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SECURITY AGREEMENT ,YJ!1 Debtor's W:;¡rr:;¡nties I., Financing Statement. Except for that in favor of Secured Party. no financing statement covering the collateral is filed in any public office, 2. OwneNhip. Debtor owns the collateral and has the authority to grant this ~curity interest. Ownership is free from any ~toff. claim. restriction. lien, ~curity interest. or encumbrance except this ~curity interest and liens for taxes not yet due. 3. Fixtures and Accessions. None of the collateral is affixed to real estate. is an accession to any goods. is commingled with other goods. or will become a fixture. accession. or part of a product or mass with other goods except as expressly provided in this agreement. 4. Financial Statements. All information about Debtor's financial condition provided to Secured Party was accurate when submitted. as will be any information sub~quently provided. Debtor's Covenants I. Protection of Collateral. Debtor will defend the collateral against all claims and demands adverse to Secured Party's interest in tt and will keep it free from all liens except tho~ for taxes not yet due and from all ~curity interests except this one. The collateral will remain in Debtor's possession or control at all times. except as otherwise provided in this agreement. Debtor will maintain the collateral in good condition and protect it against misuse. abuse. waste. and deterioration except for ordinary wear and tear resulting from its intended use, 2. Insurance. Debtor will insure the collateral in accord with Secured Party's reasonable requirements regarding choice of carrier. casualties insured against. and amount of coverage. Policies will be written in favor of Debtor and Secured Party according to their respective interests or according to Secured Party's other requirements. All policies will provide that Secured Party will receive at least ten days' notice before cancellation. and the policies or certificates evidencing them will be provided to Secured Party when issued, Debtor assumes all risk of loss and damage to the collateral to the extent of any deficiency in insurance coverage. Debtor irrevocably appoints Secured Party as attorney-in-fact to collect any return. unearned premiums. and proceeds of any insurance on the collateral and to endorse any draft or check d~riving from the Policies and made payable to Debtor. 3. Secured Party's Costs. Debtor will pay all expenses incurred by Secured Party in obtaining. preserving. perfecting, defending. and enforcing this security interest or the collateral and in collecting or enforcing the note. Expenses for which Debtor is liable include. but are not limited to. taxes. assessments. reasonable attorney's fees. and other legal expenses. The~ expen~s will bear interest from the dates of payments at the highest rate stated in notes that are part of the obligation. and Debtor will pay Secured Party this interest on demand at a time and place reasonably specified by Secured Party. These expen~s and interest will be part of the obligation and will be recoverable as such in all respects. 4. Additional Documents. Debtor will sign any papers that Secured Party considers necessary to obtain. maintain. and perfect this security interest or to comply with any relevant law. 5. Notice of Changes. Debtor will immediately notify Secured Party of any material change in the collateral; change in Debtor's name. address. or location; change in any matter w~ted or represented in this agreement; change that may affect this security interest; and any event of default. 6. u~ and Removal of Collateral. Debtor will use the collateral primarily according to the stated classification unless Secured Party consents otherwi~ in writing. Debtor will not permit the collateral to be affixed to any real estate. to become an accession to any goods. to be commingled with other goods. or to become a fixtUre. accession. or part of a product or mass with other goods except as expressly provided in this agreement. 7. Sale. Debtor will not ~ll. transfer. or encumber any of the collateral without the prior written con~nt of Secured Party. Rights and Remedies of Secured Party I. Generally. Secured Party may exercise the following rights and remedies either before or after default: a. take control of any proceeds of the collateral; b. release any collateral in Secured Party's possession to any debtor. temporarily or otherwise; c. take control of any funds generated by the collateral. such as refunds from and proceeds of insurance. and reduce any part of the obligation accordingly or pennit Debtor to use such funds to repair or replace damaged or destroyed collateral covered by insuran~; and d- demand. collect. convert. redeem. settle. compromise. receipt for. realize 00. sue for. and adjust the collateral either in Secured Party's or Debtor's name. as Secured Party desires. - 0 19'n STAn: liAR OfTEX.AS Ij,qll