Exhibit 10.51     
                               SECURITY AGREEMENT


         THIS SECURITY AGREEMENT (this "Agreement") is entered into this 1st day
of January,  1998, by and between Barton Acquisition,  Inc., a Texas corporation
("Debtor"), whose address is 1301 Capital of Texas Highway, Suite C-300, Austin,
Texas 78746, and American  Physicians  Service Group,  Inc., a Texas corporation
("Secured Party"),  whose address is 1301 Capital of Texas Highway, Suite C-300,
Austin, Texas 78746, who, for good and valuable consideration, agree as follows:


                                    ARTICLE I
                             AGREEMENT; INDEBTEDNESS

         1.1  Security  Interest.  Subject  to  the  applicable  terms  of  this
Agreement,  for good and valuable consideration,  the receipt and sufficiency of
which Debtor  acknowledges,  Debtor assigns and transfers to Secured Party,  and
grants to Secured  Party a continuing  security  interest in and lien upon,  the
Collateral  (as  defined  in Article  II below) to secure  the  payment  and the
performance of the Indebtedness (the "Security Interest").

         1.2  Indebtedness.  The following  indebtedness  and  obligations  (the
"Indebtedness") are secured by this Agreement:

                  (a) All debt,  obligations,  liabilities,  and  agreements  of
Debtor to Secured Party,  (excluding,  however,  any preferred rights under that
certain Stock Transfer Restriction and Shareholders Agreement (the "Shareholders
Agreement")  dated as of January 1, 1998,  by and among Secured  Party,  Debtor,
Barton House, Ltd., a Texas limited partnership,  Barton House at Oakwell Farms,
Ltd., a Texas limited  partnership,  Uncommon Care,  Inc., a Texas  corporation,
George R. Bouchard,  John H. Trevey,  Uncommon  Partners,  Ltd., a Texas limited
partnership  and the  additional  parties  listed on Appendix I thereto)  now or
hereafter  existing,  arising  directly  between  Debtor  and  Secured  Party or
acquired  outright,  conditionally,  or as  collateral  security from another by
Secured Party, absolute or contingent,  joint or several,  secured or unsecured,
due or not due, contractual or tortious, liquidated or unliquidated,  arising by
operation of law or otherwise,  including without limitation the Promissory Note
(Line of  Credit)  in the  maximum  original  principal  amount  of  $2,400,000,
executed by Barton  Acquisition,  Inc., a Texas corporation,  and payable to the
order  of  Secured  Party,  and  all  renewals,  extensions,  modifications,  or
rearrangements of any of the foregoing.

                  (b) All costs  incurred by Secured Party to obtain,  preserve,
perfect,  and enforce this Agreement and the Security  Interest,  to collect the
Indebtedness,  and to maintain,  preserve,  collect, and enforce the Collateral,
including but not limited to taxes,  assessments,  insurance premiums,  repairs,
reasonable  attorney's fees and legal expenses,  feed, rent,  storage costs, and
expenses of sale.

                  (c) Interest on the above  amounts as agreed  between  Secured
Party and Debtor, or if there is no agreement, at the highest lawful rate.

                                   ARTICLE II
                                   COLLATERAL

         2.1 Description of Collateral.  The Security Interest is granted in the
following (the "Collateral"):

                  (a) All of Debtor's assets,  including without  limitation all
accounts,  chattel  paper,  contract  rights,  equipment,  inventory,  fixtures,
general intangibles,  and investment property, as more particularly described in
Exhibit "A" attached to and incorporated herein by reference.

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                  (b)  All  substitutes  and   replacements   for,   accessions,
attachments  and  other  additions  to,  tools,  parts  and  equipment  used  in
connection with, and proceeds and products of, the above  Collateral  (including
all income and benefits  resulting from any of the above),  all  certificates of
title,  manufacturer's  statements of origin,  other  documents,  accounts,  and
chattel paper arising from or related to the above  Collateral,  and returned or
repossessed Collateral,  any of which, if received by Debtor, shall be delivered
immediately to Secured Party.

                  (c) All policies of  insurance  covering  the  Collateral  and
proceeds thereof.

                  (d) All security for the payment of any of the Collateral, and
all  goods  which  gave  or  will  give  rise  to any of the  Collateral  or are
evidenced, identified, or represented therein or thereby.

                  (e) All property  similar to the property  described above and
any  other  collateral  fitting  within  any  of the  foregoing  classifications
hereafter acquired by Debtor.

                  (f) All  products  and  proceeds  of the  items  described  in
subsections (a) through (e) of this Section 2.1.

         2.2 After Acquired  Consumer Goods. The Security  Interest shall attach
to after  acquired  consumer  goods  only to the  extent  permitted  by  Section
9.204(b) of the Texas Business and Commerce Code (Texas UCC).

                                   ARTICLE III
                               DEBTOR'S WARRANTIES

Debtor represents and warrants to Secured Party as follows:

         3.1  Financing   Statements.   No  financing   statement  covering  the
Collateral  is or will be on file in any public  office,  except  the  financing
statements  relating to this Security Interest,  those described in Exhibit "C",
those  expressly  permitted  under the  Shareholders  Agreement and that certain
Contribution and Stock Purchase Agreement (the "Contribution Agreement) dated as
of January 1, 1998, by and among Secured Party,  Debtor,  Barton House,  Ltd., a
Texas limited partnership,  Barton House at Oakwell Farms, Ltd., a Texas limited
partnership,  Uncommon Care, Inc., a Texas corporation, George R. Bouchard, John
H.  Trevey,  Uncommon  Partners,  Ltd.,  a  Texas  limited  partnership  and the
additional  parties  listed on  Appendix I thereto.  In the past five (5) years,
Debtor  has not used or done  business  under any name other than its legal name
set forth on the first page of this Agreement.

         3.2 Ownership.  Debtor owns the Collateral free from any setoff, claim,
restriction,  lien, security interest, or encumbrance except liens for taxes not
yet due, the Security Interest and those described in Exhibit "C".

         3.3 Fixtures and Accessions.  None of the Collateral is affixed to real
estate or is an accession to any goods,  or will become a fixture or  accession,
except as expressly set out herein.  In such case of the  Collateral's  being or
becoming affixed,  the Deed of Trust (Security  Agreement,  Assignment of Leases
and  Rents,  and  Financing  Statement)  executed  by Debtor  shall  cover  such
fixtures.

         3.4 Claims of  Debtors on  Collateral.  No  account  debtors  and other
obligors whose debts or obligations are part of the Collateral have any right to
setoffs, counterclaims, or adjustments, or any defenses in connection therewith.

         3.5 Accuracy of Financial Statements.  All representations and warrants
made by Debtor in the Contribution  Agreement with respect to its financial data
are true in all material respects.

         3.6 Power and  Authority.  Debtor has full power and  authority to make
this Agreement.

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         3.7 Principal Place of Business.  Debtor's  principal place of business
and chief executive office is at Debtor's address stated above in Austin, Travis
County,  Texas,  and such  address  is also  where  Debtor  keeps  its books and
records.

         3.8 Location of Collateral.  All of Debtor's inventory and equipment is
located at the real  properties  described  in Exhibit "B"  attached  hereto and
incorporated  herein by reference or at its principal place of business.  Debtor
has exclusive  possession  and control of its inventory and  equipment.  None of
Debtor's  inventory  or  equipment is evidenced by a document (as defined in the
Texas UCC). All  instruments,  chattel paper,  securities,  and  certificates of
title  comprising  any part of the  Collateral  have been  delivered  to Secured
Party. Before Debtor shall acquire additional inventory and equipment subject to
this  Agreement and store or use such property at a location other than the real
properties  described in Exhibit "B" or remove existing  inventory and equipment
to a location other than the real  properties  described in Exhibit "B",  Debtor
shall first notify Lender of such location and comply with Section 4.7 hereof.

         3.9  Perfection.  Upon the filing of the UCC financing  statements with
the  Office of the Texas  Secretary  of State and in the  offices  of the County
Clerks of Bexar, Fort Bend and Travis Counties,  Texas, and upon Secured Party's
obtaining  possession of all Debtor's  documents,  instruments,  chattel  paper,
securities,  and  certificates  of title,  and upon  Secured  Party's  obtaining
control of Debtor's Investment Property, the Security Interest will constitute a
valid and perfected lien upon and security  interest in the Collateral,  subject
only to those  liens  and  security  interests  expressly  permitted  under  the
Shareholders   Agreement  or   Contribution   Agreement   ("Permitted   Security
Interests").  In the event  another  secured  party has  possession  of Debtor's
assets for perfection purposes,  such secured party's possession shall be deemed
possession  on  behalf  of  Secured  Party  to the  extent  of  Secured  Party's
subordinate security interest, and when possession is no longer required for any
Permitted  Security  Interest,  then possession  shall be transferred to Secured
Party.

         3.10 Solvency.  As of the date hereof,  and after giving effect to this
Agreement and the completion of all other transactions contemplated by Debtor at
the time of the execution of this Agreement,  (i) Debtor is and will be solvent,
(ii) the fair  saleable  value of Debtor's  assets  exceeds and will continue to
exceed Debtor's liabilities (both fixed and contingent),  (iii) Debtor is paying
and will continue to be able to pay its debts as they mature, and (iv) if Debtor
is not an individual,  Debtor has and will have  sufficient  capital to carry on
Debtor's businesses and all businesses in which Debtor is about to engage.

                                   ARTICLE IV
                               DEBTOR'S COVENANTS

Debtor covenants and agrees that:

         4.1 Indebtedness and This Agreement.  Debtor shall pay the Indebtedness
in  accordance  with its terms and shall  promptly  perform  all of his (or its)
agreements  herein and in any other  agreements  between him (or it) and Secured
Party.

         4.2 Ownership of Collateral. At the time Debtor grants to Secured Party
a security  interest  in any  Collateral,  Debtor  shall be the  absolute  owner
thereof and shall have the right to grant such security  interest.  Debtor shall
defend the Collateral against all claims and demands of all persons,  other than
persons holding a Permitted Security Interest, at any time claiming any interest
therein adverse to Secured Party. Debtor shall keep the Collateral free from all
liens and  security  interests  except  those  for  taxes not yet due,  Security
Interest and the Permitted Security Interests.

         4.3  Insurance.  Debtor  shall  insure the  Collateral  with  companies
acceptable  to Secured  Party  against  such  casualties  and in such amounts as
Secured Party shall  require.  All insurance  policies  shall be written for the
benefit of Debtor and Secured Party as their  interests may appear,  or in other
form satisfactory to Secured Party, and such policies or certificates evidencing
the same shall be furnished to 

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Secured  Party.  All policies of insurance  shall
provide  for  written  notice  to  Secured  Party  at  least  10 days  prior  to
cancellation. Risk of loss or damage is Debtor's to the extent of any deficiency
in any  effective  insurance  coverage.  Secured  Party  is  appointed  Debtor's
attorney-in-fact  to collect any return or unearned  premiums or the proceeds of
such insurance and to endorse any draft or check payable to Debtor therefor.

         4.4      Maintenance.  Debtor shall keep and maintain the Collateral in
good condition, reasonable wear and tear excepted.
                  

         4.5 Secured  Party's  Costs.  Debtor  shall pay all costs  necessary to
obtain, preserve,  perfect, defend, and enforce this Security Interest,  collect
the Indebtedness,  and preserve,  defend,  enforce,  and collect the Collateral,
including but not limited to taxes,  assessments,  insurance premiums,  repairs,
reasonable  attorney's fees and legal expenses,  feed, rent,  storage costs, and
expenses  of  sales.  Whether  Collateral  is  or  is  not  in  Secured  Party's
possession,  and without any  obligation to do so and without  waiving  Debtor's
default for failure to make any such  payment,  Secured  Party at its option may
pay any such costs and expenses,  discharge encumbrances on the Collateral,  and
pay for  insurance  of  Collateral,  and  such  payment  shall  be a part of the
Indebtedness.
Debtor agrees to reimburse Secured Party on demand for any costs so incurred.

         4.6 Information and Inspection.  Debtor shall (i) furnish Secured Party
any financial statements of Debtor or reports to Debtor by accountants or others
pertaining to Debtor's  business as soon as available,  and any information with
respect to the  Collateral  reasonably  requested by Secured  Party;  (ii) allow
Secured Party to inspect the  Collateral,  at any  reasonable  time and wherever
located,  and to inspect and copy, or furnish  Secured Party with copies of, all
records relating to the Collateral and the  Indebtedness;  (iii) furnish Secured
Party such  information  as Secured  Party may  reasonably  request to  identify
inventory,  accounts, and general intangibles in Collateral,  at the time and in
the form  requested by Secured  Party;  and (iv) deliver upon request to Secured
Party  shipping  and  delivery  receipts  evidencing  the  shipment of goods and
invoices   evidencing  the  receipt  of,  and  the  payment  for,  inventory  in
Collateral.  Secured  Party's rights  hereunder  shall be subordinate to and not
interfere with persons holding a Permitted Security Interest.

         4.7  Additional  Documents.  Debtor shall sign any papers  furnished by
Secured Party which are necessary in the reasonable judgment of Secured Party to
obtain,  maintain, and perfect the Security Interest and to enable Secured Party
to comply  with the  Federal  Assignment  of Claims Act or any other  federal or
state law in order to obtain or perfect Secured  Party's  interest in collateral
or to obtain proceeds of collateral.

         4.8 Parties Liable on Collateral. Debtor will preserve the liability of
all  obligors on any  Collateral,  will  preserve  the  priority of all security
therefor,  and will deliver to Secured Party the original  certificates of title
on all motor vehicles  included in the  Collateral.  Secured Party shall have no
duty to preserve  such  liability or  security,  but may do so at the expense of
Debtor, without waiving Debtor's default.

         4.9 Modification of Collateral.  Without the written consent of Secured
Party, which consent shall not be unreasonably withheld,  Debtor shall not agree
to any  modification  of any of the terms of any  accounts,  contracts,  chattel
paper, general intangibles, or instruments constituting part of the Collateral.

         4.10 Right of Secured Party to Notify  Debtors.  During the continuance
of an Event of Default under this  Agreement,  Secured Party may notify  persons
obligated  on any  Collateral  to make  payments  directly to Secured  Party and
Secured Party may take control of all proceeds of any Collateral.  Until Secured
Party elects to exercise such rights,  Debtor, as agent of Secured Party,  shall
collect and enforce all payments owed on Collateral.

         4.11 Delivery of Receipts of Secured Party;  Rejected Goods. During the
continuance of an Event of Default under this  Agreement,  upon Secured  Party's
demand,  Debtor shall deposit,  upon receipt and in the form received,  with any
necessary  endorsement,  all payments  received as proceeds of Collateral,  in a

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special  bank  account in a bank of Secured  Party's  choice over which  Secured
Party  alone shall have power of  withdrawal.  The funds in said  account  shall
secure the Indebtedness.  Secured Party is authorized to make any endorsement in
Debtor's name and behalf. Pending such deposit, Debtor shall not mingle any such
payments  with any of  Debtor's  other  funds or  property,  but will  hold them
separate and upon an express  trust for Secured  Party.  Secured  Party may from
time to time  apply the whole or any part of the  funds in the  special  account
against the  Indebtedness.  Unless Secured Party notifies Debtor in writing that
it dispenses with any one or more of the following requirements, Debtor shall:

                  (a) inform  Secured  Party  immediately  of the  rejection  of
goods,  delay in  delivery  or  performance,  or claim  made,  in  regard to any
Collateral;

                  (b)  keep  returned  goods   segregated  from  Debtor's  other
property,  and hold the goods as trustee  for  Secured  Party  until it has paid
Secured Party the amount loaned against the related account or chattel paper and
deliver the goods on demand to Secured Party; and

                  (c) pay  Secured  Party the  unpaid  amount of any  account in
Collateral  (i) if the account is not paid when due;  (ii) if purchaser  rejects
the goods or services covered by the account; or (iii) if Secured Party shall at
any time  reject the  account as  unsatisfactory.  Secured  Party may retain the
account in  Collateral.  Secured  Party may charge any deposit  amount of Debtor
with any such amounts.

         4.12 Records of Collateral.  Debtor at all times will maintain accurate
books and records  covering the  Collateral.  Debtor  immediately  will mark all
books and records with an entry showing the absolute  assignment of all accounts
in  Collateral  to Secured  Party and Secured Party is hereby given the right to
audit the books and  records of Debtor  relating to  Collateral  at any time and
from time to time.  The amounts shown as owed to Debtor on Debtor's books and on
any assignment schedule will be the undisputed amounts owing and unpaid.  Debtor
shall  disclose  to  Secured  Party  all   agreements   modifying  any  account,
instrument, or chattel paper.

         4.13 Disposition of Collateral.  If disposition of any Collateral gives
rise to an account,  chattel paper,  or  instrument,  Debtor  immediately  shall
notify Secured Party,  and upon request of Secured Party shall assign or endorse
the same to Secured  Party.  No Collateral  may be sold,  leased,  manufactured,
processed,  or otherwise  disposed of by Debtor in any manner  without the prior
written consent of Secured Party,  except inventory sold,  leased  manufactured,
processed, or consumed in the ordinary course of business.

         4.14  Accounts   Receivable.   Each  account  receivable   constituting
Collateral will represent the valid and legally enforceable  obligation of third
parties and shall not be evidenced by any  instrument or chattel  paper.  In the
event any account  shall give rise to any  instrument or chattel  paper,  Debtor
shall  immediately  endorse the same to Secured  Party and deliver all  original
such instruments and chattel paper to Secured Party.

         4.15  Location of Accounts  and  Inventory.  Debtor  shall give Secured
Party  written  notice  of each  office of  Debtor  in which  records  of Debtor
pertaining  to  accounts  in  Collateral  are kept,  and each  location at which
inventory  in  Collateral  is or will be  kept,  and of any  change  of any such
location.  If no such  notice is given,  all  records  of Debtor  pertaining  to
accounts  and all  inventory  are and shall be kept at  Debtor's  address  shown
above.

         4.16 Notice of Changes. Debtor will notify Secured Party immediately of
any  material  change in the  Collateral,  of a change in Debtor's  residence or
location,  of a change in any matter  warranted or represented by Debtor in this
Agreement or furnished to Secured Party, and of any Event of Default.

         4.17 Use and Removal of Collateral.  Debtor will not use the Collateral
illegally.  Debtor will not permit any of the  Collateral to be removed from the
locations  specified herein or between  locations without the written consent of
Secured Party.

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         4.18  Possession of  Collateral.  If the  Collateral is chattel  paper,
documents,  instruments, or investment securities or other instruments,  Secured
Party may deliver a copy of this Agreement to the broker or seller  thereof,  or
any person in possession  thereof,  and such delivery shall constitute notice to
such person of Secured Party's  security  interest  therein and shall constitute
Debtor's  instruction to such person to deliver to Secured Party certificates or
other  evidence  of the  same as soon as  available.  Debtor  will  deliver  all
investment securities, other instruments, documents, and chattel paper which are
part  of the  Collateral  and  in  Debtor's  possession  to  the  Secured  Party
immediately,  or  if  hereafter  acquired,  immediately  following  acquisition,
appropriately  endorsed to Secured Party's order, or with appropriate,  executed
powers. Debtor waives presentment,  demand, notice of dishonor, protest, and all
other notices with respect thereto.

         4.19  Chattel  Paper.  Debtor has  perfected or will perfect a security
interest  by means  satisfactory  to Secured  Party in goods  covered by chattel
paper in Collateral.

         4.20  Consumer   Credit.   If  any  Collateral  or  proceeds   includes
obligations  of third  parties to Debtor,  the  transactions  giving rise to the
Collateral  shall  conform in all  respects to the  applicable  state or federal
consumer  credit law.  DEBTOR SHALL HOLD  HARMLESS AND  INDEMNIFY  SECURED PARTY
AGAINST ANY COST,  LOSS,  OR EXPENSE  INCLUDING  ATTORNEY'S  FEES,  ARISING FROM
DEBTOR'S BREACH OF THIS COVENANT.

         4.21 Change of Name.  Debtor  shall not change its name (or any assumed
name or other name under which Debtor does business) or its corporate  structure
unless at least  thirty (30) days prior to the  effective  date of any such name
change,  Debtor gives Secured Party written  notice of such intended name change
and the new name or any  change  in its  corporate  structure.  Debtor  will not
change its principal  place of business,  chief executive  office,  or the place
where it keeps its books and records  unless Debtor (i) shall have given Secured
Party thirty (30) days prior written notice  thereof,  and (ii) shall have taken
all action deemed  necessary or desirable by Secured Party to cause the Security
Interest  to be  and  remain  perfected  with  the  priority  required  by  this
Agreement.  Debtor shall execute all such  documents and  agreements  (including
without limitation security agreements,  financing statements, and amendments to
financing statements) as Secured Party may reasonably request in connection with
any such name change.

         4.22  Notation  on Title  Certificates.  If  certificates  of title are
issued or outstanding  with respect to any of the Collateral,  Debtor will cause
the Security Interest to be properly noted therein.

         4.23 Power of  Attorney.  Debtor  appoints  Secured  Party as  Debtor's
attorney-in-fact  with full  power in  Debtor's  name and behalf to do every act
which  Debtor is obligated  to do or may be required to do  hereunder;  however,
nothing in this section shall be construed to obligate Secured Party to take any
action hereunder.

         4.24 Debtor's Waivers.  Except as otherwise  provided in this Agreement
or by law, Debtor waives notice of the creation,  advance, increase,  existence,
extension,   or  renewal  of,  and  of  any  indulgence  with  respect  to,  the
Indebtedness;  waives notice of intent to  accelerate,  notice of  acceleration,
notice  of intent to  demand,  presentment,  demand,  notice  of  dishonor,  and
protest;  waives  notice of the amount of the  Indebtedness  outstanding  at any
time,  notice of any change in financial  condition of any person liable for the
Indebtedness  or  any  part  thereof,  and  all  other  notices  respecting  the
Indebtedness;  and agrees that maturity of the Indebtedness and any part thereof
may be accelerated,  extended,  or renewed one or more times by Secured Party in
its discretion, without notice to Debtor.

         4.25 Other Parties and Other Collateral.  No renewal or extension of or
any other  indulgence with respect to the  Indebtedness or any part thereof,  no
release  of any  security,  no  release  of any  person  (including  any  maker,
endorser,  guarantor,  or  surety)  liable  on the  Indebtedness,  no  delay  in
enforcement  of payment,  and no delay or admission or lack of diligence or care
in  exercising  any  right or power  with  respect  to the  Indebtedness  or any
security  therefor or guaranty  thereof or under this  Agreement  shall in other

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manner  impair or affect the rights of Secured  Party under the law,  under this
Agreement, or under any other agreement pertaining to the other security for the
Indebtedness,  before  foreclosing upon the Collateral for the purpose of paying
the  Indebtedness.  Debtor  waives any right to the  benefit of or to require or
control application of any other security or proceeds thereof, and Debtor agrees
that Secured  Party shall have no duty or  obligation  to Debtor to apply to the
Indebtedness any such other security or proceeds thereof.

                                    ARTICLE V
                       RIGHTS AND POWERS OF SECURED PARTY

         5.1 General.  Secured Party before default without  liability to Debtor
may: obtain from any person  information  regarding Debtor or Debtor's business,
which  information any such person also may furnish without liability to Debtor;
endorse as  Debtor's  agent any  instruments,  documents,  or  chattel  paper in
Collateral or  representing  proceeds of  Collateral;  contact  account  debtors
directly to verify  information  furnished by Debtor;  release Collateral in its
possession to any Debtor temporarily or otherwise;  reject as unsatisfactory any
property  hereafter offered by Debtor as Collateral;  set standards from time to
time to govern what may be used as  after-acquired  collateral;  and at any time
transfer any of the Collateral or evidence  thereof into its own name of that of
its  nominee.  Secured  Party,  during  the  continuance  of an Event of Default
without liability to Debtor, may:

                  (a)      require Debtor to give possession or control of any 
                           Collateral to Secured Party;

                  (b)      take control of proceeds;

                  (c)      require additional collateral;

                  (d) take control of funds generated by the Collateral, such as
cash dividends,  interest, and proceeds or refunds from insurance,  and use same
to reduce any part of the  Indebtedness  and  exercise all other rights which an
owner of such  Collateral  may exercise,  except the right to vote or dispose of
Collateral before an Event of Default; and

                  (e) demand,  collect,  convert,  redeem,  receipt for, settle,
compromise,  adjust, sue for, foreclose, or realize upon Collateral,  in its own
name or in the name of Debtor,  as Secured  Party may  determine in its sole and
absolute discretion,

Secured  Party  shall not be liable  for  failure  to  collect  any  account  or
instrument,  or for any act or omission on the part of the  Secured  Party,  its
officers, agents, or employees,  except willful misconduct. The foregoing rights
and powers of Secured  Party will be in addition to, and not a limitation  upon,
any  rights  and  powers  of  Secured  Party  given  by law,  elsewhere  in this
Agreement,  or otherwise. If Debtor fails to maintain any required insurance, to
the extent  permitted by applicable  law Secured Party may (but is not obligated
to)  purchase  single  interest  insurance  coverage  for the  Collateral  which
insurance may at Secured  Party's  option (i) protect only Secured Party and not
provide any  remuneration  or protection for Debtor  directly,  and (ii) provide
coverage only after the  Indebtedness  has been declared due as herein provided.
The premiums for any such  insurance  purchased by Secured Party shall be a part
of the Indebtedness and shall bear interest as provided in Section 1.2(d) above.

                                   ARTICLE VI
                                     DEFAULT

         6.1 Events of Default.  The  following are events of default under this
Agreement  after  thirty  (30)  days'  written  notice  to  Debtor  ("Events  of
Default"):

                  (a)  default  in  the  timely  payment  of  any  part  of  the
Indebtedness or in performance or observance of the terms and conditions  herein
or the Loan Agreement between Debtor and Secured Party;

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<PAGE>

                  (b)  any  warranty,   representation,  or  statement  made  or
furnished to Secured  Party by Debtor  proves to have been false in any material
respect when made or furnished;

                  (c)      acceleration of the maturity of debt of Debtor to any
                           other person;

                  (d) sale,  encumbrance,  or transfer which is not permitted by
the  Contribution  Agreement or the  Shareholders  Agreeement;  or loss,  theft,
destruction  which is not covered by Debtor's  insurance,  of any  Collateral in
violation hereof, or substantial damage to any Collateral;

                  (e) death, incapacity,  dissolution, merger, or consolidation,
termination of existence, insolvency or business failure of Debtor or any person
liable on the Indebtedness; commencement of proceedings for the appointment of a
receiver for any property of Debtor;  commencement  of any proceeding  under any
bankruptcy or insolvency law by or against Debtor (or any corporate action shall
be taken to effect same), or any partnership of which Debtor is a partner, or by
or against  any person  liable upon the  Indebtedness  or any part  thereof,  or
liable upon Collateral;

                  (f)      levy on, seizure, or attachment of any property of 
                           Debtor in excess of $50,000; or

                  (g)      a judgment against Debtor in excess of $250,000 
                           becomes final and is not covered by Debtor's 
                           insurance.

         6.2 Remedies of Secured  Party Upon  Default.  When an Event of Default
occurs, and at any time thereafter so long as the Event of Default is not cured,
Secured Party without notice or demand, except as otherwise provided herein, may
declare  the  Indebtedness  in whole  or part  immediately  due and may  enforce
payment  of the same and  exercise  any rights  under the Texas UCC,  rights and
remedies of Secured Party under this Agreement, or otherwise.  Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a place which is reasonably convenient to both parties. Unless the Collateral
is  perishable  or  threatens  to  decline  speedily  in  value  or is of a type
customarily  sold  on a  recognized  market,  Secured  Party  will  give  Debtor
reasonable  notice of the time and place of any  public  sale  thereof or of the
time after which any private sale or other intended disposition thereof is to be
made. Expenses of retaking,  holding,  preparing for sale, selling,  leasing, or
the like shall include  Secured  Party's  reasonable  attorney's  fees and legal
expenses.  Secured Party shall be entitled to immediate  possession of all books
and records  evidencing  any accounts or general  intangibles  or  pertaining to
chattel  paper  covered by this  Agreement and shall have the authority to enter
upon any premises upon which any of the same, or any Collateral, may be situated
and remove the same therefrom without liability. Secured Party may surrender any
insurance  policies in  Collateral  and receive the  unearned  premium  thereon.
Debtor shall be entitled to any surplus  after payment of the  Indebtedness  and
shall be  liable  to  Secured  Party  for any  deficiency.  The  process  of any
disposition after default available to satisfy the Indebtedness shall be applied
to the  Indebtedness  in such order and in such  manner as Secured  Party in its
discretion  shall  decide.  If, in the  opinion of Secured  Party,  there is any
question that a public sale or  distribution  of any Collateral will violate any
state or federal securities law, Secured Party (i) may offer and sell securities
privately to purchasers who will agree to take them for investment  purposes and
not with a view to distribution  and who will agree to imposition of restrictive
legends on the  certificates  representing  the security,  or (ii) may sell such
securities in an intrastate  offering  under Section  3(a)(11) of the Securities
Act of 1933,  and no sale so made in good faith by Secured Party shall be deemed
to be not "commercially reasonable" because so made.

                                   ARTICLE VII
                                     GENERAL

         7.1 Parties Bound.  Secured Party's rights under this Agreement and the
Security Interest shall inure to the benefits of its successors and assigns, and
in the event of any  assignment  or transfer of any of the  Indebtedness  or the
Collateral,  Secured  Party  thereafter  shall  be  fully  discharged  from  any
responsibility  with respect to the Collateral so assigned or  transferred,  but
Secured  Party shall  retain all rights and powers  

                                       8
<PAGE>

hereby given with respect to
any of the  Indebtedness  or  Collateral  not so  assigned or  transferred.  All
representations, warranties, and agreements of Debtor if more than one are joint
and several, and all shall be binding upon the personal representatives,  heirs,
successors, and assigns of Debtor.

         7.2 Waiver.  No delay of Secured Party in exercising any power or right
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any power or right preclude other or further exercise thereof or the exercise of
any other power or right.  No waiver by Secured Party of any right  hereunder of
any default by Debtor shall be binding upon Secured Party unless in writing, and
no failure by Secured  Party to exercise any power or right  hereunder or waiver
of any  default  by Debtor  shall  operate  as a waiver of any other or  further
exercise of such right or power of any further default.

         7.3 Agreement Continuing.  This Agreement shall constitute a continuing
agreement,  applying to all future as well as existing transactions,  whether or
not of the  character  contemplated  at the date of this  Agreement,  and if all
transactions between Secured Party and Debtor shall be closed at any time, shall
be equally  applicable to any new  transactions  thereafter.  Provisions of this
Agreement,  unless  by their  terms  exclusive,  shall be in  addition  to other
agreements between the parties.

         7.4 Definitions. Unless the context indicates otherwise, definitions in
the  Texas  UCC  apply to words  and  phrases  in this  Agreement;  if Texas UCC
definitions conflict, Chapter 9 definitions apply.

         7.5 Notice. Notice shall be deemed reasonable if mailed postage prepaid
at least 5 days  before  the  related  action  (or if the  Texas  UCC  elsewhere
specifies a longer period, such longer period) to Debtor's address shown above.

         7.6  Interest.  No  agreement  relating  to the  Indebtedness  shall be
construed to be a contract for or to authorize charging or receiving, or require
the  payment or permit the  collection  of,  interest  at a rate or in an amount
above that  authorized by law.  Interest  payable under any agreement above that
authorized by law shall be reduced automatically to the highest amount permitted
by law.

         7.7  Modifications.  No  provision  hereof shall be modified or limited
except by a written agreement  expressly  referring hereto and to the provisions
so modified or limited and signed by Debtor and Secured Party,  nor by course of
conduct, usage of trade, or by the law merchant.

         7.8  Severability.  The  unenforceability  of  any  provision  of  this
Agreement  shall  not  affect  the  enforceability  or  validity  of  any  other
provision.

         7.9 Gender and Number.  Where appropriate,  the use of one gender shall
be construed to include the others or any of them; and the singular number shall
be construed to include the plural, and vice versa.

         7.10  Applicable  Law and  Venue.  THIS  AGREEMENT  SHALL BE  CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF
AMERICA  APPLICABLE TO TRANSACTIONS  IN THE STATE OF TEXAS.  Except at otherwise
stated,  this  Agreement  and  the  Security  Interest  shall  be  construed  in
accordance  with the Texas Uniform  Commercial Code [Texas Business and Commerce
Code ' 1.01, et seq.  ("Texas UCC").  This Agreement is performable by Debtor in
the county of Secured Party's address set out above.

         7.11 Financing Statement. A carbon, photographic, or other reproduction
of this security  agreement or any financing  statement  covering the Collateral
shall be sufficient as a financing statement.

         7.12  Limitations  of Law. If any law prohibits or limits any charge or
expense  provided  for in this  Agreement  in  connection  with any loan secured
hereby,  such charge or expense will not be made or incurred in connection  with
such loan beyond the limits permitted by such law.

                                       9

<PAGE>


         EXECUTED this 16th day of March, 1998.


                              DEBTOR:

                              BARTON ACQUISITION, INC.,  a Texas corporation


                              By:     /s/ John Trevey                           
                              Name:       John Trevey                           
                              Title:      CEO                                   


                              SECURED PARTY:

                              AMERICAN PHYSICIANS SERVICE GROUP, INC., a Texas 
                                   corporation


                              By:     /s/ Duane K. Boyd, Jr.                    
                              Name:       Duane K. Boyd, Jr.                    
                              Title:      Senior VP                             


                                       10
<PAGE>


                                   EXHIBIT "A"

                             List of Debtor's Assets

         (a)  all  equipment,   fixtures,   furnishings,   inventory,   building
materials, and articles of personal property (the "Personalty") now or hereafter
owned by Debtor, including but not limited to the Personalty attached to or used
in or on the Land or in or about the  Improvements  more fully  described in the
Exhibit B  hereafter  or that are  necessary  or  useful  for the  complete  and
comfortable  use and  occupancy of the  Improvements  for the purposes for which
they were or are to be attached,  placed, erected,  constructed or developed, or
which  Personalty is or may be used in or related to the planning,  development,
financing or operation of the Improvements,  and all renewals of or replacements
or substitutions for any of the foregoing,  whether or not the same are or shall
be attached to the Land or Improvements;

         (b) all water and water rights,  timber,  crops, and mineral  interests
pertaining to the Land;

         (c)      all plans and specifications for the Improvements and for any 
future development of or construction on the Land;

         (d) all  accounts,  deposits  (including  tenant or  resident  security
deposits),  patient records,  personnel files,  provider agreements,  records of
inspections by governmental agencies,  receivables from Medicare,  Medicaid, the
State of Texas, any health insurance carrier,  or any governmental  agency, bank
accounts, funds,  instruments,  notes or chattel paper arising from or by virtue
of any  transactions or operations  related to the Land, the  Improvements,  the
Personalty, the Leases, or the Rents;

         (e) all  Debtor's  rights  (but not  Debtor's  obligations)  under  any
documents,  contracts,  contract  rights,  accounts,  commitments,  construction
contracts (and all payment and performance bonds, statutory or otherwise, issued
by any  surety  in  connection  with any such  construction  contracts,  and the
proceeds of such bonds),  architectural  contracts,  engineering contracts,  and
general intangibles (including without limitation  trademarks,  trade names, and
symbols) arising from or by virtue of any transactions  related to the Land, the
Improvements, or the Personalty;

         (f) all permits,  licenses,  franchises,  certificates,  accreditation,
registrations and authorizations of all federal, state and local governmental or
regulatory  authority,  and other rights and  privileges  obtained in connection
with the Land, the Improvements, or the Personalty and the operation thereof;

         (g) all development rights,  utility commitments,  water and wastewater
taps, living unit equivalents, capital improvement project contracts, letters of
credit,  and utility  construction  agreements with any governmental  authority,
including  municipal utility  districts,  or with any utility companies (and all
refunds and reimbursements thereunder) relating to the Land or the Improvements;

         (h) all proceeds  arising from or by virtue of the sale, lease or other
disposition of the Land, the Improvements, or the Personalty;

         (i)  all  proceeds  (including  premium  refunds)  of  each  policy  of
insurance relating to the Land, the Improvements, or the Personalty;

         (j) all proceeds from the taking of any of the Land, the  Improvements,
the Personalty,  or any rights appurtenant thereto by right of eminent domain or
by private  or other  purchase  in lieu  thereof,  including  change of grade of
streets, curb cuts or other rights of access, for any public or quasi-public use
under any law;

         (k) all right,  title,  and  interest of Debtor in and to all  streets,
roads, public places, easements, and rights-of-way, existing or proposed, public
or private,  adjacent to or used in connection with, belonging, or pertaining to
the Land;

<PAGE>

         (l)  all of  Debtor's  rights  (but  not  Debtor's  obligations)  under
existing  and  future  residency  or  occupancy  agreements,  licenses,  leases,
including subleases,  concession  agreements,  management agreements and any and
all extensions,  renewals,  modifications,  and replacements of such agreements,
upon or of any part of the Land or  Improvements,  including  cash or securities
deposited  and  guaranties  to  secure  performance  by  the  tenants  of  their
obligations thereunder (the "Leases");

         (m) all of the rents, receipts,  royalties,  bonuses,  issues, profits,
revenues,  or other benefits of the Land, the  Improvements,  the Leases, or the
Personalty,  including  those now due or to become due by virtue of any Lease or
other  agreement  for the  occupancy  or use of all or any  part of the  Land or
Improvements (the "Rents");

         (n) all  consumer  goods  located  in,  on,  or  about  the Land or the
Improvements or used in connection with the use or operation  thereof;  however,
neither the term "consumer goods" nor the term "Personalty"  includes  clothing,
furniture,   appliances,  linens,  china,  crockery,   kitchenware,   inventory,
medicines,  drugs or personal  effects used  primarily  for the operation of the
Property;

         (o) all other interests of every kind and character that Debtor now has
or at any time hereafter acquires in and to the Land, Improvements,  Personalty,
Leases,  and  Rents  and all  property  that is used  or  useful  in  connection
therewith, including rights of ingress and egress and all reversionary rights or
interests  of Debtor with respect to such  property  and all of Debtor's  rights
(but not Debtor's obligations) under any covenants, conditions, and restrictions
for the Land, as the same may be amended from time to time,  including  Debtor's
rights,   title,  and  interests  thereunder  as  declarant  or  developer,   if
applicable; and

         (p)      all products and proceeds of the Personalty.


<PAGE>


                                   EXHIBIT "B"

                    Description of the Land and Improvements


Tract 1: A 0.8800 acre tract now known as Lot 4, Block B, New City Block  17305,
OAKWELL FARMS,  UNIT 7B, PLANNED UNIT  DEVELOPMENT,  City of San Antonio,  Bexar
County, Texas, according to plat thereof recorded in Volume 9535, Page 203, Deed
and Plat Records of Bexar County, Texas.

Tract 2: All that certain tract or parcel of land, containing 1.6756 acres, more
or less, being out of the Elijah Alcorn Survey, Abstract No. l, situated in Fort
Bend County,  Texas.  Said 1.6756 acres being all of Commercial  Reserve "F" and
part of Commercial Reserve "D" of the Replat of the Amending Plat for Edgewater,
Section  Two (2),  according  to the map or plat  thereof  recorded in Slide No.
1353/A of the Plat Records of Fort Bend County,  Texas.  Said 1.6756 acres being
more particularly described by metes and bounds in Exhibit "A-1" attached hereto
and  made a part  hereof;  together  with  those  nonexclusive  easement  rights
described in that  Ingress and Egress  Easement,  recorded in Volume 2364,  Page
1480 of the County Clerk Official Records of Fort Bend County,  Texas, and those
easement  rights reserved in that deed recorded in Volume 2364, Page 1452 of the
County Clerk Official Records of Fort Bend County, Texas.

Tract 3: A tract or parcel of land being 0.2008 acres, more or less,  located in
the Elijah Alcorn League Survey, Abstract No. l, being out of Commercial Reserve
"D" of the Replat of the Amending Plat for Edgewater, Section Two (2), according
to the map or plat thereof  recorded in Slide No.  1353/A of the Plat Records of
Fort Bend County, Texas. Said 0.2008 acres being more particularly  described by
metes and bounds in Exhibit "B-1" attached hereto and made a part hereof.

Tract 4: Lot 2A, Block "B", of RESUBDIVISION OF LOT 2, BLOCK "B" MILWOOD SECTION
SIX, a subdivision  in Travis  County,  Texas,  according to the map or plat, of
record in Volume 95, Page 231, of the Plat Records of Travis County, Texas.

Tract 5: Lot 2B, Block "B", of RESUBDIVISION OF LOT 2, BLOCK "B" MILWOOD SECTION
SIX, a subdivision  in Travis  County,  Texas,  according to the map or plat, of
record in Volume 95, Page 231, of the Plat Records of Travis County, Texas.

All other real  property and  improvements  now owned or  hereafter  acquired by
Debtor.



<PAGE>


                                   EXHIBIT "C"

                        List of Prior Security Interests


1.       Financing Statement No. 96-00239701 filed on December 4, 1996 with the 
Texas Secretary of State with Barton House At Oakwell Farms, Ltd. as Debtor and 
Bank One, Texas, N.A. as Secured Party.

2. Financing  Statement No. 95-00212294 filed on November 1, 1995 with the Texas
Secretary of State with Barton House, LTD as Debtor and Bank One, Texas, N.A. as
Secured Party.

3.  Financing  Statement No.  96-00135820  filed on July 12, 1996 with the Texas
Secretary  of  State  with  Barton  House,  LTD as  Debtor  and  Small  Business
Administration as Secured Party.

4.  Financing  Statement  No.  97-00192192  filed on September 15, 1997 with the
Texas  Secretary of State with Barton House,  LTD as Debtor and Bank One, Texas,
N.A. as Secured Party.

5.  Financing  Statement No. 1737 filed on September 12, 1997 in the UCC Records
of Travis County,  Texas with Barton House, LTD as Debtor and Bank One Texas, NA
as Secured Party.

6. All  financing  statements  filed with any county with  respect to any of the
promissory notes identified on Schedule 1.6 to the Contribution Agreement.