent, executes and delivers any and all
         agreements, instruments, documents and papers as the Administrative
         Agent may reasonably request to evidence the Administrative Agent's
         security interest in such Intellectual Property Collateral and the
         goodwill and general intangibles of such Grantor relating thereto or
         represented thereby;

                  (d) unless such Grantor shall otherwise determine in the
         exercise of its reasonable business judgment, such Grantor will take
         all necessary steps, including in any proceeding before the United
         States Patent and Trademark Office or the United States Copyright
         Office, to maintain and pursue any application (and to obtain the
         relevant registration) filed with respect to, and to maintain any
         registration of any material item of the Intellectual Property
         Collateral, including the filing of applications for renewal,
         affidavits of use, affidavits of incontestability and opposition,
         interference and cancellation proceedings and the payment of fees and
         taxes (except to the extent that dedication, abandonment or
         invalidation is permitted under the foregoing clauses (a), (b) and
         (c)); and

                  (e) such Grantor will, contemporaneously herewith, execute and
         deliver to the Administrative Agent a Patent Security Agreement,
         Trademark Security Agreement and Copyright Security Agreement in the
         forms of Exhibit A, Exhibit B and Exhibit C hereto, and shall execute
         and deliver to the Administrative Agent any other document required to
         acknowledge or register or perfect the Administrative Agent's interest
         in any material item of the Intellectual Property Collateral.

         SECTION 4.6. Further Assurances, etc. Such Grantor agrees that, from
time to time at its own expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Administrative Agent may reasonably request,
in order to perfect, preserve and protect any security interest granted or
purported to be granted hereby or to enable the Administrative Agent to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, such Grantor will:

                  (a) if any Receivable shall be evidenced by a promissory note
         or other instrument, negotiable document or chattel paper, deliver and
         pledge to the Administrative Agent hereunder such promissory note,
         instrument, negotiable document or chattel paper duly endorsed and
         accompanied by duly executed instruments of transfer or assignment, all
         in form and substance satisfactory to the Administrative Agent;

                                       15
<PAGE>   16

                  (b) take such actions as are requested by the Administrative
         Agent in order to allow the Administrative Agent to obtain control with
         respect to all Collateral consisting of (i) deposit accounts, (ii)
         investment property, (iii) letter-of-credit rights and (iv) electronic
         chattel paper;

                  (c) execute such financing or continuation statements, or
         amendments thereto, and such other instruments or notices (including
         any assignment of claim form under or pursuant to the federal
         assignment of claims statute, 31 U.S.C. Section 3726, any successor or
         amended version thereof or any regulation promulgated under or pursuant
         to any version thereof), as may be necessary or desirable, or as the
         Administrative Agent may request; and

                  (d) furnish to the Administrative Agent, from time to time at
         the Administrative Agent's request, statements and schedules further
         identifying and describing the Collateral and such other reports in
         connection with the Collateral as the Administrative Agent may
         reasonably request, all in reasonable detail.

With respect to the foregoing and the grant of the security interest hereunder,
such Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Grantor where permitted
by law. A carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

         SECTION 4.7. Intentionally deleted.

         SECTION 4.8. Insurance. Each Grantor will:

                  (a) maintain insurance on its property with financially sound
         and reputable insurance companies against loss and damage in at least
         the amounts (and with only those deductibles) customarily maintained,
         (and if insurance companies cease to offer such insurance generally,
         such insurance as is acceptable to the Administrative Agent) and
         against such risks as are typically insured against in the same general
         area, by Persons of comparable size engaged in the same or similar
         business as the Grantor; and

                  (b) all worker's compensation, employer's liability insurance
         or similar insurance as may be required under the laws of any state or
         jurisdiction in which it may be engaged in business.

                                    ARTICLE V
                            THE ADMINISTRATIVE AGENT

         SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Each
Grantor hereby irrevocably appoints the Administrative Agent as such Grantor's
attorney-in-fact, with full authority in the place and stead of such Grantor and
in the name of such Grantor or otherwise,

                                       16
<PAGE>   17

from time to time in the Administrative Agent's discretion, upon the occurrence
and during the continuance of an Event of Default, to, without further order of
or application to the Bankruptcy Court, take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including:

                  (a) to ask, demand, collect, sue for, recover, compromise and
         receive and give acquittance and receipts for moneys due and to become
         due under or in respect of any of the Collateral;

                  (b) to receive, endorse and collect any drafts or other
         instruments, documents and chattel paper, in connection with clause
         (a) above;

                  (c) to file any claims or take any action or institute any
         proceedings which the Administrative Agent may deem necessary or
         desirable for the collection of any of the Collateral or otherwise to
         enforce the rights of the Administrative Agent with respect to any of
         the Collateral; and

                  (d) to perform the affirmative obligations of such Grantor
         hereunder (including all obligations of such Grantor pursuant to
         Section 4.6).

Such Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.

         SECTION 5.2. Administrative Agent May Perform. If any Grantor fails to
perform any agreement contained herein, the Administrative Agent may, without
further order of or application to the Bankruptcy Court, itself perform, or
cause performance of, such agreement, and the expenses of the Administrative
Agent incurred in connection therewith shall be payable by such Grantor pursuant
to Section 6.3.

         SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on
the Administrative Agent hereunder are solely to protect its interest (on behalf
of the Fixed Assets Secured Parties) in the Collateral and shall not impose any
duty on it to exercise any such powers. Except for reasonable care of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Administrative Agent shall have no duty as to any Collateral
or responsibility for:

                  (a) ascertaining or taking action with respect to calls,
         conversions, exchanges, maturities, tenders or other matters relative
         to any investment property, whether or not the Administrative Agent has
         or is deemed to have knowledge of such matters; or

                  (b) taking any necessary steps to preserve rights against
         prior parties or any other rights pertaining to any Collateral.

         SECTION 5.4. Reasonable Care. The Administrative Agent is required to
exercise reasonable care in the custody and preservation of any of the
Collateral in its possession; provided, however, that the Administrative Agent
shall be deemed to have exercised reasonable

                                       17
<PAGE>   18

care in the custody and preservation of any of the Collateral, if it takes such
action for that purpose as any Grantor reasonably requests in writing from time
to time, but failure of the Administrative Agent to comply with any such request
at any time shall not in itself be deemed a failure to exercise reasonable care.
If an Event of Default has occurred and is continuing, the Administrative Agent
shall not be required to comply with any request of the Grantor with respect to
the matters described in this Section.

                                   ARTICLE VI
                                    REMEDIES

         SECTION 6.1. Certain Remedies. Without further order of or application
to the Bankruptcy Court, but subject to any applicable requirements of the
Financing Order, the Credit Agreement and the Revolving Intercreditor Agreement,
if any Event of Default shall have occurred and be continuing:

                  (a) The Administrative Agent may exercise in respect of the
         Collateral, in addition to other rights and remedies provided for
         herein or otherwise available to it, all the rights and remedies of a
         secured party on default under the U.C.C. (whether or not the U.C.C.
         applies to the affected Collateral) and also may

                           (i) require each Grantor to, and such Grantor hereby
                  agrees that it will, at its expense and upon request of the
                  Administrative Agent forthwith, assemble all or part of the
                  Collateral as directed by the Administrative Agent and make it
                  available to the Administrative Agent at a place to be
                  designated by the Administrative Agent which is reasonably
                  convenient to both parties, and

                           (ii) without notice except as specified below, sell
                  the Collateral or any part thereof in one or more parcels at
                  public or private sale, at any of the Administrative Agent's
                  offices or elsewhere, for cash, on credit or for future
                  delivery, and upon such other terms as the Administrative
                  Agent may deem commercially reasonable. Each Grantor agrees
                  that, to the extent notice of sale shall be required by law,
                  at least ten days prior notice to such Grantor of the time and
                  place of any public sale or the time after which any private
                  sale is to be made shall constitute reasonable notification.
                  The Administrative Agent shall not be obligated to make any
                  sale of such Collateral regardless of notice of sale having
                  been given. The Administrative Agent may adjourn any public or
                  private sale from time to time by announcement at the time and
                  place fixed therefor, and such sale may, without further
                  notice, be made at the time and place to which it was so
                  adjourned.

                  (b) All cash proceeds received by the Administrative Agent in
         respect of any sale of, collection from or other realization upon all
         or any part of the Collateral shall be applied by the Administrative
         Agent, subject to any applicable requirements of the Financing Order,
         the Credit Agreement and the Revolver Intercreditor Agreement against
         all or any part of the Fixed Assets Obligations as follows:

                                       18
<PAGE>   19

                           (i) first, to the payment of any amounts payable to
                  the Administrative Agent pursuant to Section 10.3 of the
                 Credit Agreement and Section 6.3;

                           (ii) second, to the equal and ratable payment of
                  Fixed Assets Obligations, in accordance with each Fixed Assets
                  Secured Party's Fixed Assets Obligations owing to it under or
                  pursuant to the Credit Agreement or any other Loan Document,
                  or under or pursuant to any Rate Protection Agreement included
                  in the Fixed Assets Obligations, as to each Fixed Assets
                  Secured Party, applied

                                    (A) first to fees and expense reimbursements
                           then due to such Fixed Assets Secured Party,

                                    (B) then to interest due to such Fixed
                           Assets Secured Party,

                                    (C) then to pay or prepay principal of the
                           Fixed Assets Loans owing to, or to reduce the "credit
                           exposure" of, such Fixed Assets Secured Party under
                           any Rate Protection Agreement, as the case may be,
                           and

                                    (D) then to pay the remaining outstanding
                           Fixed Assets Obligations;

                           (iii) third, without duplication of any amounts paid
                  pursuant to clause (b)(ii) above, to the Indemnified Parties
                  to the extent of any amounts owing pursuant to Section 10.4 of
                  the Credit Agreement; and

                           (iv) fourth, to be held as additional collateral
                  security until the Fixed Assets Termination Date, after which
                  such remaining cash proceeds shall be paid over to the
                  applicable Grantor (or the Current Assets Secured Parties, if
                  applicable, or the holders of any applicable Priority Liens)
                  or to whomsoever may be lawfully entitled to receive such
                  surplus.

For purposes of this Agreement, the "credit exposure" at any time of any Fixed
Assets Secured Party with respect to a Rate Protection Agreement to which such
Fixed Assets Secured Party is a party shall be determined at such time in
accordance with the customary methods of calculating credit exposure under
similar arrangements by the counterparty to such arrangements, taking into
account potential interest rate movements and the respective termination
provisions and notional principal amount and term of such Rate Protection
Agreement.

                  (c) The Administrative Agent may

                           (i) transfer all or any part of the Collateral into
                  the name of the Administrative Agent or its nominee, with or
                  without disclosing that such Collateral is subject to the lien
                  and security interest hereunder,

                           (ii) notify the parties obligated on any of the
                  Collateral to make payment to the  Administrative  Agent
                  of any amount due or to become due thereunder,

                                       19
<PAGE>   20

                           (iii) enforce collection of any of the Collateral by
                  suit or otherwise, and surrender, release or exchange all or
                  any part thereof, or compromise or extend or renew for any
                  period (whether or not longer than the original period) any
                  obligations of any nature of any party with respect thereto,

                           (iv) endorse any checks, drafts or other writings in
                  such Grantor's name to allow collection of the Collateral,

                           (v) take control of any proceeds of the Collateral
                  and

                           (vi) execute (in the name, place and stead of such
                  Grantor) endorsements, assignments, stock powers and other
                  instruments of conveyance or transfer with respect to all or
                  any of the Collateral.

         SECTION 6.2. Compliance with Restrictions. Each Grantor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Administrative Agent is hereby authorized,
without further order of or application to the Bankruptcy Court, to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications and restrict such prospective bidders and
purchasers to Persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any Governmental Authority or official, and such
Grantor further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Administrative Agent be liable nor accountable to such Grantor for
any discount allowed by the reason of the fact that such Collateral is sold in
compliance with any such limitation or restriction.

         SECTION 6.3. Indemnity and Expenses. Each Grantor hereby jointly and
severally indemnifies and holds harmless the Administrative Agent from and
against any and all claims, losses and liabilities arising out of or resulting
from this Agreement (including enforcement of this Agreement), except claims,
losses or liabilities resulting from the Administrative Agent's gross negligence
or willful misconduct and each Grantor will upon demand pay to the
Administrative Agent the amount of any and all reasonable expenses, including
the reasonable fees and disbursements of its counsel and of any experts and
agents, which the Administrative Agent may incur, in each case, in connection
with:

                           (a) the administration of this Agreement;

                           (b) the custody, preservation, use or operation of
                  or the sale of, collection from or other realization upon,
                  any of the Collateral;

                                       20
<PAGE>   21

                           (c) the exercise or enforcement of any of the rights
                  of the Administrative Agent hereunder; or

                           (d) the failure by any Grantor to perform or observe
                  any of the provisions hereof.

                                   ARTICLE VII
                            MISCELLANEOUS PROVISIONS

         SECTION 7.1. Loan Document. This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.

         SECTION 7.2. Amendments, etc. No amendment to or waiver of any
provision of this Agreement nor consent to any departure by any Grantor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Administrative Agent (on behalf of the Lenders or the Required Lenders,
as the case may be) and each Grantor and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

         SECTION 7.3. Protection of Collateral. The Administrative Agent may
from time to time, at its option, perform any act which each Grantor agrees
hereunder to perform and which such Grantor shall fail to perform after being
requested in writing so to perform (it being understood that no such request
need be given after the occurrence and during the continuance of an Event of
Default) and the Administrative Agent may from time to time take any other
action which the Administrative Agent reasonably deems necessary for the
maintenance, preservation or protection of any of the Collateral or of its
security interest therein.

         SECTION 7.4. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and addressed,
delivered or transmitted, if to any Grantor, at the address or facsimile number
of the Company provided for in the Credit Agreement, and if to the
Administrative Agent, at the address or facsimile number provided for in the
Credit Agreement, or as to any such party, at such other address or facsimile
number as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. Any notice, (a)
if mailed and properly addressed with postage prepaid or if properly addressed
and sent by pre-paid courier service, shall be deemed given when received, or
(b) if transmitted by facsimile, shall be deemed given when transmitted (and
telephonic confirmation of receipt thereof has been received).

         SECTION 7.5. Headings. The various headings of this Agreement are
inserted for convenience only, and shall not affect the meaning or
interpretation of this Agreement or any provisions thereof.

         SECTION 7.6. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective

                                       21
<PAGE>   22

to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.

         SECTION 7.7. Counterparts; Effectiveness. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original (whether such counterpart is originally executed or an
electronic copy of an original) and all of which shall constitute together but
one and the same agreement. This Agreement shall become effective as of the date
first above written and be binding upon a Grantor when a counterpart hereof
executed on behalf of such Grantor shall have been received by the
Administrative Agent.

         SECTION 7.8. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK,
EXCLUDING THE LAW OF CONFLICTS BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.

         SECTION 7.9. Additional Grantors. Upon the execution and delivery by
any other Person of an instrument in the form of Annex I hereto, together with
each Schedule thereto, such Person shall become a "Grantor" hereunder with the
same force and effect as if originally named as a Grantor herein. The execution
and delivery of any such instrument shall not require the consent of any other
Grantor hereunder. The rights and obligations of each Grantor hereunder shall
remain in full force and effect notwithstanding the addition of any new Grantor
as a party to this Agreement.

         SECTION 7.10. Agreement Subject to Revolver Intercreditor Agreement.
Notwithstanding anything to the contrary contained herein, it is expressly
understood and agreed by the parties hereto that this Agreement shall be subject
to the terms of the Revolver Intercreditor Agreement.

                                       22
<PAGE>   23

         IN WITNESS WHEREOF, each Grantor has caused this Fixed Assets Secured
Parties Security Agreement to be duly executed and delivered by its officer
thereunto duly authorized as of the date first above written.

                                           GRANTORS:

                                           STERLING CHEMICALS, INC.

                                           By
                                             ----------------------------------
                                              Title:

                                           STERLING CANADA, INC.

                                           By
                                             ----------------------------------
                                              Title:

                                           STERLING PULP CHEMICALS US, INC.

                                           By
                                             ----------------------------------
                                              Title:

                                           STERLING PULP CHEMICALS, INC.

                                           By
                                             ----------------------------------
                                              Title:

                                           STERLING FIBERS, INC.

                                           By
                                             ----------------------------------
                                              Title:

<PAGE>   24

                                           STERLING CHEMICALS ENERGY, INC.

                                           By
                                             ----------------------------------
                                              Title:

                                           STERLING CHEMICALS INTERNATIONAL,
                                           INC.

                                           By
                                             ----------------------------------
                                              Title:

                                           ADMINISTRATIVE AGENT:

                                           THE CIT GROUP/BUSINESS CREDIT, INC.
                                              as Administrative Agent, on behalf
                                              of the Fixed Assets Secured
                                              Parties

                                           By
                                             ----------------------------------
                                              Title:

<PAGE>   25

                                                                       EXHIBIT A

                            PATENT SECURITY AGREEMENT

         This PATENT SECURITY AGREEMENT (this "Agreement"), dated as of
___________, _____, is made between _______________, a ____________ (the
"Grantor"), and THE CIT GROUP/BUSINESS CREDIT, INC., as administrative agent
(together with any successors) thereto in such capacity, the "Administrative
Agent") for each of the Fixed Assets Secured Parties.

                                   WITNESSETH:

         WHEREAS, pursuant to a Revolving Credit Agreement, dated as of July
___, 2001 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among Sterling Chemicals, Inc., a
Delaware corporation (the "Company"), Sterling Canada, Inc., a Delaware
corporation, Sterling Pulp Chemicals US, Inc., a Delaware corporation, Sterling
Pulp Chemicals, Inc., a Georgia corporation, Sterling Fibers, Inc., a Delaware
corporation, Sterling Chemicals Energy, Inc., a Delaware corporation, and
Sterling Chemicals International, Inc., a Delaware corporation (collectively,
the "Borrowers"), the various financial institutions as are, or may from time to
time become, parties thereto (the "Lenders") and the Administrative Agent, the
Lenders and the Issuer have extended Commitments to make Credit Extensions to
the Borrowers;

         WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered a Fixed Assets Secured Parties Security Agreement, dated
as of July ___, 2001 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the "Security Agreement");

         WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) under the Credit Agreement
and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor
is required to execute and deliver this Agreement and to grant to the
Administrative Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Fixed Assets Obligations;

         WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement; and

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce (i) the
Fixed Assets Lenders to make Fixed Assets Loans (including the initial Fixed
Assets Loans) to the Borrowers pursuant to the Credit Agreement and (ii) the
Fixed Assets Secured Parties to enter into Rate Protection Agreements, the
Grantor agrees, for the benefit of each Fixed Assets Secured Party, as follows:

         SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.

                                    EX. A-1

<PAGE>   26

         SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Fixed Assets Obligations, the Grantor does hereby pledge and
hypothecate to the Administrative Agent, and grant to the Administrative Agent a
security interest in, for its benefit and the benefit of each Fixed Assets
Secured Party, all of the following property (the "Patent Collateral"), whether
now owned or hereafter acquired or existing by it:

                  (a) all letters patent and applications for letters patent
         in the United States, including all patent applications in
         preparation for filing in the United States and including each
         patent and patent application referred to in Item A of Schedule I
         attached hereto;

                  (b) all reissues, divisions, continuations,
         continuations-in-part, extensions, renewals and reexaminations of
         any of the items described in clause (a);

                  (c) all patent licenses in the United States, including each
         patent license referred to in Item B of Schedule I attached hereto;
         and

                  (d) all proceeds of, and rights associated with, the
         foregoing (including license royalties and proceeds of infringement

         suits), the right to sue third parties for past, present or future
         infringements of any patent or patent application, referred to in
         clauses (a) or (b) above, and for breach or enforcement of any patent
         license referred to in clause (c) above.

         SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest of
the Administrative Agent in the Patent Collateral with the United States Patent
and Trademark Office. The security interest granted hereby has been granted as a
supplement to, and not in limitation of, the security interest granted to the
Administrative Agent for its benefit and the benefit of each Fixed Assets
Secured Party under the Security Agreement. The Security Agreement (and all
rights and remedies of the Administrative Agent and each Fixed Assets Secured
Party thereunder) shall remain in full force and effect in accordance with its
terms.

         SECTION 4. Release of Security Interest. Upon (i) the sale, transfer or
other disposition of any Patent Collateral in accordance with the Credit
Agreement or (ii) the Fixed Assets Termination Date, the Administrative Agent
shall, at the Grantor's expense, execute and deliver to the Grantor all
instruments and other documents as may be necessary or proper to release the
lien on and security interest in the Patent Collateral which has been granted
hereunder.

         SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge
and affirm that the rights and remedies of the Administrative Agent with respect
to the security interest in the Patent Collateral granted hereby are more fully
set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.

                                     EX A-2
<PAGE>   27

         SECTION 6. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.

         SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
(whether such counterpart is originally executed or an electronic copy of an
original) and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective and binding as of the date
first above written when a counterpart hereof executed on behalf of the Grantor
shall have been received by the Administrative Agent.

         SECTION 8. Agreement Subject to Revolver Intercreditor Agreement.
Notwithstanding anything to the contrary contained herein, it is expressly
understood and agreed by the parties hereto that this Agreement shall be subject
to the terms of the Revolver Intercreditor Agreement.

     [REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

                                    EX. A-3

<PAGE>   28

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.

                                                      [NAME OF GRANTOR]

                                                      By
                                                        ------------------------
                                                         Title:

                                                      THE CIT GROUP/BUSINESS
                                                        CREDIT, INC. as
                                                        Administrative Agent, on
                                                        behalf of the Fixed
                                                        Assets Secured Parties

                                                      By
                                                        ------------------------
                                                         Title:

                                     EX A-4
<PAGE>   29

                                                                      SCHEDULE I
                                                           to Security Agreement

Item A.  Patents

                                 Issued Patents

<Table>
<Caption>
Patent No.             Issue Date                   Inventor(s)                  Title
----------             ----------                   -----------                  -----
<S>                    <C>                          <C>                          <C>
</Table>

                           Pending Patent Applications

<Table>
<Caption>
Serial No.             Filing Date                  Inventor(s)                  Title
----------             -----------                  -----------                  -----
<S>                    <C>                         <C>                           <C>
</Table>

<Table>
<Caption>

                       Patent Applications in Preparation

Docket No.          Filing Date                  Expected Inventor(s)            Title
----------          -----------                  --------------------            -----
<S>                 <C>                          <C>                             <C>
</Table>

Item B.  Patent Licenses

<Table>
<Caption>
                                  Effective          Expiration
Licensor       Licensee             Date               Matter          Subject Matter
--------       --------           ---------          -----------       --------------
<S>            <C>                <C>                <C>               <C>
</Table>

<PAGE>   30

                                                                       EXHIBIT B
                                                           to Security Agreement

                          TRADEMARK SECURITY AGREEMENT

         This TRADEMARK SECURITY AGREEMENT (this "Agreement"), dated as of
__________, _____, is made between ________________, a ________________ (the
"Grantor"), and THE CIT GROUP/BUSINESS CREDIT, INC., as administrative agent
(together with any successors) thereto in such capacity, the "Administrative
Agent") for each of the Fixed Assets Secured Parties.

                                  WITNESSETH:

         WHEREAS, pursuant to a Revolving Credit Agreement, dated as of July __,
2001 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the "Credit Agreement"),among Sterling Chemicals, Inc., a Delaware
corporation (the "Company"), Sterling Canada, Inc., a Delaware corporation,
Sterling Pulp Chemicals US, Inc., a Delaware corporation, Sterling Pulp
Chemicals, Inc., a Georgia corporation, Sterling Fibers, Inc., a Delaware
corporation, Sterling Chemicals Energy, Inc., a Delaware corporation, and
Sterling Chemicals International, Inc., a Delaware corporation (collectively,
the "Borrowers"), the various financial institutions as are, or may from time to
time become, parties thereto (the "Lenders") and the Administrative -Agent, the
Lenders and the Issuer have extended Commitments to make Credit Extensions to
the Borrowers;

         WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered a Fixed Assets Secured Parties Security Agreement, dated
as of July ___, 2001 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the "Security Agreement");

         WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) under the Credit Agreement
and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor
is required to execute and deliver this Agreement and to grant to the
Administrative Agent a continuing security interest in all of the Trademark
Collateral (as defined below) to secure all Fixed Assets Obligations;

         WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement; and

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce (i) the
Fixed Assets Lenders to make Fixed Assets Loans (including the initial Fixed
Assets Loans) to the Borrowers pursuant to the Credit Agreement, and (ii) the
Fixed Assets Secured Parties to enter into Rate Protection Agreements, the
Grantor agrees, for the benefit of each Fixed Assets Secured Party, as follows:

         SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.

                                    EX. B-1

<PAGE>   31

         SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Fixed Assets Obligations, the Grantor does hereby, pledge and
hypothecate to the Administrative Agent, and grant to the Administrative Agent a
security interest in, for its benefit and the benefit of each Fixed Assets
Secured Party, all of the following property (the "Trademark Collateral"),
whether now owned or hereafter acquired or existing by it:

                  (a) all trademarks, trade names, corporate names, company
         names, business names, fictitious business names, trade styles,
         service marks, certification marks, collective marks, logos,
         other source of business identifiers, prints and labels on which
         any of the foregoing have appeared or appear, designs and general
         intangibles of alike nature (all of the foregoing items in this
         clause (a) being collectively called a "Trademark"), now existing
         anywhere in the United States or hereafter adopted or acquired in
         the United States, whether currently in use or not, all
         registrations and recordings thereof and all applications in
         connection therewith, whether pending or in preparation for
         filing, including registrations, recordings and applications in
         the United States Patent and Trademark Office or in any office or
         agency of the United States of America or any State, including
         those referred to in Item A of Schedule I attached hereto;

                  (b) all Trademark licenses in the United States, including
         each Trademark license referred to in Item B of Schedule I
         attached hereto;

                  (c) all reissues, extensions or renewals of any of the items
         described in clause (a) and (b);

                  (d) all of the goodwill of the business connected with the
         use of, and symbolized by the items described in, clauses (a) and
         (b); and

                  (e) all proceeds of, and rights associated with, the
         foregoing, including any claim by the Grantor against third
         parties for past, present or future infringement or dilution of
         any Trademark, Trademark registration or Trademark license
         referred to in clauses (a) through (c) above, or for any injury
         to the goodwill associated with the use of any such Trademark or
         for breach or enforcement of any such Trademark license.

         SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest of
the Administrative Agent in the Trademark Collateral with the United States
Patent and Trademark Office. The security interest granted hereby has been
granted as a supplement to, and not in limitation of, the security interest
granted to the Administrative Agent for its benefit and the benefit of each
Fixed Assets Secured Party under the Security Agreement. The Security Agreement
(and all rights and remedies of the Administrative Agent and each Fixed Assets
Secured Party thereunder) shall remain in full force and effect in accordance
with its terms.

         SECTION 4. Release of Security Interest. Upon (i) the sale, transfer or
other disposition of any Trademark Collateral in accordance with the Credit
Agreement or (ii) the Fixed Assets Termination Date, the Administrative Agent
shall, at the Grantor's expense, execute

                                    EX. B-2

<PAGE>   32

and deliver to the Grantor all instruments and other documents as may be
necessary or proper to release the lien on and security interest in the
Trademark Collateral which has been granted hereunder.

         SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge
and affirm that the rights and remedies of the Administrative Agent with respect
to the security interest in the Trademark Collateral granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.

         SECTION 6. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.

         SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
(whether such counterpart is originally executed or an electronic copy of an
original) and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective and binding as of the date
first above written when a counterpart hereof executed on behalf of the Grantor
shall have been received by the Administrative Agent.

         SECTION 8. Agreement Subject to Revolver Intercreditor Agreement.
Notwithstanding anything to the contrary contained herein, it is expressly
understood and agreed by the parties hereto that this Agreement shall be subject
to the terms of the Revolver Intercreditor Agreement.

     [REMAINDER OF PAGE IS INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

                                    EX. B-3

<PAGE>   33

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.

                                           [NAME OF GRANTOR]

                                           By
                                             -----------------------------------
                                             Title:

                                           THE CIT GROUP/BUSINESS CREDIT, INC.
                                             as Administrative Agent, on
                                             behalf of the Fixed Assets Secured
                                             Parties

                                           By
                                             -----------------------------------
                                             Title:

                                    EX. B-4

<PAGE>   34

                                                                      SCHEDULE I
                                                 to Trademark Security Agreement

Item A.  Trademarks

                              Registered Trademarks

<Table>
<Caption>
                  Trademark        Registration No.      Registration Date
                  ---------        ----------------      -----------------
<S>                                <C>                   <C>
</Table>

                         Pending Trademark Applications

<Table>
<Caption>
                  Trademark          Serial No.                 Filing Date
                  ---------          ----------                 -----------
<S>                                  <C>                        <C>
</Table>

                      Trademark Applications in Preparation
<Table>
<Caption>
                                                     Expected       Products/
                  Trademark         Docket No.       Filing Date    Services
                  ---------         ----------       -----------    ---------
<S>                                 <C>              <C>            <C>
</Table>

Item B.  Trademark Licenses

<Table>
<Caption>
                                                                Effective     Expiration
                  Trademark         Licensor     Licensee       Date          Date
                  ---------         --------     --------       ---------     ----------
<S>                                 <C>          <C>            <C>           <C>
</Table>

<PAGE>   35

                                                                       EXHIBIT C
                                                           to Security Agreement

                                 COPYRIGHT SECURITY AGREEMENT

         This COPYRIGHT SECURITY AGREEMENT (this "Agreement"), dated as of _, is
made between ______________, a __________________ (the "Grantor"), and THE CIT
GROUP/BUSINESS CREDIT, INC., as administrative agent (together with any
successors) thereto in such capacity, the "Administrative Agent") for each of
the Fixed Assets Secured Parties.

                                   WITNESSETH:

         WHEREAS, pursuant to a Revolving Credit Agreement, dated as of July
___, 2001 (as amended, supplemented, amended and restated or otherwise modified
from time to time, the "Credit Agreement"), among Sterling Chemicals, Inc., a
Delaware corporation (the "Company"), Sterling Canada, Inc., a Delaware
corporation, Sterling Pulp Chemicals US, Inc., a Delaware corporation, Sterling
Pulp Chemicals, Inc., a Georgia corporation, Sterling Fibers, Inc., a Delaware
corporation, Sterling Chemicals Energy, Inc., a Delaware corporation, and
Sterling Chemicals International, Inc., a Delaware corporation (collectively,
the "Borrowers"), the various financial institutions as are, or may from time to
time become, parties thereto (the "Lenders") and the Administrative Agent, the
Lenders and the Issuer have extended Commitments to make Credit Extensions to
the Borrowers;

         WHEREAS, in connection with the Credit Agreement, the Grantor has
executed and delivered a Fixed Assets Secured Parties Security Agreement, dated
as of July ____, 2001(as amended, supplemented, amended and restated or
otherwise modified from time to time, the "Security Agreement");

         WHEREAS, as a condition precedent to the making of the Credit
Extensions (including the initial Credit Extension) under the Credit Agreement
and pursuant to clause (e) of Section 4.5 of the Security Agreement, the Grantor
is required to execute and deliver this Agreement and to grant to the
Administrative Agent a continuing security interest in all of the Copyright
Collateral (as defined below) to secure all Fixed Assets Obligations;

         WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement; and

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce (i) the
Fixed Assets Lenders to make Fixed Assets Loans (including the initial Fixed
Assets Loans) to the Borrowers pursuant to the Credit Agreement, and (ii) the
Fixed Assets Secured Parties to enter into Rate Protection Agreements, the
Grantor agrees, for the benefit of each Fixed Assets Secured Party, as follows:

                                    EX. C-1
<PAGE>   36

         SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.

              SECTION 2. Grant of Security Interest. For good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, to secure all of the Fixed Assets Obligations, the Grantor does
hereby pledge and hypothecate to the Administrative Agent, and grant to the
Administrative Agent a security interest in, for its benefit and the benefit of
each Fixed Assets Secured Party, all of the following property (the "Copyright
Collateral"), whether now owned or hereafter acquired or existing by it, being
all copyrights of the Grantor, whether statutory or common law, registered or
unregistered, now or hereafter in force in the United States including all of
the Grantor's right, title and interest in and to all copyrights registered in
the United States Copyright Office and also including the copyrights referred to
in Item A of Schedule I attached hereto, and all applications for registration
thereof, whether pending or in preparation, all copyright licenses in the United
States, including each copyright license referred to in Item B of Schedule I
attached hereto, the right to sue for past, present and future infringements of
any thereof, all rights corresponding thereto in the United States, all
extensions and renewals of any thereof and all proceeds of the foregoing,
including licenses, royalties, income, payments, claims, damages and proceeds of
suit.

      SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Grantor for the purpose of registering the security interest of
the Administrative Agent in the Copyright Collateral with the United States
Copyright Office. The security interest granted hereby has been granted as a
supplement to, and not in limitation of, the security interest granted to the
Administrative Agent for its benefit and the benefit of each Fixed Assets
Secured Party under the Security Agreement. The Security Agreement (and all
rights and remedies of the Administrative Agent and each Fixed Assets Secured
Party thereunder) shall remain in full force and effect in accordance with its
terms.

         SECTION 4. Release of Security Interest. Upon (i) the sale, transfer or
other disposition of any Copyright Collateral in accordance with the Credit
Agreement or (ii) the Fixed Assets Termination Date, the Administrative Agent
shall, at the Grantor's expense, execute and deliver to the Grantor all
instruments and other documents as may be necessary or proper to release the
lien on and security interest in the Copyright Collateral which has been granted
hereunder.

         SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge
and affirm that the rights and remedies of the Administrative Agent with respect
to the security interest in the Copyright Collateral granted hereby are more
fully set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.

         SECTION 14. Loan Document, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be

                                    EX. C-2

<PAGE>   37

construed, administered and applied in accordance with the terms and provisions
of the Credit Agreement.

         SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
(whether such counterpart is originally executed or an electronic copy of an
original) and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective and binding as of the date
first above written when a counterpart hereof executed on behalf of the Grantor
shall have been received by the Administrative Agent.

         SECTION 8. Agreement Subject to Revolver Intercreditor Agreement.
Notwithstanding anything to the contrary contained herein, it is expressly
understood and agreed by the parties hereto that this Agreement shall be subject
to the terms of the Revolver Intercreditor Agreement.

                                    EX. C-3

<PAGE>   38

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.

                                             [NAME OF GRANTOR]

                                             By
                                               ---------------------------------
                                               Title:

                                             THE CIT GROUP/BUSINESS CREDIT,
                                                INC. as Administrative Agent,
                                                on behalf of the Fixed Assets
                                                Secured Parties

                                             By
                                               ---------------------------------
                                               Title:

                                    EX. C-4

<PAGE>   39

                                                                      SCHEDULE I
                                                 to Copyright Security Agreement

Item A.  Copyrights

                              Registered Copyrights

<Table>
<Caption>
         Registration No.       Registration Date        Author(s)         Title
         ----------------       -----------------        ---------         -----
<S>                             <C>                      <C>               <C>
</Table>

                   Copyright Pending Registration Applications

<Table>
<Caption>
                  Serial No.        Filing Date      Author(s)         Title
                  ----------        -----------      ---------         -----
<S>               <C>               <C>              <C>               <C>

</Table>

               Copyright Registration Applications in Preparation

<Table>
<Caption>
                                     Expected
                  Docket No.         Filing Date       Author(s)         Title
                  ----------         -----------       ---------         -----
<S>                                  <C>               <C>              <C>
</Table>

Item B.  Copyright Licenses

                          Effective Expiration Subject

<Table>
<Caption>

                                        Effective       Expiration  Subject
         Licensor     Licensee          Date            Date        Matter
         --------     --------          ----------      ----------- ------
<S>                   <C>               <C>            <C>          <C>
</Table>

<PAGE>   40

                                                                         ANNEX I
                                                           to Security Agreement

                              SUPPLEMENT TO SECURITY AGREEMENT

         THIS SUPPLEMENT NO. ___, dated as of _________, ________ (this
"Supplement"), to the Fixed Assets Secured Parties Security Agreement, dated as
of July ____, 2001 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "Security Agreement"), among the initial
signatories thereto and each other Person which from time to time thereafter
became a party thereto pursuant to Section 7.9 thereof (each, individually, a
"Grantor'", and, collectively, the "Grantors"), and THE CIT GROUP/BUSINESS
CREDIT, INC., as Administrative Agent for each of the Fixed Assets Secured
Parties (such capitalized term and all other capitalized terms being used herein
with the meanings provided, or incorporated by reference, in the Security
Agreement), is made by the undersigned.

                                   WITNESSETH:

         WHEREAS, pursuant to a Revolving Credit Agreement, dated as of July
_____, 2001 (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "Credit Agreement"), among Sterling Chemicals,
Inc., a Delaware corporation (the "Company"), Sterling Canada, Inc., a Delaware
corporation, Sterling Pulp Chemicals US, Inc., a Delaware corporation, Sterling
Pulp Chemicals, Inc., a Georgia corporation, Sterling Fibers, Inc., a Delaware
corporation, Sterling Chemicals Energy, Inc., a Delaware corporation, and
Sterling Chemicals International, Inc., a Delaware corporation (collectively,
the "Borrowers"), the various financial institutions as are, or may from time to
time become, parties thereto (the "Lenders") and the Administrative Agent, the
Lenders and the Issuer have extended Commitments to make Credit Extensions to
the Borrowers;

         WHEREAS, as a condition precedent to the making and maintenance of the
Credit Extensions under the Credit Agreement, the undersigned is required to
execute and deliver this Supplement;

         WHEREAS, the undersigned has duly authorized the execution, delivery
and performance of this Supplement and the Security Agreement;

         WHEREAS, the Security Agreement provides that additional parties may
become Grantors under the Security Agreement by execution and delivery of an
instrument in the form of this Supplement;

         WHEREAS, pursuant to the provisions of Section 7.9 of the Security
Agreement, the undersigned is becoming a Grantor under the Security Agreement;
and

         WHEREAS, the undersigned desires to become a Grantor under the Security
Agreement in order to induce the Fixed Assets Secured Parties to continue to
make and maintain Fixed Assets Loans under the Credit Agreement as consideration
therefor;

                                   ANNEX I-1

<PAGE>   41

         NOW, THEREFORE, the undersigned agrees, for the benefit of each Fixed
Assets Secured Party, as follows:

         SECTION 1. In accordance with the Security Agreement, the undersigned
by its signature below becomes a Grantor under the Security Agreement with the
same force and effect as if it were an original signatory thereto as a Grantor.
In furtherance of the foregoing, each reference to a "Grantor" in the Security
Agreement shall be deemed to include the undersigned and the Schedules hereto
shall be deemed to be Schedules thereto.

         SECTION 2. The undersigned hereby represents and warrants that this
Supplement has been duly authorized, executed and delivered by the undersigned
and constitutes a legal, valid and binding obligation of the undersigned,
enforceable against it in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally and general equitable
principles.

         SECTION 3. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect in accordance with its terms.

         SECTION 4. Any provision of this Supplement which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Supplement or affecting the validity or enforceability of such provision in any
other jurisdiction.

         SECTION 5. Without limiting the provisions of the Credit Agreement (or
any other Loan Document, including the Security Agreement), the undersigned
agrees to reimburse the Administrative Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including reasonable attorneys'
fees and expenses of the Administrative Agent.

         SECTION 6. THIS SUPPLEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCLUDING THE LAW OF
CONFLICTS BUT INCLUDING FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. THIS
SUPPLEMENT, THE SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND THEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.

         SECTION 7. This Supplement hereby incorporates by reference the
provisions of the Security Agreement, which provisions are deemed to be a part
hereof, and this Supplement shall be deemed to be a part of the Security
Agreement.

         SECTION 8. This Supplement may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original (whether
such counterpart is originally executed or an electronic copy of an original)
and all of which shall constitute together

                                   ANNEX I-2

<PAGE>   42

but one and the same agreement. This Supplement shall become effective and
binding as of the date first above written when a counterpart hereof executed on
behalf of the Grantor shall have been received by the Administrative Agent.

         IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.

                                              [NAME OF ADDITIONAL GRANTOR]

                                              By
                                                --------------------------------
                                                Title:

ACKNOWLEDGED AND ACCEPTED BY:

THE CIT GROUP/BUSINESS CREDIT, INC.
as Administrative Agent, on behalf of the
Fixed Assets Secured Parties

BY
  ----------------------------------------
  Title:

                                   ANNEX I-3
<PAGE>   43

                                                                      SCHEDULE I
                                                           to Supplement No. ___
                                                           to Security Agreement
                                                  ([NAME OF ADDITIONAL GRANTOR])

                             Perfection Certificate

         See Exhibit M to the Credit Agreement

<PAGE>   44

                                                                     SCHEDULE II
                                                           to Supplement No. ___
                                                           to Security Agreement
                                                  ([NAME OF ADDITIONAL GRANTOR])

Item A. Patents

                                 Issued Patents

<Table>
<Caption>
         Patent No.          Issue Date            Inventor(s)             Title
         ----------          ----------            -----------             -----
<S>                          <C>                   <C>                     <C>
</Table>

                           Pending Patent Applications

<Table>
<Caption>
         Serial No.          Filing Date           Inventor(s)             Title
         ----------          -----------           -----------             -----
<S>                          <C>                   <C>                     <C>
</Table>

                       Patent Applications in Preparation

<Table>
<Caption>
                             Expected
         Docket No.         Filing Date             Inventor(s)           Title
         ----------         -----------             -----------           -----
<S>                         <C>                     <C>                   <C>
</Table>

Item B. Patent Licenses

<Table>
<Caption>
                                               Effective       Expiration       Subject
           Licensor           Licensee           Date             Date           Matter
           --------           --------         ----------      ----------       -------
<S>                           <C>               <C>             <C>             <C>
</Table>

<PAGE>   45

                                                                    SCHEDULE III
                                                           to Supplement No. ___
                                                           to Security Agreement
                                                  ([NAME OF ADDITIONAL GRANTOR])

Item A.  Trademarks

                              Registered Trademarks

<Table>
<Caption>
                  Trademark     Registration No.     Registration Date
                  ---------     ----------------     -----------------
<S>                             <C>                 <C>
</Table>

                         Pending Trademark Applications

<Table>
<Caption>
                  Trademark        Serial No.           Filing Date
                  ---------        ----------           -----------
<S>                                <C>                  <C>
</Table>

                      Trademark Applications in Preparation

<Table>
<Caption>
                                                   Expected          Products/
                  Trademark       Docket No.       Filing Date       Services
                  ---------       ----------       -----------       --------
<S>                               <C>              <C>               <C>
</Table>

Item B.  Trademark Licenses

<Table>
<Caption>
                                                             Effective     Expiration
                   Trademark        Licensor    Licensee     Date          Date
                   ---------        --------    --------     ---------     -----------
<S>                                <C>          <C>          <C>           <C>
</Table>

<PAGE>   46

                                                                     SCHEDULE IV
                                                           to Supplement No. ___
                                                           to Security Agreement
                                                  ([NAME OF ADDITIONAL GRANTOR])

Item A.  Copyrights

                              Registered Copyrights

<Table>
<Caption>
       Registration No.       Registration Date         Author(s)         Title
       ----------------       -----------------         ---------         -----
<S>                           <C>                      <C>                <C>
</Table>

                   Copyright Pending Registration Applications

<Table>
<Caption>
        Serial No.        Filing Date               Author(s)         Title
        ----------        -----------               ---------         -----
<S>                       <C>                      <C>                <C>
</Table>

               Copyright Registration Applications in Preparation

<Table>
<Caption>
                                 Expected
       Docket No.                Filing Date            Author(s)        Title
       ----------                -----------            ---------        -----
<S>                              <C>                    <C>              <C>
</Table>

Item B.  Copyright Licenses

<Table>
<Caption>
                                       Effective      Expiration       Subject
       Licensor          Licensee      Date           Date              Matter
       --------          --------      ---------      ----------       -------
<S>                      <C>           <C>            <C>             <C>
</Table>

<PAGE>   47

                                                                      SCHEDULE V
                                                           to Supplement No. ___
                                                           to Security Agreement
                                                  ([NAME OF ADDITIONAL GRANTOR])

                        Trade Secret or Know-How Licenses

<Table>
<Caption>
                              Effective       Expiration         Subject
Licensor      Licensee          Date             Date             Matter
--------      --------        ---------       -----------        -------
<S>           <C>             <C>            <C>                 <C>
</Table>

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