<PAGE>
                             
                                                               EXHIBIT 10.29(b)
                              SECURITY AGREEMENT
                              ------------------



     THIS SECURITY AGREEMENT (this "Security Agreement") is executed and
                                    ------------------                  
effective as of the 12th day of December, 1996, by TRAVIS BOATS & MOTORS, INC.,
a Texas corporation, TRAVIS SNOWDEN MARINE, INC., a Texas corporation, TRAVIS
BOATING CENTER ARLINGTON, INC., a Texas corporation, FALCON MARINE, INC., a
Texas corporation, FALCON MARINE ABILENE, INC., a Texas corporation, TRAVIS
BOATING CENTER BEAUMONT, INC., a Texas corporation, TRAVIS BOATS & MOTORS BATON
ROUGE, INC., a Louisiana corporation, TBC ARKANSAS, INC., an Arkansas
corporation, TBC MANAGEMENT, LTD., a Texas limited partnership, TBC MANAGEMENT,
INC., a Delaware corporation, TRAVIS BOATING CENTER LOUISIANA, INC., a Louisiana
corporation, TRAVIS BOATING CENTER TENNESSEE, INC., a Texas corporation, TRAVIS
BOATING CENTER ALABAMA, INC., a Texas corporation, RED RIVER MARINE ARKANSAS,
INC., an Arkansas corporation, TRAVIS BOATING CENTER LITTLE ROCK, INC., an
Arkansas corporation, TRAVIS BOATING CENTER GEORGIA, INC., a Texas corporation
and TRAVIS BOATING CENTER FLORIDA, INC., a Texas corporation and any other
entity which may hereafter execute this Security Agreement as a "Debtor" or be
added to the Agreement (as herein defined) as a "Borrower" (collectively,
                                                                         
"Debtor"), in favor of NATIONSBANK OF TEXAS, N.A., a national banking
-------                                                              
association, as agent (in such capacity, "Agent") and for itself as a lender and
                                          -----                                 
such other lenders as may from time to time be a "Lender" under the Agreement
(hereinafter defined) (all such lenders are collectively referred to herein as
the "Lenders").
     -------   


                              W I T N E S S E T H:
                              ------------------- 

     WHEREAS, pursuant to that certain Revolving Credit Agreement (as modified
from time to time, the "Agreement") dated as of December 12, 1996, by and among
                        ---------                                              
Agent, the Lenders and Debtor, as borrowers, the Lenders have agreed to make the
Credit Facility available to Debtor upon the terms and conditions set forth
therein (unless otherwise defined herein, each term used herein with its initial
letter capitalized shall have the meaning given to such term in the Agreement);
and

     WHEREAS, the Credit Facility is given in renewal, extension, modification
and consolidation of the Prior Credit Facility, the indebtedness of which is
respectively secured by security interests granted by certain of the Borrowers
in favor of the Lender thereunder, as more particularly described on Exhibit A
                                                                     ---------
attached hereto (the "Existing Security Interests", as referenced in the
                      ---------------------------                       
Agreement), which security interests have been respectively assigned by Lenders
to Agent for the benefit of Lenders pursuant to the Agreement; and

     WHEREAS, as a condition to and in consideration for the agreement of the
Lenders to make monies available to Debtor and in order to provide collateral
security for the Obligations



                                                                          Page 1
<PAGE>
 
and the Other Lender Obligations, the Lenders have requested and Debtor has
agreed to enter into this Agreement pursuant to which Debtor will grant to Agent
on behalf of the Lenders a first priority security interest in the Collateral
(as hereafter defined) and amend and restate the security agreements giving rise
to the Existing Security Interests.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged and confessed, Debtor agrees with Agent for the
benefit of the Lenders as follows:


                                   ARTICLE I

                                     GRANT
                                     -----

     1.01.  Assignment and Grant of Security.  Debtor hereby grants, pledges and
assigns to Agent a security interest in the following assets of Debtor, and all
rights, titles and interests of Debtor therein, wherever located and whether now
owned or hereafter acquired by Debtor or in which Debtor now has or at any time
in the future may acquire any right, title or interest (collectively, the
                                                                         
"Collateral"):
-----------   

     (a) all inventory now owned or hereafter acquired by Debtor, including,
without limitation, any and all boat motor, trailer and parts inventory and
accessories ("Inventory"), and all related documents, goods, general intangibles
              ---------                                                         
and other property in which a security interest may be created under Chapter 9
of the Uniform Commercial Code as from time to time in effect in the State of
Texas or other applicable jurisdictions (the "UCC"), including, without
                                              ---                      
limitation, any bills of lading, invoices, warehouse receipts, documents of
title, bills of sale, certificates of title, manufacturer's certifies of origin,
certificates of origin, dealer reassignments of title, trust receipts, and other
documents, all monies received from manufacturers by way of credits, refunds, or
otherwise, and/or the proceeds of all repurchases payable to Debtor, and all
returned or repossessed goods; and

     (b) any right to payment for services rendered or for goods sold or leased,
which is not evidenced by an instrument or chattel paper, whether or not it has
been earned by performance ("Accounts"), and all of Debtor's rights to any goods
                             --------                                           
represented by any of the foregoing (including returned, refused or repossessed
goods and unpaid seller's rights) ; all general intangibles and other
obligations of any kind owing to Debtor (including under any trade names), now
or hereafter owned, existing, received or acquired, arising out of or in
connection with the sale or lease of goods or the rendering of services or
otherwise (including, without limitation, any such obligations that would be
characterized as an account, general intangible or chattel paper under the UCC)
(any and all such Accounts, general intangibles and obligations described in
this Section 1.01(a) being sometimes referred to herein collectively as the
     ---------------                                                       
"Receivables");
------------   

                                                                          Page 2
<PAGE>
 
     (c) all now owned or existing or hereafter received or acquired writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods (collectively, the "Chattel Paper");
                                      -------------   

     (d) all now owned or existing or hereafter received or acquired contracts
and agreements relating to any property described in this Section 1.10 to which
                                                          ------------         
Debtor is a party or to which Debtor has any rights, together with all
modifications, amendments or replacements of any of the foregoing (collectively,
the "Contracts"), including, without limitation, (i) all of Debtor's rights in,
     ---------                                                                 
to and under all purchase orders or contracts by it for goods or services, and
all of Debtor's rights to any goods represented by any of the foregoing
(including returned, refused or repossessed goods and unpaid seller's rights),
(ii) all rights of Debtor to receive moneys due and to become due to it
thereunder or in connection therewith, whether or not yet earned by performance
(including, without limitation, all discounts or rebates on goods or inventory
purchased), (iii) all rights in and to all security agreements, leases,
guarantees and other contracts securing or otherwise relating to any such
Contracts, (iv) all rights of Debtor to damages arising out of, or for, breach
or default in respect thereof, and (v) all rights of Debtor to perform and to
exercise all remedies thereunder;

     (e) the balance of every bank account and deposit account of Debtor,
including without limitation all accounts on deposit with or under the control
of any Lender or any affiliate of any Lender, and any other claim of Debtor
against any Lender, now or hereafter existing, liquidated or unliquidated, and
all money, instruments, securities, documents, chattel paper, credits, claims,
demands, income, and any other property, rights and interests of Debtor which at
any time shall come into the possession or custody or under the control of any
Lender or any agent, affiliate or correspondent of any Lender, for any purpose,
and the proceeds thereof (Agent shall be deemed to have possession of any of the
Collateral in transit to or set apart for Agent, any Lender or any of their
respective agents, affiliates or correspondents);

     (f) all customer lists, subscription lists, invoices, agings, verification
reports and other records relating in any way to any property described in this
                                                                               
Section 1.01, and all insurance policies and bonds and claims relating to any
------------                                                                 
property described in this Section 1.01 and payments thereunder;
                           ------------                         

     (g) all rights, claims and benefits of Debtor against any Person arising
out of, relating to or in connection with any property described in this Section
                                                                         -------
1.01;
---- 

     (h) all accessions to, all substitutions for and replacements of, and all
cash or no-cash proceeds, products of and property receivable for any and all of
the foregoing Collateral arising from their sale or other disposition
(including, without limitation, proceeds which constitute property of the types
described in this Section 1.01) and, to the extent not otherwise included, all
                  ------------                                                
payments under insurance (whether or not 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.

                                                                          Page 3
<PAGE>
 
     1.02.  Description of Obligations.  This Security Agreement creates a
security interest in the Collateral securing the payment and performance of the
Obligations, which includes, without limitation, all obligations and
indebtedness arising under or pursuant to the Agreement, the Notes and the other
Loan Documents and, to the extent of the payment in full of the Obligations, the
Other Lender Obligations, pari passu.

     1.03.  Debtor Remains Liable.  Anything herein to the contrary
notwithstanding, (a) each Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Security Agreement had not been executed, (b) the exercise by Agent or any
Lender of any of the Rights hereunder shall not release any Debtor from any of
its duties or obligations under the contracts and agreements included in the
Collateral, and (c) neither Agent nor any Lender shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Security Agreement, nor shall Agent or any Lender be obligated to
perform any of the obligations or duties of Debtor thereunder or to take any
action to correct or enforce any claim for payment assigned hereunder, make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party under
any Account or other receivable (or any agreement giving rise thereto) or under
any contract, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.

     1.04.  Delivery of Security Collateral.  All original manufacturer's
invoices, certificates of origin and all other title documents evidencing
Borrowers' ownership of all of their Inventory shall be maintained in
safekeeping by Borrowers in a manner reasonably acceptable to Agent, including,
without limitation, Borrowers' current practices, unless and until a request is
made therefor by Agent upon the occurrence of a monetary Event of Default which
Borrower has not cured in accordance with the applicable provisions of the
Agreement.  In such event, within five Business Days of the request by Agent,
Borrowers shall deliver to Agent all original manufacturer's invoices,
certificates of origin and all other title documents in Borrowers' possession,
whether at the time of such request or thereafter, to Agent, and Agent shall
retain or hold all such original documents received by Agent after such request;
provided, however, Borrowers may retain or hold all such original documents
relating to Inventory covered by liens expressly excluded from the subordination
of an Intercreditor Agreement which is in full force and effect at the time of
Agent's request under this Section 1.04.  Thereafter, all original
                           ------------                           
manufacturer's invoices, certificates of origin and all other title documents
shall remain in Agent's possession until the Note and the Obligations are paid
and performed in full, provided that, if the original title documents have been
delivered to Agent as provided for herein and if no Event of Default has
occurred and is then existing, upon the sale of an item of Inventory by a
Borrower, Agent shall promptly deliver to the respective Borrower the original
title documents pertaining to the item of Inventory which has been sold; and
further provided, that, upon the happening of an Event of Default and during the
continuance thereof, Agent may transfer, as applicable, title documents
delivered to it pursuant to this Section 1.04 in connection with its sale of
                                 ------------                               
Inventory which constitute Collateral in accordance with its rights provided for
in this


                                                                          Page 4
<PAGE>
 
Agreement.  Except as noted above in this Section 1.04 all certificates or
                                          ------------                    
instruments representing or evidencing the Collateral shall be delivered to and
held by or on behalf of Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Agent. After the occurrence of an Event of Default, Agent shall have the right,
at any time in its discretion and without notice to Debtor, to transfer to or to
register in the name of Agent or any of its nominees any or all of the
Collateral.  In addition, after the occurrence of any Event of Default, Agent
shall have the right at any time to exchange certificates or instruments
representing or evidencing Collateral for certificates or instruments of smaller
or larger denominations.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     2.01.  Representations and Warranties.  Debtor represents and warrants,
with respect to itself and the Collateral, as follows:

     (a) The chief places of business and chief executive offices of Debtor, the
storage and distribution facilities and the office where Debtor keeps all of its
records concerning the Inventory and other Collateral are located at the
addresses specified in Schedule 1 hereto.  All of the Inventory and other
                       ----------                                        
Collateral pledged by Debtor hereunder is located at the places specified on
                                                                            
Schedule 1 hereto or in transit to a place specified on Schedule 1 hereto, or in
----------                                              ----------              
transit for sale to a third-party purchaser in the ordinary course of Debtor's
business.  All promissory notes or other instruments evidencing the Accounts
have been delivered and pledged to Agent duly endorsed and accompanied by such
duly executed instruments of transfer or assignment as are necessary for such
pledge, to be held as pledged collateral.  Debtor has possession and control of
the Collateral pledged by it hereunder.

     (b) Debtor is the legal and beneficial owner of all the Collateral free and
clear of any lien or security interest, option or other charge or encumbrance
except for (i) the security interest created by this Security Agreement and (ii)
any Liens permitted by the Agreement ("Permitted Liens").  No effective
                                       ---------------                 
financing statement or other similar document used to perfect and preserve a
security interest under the Laws of any jurisdiction covering all or any part of
the Collateral is on file in any recording office, except (i) such as may have
been filed in favor of Agent relating to this Security Agreement, and (ii) such
as may have been filed in connection with Permitted Liens.

     (c) As of the date hereof, Debtor has the trade names set forth on Schedule
                                                                        --------
2 and no others.
-               

     (d) This Security Agreement and the pledge of the Collateral pursuant
hereto creates a valid first priority security interest (subject only to such
Permitted Liens as may cover the Collateral) in the Collateral securing the
payment of the Obligations and, to the extent of the

                                                                          Page 5
<PAGE>
 
payment in full of the Obligations, the Other Lender Obligations, pari passu,
and upon filing of financing statements in accordance with the UCC, and any
other necessary actions to perfect such security interest, such first priority
security interest in such Collateral will be duly perfected; and all filings and
other actions necessary or desirable to perfect and protect such security
interest and such priority have been duly taken (or will be taken).

     (e) The amount represented by Debtor to Agent from time to time as owing by
each account debtor or by all account debtors in respect of the Accounts will at
such time be the correct amount actually owing by such account debtor or debtors
thereunder.  Each Account held as Collateral will represent a valid and legally
enforceable obligation of third parties.  No amount payable to Debtor under or
in connection with any Accounts is evidenced by any Chattel Paper that has not
been delivered to Agent.

     (f) No consent of any other Person and no authorization, approval or other
action by, and no notice to or filing with, any Governmental Authority is
required (i) for the pledge by Debtor of the Collateral pledged by it hereunder,
for the grant by Debtor of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by Debtor, (ii)
for the perfection or maintenance of the pledge, assignment and security
interest created hereby (including the first priority nature of such pledge,
assignment and security interest) except for UCC filings or any other action
required by the UCC or other applicable perfection statutes, or (iii) for the
exercise by Agent or any Lender of the Rights provided for in this Security
Agreement or the remedies in respect of the Collateral pursuant to this Security
Agreement.

     (g) Debtor has the corporate or partnership power and authority and the
legal right to execute and deliver, to perform its obligations under, and to
grant the security interest in the Collateral pursuant to, this Security
Agreement, and Debtor has taken all necessary corporate or partnership action to
authorize its execution, delivery and performance of, and grant of the security
interest in the Collateral pursuant to this Security Agreement.

     (h) This Security Agreement constitutes a legal, valid and binding
obligation of Debtor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.

     (i) The execution, delivery and performance of this Security Agreement will
not violate any provision of any applicable law, rule, regulation or contractual
obligations of Debtor and will not result in the creation or imposition of any
lien on any of the properties or revenues of Debtor pursuant to any applicable
law, rule, regulation or contractual obligations of Debtor, except as
contemplated hereby and except as would not have a Material Adverse Effect.

     (j) No action, suit or proceeding of or before any court, arbitrator or any
governmental body, agency or official is pending or, to the knowledge of Debtor,
threatened by or against Debtor or against any of its properties or revenues
with respect to this Security Agreement or any of the transactions contemplated
hereby.

                                                                          Page 6
<PAGE>
 
                                  ARTICLE III

                                   COVENANTS
                                   ---------

     3.01.  Further Assurances.  (a) Debtor agrees that, where any agreement
existing as of the date hereof or hereafter to which Debtor is a party contains
any restriction prohibiting Debtor from granting any security interest under
this Security Agreement, Debtor will obtain or use its best efforts to obtain
the necessary consent to or waiver of such restriction from any Person so as to
enable Debtor to effectively grant to Agent such security interest under this
Security Agreement.

     (b) Debtor will from time to time at its expense promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary, or that Agent may reasonably request, in order to perfect and
protect any pledge, assignment or security interest granted or purported to be
granted hereby, and the priority thereof, or to create or preserve the full
benefits of this Security Agreement and the rights and powers of Agent herein
granted, or to enable Agent to exercise and enforce its rights and remedies
hereunder with respect to any of the Collateral.  Without limiting the
generality of the foregoing, upon written request by Agent, Debtor will: (i)
mark conspicuously each item of Chattel Paper included in Accounts:

     THIS INSTRUMENT IS SUBJECT TO A SECURITY INTEREST AND LIEN PURSUANT TO A
     SECURITY AGREEMENT (AS THE SAME MAY BE MODIFIED OR RESTATED) MADE BY
     ____________, IN FAVOR OF NATIONSBANK OF TEXAS, N.A., AS AGENT

or such other legend, in form and substance satisfactory to and as specified by
Agent, indicating that such item of Chattel Paper is subject to the pledge,
assignment and security interest granted hereby; (ii) if any Collateral shall be
evidenced by a promissory note or other instrument or be Chattel Paper, deliver
to Agent such note, instrument or Chattel Paper, duly endorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance satisfactory to Agent; and (iii) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary, or as Agent may request, in order to perfect and
preserve the pledge, assignment and security interest granted or purported to be
granted hereby with respect to any and all the Collateral.

     (c) Debtor hereby authorizes Agent to file one or more financing or
continuation statements, and amendments thereto, relating to all or any part of
the Collateral without the signature of Debtor where and to the extent permitted
by applicable law.  A photocopy or other reproduction of this Security Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where and to the extent permitted by
applicable law.


                                                                          Page 7
<PAGE>
 
     (d) Debtor will furnish to Agent from time to time, upon the written
request of Agent, statements and schedules further identifying and describing
the Collateral, and such other reports in connection with the Collateral, as
Agent may reasonably request.

     (e) In addition to such other information as shall be specifically provided
for herein, Debtor shall furnish to Agent such other information with respect to
the Collateral as Agent may reasonably request from time to time in connection
with the Collateral, or the protection, preservation, maintenance or enforcement
of the security interest or the Collateral, including, without limitation, all
documents and things in Debtor's possession, or subject to its demand for
possession, related to the Collateral.

     (f) If an Event of Default shall occur and be continuing, Debtor shall, if
any of the monies or property pledged or required to be pledged under Section
                                                                      -------
1.01 are received by Debtor, forthwith transfer and deliver to Agent such money
----                                                                           
or property received by Debtor, all of which thereafter shall be held by Agent,
pursuant to the terms of this Agreement, as part of the Collateral.

     3.02.  Inventory and Equipment.

     (a) Debtor shall keep all of the Inventory (other than Inventory sold or
displayed in the ordinary course of business) at the place or places specified
therefor in Section 2.01(a) or, upon thirty days' prior written notice to Agent,
            ---------------                                                     
at such other places in such jurisdiction where all action required by Section
                                                                       -------
3.01 shall have been taken with respect to such transferred Inventory.
----                                                                  

     (b) Debtor shall pay all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against the Collateral pledged by it
hereunder as provided in the Agreement.

     3.03.  Insurance.  Debtor will, at its own expense, maintain, or cause to
be maintained, insurance on the Collateral as provided in the Agreement, with
Agent (on behalf of the Lenders) being named as loss payee and additional
insured on all insurance policies which pertain to the Collateral.  If Debtor
fails to perform or observe any applicable covenants as to insurance on any of
such Collateral, Agent may, upon notice to Debtor, at its own option obtain
insurance on such Collateral, and any premium therefor paid by Agent shall
become part of the Obligations and shall bear interest prior to the occurrence
of an Event of Default at the interest rate then applicable to the Credit
Facility and after the occurrence of an Event of Default, at the Default Rate in
effect under the Credit Facility.  In the event Agent maintains such substitute
insurance, the additional premium for such insurance shall be due on demand and
payable by Debtor to Agent in accordance with any notice delivered to Debtor by
Agent.  Debtor hereby grants Agent a security interest in any refunds of
unearned premiums in connection with any cancellation, adjustment or termination
of any policy of insurance required by Agent and in all proceeds of such
insurance and hereby appoints Agent its attorney-in-fact to, after the
occurrence and during the continuance of an Event of Default, endorse any check
or draft that may be payable to

                                                                          Page 8
<PAGE>
 
Debtor in order to collect such refunds or proceeds.  Any such sums collected by
Agent shall be credited, except to the extent applied to the purchase by Agent
of similar insurance, to any amounts then owing on the Obligations.

     3.04.  Place of Perfection; Records; Collection of Receivables and Chattel
Paper.

     (a) Debtor will not (i) change the location of its chief executive office
from that specified in Schedule 1, or (ii) change its name, identity, tax
                       ----------                                        
identification number or corporate structure to such an extent that any
financing statement filed by Agent in connection with this Security Agreement
would become seriously misleading, or (iii) use any trade name other than those
listed on Schedule 2, unless Debtor shall have given prior written notice as
          ----------                                                        
soon as practicable thereof, and prior to effecting any such change Debtor shall
have taken such steps as Agent may deem necessary or advisable to continue the
perfection and priority of the security interest granted pursuant hereto.

     (b) Except as otherwise provided in this Section 3.04(b) or in any of the
                                              ---------------                 
other Loan Documents, Debtor shall continue to collect, at its own expense, all
amounts due or to become due Debtor under the Receivables and Chattel Paper.  In
connection with such collections, Debtor may take such action as Debtor or Agent
may deem reasonably necessary or advisable to enforce collection of the
Receivables and Chattel Paper; provided, however, that Agent shall have the
                               --------  -------                           
right upon the occurrence of an Event of Default (without notice to Debtor) to
notify the account debtors or obligors under any or all of the Collateral of the
assignment of such Collateral to Agent and to direct such account debtors or
obligors to make payment of all amounts due or to become due to Debtor
thereunder directly to Agent and, after the occurrence of an Event of Default,
at the expense of Debtor, to enforce collection of any such Collateral and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor shall have been entitled.  All amounts and
proceeds received by Debtor in respect of the Collateral after the occurrence of
and during the continuance of an Event of Default shall be received in trust for
the benefit of Agent hereunder, shall be segregated from other funds of Debtor
and shall be forthwith paid over to Agent in the same form as received (with any
necessary endorsement) to be held as collateral or applied to the Obligations,
or the Other Lender Obligations, as appropriate.  Except prior to the occurrence
of an Event of Default and in accordance with Debtor's normal business policies
and practices in effect on the date hereof, Debtor shall not adjust, settle or
compromise the amount or payment of any Receivable or Chattel Paper, release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.

     3.05.  Other Liens.  Debtor shall not create or permit to exist any lien,
security interest, option or other charge or encumbrance upon or with respect to
any of the Collateral, except for the security interests in favor of Agent under
this Security Agreement or any lien permitted under the Agreement.

     3.06.  Rights to Distributions.  If Debtor shall become entitled to receive
or shall receive any interest in or certificate (including, without limitation,
any interest in or certificate


                                                                          Page 9
<PAGE>
 
representing a distribution in connection with any reclassification, increase,
or reduction of capital, or issued in connection with any reorganization), or
any option or rights arising from or relating to any of the Collateral, whether
as an addition to, in substitution of, as a conversion of, or in exchange for
any of the Collateral, or otherwise, Debtor agrees to accept the same as Agent's
agent and to hold the same in trust on behalf of and for the benefit of Agent,
and to deliver the same immediately to Agent in the exact form received, with
appropriate undated stock or similar powers, duly executed in blank, to be held
by Agent, subject to the terms hereof, as Collateral.  Agent shall be entitled
to all distributions, and to any sums paid upon or in respect of any Collateral,
upon the liquidation, dissolution, or reorganization of the issuer thereof which
shall be paid to Agent to be held by it as additional collateral security for
the Obligations and the Other Lender Obligations and application to the
Obligations and the Other Lender Obligations at the discretion of Agent.  All
distributions paid or distributed in respect of the Collateral which are
received by Debtor in violation of this Security Agreement shall, until paid or
delivered to Agent, be held by Debtor in trust as additional Collateral for the
Obligation and the Other Lender Obligations.

     3.07.  Maintenance of Records.  Debtor will keep and maintain at its own
cost and expense complete records of the Collateral, including, without
limitation, a record of all payments received and all credits granted with
respect to Receivables.

     3.08.  Right of Inspection.  Each of the Agent and Lenders and its
officers, agents and representatives shall have the right to inspect, Debtor's
books and records upon request of Agent or Lenders and during normal business
hours.  Upon notice to Debtor, not more than twice per year, not including a
Fiscal Year Audit, prior to the occurrence of an Event of Default, each of the
Agent and Lenders and its officers, agents and representatives shall, at the
expense of Debtor, at all reasonable times also have the right to enter into and
upon any premises where any of the Inventory is located for the purpose of
inspecting the same, observing its use or otherwise protecting its interests
therein.

     3.09.  Compliance with Terms of Contracts, etc.  Debtor will perform and
comply in all material respects with all its obligations under all its other
contractual obligations relating to the Collateral.

     3.10.  Payment of Obligations.  Debtor will pay promptly when due all taxes
and claims with respect to the Collateral, or in respect of its income or
profits therefrom as provided in the Agreement.

     3.11.  Limitations on Dispositions of Collateral.  Debtor will not sell,
transfer, assign (by operation of law or otherwise), lease, abandon or otherwise
dispose of, or grant an option with respect to,  any of the Collateral, or
attempt, offer or contract to do so, except for sales of Inventory in the
ordinary course of business and for full and fair consideration as provided in
the Agreement.


                                                                         Page 10
<PAGE>
 
     3.12.  Limitations on Modifications, Waivers, Extensions of Agreements
Giving Rise to Accounts and Contracts.  Debtor will not (i) amend, modify,
terminate or waive any provision of any contract or any agreement giving rise to
a Receivable in any manner, except in the ordinary course of business or (ii)
fail to exercise promptly and diligently each and every material right which it
may have under each contract and each agreement giving rise to a Receivable.

                                   ARTICLE IV

                           RIGHTS AND POWERS OF AGENT
                           --------------------------

     4.01.  Agent May Perform. If Debtor fails to perform any agreement
contained herein, Agent may, after the occurrence of an Event of Default, itself
perform, or cause performance of, such agreement, and the expenses of Agent
incurred in connection therewith shall be payable by Debtor as provided in
                                                                          
Section 4.05.
------------ 

     4.02.  Limitation on Agent's Duties.  The powers conferred on Agent
hereunder are solely to protect the interests of Agent and the Lenders in the
Collateral and shall not impose any duty upon Agent or any Lender to exercise
any such powers.  Except for the safe custody of any Collateral in the
possession of Agent or any Lender and the accounting for monies actually
received by Agent or any Lender hereunder, neither Agent nor any Lender shall
have any duty as to any of the Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Agent or any Lender has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any reasonable care in the custody and preservation of any Collateral in the
possession of Agent or any Lender.  Except as provided in this Section 4.02,
                                                               ------------ 
neither Agent nor any Lender shall have any duty or liability to protect or
preserve any Collateral or to preserve rights pertaining thereto.  Nothing
contained in this Security Agreement shall be construed as requiring or
obligating Agent or any Lender, and neither Agent nor any Lender shall be
required or obligated, to (a) present or file any claim or notice or take any
action, with respect to any Collateral or in connection therewith or (b) notify
Debtor of any decline in the value of any Collateral.  The sole duty of Agent
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9.207 of the UCC or otherwise, shall
be to deal with it in the same manner as Agent deals with similar property for
its own account.  Neither Agent nor any Lender, nor any of their respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Debtor or otherwise.

     4.03.  Agent's Appointment as Attorney-in-Fact.

     (a) Powers.  Debtor hereby irrevocably constitutes and appoints Agent and
         ------                                                               
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Debtor and in the name of Debtor or


                                                                         Page 11
<PAGE>
 
in its own name, after the occurrence of an Event of Default, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, Debtor hereby
gives Agent after the occurrence and during the continuance of an Event of
Default the power and right, on behalf of Debtor, without notice to or assent by
Debtor, to do the following:

          (1) in the case of any Collateral, in the name of Debtor or its own
     name, or otherwise, to take possession of and endorse and collect any
     checks, drafts, notes, acceptances or other instruments for the payment of
     moneys due under, or with respect to, any Collateral and to file any claim
     or to take any other action or proceeding in any court of law or equity or
     otherwise deemed appropriate by Agent for the purpose of collecting any and
     all such moneys due or with respect to such Collateral whenever payable;

          (2) to pay or discharge taxes and liens levied or placed on or
     threatened against the Collateral, to effect any repairs or any insurance
     called for by the terms of this Security Agreement and to pay all or any
     part of the premiums therefor and the costs thereof; and

          (3) (i) to direct any party liable for any payment under any of the
     Collateral to make payment of any and all moneys due or to become due
     thereunder directly to Agent or as Agent shall direct; (ii) to ask or
     demand for, collect, receive payment of and receipt for, any and all
     moneys, claims and other amounts due or to become due at any time in
     respect of or arising out of any Collateral; (iii) to sign and endorse any
     invoices, freight or express bills, bills of lading, storage or warehouse
     receipts, drafts against debtors, assignments, verifications, notices and
     other documents in connection with any of the Collateral; (iv) to commence
     and prosecute any suits, actions or proceedings at law or in equity in any
     court of competent jurisdiction to collect the Collateral or any portion
     thereof and to enforce any other right in respect of any Collateral; (v) to
     defend any suit, action or proceeding brought against Debtor with respect
     to any Collateral; (vi) to settle, compromise or adjust any suit, action or
     proceeding described in the preceding clause and, in connection therewith,
     to give such discharges or releases as Agent may deem appropriate; and
     (vii) generally, to sell, transfer, pledge and make any agreement with
     respect to or otherwise deal with any of the Collateral as fully and
     completely as though Agent were the absolute owner thereof for all
     purposes, and to do, at Agent's option and Debtor's expense, at any time,
     or from time to time, all acts and things which Agent deems necessary to
     protect, preserve or realize upon the Collateral and the liens of Agent
     thereon and to effect the intent of this Security Agreement, all as fully
     and effectively as Debtor might do.

This power of attorney is power coupled with an interest and shall be
irrevocable until the Obligations shall have been paid in full or this Security
Agreement shall have been terminated.

                                                                         Page 12
<PAGE>
 
     (b) Other Powers.  Debtor also authorizes Agent after the occurrence of and
         ------------                                                           
during the continuance of an Event of Default, at any time and from time to
time, to execute, in connection with any sale provided for in Section 4.04, any
                                                              ------------     
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.

     (c) No Duty on the Part of Agent.  The powers conferred on Agent hereunder
         ----------------------------                                          
are solely to protect the interests of Agent in the Collateral and shall not
impose any duty upon Agent to exercise any such powers.  Agent shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to Debtor for any act or failure to act
hereunder, except for its own gross negligence or willful misconduct, IT BEING
THE INTENT OF THE PARTIES HERETO THAT AGENT SHALL NOT BE ACCOUNTABLE FOR ITS OWN
NEGLIGENCE.

     4.04.  Remedies.   (a)  If an Event of Default shall occur and be
continuing, Agent may exercise, in addition to all other rights and remedies
granted to Agent or the Lenders in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the UCC.  Without limiting the
generality of the foregoing, Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon Debtor or any other Person
(all and each of which demands, offenses, advertisements and notices are hereby
waived), may in such circumstances forthwith take possession of, assemble,
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of Agent or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk.  Agent shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in Debtor, which right or equity is hereby
waived and released.  Debtor further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at Debtor's premises.  Agent shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the possession, assembly, preparation for
sale or other disposition, care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of Agent hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as Agent may elect, and,
to the extent of the payment in full of the Obligations, the Other Lender
Obligations, pari passu, and only after such application and after the payment
by Agent of any other amount required by any provision of law, need Agent
account for the surplus, if any, to Debtor.  To the extent permitted by
applicable law, Debtor waives all claims, damages and demands it may acquire
against Agent or any Lender arising out of the exercise of any rights hereunder.
It shall not be necessary that

                                                                         Page 13
<PAGE>
 
Agent take possession of the Collateral or any part thereof prior to the time
that any sale pursuant to the provisions of this Section 4.04 is conducted, and
                                                 ------------                  
it shall not be necessary that the Collateral or any part thereof be present at
the location of such sale.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least ten (10) days before such sale or other
disposition.  Debtor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by Agent to
collect such deficiency.

     (b) Louisiana proceedings.  In the event that Agent elects to commence
         ---------------------                                             
appropriate Louisiana foreclosure proceedings under this Security Agreement
after an Event of Default has occurred, Agent may cause the Collateral, or any
part or parts thereof, provided such Collateral is located within the state of
Louisiana, to be immediately seized wherever found, and sold, whether in term of
court or in vacation, under ordinary or executory process, in accordance with
applicable Louisiana law, to the highest bidder for cash, with or without
appraisement, and without the necessity of making additional demand upon or
notifying Debtor or placing Debtor in default, all of which are expressly
waived.  For purposes of foreclosure under Louisiana executory process
procedures, Debtor confesses judgment and acknowledges to be indebted unto and
in favor of Agent, in the full amount of all sums secured by this Security
Agreement, including principal, interest, costs, expenses, attorneys' fees,
other fees and charges, and all additional Advances that Agent may make on
Debtor's behalf pursuant to this Security Agreement.  To the extent permitted
under applicable Louisiana law, Debtor additionally waives (a) the benefit of
appraisal as provided in Articles 2332, 2336, 2723 and 2724 of the Louisiana
Code of Civil Procedure, and all other laws with regard to appraisal upon
judicial sale; (b) the demand and three (3) days' delay as provided under
Articles 2639 and 2721  of the Louisiana Code of Civil Procedure; (c) the notice
of seizure as provided under Articles 2293 and 2721 of the Louisiana Code of
Civil Procedure; (d) the three (3) days' delay provided under Articles 2331 and
2722 of the Louisiana Code of Civil Procedure; and (e) all other benefits
provided under Articles 2331, 2722 and 2723 of the Louisiana Code of Civil
Procedure and all other Articles not specifically mentioned above.  Should any
or all of the Collateral be seized as an incident to an action for the
recognition or enforcement of this Security Agreement, by executory process,
sequestration, attachment, writ of fieri facias or otherwise, Debtor hereby
agrees that the court issuing any or any person or entity named by Agent at the
time such seizure is requested, or any time thereafter, as keeper of the
Collateral ("Keeper") as provided under La.-R.S. 9:5136, et.seq.  The Keeper
shall be entitled to reasonable compensation.  Debtor agrees to pay the
reasonable fees of the Keeper, which are hereby fixed at $150.00 per hour, which
compensation to the Keeper shall also be secured by this Security Agreement in
the form of an additional advance as provided herein.  In the event that it
should become necessary for Agent to conduct a search for any of the Collateral
in connection with any foreclosure action, or should it be necessary to remove
the Collateral, or any part or  parts thereof, from the premises in which or on
which the Collateral is then located, and/or to store and/or refurbish such
Collateral, Debtor agrees to reimburse Agent for the reasonable cost of
conducting such a search and/or removing and/or storing and/or refurbishing such
Collateral, which additional expense shall also be secured by the lien of this
Security Agreement.


                                                                         Page 14
<PAGE>
 
     4.05.  Indemnity and Expenses. (a) Debtor agrees to indemnify Agent and the
Lenders from and against any and all claims, damages, losses, liabilities, costs
and expenses of any kind (including reasonable attorneys' fees) arising out of
or resulting from this Security Agreement or the security interest granted
herein, or any of the Collateral (including, without limitation, enforcement of
this Agreement), EXPRESSLY INCLUDING SUCH CLAIMS, LOSSES OR LIABILITIES ARISING
OUT OF THE NEGLIGENCE OF AGENT OR ANY LENDER, except claims, losses or
liabilities resulting from the gross negligence or willful misconduct of Agent
or any Lender.

     (b) Debtor will upon demand pay to Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, which Agent or, as to the matters described in
clauses (iii) or (iv) below, the Lenders may incur in connection with (i) the
administration of this Security Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of
Agent or the Lenders hereunder or (iv) the failure by Debtor to perform or
observe any of the provisions hereof.  Any such amounts so made shall be a part
of the Obligation, shall be payable upon demand, and if not paid upon demand
shall bear interest at the Default Rate in effect under the Credit Facility.

                                   ARTICLE V

                                 MISCELLANEOUS
                                 -------------

     5.01.  Cumulative Rights.  All Rights of Agent and the Lenders under the
Loan Documents are cumulative of each other and of every other Right which Agent
or the Lenders may otherwise have at Law or in equity or under any other
contract or other writing for the enforcement of the security interest herein or
the collection of the Obligations.  The exercise of one or more Rights shall not
prejudice or impair the concurrent or subsequent exercise of other Rights.

     5.02.  Modifications; Amendments; Schedules; Etc.  No amendment or waiver
of any provision of this Security Agreement, and no consent to any departure by
Debtor herefrom, shall in any event be effective unless the same shall be in
writing and signed by Agent, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
Upon any change in any information disclosed on any Schedule hereto, Debtor
shall promptly prepare and deliver to Agent a replacement schedule, indicating
its effective date, in form and substance satisfactory to Agent, and amendments
to and additional financing statements as Agent may require to preserve and
perfect a first priority security interest in the Collateral.

     5.03.  Continuing Security Interest.  This Security Agreement shall create
a continuing security interest in the Collateral and shall remain in full force
and effect until the later of (i) the final payment in full of the Obligations
and all amounts payable under this Security Agreement and (ii) the expiration or
termination of the obligations of the Lenders to extend

                                                                        Page 15
<PAGE>
 
credit to Debtor. Upon any such termination, Agent will, at Debtor's expense,
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence such termination.

     5.04.  GOVERNING LAW; TERMS. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,  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 TEXAS.  UNLESS OTHERWISE DEFINED
HEREIN OR IN THE AGREEMENT, TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN
AS THEREIN DEFINED.

     5.05  ARBITRATION.  ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES
HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT OR ANY RELATED NOTES OR INSTRUMENTS, INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OR JUDICIAL ARBITRATION AND MEDIATION
SERVICES, INC. (J.A.M.S.) AND THE "SPECIAL RULES" SET FORTH BELOW.  IN THE EVENT
OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL.  JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.  ANY PARTY TO
THE SECURITY AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS
SECURITY AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.

     (A) SPECIAL RULES.  THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
BORROWER'S DOMICILE AT THE TIME OF THE SECURITY AGREEMENT'S EXECUTION AND
ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR.  IF J.A.M.S. IS UNABLE
OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN
ARBITRATION ASSOCIATION WILL SERVE.  ALL ARBITRATION HEARINGS WILL BE COMMENCED
WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION;  FURTHER, THE ARBITRATOR SHALL
ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH
HEARING FOR AN ADDITIONAL 60 DAYS.

     (B) RESERVATION OF RIGHTS. NOTHING IN THIS SECURITY AGREEMENT SHALL BE
DEEMED TO (1) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS

                                                                        Page 16
<PAGE>
 
CONTAINED IN THIS SECURITY AGREEMENT; OR (II) BE A WAIVER BY THE LENDERS OF THE
PROTECTION AFFORDED TO IT BY 12. U.S.C. (S)91 OR ANY SUBSTANTIALLY EQUIVALENT
STATE LAW; OR (III) LIMIT THE RIGHT OF THE LENDERS HERETO (A) TO EXERCISE SELF
HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSURE AGAINST
ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT
PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE
RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE LENDERS MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSURE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS SECURITY AGREEMENT. NEITHER THE
EXERCISE OR SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION
FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER
OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH ACTION, TO ARBITRATE
THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.

     5.06   WAIVER OF JURY TRIAL.  DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.

     5.07.  Right to Use Agents.  Agent and the Lenders may exercise their
Rights under or with respect to this Security Agreement through an agent,
representative, attorney or other designee.

     5.08.  No Interference, Compensation or Expense.  Agent and the Lenders may
exercise their Rights under or with respect to this Security Agreement (a)
without resistance or interference by Debtor and (b) without payment of any
license fee or compensation of any kind to Debtor.

     5.09.  Waivers of Rights Inhibiting Enforcement.  Debtor waives (a) any
claim that a public sale, in and of itself, of all or any part of the Collateral
is not a commercially reasonable method of sale for such Collateral, (b) except
as otherwise provided in this Security Agreement, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY SUCH RIGHT THAT DEBTOR WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND ALL OTHER
REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF SALE WITH RESPECT TO THE
ENFORCEMENT OF AGENT'S AND ALL OTHER RIGHTS HEREUNDER and (c) all rights of
redemption, appraisal or valuation.


                                                                        Page 17
<PAGE>
 
     5.10.  Notices and Deliveries.

     (a) Manner of Delivery.  All notices, communications and materials to be
given or delivered pursuant to this Security Agreement shall be delivered in
accordance with Section 10.2 of the Agreement.
                ------------                  

     5.11.  ENTIRE AGREEMENT.  THIS SECURITY AGREEMENT, TOGETHER WITH THE OTHER
LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES.

     5.12.  Successors and Assigns.  All of the provisions of this Security
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns as and to the extent provided in the
Agreement.

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

     5.14.  Severability.  If any provision of this Security Agreement is held
to be illegal, invalid, or unenforceable under present or future Laws during the
term hereof, such provision shall be fully severable, this Security Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof, and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.  Furthermore,
in lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Security Agreement a legal, valid, and
enforceable provision as similar in terms to the illegal, invalid, or
unenforceable provision as may be possible.

     5.15.  Counterparts.  This Security Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.


                                                                        Page 18
<PAGE>
 
     IN WITNESS WHEREOF, Debtor and Agent have duly executed and delivered this
Security Agreement effective as of the date first above written.

                         DEBTOR:

                         TRAVIS BOATS & MOTORS, INC., a Texas corporation,
                         TRAVIS SNOWDEN MARINE, INC., A Texas corporation,
                         TRAVIS BOATING CENTER ARLINGTON, INC., a Texas
                         corporation, FALCON MARINE, INC., a Texas corporation,
                         FALCON MARINE ABILENE, INC., a Texas corporation,
                         TRAVIS BOATING CENTER BEAUMONT, INC., a Texas
                         corporation, TRAVIS BOATING CENTER TENNESSEE, INC., a
                         Texas corporation, TRAVIS BOATING CENTER ALABAMA, INC.,
                         a Texas corporation, TRAVIS BOATING CENTER GEORGIA,
                         INC., a Texas corporation and TRAVIS BOATING CENTER
                         FLORIDA, INC., a Texas corporation

                         By:    /s/ Mark T. Walton
                                ------------------------------------------------
                         Name:  Mark T. Walton
                         Title: President

                         TRAVIS BOATS & MOTORS BATON ROUGE, INC., a Louisiana
                         corporation and TRAVIS BOATING CENTER LOUISIANA, INC.,
                         a Louisiana corporation

                         By:    /s/ Mark T. Walton
                                ------------------------------------------------
                         Name:  Mark T. Walton
                         Title: President

                         TBC ARKANSAS, INC., an Arkansas corporation, RED RIVER
                         MARINE ARKANSAS, INC., a Arkansas corporation and
                         TRAVIS BOATING CENTER LITTLE ROCK, INC., a Arkansas
                         corporation

                         By:    /s/ Mark T. Walton
                                ------------------------------------------------
                         Name:  Mark T. Walton
                         Title: President



                                                                        Page 19
<PAGE>
 
                           TBC MANAGEMENT, INC., a Delaware corporation

                           By:    /s/ Mark T. Walton
                                  ----------------------------------------------
                           Name:  Mark T. Walton
                           Title: President

                           TBC MANAGEMENT, LTD., a Texas limited partnership

                                By: TRAVIS BOATS & MOTORS, INC., a Texas
                                    corporation, as General Partner


                                By:    /s/ Mark T. Walton
                                       -----------------------------------------
                                Name:  Mark T. Walton
                                Title: President
 
 
Address of Agent:               AGENT:
 
NationsBank Plaza               NATIONSBANK OF TEXAS, N.A., as Agent for
300 Convent Street              the Lenders
San Antonio, Texas 78205
Attention:  Commercial Banking  By:    /s/ R. Mark Bearfield
            Department                 -----------------------------------------
Telecopy No.: (210) 270-5374    Name:  R. Mark Bearfield 
                                Title: Vice President    






                                                                        Page 20
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                          EXISTING SECURITY AGREEMENTS

A.   WITH NATIONSBANK OF TEXAS, N.A. AS LENDER

1.   Security Agreement dated May 29, 1992 by and between Travis Boats & Motors,
     Inc., Falcon Marine, Inc. and Falcon Marine Abilene, Inc., as Debtor, and
     NationsBank of Texas, N.A., as Secured Party, with the collateral being
     described therein.

2.   Security Agreement dated June 30, 1992 by and between Travis Boats &
     Motors, Inc., Falcon Marine, Inc. and Falcon Marine Abilene, Inc., as
     Debtor, and NationsBank of Texas, N.A., as Secured Party, with the
     collateral being described therein.

3.   Security Agreement dated June 21, 1993 by and between Travis Snowden
     Marine, Inc., as Debtor, and NationsBank of Texas, N.A., as Secured Party,
     with the collateral being described therein.

4.   Security Agreement dated July 30, 1993 by and between Travis Boats &
     Motors, Inc., Falcon Marine, Inc., Falcon Marine Abilene, Inc. and Travis
     Snowden Marine, Inc., as Debtor, and NationsBank of Texas, N.A., as Secured
     Party, with the collateral being described therein.

5.   Security Agreement dated December 6, 1993 by and between Travis Boats &
     Motors, Inc., Falcon Marine, Inc., Falcon Marine Abilene, Inc., Travis
     Snowden Marine, Inc. and Travis Boating Center Beaumont, Inc., as Debtor,
     and NationsBank of Texas, N.A., as Secured Party, with the collateral being
     described therein.

6.   Security Agreement dated January 7, 1995 by and between Travis Boats &
     Motors, Inc., Falcon Marine, Inc, Falcon Marine Abilene, Inc., Travis
     Snowden Marine, Inc., Travis Boating Center Beaumont, Inc. and Travis
     Boating Center Arlington, Inc., as Debtor, and NationsBank of Texas, N.A.,
     as Secured Party, with the collateral being described therein.

7.   Security Agreement dated July 31, 1995 by and between Travis Boats &
     Motors, Inc., Falcon Marine, Inc., Falcon Marine Abilene, Inc., Travis
     Snowden Marine, Inc., Travis Boating Center Beaumont, Inc., Travis Boating
     Center Arlington, Inc., as Debtor, and NationsBank of Texas, N.A., as
     Secured Party, with the collateral being described therein.

8.   Security Agreement dated January 26, 1996 by and between Travis Boats &
     Motors, Inc., as Debtor, and NationsBank of Texas, N.A., as Secured Party,
     with the collateral being described therein.
<PAGE>
 
B.   WITH HIBERNIA NATIONAL BANK AS LENDER

1.   Commercial Security Agreement dated November 24, 1994 by and between Travis
     Boats and Motors Baton Rouge, Inc. d/b/a Baton Rouge Boating Centre, as
     Borrower, and Hibernia National Bank, as Lender, with the collateral being
     described therein.

2.   Commercial Security Agreement dated September 1, 1995 by and between TBC
     Arkansas, Inc., as Borrower, and Hibernia National Bank, as Lender, with
     the collateral being described therein.

3.   Commercial Security Agreement dated November 30, 1995 by and between Travis
     Boating Center Louisiana, Inc., as Borrower, and Hibernia National Bank, as
     Lender, with the collateral being described therein.
<PAGE>
 
                                   SCHEDULE 1
                                   ----------

                              Collateral Locations
<TABLE>
<CAPTION>
 
                                                                      CHIEF EXECUTIVE     
                                                                      OFFICE AND LOCATION 
                               BUSINESS STORAGE AND                   OF MATERIAL RECORDS 
COMPANY                        DISTRIBUTION LOCATIONS                 AND BOOKS OF ACCT.  
<S>                            <C>                                    <C>                 
Travis Boats & Motors, Inc.    13045 Research Blvd.                   13045 Research Blvd.
                               Austin, Texas 78750                    Austin, Texas 78750 
                                                                                          
Travis Boats & Motors, Inc.    12300 IH 10 West                       13045 Research Blvd.
                               San Antonio, Texas 78230               Austin, Texas 78750 
                                                                                          
Travis Boats & Motors, Inc.    7530 North Freeway                     13045 Research Blvd.
                               Houston, Texas 77037                   Austin, Texas 78750 
                                                                                          
Travis Snowden Marine, Inc.    1320 S. Stemmons                       13045 Research Blvd.
                               Lewisville, Texas 75067                Austin, Texas 78750 
                                                                                          
Travis Boating Center          1725 W. Division                       13045 Research Blvd.
 Arlington, Inc.               Arlington, Texas 76012                 Austin, Texas 78750  
                                                                                          
Falcon Marine, Inc.            1920 North Loop 250 W.                 13045 Research Blvd.
                               Midland, Texas 79707                   Austin, Texas 78750 
                                                                                          
Falcon Marine Abilene, Inc.    1021 E. Highway 80                     13045 Research Blvd.
                               Abilene, Texas 79601                   Austin, Texas 78750 
                                                                                          
Travis Boating Center          7660 College Street                    13045 Research Blvd.
 Beaumont, Inc.                Beaumont, Texas 77707                  Austin, Texas 78750 
                                                                                          
Travis Boats & Motors Baton    14369 Florida Blvd.                    13045 Research Blvd.
 Rouge, Inc.                   Baton Rouge, Louisiana 70819           Austin, Texas 78750 
                                                                                          
TBC Arkansas, Inc.             2001 Hwy. 25 North                     13045 Research Blvd.
                               Heber Springs, Arkansas 72543          Austin, Texas 78750 
                                                                                          
TBC Arkansas, Inc.             3034 Albert Pike                       13045 Research Blvd.
                               Hot Springs, Arkansas 71913            Austin, Texas 78750 
                                                                                          
TBC Management, Ltd.,          13045 Research Blvd.                   13045 Research Blvd.
                               Austin, Texas 78750                    Austin, Texas 78750 
                                                                                          
TBC Management, Inc.           1209 Orange Street                     1209 Orange Street   
                               Wilmington, Delaware  19801-1134       Wilmington, Delaware 19801-1134

Travis Boating Center          1700 East Main Street                  13045 Research Blvd.
 Louisiana, Inc.               New Iberia, Louisiana 70560            Austin, Texas 78750 
                                                                                          
Travis Boating Center          38 Marina Lane                         13045 Research Blvd.
 Tennessee, Inc.               Winchester, Tennessee 37398            Austin, Texas 78750 
                                                                                          
</TABLE>
<PAGE>
 
                                   SCHEDULE 1
                                   ----------

                          Collateral Locations (cont.)
<TABLE>
 
<S>                              <C>                                  <C> 
Travis Boating Center Alabama,   2006 Fisher Street                   13045 Research Blvd.
 Inc.                            Huntsville, Alabama 35803            Austin, Texas 78750 
                                                                                          
Travis Boating Center Alabama,   Route 7, Box 1                       13045 Research Blvd.
 Inc.                            Florence, Alabama 35630              Austin, Texas 78750 
                                                                                          
Red River Marine Arkansas, Inc.                                       13045 Research Blvd.
                                                                      Austin, Texas 78750

Travis Boating Center Little Rock, Inc.                               13045 Research Blvd.
                                                                      Austin, Texas 78750 
                                                                                          
Travis Boating Center Georgia, Inc.                                   13045 Research Blvd.
                                                                      Austin, Texas 78750 
                                                                                          
Travis Boating Center Florida, Inc.                                   13045 Research Blvd. 
</TABLE> 
<PAGE>
 
                                   SCHEDULE 2
                                   ----------

                                  Trade Names

                                        
--------------------------------------------------------------------------------

The following trade names are used by Debtor:

Travis Boating Center

Red River Marine

Baton Rouge Boating Centre