3. **Assurances; Covenants.**Debtor hereby agrees that:a. The Debtor covenants to the Secured Party that except for the security interest granted tothe Secured Party by this Security Agreement: (i) the Collateral is and will be free of all liensand security interests of every kind and nature, except as may have been the result of actions ofthe Secured Party; (ii) the Debtor will not assign, transfer, sell, convey, hypothecate, pledge, orin any other way dispose of or encumber the Collateral while this Security Agreement is in effect;and (iii) the Debtor will warrant and defend the Collateral and the Secured Party’s securityinterest against the claims and demands of all persons.b. Debtor will not, without the prior written consent of Secured Party, borrow from anyone onthe security of the Collateral, or otherwise permit any liens, encumbrances, security interests, oradverse claims against the Collateral, and will not permit the Collateral to be levied upon underany legal process.c. Debtor will not, without the prior written consent of Secured Party, sell, transfer,assign, deliver, trade, lease, license, grant any other security interest in, rent, secrete, orotherwise dispose of all or any part of the Collateral (other than accounts and inventory, whichmay be sold only in the ordinary course of business), or permit anything to be done that may impairthe value of the Collateral.d. Debtor authorizes Secured Party to file financing statements, including amendments orcontinuations thereof, describing the Collateral, and from time to time at the request of SecuredParty, will execute such other documents, and will do such other acts and things, all as SecuredParty may reasonably request, to establish and maintain a valid perfected security interest in theCollateral (free of all other liens and claims whatsoever) and to enable Secured Party to enforceits rights and remedies hereunder with respect to the Collateral.4. **Representations and Warranties.**Debtor represents and warrants to Secured Party as follows:a. Debtor is a corporation duly organized, validly existing, and in good standing and activestatus under the laws of the state of Delaware;b. Debtor has all requisite power to own and operate its properties and to carry on itsbusiness as now being conducted, and has all necessary rights to conduct its business;c. Debtor has the power, authority, and legal right to execute and deliver this SecurityAgreement, and to perform its obligations hereunder, and has taken all action necessary toauthorize the execution, delivery, and performance of this Security Agreement and to authorize thetransactions contemplated hereby;d. The execution, delivery, and performance by Debtor of this Security Agreement will not (i)contravene, conflict with, result in the breach of, or constitute a violation of or default underthe organizational documents of Debtor, any applicable law, rule, regulation, judgment, order,writ, injunction, or decree of any court or governmental authority, or any agreement or instrumentto which Debtor is a party or by which Debtor or its property may be bound or affected, or (ii)result in the creation of any lien, charge, or encumbrance upon any property or assets of Debtorpursuant to any of the foregoing, except the liens created by this Security Agreement;
 
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e. This Security Agreement constitutes a legal, valid, and binding agreement enforceableagainst the Debtor and the Collateral in accordance with its terms and, without limiting theforegoing, this Security Agreement grants Secured Party a valid, perfected security interest in theCollateral; andf. Debtor is the owner of the Collateral free and clear of all liens, encumbrances, securityinterests, and adverse claims whatsoever, except in respect of the security interest granted inthis Security Agreement.5. **Default.**Each of the following shall, after receipt by Debtor of written notice fromSecured Party and after a cure period of five (5) business days with respect to Section 5(a) below,and thirty (30) days with respect to Sections 5(b) through 5(d) below, constitute an event ofdefault under this Security Agreement (each, an “Event of Default”):a. The occurrence of a default under the Note, or a breach of the assurances set forth inSection 3 of this Security Agreement, or any other Liability is not paid when due (and suchnonpayment continues beyond the expiration of any applicable grace or cure period);b. Any representation or warranty made by any Debtor under this Security Agreement or anyreport, certificate, financial statement, or other information provided by any Debtor to SecuredParty in connection herewith is false or misleading in any material respect when made or deemedmade; andc. Any Debtor fails to fully and promptly perform when due any agreement or covenant underthis Security Agreement or any related document (and such failure continues beyond the expirationof any applicable grace or cure period).In the event that Debtor substantially cures such default within the applicable cure period, suchdefault shall not constitute an Event of Default.6. **Remedies in the Event of a Default.**a. In an Event of Default under this Security Agreement, the Secured Party will have the rightat any time and from time to time, without further notice or demand to any Debtor to exercise therights and remedies upon default that are granted to a secured party under the Uniform CommercialCode and/or that are otherwise available to Secured Party under this Security Agreement, the Note,or otherwise available to secured creditors at law and/or in equity under applicable law, includingwithout limitation:(i) Enforce any Debtor’s rights against account debtors and notify any and all account debtorsor other parties against which any Debtor has a claim under the Collateral that such Collateral hasbeen assigned by Debtor and that Secured Party has a security interest therein and, if desired bySecured Party, that all payments should be made to Secured Party;(ii) Receive and endorse the name of any Debtor upon any instruments of payment (includingpayments made under any policy of insurance) that may come into the possession of Secured Party;
 
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(iii) Sell, assign, demand, sue for, collect, compromise, or settle payment of all or any partof the Collateral in the name of any Debtor or in its own name, or make any other disposition ofthe Collateral, or any part thereof, which disposition may be for cash, credit, or any combinationthereof, or make exchanges, substitutions, surrenders, or discharges of any of the Collateral;(iv) Purchase all or any part of the Collateral at public or, if permitted by law, privatesale, and in lieu of actual payment of such purchase price, to set off the amount of such priceagainst the Liabilities; and(v) Do all things that Secured Party may reasonably deem necessary or advisable to accomplishthe purposes of this Security Agreement;granting to Secured Party, as the attorney-in-fact of Debtor, full power of substitution and fullpower to do any and all things necessary to be done in and about the premises as fully andeffectually as any Debtor might or could do but for this appointment, and hereby ratifying all thatsaid attorney-in-fact shall lawfully do or cause to be done by virtue of this Security Agreement.This power of attorney is coupled with an interest and shall be irrevocable until the Liabilitieshave been paid in full and all commitments to lend have been terminated.b. Upon the occurrence of an Event of Default:(i) Secured Party may direct the disposition of the Collateral and any other collateral forthe Liabilities, in such order or manner as Secured Party may in its sole discretion determine;(ii) Secured Party shall have the right to enter and remain upon the premises of Debtor,without any obligation to pay rent to any Debtor or others, or any other place or places where anyof the Collateral is located or kept, and: (1) remove Collateral therefrom, in order to maintain,sell, collect, and liquidate the Collateral; or (2) use such premises, together with materials,supplies, books, and records of Debtor, to maintain possession of and the condition of theCollateral, and to prepare the Collateral for selling, liquidating, or collecting.(iii) Secured Party may require Debtor, at Debtor’s expense, to assemble the Collateral andmake it available to Secured Party at a place to be designated by Secured Party which is reasonablyconvenient to both parties.c. The net proceeds realized by Secured Party upon a sale or other disposition of theCollateral, or any part thereof, after deduction of the expenses of retaking, holding, preparingfor sale, selling or the like, and reasonable attorneys’ fees and other expenses incurred bySecured Party, shall, be applied to payment of (or held as a reserve against) the Liabilities,whether or not then due, and in such order of application as Secured Party may from time to timeelect.
 
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7. **Termination.**This Security Agreement and the security interest granted pursuant to thisSecurity Agreement shall terminate when all the Liabilities have been paid in full. Upon suchtermination, the Secured Party will deliver all the appropriate executed Form UCC-3s to the Debtornecessary to terminate all effective financing statements in the Secured Party’s favor that arethen on file or recorded with respect to the collateral described in this Security Agreement.8. **Right to Inspect.**If Debtor is in default under this Security Agreement, the Debtor willpermit representatives of the Secured Party to have full access to all premises, properties, books,records, tax records, or documents of or pertaining to the Collateral in order to enable theSecured Party to have access to the Collateral and the premises, properties, books, records, taxrecords and documents related thereto.9. **Assignment.**Neither this Security Agreement nor any of the rights, interests, orobligations arising under this Security Agreement may be assigned by either party, without theprior written consent of the other party hereto. Subject to the foregoing, this Security Agreementshall be binding upon and inure to the benefit of Secured Party, its successors and assigns, andshall be binding upon Debtor and its heirs, legal representatives, successors, and assigns andshall bind all persons who become bound as a Debtor to this Security Agreement.10. **Binding Effect.**This Security Agreement shall inure to the benefit of and be binding uponthe Secured Party’s permitted successors and assigns, and shall inure to the benefit of and bebinding upon Debtor’s permitted successors and assigns.11. **Severability.**Any provision of this Security Agreement which is prohibited orunenforceable in any jurisdiction shall, as to such jurisdiction only, be ineffective only to theextent of such prohibition or unenforceability without invalidating the remaining provisions ofthis Security Agreement or affecting the validity or enforceability of such provision in any otherjurisdiction. If any provision of this Security Agreement is so broad as to be unenforceable, theprovision shall be interpreted to be only so broad as is enforceable.12. **Titles.**The titles and headings preceding the text of the sections of this SecurityAgreement have been inserted solely for convenience of reference and do not constitute a part ofthis Security Agreement or affect its meaning, interpretation, or effect.13. **Waiver.**The failure of either party to insist in any one or more instances uponperformance of any terms or conditions of this Security Agreement shall not be construed as awaiver of future performance of any such term, covenant, or condition, and the obligations ofeither party with respect to such term, covenant, or condition shall continue in full force andeffect.14. **Entire Agreement.**This Security Agreement contains the final, complete, and exclusiveexpression of the understanding of the Debtor and the Secured Party with respect to thetransactions contemplated in this Security Agreement, and supersedes any prior or othercontemporaneous agreement or representation by or between the parties related to the subject matterof this Security Agreement.15. **Amendment.**This Security Agreement may not be amended, modified, or changed in any respectexcept by an agreement in writing signed by the Debtor and the Secured Party, and any waiver byeither party of any requirement pursuant to this Security Agreement shall be in writing.
 
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16. **Notices.**All notices, requests, demands, claims and other communications under thisSecurity Agreement will be in writing. Any notice, request, demand, claim or other communicationunder this Security Agreement shall be deemed duly given if it is sent: (a) by personal delivery,or (b) by commercial delivery or overnight courier service that requires a signature as evidence ofdelivery, and, in each case, addressed to the intended recipient as set forth below, or to anyother or additional persons and addresses as the Parties may from time to time designate in awriting delivered in a writing in accordance with this Section 16:If to the Secured Party:Blue Moon Energy Partners LLC