Security Agreement (Page 2 of 7) in pdf

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d) All inventory and equipment of Debtor is located at the locations listed in this Section above, and Debtor does not keep

inventory and equipment and has not kept inventory and equipment at any other location in the past year immediately

preceding the date of this Agreement except as follows:

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e) Debtor owns the Collateral free from all liens, security interests or encumbrances, except as given to Secured Party

hereunder and as follows:

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No financing statement covering the Collateral or any part of it or any proceeds of it other than those disclosed above is on

file in any public office.

3) Debtor’s Obligations

a) Sale, Lease, or Disposition of Collateral, Continuing Interest. Debtor shall not transfer, sell, pledge or assign Debtor’s

interest in the Collateral, nor permit any other security interest to be created thereon, without Secured Party’s prior written

approval; provided, however, that Debtor may sell inventory in the ordinary course of business on terms and at prices

customary therein, and may collect proceeds of collateral until advised otherwise by Secured Party or until an Event of

Default hereunder. The security interest created hereunder shall continue in the Collateral notwithstanding its sale, exchange

or other disposition where such disposition is to a person or entity (i) affiliated in any way with Debtor (including, but not

limited to, by complete or partial common ownership), or (ii) to whom Secured Party has delivered collateral directly on

behalf of Debtor.

b) Conduct of Business. Debtor shall not conduct business under any other name than Debtor’s legal name first listed above,

or change or reorganize the type of business entity under which it does business, except with prior written approval of the

Secured Party. If such approval is obtained, Debtor guarantees that all documents, instruments and agreements demanded

by Secured Party shall be prepared and filed at Debtor’s expense before such change of name or business entity occurs.

c) Risk of Loss and Insurance. The risk of loss of Collateral shall be on Debtor at all times. The Debtor will insure the

Collateral with companies acceptable to Secured Party against destruction and theft, in such amounts and with such

companies as Secured Party may demand, all policies thereon to contain a loss payable clause naming Secured Party and

satisfactory to Secured Party. Debtor hereby irrevocably assigns to Secured Party any proceeds of such policies and all

unearned premiums thereon, and authorizes and empowers Secured Party to collect such sums and to execute and endorse in

Debtor’s name all proofs of loss, drafts, checks, and any other documents necessary to accomplish such collections. Such

policy or policies of insurance shall provide that Secured Party shall receive at least ten (10) days' prior written notice of

cancellation. Debtor shall provide Secured Party with certificates of insurance for all such policy or policies required under

this Agreement.

d) Protection of Collateral.

The Debtor will not store the Collateral in violation of any statute or ordinance. Debtor grants to Secured Party or its

designated agent the right to examine and inspect the Collateral at any reasonable time, during business hours with full

access to Debtor's premises, inventory, and books of account as they pertain to Debtor's indebtedness to Secured Party.

ii) Debtor shall defend Collateral against any claims and demands of all persons at any time claiming the Collateral or any

interest therein.

e) Taxes. The Debtor will pay promptly when due all taxes and assessments on the Collateral.

Financial Statements on Request. Debtor agrees to deliver to Secured Party within ten (10) days after written request by

Secured Party, current financial and operating statements and such other data as Secured Party may request, plus a list of

all collateral on hand. Secured Party may at any time demand supporting documentation for such statements. Failure to

provide Secured Party with the requested information shall be an Event of Default under this agreement.

g) Change of Location or Entity.

Location of Collateral. The Debtor will keep the Collateral at the address shown above and will not remove the

Collateral from that address without Secured Party's written consent.

ii) Change of Place of Business. The Debtor will promptly notify Secured Party of any change of the Debtor's place of

business or place of conduct of business, or where books and records concerning the Collateral are kept or of any

changes in Debtor's trade name.

iii) Change of Name or Entity. The Debtor shall not change its name, merge, consolidate or acquire all or substantially all

of the stock, business or assets of any other person, corporation or business organization without written notification to

Secured Party.

h) Security Interests and Liens. Debtor agrees to keep the collateral free from all unpaid charges, liens and security interest,

other than the security interests granted to Secured Party and those disclosed in this agreement.

Decrease in Value of Collateral. The Debtor shall, if in Secured Party's judgment the Collateral has materially decreased in

value, or if Secured Party shall at any time deem that the Debtor is financially unstable, within five (5) days, either provide

enough additional Collateral to satisfy Secured Party or reduce the total indebtedness by an amount sufficient to satisfy

Secured Party.

Security Agreement Page 2

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