<PAGE>

                                                                   EXHIBIT 10(d)

                     SECURITY AGREEMENT
[COMERICA BANK LOGO] (All Assets)

As of October 30, 2003, for value received, the undersigned ("Debtor") pledges,
assigns and grants to Comerica Bank ("Bank"), whose address is P. O. Box 650282,
Dallas, Texas 75265-0282, Attention: Deborah T. Purvin, Mail Code 6525, a
continuing security interest and lien (any pledge, assignment, security interest
or other lien arising hereunder is sometimes referred to herein as a "security
interest") in the Collateral (as defined below) to secure payment when due,
whether by stated maturity, demand, acceleration or otherwise, of all existing
and future indebtedness ("Indebtedness") to the Bank of Debtor. Indebtedness
includes without limit any and all obligations or liabilities of the Debtor to
the Bank, whether absolute or contingent, direct or indirect, voluntary or
involuntary, liquidated or unliquidated, joint or several, known or unknown,
originally payable to the Bank or to a third party and subsequently acquired by
the Bank including, without limitation, any late charges, loan fees or charges,
and overdraft indebtedness, any and all obligations or liabilities for which the
Debtor would otherwise be liable to the Bank were it not for the invalidity or
unenforceability of them by reason of any bankruptcy, insolvency or other law,
or for any other reason; any and all amendments, modifications, renewals and/or
extensions of any of the above; all reasonable costs incurred by Bank in
establishing, determining, continuing, or defending the validity or priority of
any security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Debtor or in connection
with any proceeding involving Bank as a result of any financial accommodation to
Debtor; and all other costs of collecting Indebtedness, including without limit
attorneys' fees. Debtor agrees to pay Bank all such costs incurred by the Bank,
immediately upon demand in writing, accompanied by reasonable detail and
explanation, and, following such written demand and reasonable explanation,
until paid all costs shall bear interest at the highest per annum rate
applicable to any of the Indebtedness, but not in excess of the maximum rate
permitted by law. Any reference in this Agreement to attorneys' fees shall be
deemed a reference to reasonable fees, costs, and expenses of both in-house and
outside counsel and paralegals, whether inside or outside counsel is used,
whether or not a suit or action is instituted, and to court costs if a suit or
action is instituted, and whether attorneys' fees or court costs are incurred at
the trial court level, on appeal, in a bankruptcy, administrative or probate
proceeding or otherwise.

Debtor further covenanats, agrees, represents and warrants as follows:

1.       COLLATERAL shall mean all personal property of Debtor including,
         without limitation, all of the following property Debtor now or later
         owns or has an interest in, wherever located :

         (a)      all Accounts Receivable (for purposes of this Agreement,
                  "Accounts Receivable" consists of all accounts, general
                  intangibles, chattel paper (including without limit electronic
                  chattel paper and tangible chattel paper), contract rights,
                  deposit accounts, documents, instruments and rights to payment
                  evidenced by chattel paper, documents or instruments, health
                  care insurance receivables, commercial tort claims, letters of
                  credit, letter of credit rights, supporting obligations, and
                  rights to payment for money or funds advanced or sold),

         (b)      all Inventory,

         (c)      all Equipment and Fixtures,

         (d)      all Software (for purposes of this Agreement "Software"
                  consists of all (i) computer programs and supporting
                  information provided in connection with a transaction relating
                  to the program, and (ii) computer programs embedded in goods
                  and any supporting information provided in connection with a
                  transaction relating to the program whether or not the program
                  is associated with the goods in such a manner that it
                  customarily is considered part of the goods, and whether or
                  not, by becoming the owner of the goods, a person acquires a
                  right to use the program in connection with the goods, and
                  whether or not the program is embedded in goods that consist
                  solely of the medium in which the program is embedded),

         (e)      all investment property (including, without limitation,
                  securities, securities entitlements and financial assets);

         (f)      specific items listed below and/or on attached Schedule A, if
                  any, is/are also included in Collateral:

                  ______________________________________________________________

                  ______________________________________________________________

                  ______________________________________________________________

         (g)      all goods, instruments (including, without limit, promissory
                  notes), documents (including, without limit, negotiable
                  documents), policies and certificates of insurance, deposit
                  accounts, and money or other property (except real property
                  which is not a fixture) which are now or later in possession
                  or control of Bank, or as to which Bank now or later controls
                  possession by documents or otherwise, and

         (h)      all additions, attachments, accessions, parts, replacements,
                  substitutions, renewals, interest, dividends, distributions,
                  rights of any kind (including but not limited to stock splits,
                  stock rights, voting and preferential rights), products, and
                  proceeds of or pertaining to the above including, without
                  limit, cash or other property which were proceeds and are
                  recovered by a bankruptcy trustee or otherwise as a
                  preferential transfer by Debtor.

         In the definition of Collateral, a reference to a type of collateral
         shall not be limited by a separate reference to a more specific or
         narrower type of that collateral.

2.       WARRANTIES, COVENANTS AND AGREEMENTS. Debtor warrants, covenants and
         agrees as follows:

         2.1      Debtor shall furnish to Bank such information and reports as
                  are required to be delivered under that certain Credit
                  Agreement of even date herewith (the "Credit Agreement") by
                  and between Debtor and Bank, and shall allow Bank to examine,
                  inspect, and copy any of Debtor's books and records as
                  provided in the Credit Agreement. Debtor shall, at the request
                  of Bank, mark its records and the Collateral clearly to
                  indicate the security interest of Bank under this Agreement.

         2.2      At the time any Collateral becomes, or is represented to be,
                  subject to a security interest in favor of Bank, Debtor shall
                  be deemed to have warranted that (a) Debtor is the lawful
                  owner of the Collateral and has the right and authority to
                  subject it to a security interest granted to Bank; (b) none of
                  the Collateral is subject to any security interest, except for
                  a Permitted Encumbrance (as defined in the Credit Agreement),
                  other than that in favor of Bank; (c) there are no financing
                  statements on file, except with respect

                                       1

<PAGE>

                  to Permitted Encumbrances, other than in favor of Bank; (d) no
                  person, other than Bank, has possession or control (as defined
                  in the Uniform Commercial Code) of any Collateral, except with
                  respect to Permitted Encumbrances, of such nature that
                  perfection of a security interest may be accomplished by
                  control; and (e) Debtor acquired its rights in the Collateral
                  in the ordinary course of its business.

         2.3      Debtor will keep the Collateral free at all times from all
                  claims, liens, security interests and encumbrances other than
                  those in favor of Bank and Permitted Encumbrances. Debtor will
                  not, without the prior written consent of Bank, sell,
                  transfer, lease or grant control to any person other than Bank
                  over, or permit to be sold, transferred, leased or controlled
                  (by a person other than Bank), any or all of the Collateral,
                  except for Inventory in the ordinary course of its business
                  and will not return any Inventory to its supplier. Bank or its
                  representatives may inspect the Collateral as provided in the
                  Credit Agreement, and, in connection with such inspections,
                  may enter upon all premises where the Collateral is kept or
                  might be located.

         2.4      Debtor will do all acts and will execute or cause to be
                  executed all writings requested by Bank to establish, maintain
                  and continue an exclusive, perfected and first security
                  interest of Bank in the Collateral. Debtor agrees that Bank
                  has no obligation to acquire or perfect any lien on or
                  security interest in any asset(s), whether realty or
                  personalty, to secure payment of the Indebtedness, and Debtor
                  is not relying upon assets in which the Bank may have a lien
                  or security interest for payment of the Indebtedness.

         2.5      Debtor will pay within the time that they can be paid without
                  interest or penalty all taxes, assessments and similar charges
                  which at any time are or may become a lien, charge, or
                  encumbrance upon any Collateral, except to the extent
                  contested in good faith and bonded in a manner satisfactory to
                  Bank. If Debtor fails to pay any of these taxes, assessments,
                  or other charges in the time provided above, Bank has the
                  option (but not the obligation) to do so, and Debtor agrees to
                  repay all amounts so expended by Bank immediately upon demand
                  in writing, accompanied by reasonable detail and explanation,
                  together with interest at the highest lawful default rate
                  which could be charged by Bank on any Indebtedness.

         2.6      Debtor will keep the Collateral in operating condition, and
                  will protect it from loss, damage, or deterioration from any
                  cause. Debtor has and will maintain at all times (a) with
                  respect to the Collateral, insurance under an "all risk"
                  policy against fire and other risks customarily insured
                  against, and (b) public liability insurance and other
                  insurance as may be required by law or reasonably required by
                  Bank, all of which insurance shall be in amount, form and
                  content, and written by companies as may be satisfactory to
                  Bank, containing a lender's loss payable endorsement
                  acceptable to Bank. Debtor will deliver to Bank immediately
                  upon demand evidence satisfactory to Bank that the required
                  insurance has been procured. If Debtor fails to maintain
                  satisfactory insurance, Bank has the option (but not the
                  obligation) to do so and Debtor agrees to repay all amounts so
                  expended by Bank immediately upon demand in writing,
                  accompanied by reasonable detail and explanation, together
                  with interest at the Maximum Legal Rate (as defined in the
                  Credit Agreement).

         2.7      On each occasion on which Debtor evidences to Bank the account
                  balances on and the nature and extent of the Accounts
                  Receivable, Debtor shall be deemed to have warranted that
                  except as otherwise indicated (a) each of those Accounts
                  Receivable is valid and enforceable without performance by
                  Debtor of any act; (b) each of those account balances are in
                  fact owing, (c) there are no setoffs, recoupments, credits,
                  contra accounts, counterclaims or defenses against any of
                  those Accounts Receivable, (d) as to any Accounts Receivable
                  represented by a note, trade acceptance, draft or other
                  instrument or by any chattel paper or document, the same have
                  been endorsed and/or delivered by Debtor to Bank, (e) Debtor
                  has not received with respect to any Account Receivable, any
                  notice of the death of the related account debtor, or of the
                  dissolution, liquidation, termination of existence,
                  insolvency, business failure, appointment of a receiver for,
                  assignment for the benefit of creditors by, or filing of a
                  petition in bankruptcy by or against, the account debtor, and
                  (f) as to each Account Receivable, except as may be expressly
                  permitted by Bank to the contrary in another document, the
                  account debtor is not an affiliate of Debtor, the United
                  States of America or any department, agency or instrumentality
                  of it, or a citizen or resident of any jurisdiction outside of
                  the United States. Debtor will do all acts and will execute
                  all writings requested by Bank to perform, enforce performance
                  of, and collect all Accounts Receivable. Debtor shall neither
                  make nor permit any modification, compromise or substitution
                  for any Account Receivable without the prior written consent
                  of Bank. Debtor shall, at Bank's request, arrange for
                  verification of Accounts Receivable directly with account
                  debtors or by other methods acceptable to Bank.

         2.8      Debtor at all times shall be in material compliance with all
                  applicable laws, including without limit any laws, ordinances,
                  directives, orders, statutes, or regulations an object of
                  which is to regulate or improve health, safety, or the
                  environment ("Environmental Laws").

         2.9      If Bank, acting in its sole discretion, redelivers Collateral
                  to Debtor or Debtor's designee for the purpose of (a) the
                  ultimate sale or exchange thereof; or (b) presentation,
                  collection, renewal, or registration of transfer thereof; or
                  (c) loading, unloading, storing, shipping, transshipping,
                  manufacturing, processing or otherwise dealing with it
                  preliminary to sale or exchange; such redelivery shall be in
                  trust for the benefit of Bank and shall not constitute a
                  release of Bank's security interest in it or in the proceeds
                  or products of it unless Bank specifically so agrees in
                  writing. If Debtor requests any such redelivery, Debtor will
                  deliver with such request a duly executed financing statement
                  in form and substance satisfactory to Bank. Any proceeds of
                  Collateral coming into Debtor's possession as a result of any
                  such redelivery shall be held in trust for Bank and
                  immediately delivered to Bank for application on the
                  Indebtedness. Bank may (in its sole discretion) deliver any or
                  all of the Collateral to Debtor, and such delivery by Bank
                  shall discharge Bank from all liability or responsibility for
                  such Collateral. Bank, at its option, may require delivery of
                  any Collateral to Bank at any time with such endorsements or
                  assignments of the Collateral as Bank may request.

         2.10     At any time after the occurrence and during the continuance of
                  an Event of Default and without notice, except as required by
                  the Credit Agreement or under applicable law, Bank may (a)
                  cause any or all of the Collateral to be transferred to its
                  name or to the name of its nominees; (b) receive or collect by
                  legal proceedings or otherwise all dividends, interest,
                  principal payments and other sums and all other distributions
                  at any time payable or receivable on account of the
                  Collateral, and hold the same as Collateral, or apply the same
                  to the Indebtedness, the manner and distribution of the
                  application to be in the sole discretion of Bank; (c) enter
                  into any extension, subordination, reorganization, deposit,
                  merger or consolidation agreement or any other agreement
                  relating to or affecting the Collateral, and deposit or
                  surrender control of the Collateral, and accept other property
                  in exchange for the Collateral and hold or apply the property
                  or money so received pursuant to this Agreement; and (d) take
                  such actions in its own name or in Debtor's name as Bank, in
                  its sole discretion, deems necessary or appropriate to
                  establish exclusive control (as defined in the Uniform
                  Commercial Code) over any Collateral of such nature that
                  perfection of the Bank's security interest may be accomplished
                  by control.

         2.11     Bank may assign any of the Indebtedness and deliver any or all
                  of the Collateral to its assignee, as permitted under the
                  Credit Agreement, who then shall have with respect to
                  Collateral so delivered all the rights and powers of Bank
                  under this Agreement, and after that Bank shall be fully
                  discharged from all liability and responsibility with respect
                  to Collateral so delivered.

         2.12     [Intentionally Omitted.]

         2.13     Debtor shall defend, indemnify and hold harmless Bank, its
                  employees, agents, shareholders, affiliates, officers, and
                  directors from and against any and all claims, damages, fines,
                  expenses, liabilities or causes of action of whatever kind (as
                  used in this Section,

                                       2

<PAGE>

                  collectively, the "Indemnified Matters"), including without
                  limit consultant fees, legal expenses, and attorneys' fees,
                  suffered by any of them as a direct or indirect result of any
                  actual or asserted violation of any law, including, without
                  limit, Environmental Laws, or of any remediation relating to
                  any property required by any law, including without limit
                  Environmental Laws, INCLUDING ANY CLAIMS, DAMAGES, FINES,
                  EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND
                  RESULTING FROM BANK'S OWN NEGLIGENCE, except and to the extent
                  (but only to the extent) caused by Bank's gross negligence or
                  wilful misconduct. Upon Bank's receipt of written notice of
                  any such Indemnified Matters, Bank will provide to Debtor
                  notice, in writing accompanied by reasonable detail, of such
                  Indemnified Matters, but any failure by Bank to provide such
                  notice to Debtor shall not impair or otherwise affect the
                  rights of Bank, its employees, agents, shareholders,
                  affiliates, officers, or directors to be indemnified and held
                  harmless under this Section.

3.       COLLECTION OF PROCEEDS.

         3.1      Debtor agrees to collect and enforce payment of all Collateral
                  until Bank, after the occurrence and during the continuance of
                  an Event of Default, shall direct Debtor to the contrary.
                  Immediately upon notice to Debtor by Bank and at all times
                  after that, Debtor agrees to fully and promptly cooperate and
                  assist Bank in the collection and enforcement of all
                  Collateral and to hold in trust for Bank all payments received
                  in connection with Collateral and from the sale, lease or
                  other disposition of any Collateral, all rights by way of
                  suretyship or guaranty and all rights in the nature of a lien
                  or security interest which Debtor now or later has regarding
                  Collateral. Immediately upon and after such notice, Debtor
                  agrees to (a) endorse to Bank and immediately deliver to Bank
                  all payments received on Collateral or from the sale, lease or
                  other disposition of any Collateral or arising from any other
                  rights or interests of Debtor in the Collateral, in the form
                  received by Debtor without commingling with any other funds,
                  and (b) immediately deliver to Bank all property in Debtor's
                  possession or later coming into Debtor's possession through
                  enforcement of Debtor's rights or interests in the Collateral.
                  Debtor irrevocably authorizes Bank or any Bank employee or
                  agent to endorse the name of Debtor upon any checks or other
                  items which are received in payment for any Collateral, and to
                  do any and all things necessary in order to reduce these items
                  to money. Bank shall have no duty as to the collection or
                  protection of Collateral or the proceeds of it, or as to the
                  preservation of any related rights, beyond the use of
                  reasonable care in the custody and preservation of Collateral
                  in the possession of Bank. Debtor agrees to take all steps
                  necessary to preserve rights against prior parties with
                  respect to the Collateral. Nothing in this Section 3.1 shall
                  be deemed a consent by Bank to any sale, lease or other
                  disposition of any Collateral.

         3.2      Debtor agrees that immediately upon Bank's request (if and for
                  so long as an Event of Default exists) the Indebtedness shall
                  be on a "remittance basis" as follows: Debtor shall at its
                  sole expense establish and maintain (and Bank, at Bank's
                  option may establish and maintain at Debtor's expense): (a) an
                  United States Post Office lock box (the "Lock Box"), to which
                  Bank shall have exclusive access and control. Debtor expressly
                  authorizes Bank, from time to time, to remove contents from
                  the Lock Box, for disposition in accordance with this
                  Agreement. Debtor agrees to notify all account debtors and
                  other parties obligated to Debtor that all payments made to
                  Debtor (other than payments by electronic funds transfer)
                  shall be remitted, for the credit of Debtor, to the Lock Box,
                  and Debtor shall include a like statement on all invoices; and
                  (b) a non-interest bearing deposit account with Bank which
                  shall be titled as designated by Bank (the "Cash Collateral
                  Account") to which Bank shall have exclusive access and
                  control. Debtor agrees to notify all account debtors and other
                  parties obligated to Debtor that all payments made to Debtor
                  by electronic funds transfer shall be remitted to the Cash
                  Collateral Account, and Debtor, at Bank's request, shall
                  include a like statement on all invoices. Debtor shall execute
                  all documents and authorizations as required by Bank to
                  establish and maintain the Lock Box and the Cash Collateral
                  Account.

         3.3      All items or amounts which are remitted to the Lock Box, to
                  the Cash Collateral Account, or otherwise delivered by or for
                  the benefit of Debtor to Bank on account of partial or full
                  payment of, or with respect to, any Collateral shall, at
                  Bank's option, (a) be applied to the payment of the
                  Indebtedness, whether then due or not, in such order or at
                  such time of application as Bank may determine in its sole
                  discretion, or, (b) be deposited to the Cash Collateral
                  Account. Debtor agrees that Bank shall not be liable for any
                  loss or damage which Debtor may suffer as a result of Bank's
                  processing of items or its exercise of any other rights or
                  remedies under this Agreement, including without limitation
                  indirect, special or consequential damages, loss of revenues
                  or profits, or any claim, demand or action by any third party
                  arising out of or in connection with the processing of items
                  or the exercise of any other rights or remedies under this
                  Agreement. Debtor agrees to indemnify and hold Bank harmless
                  from and against all such third party claims, demands or
                  actions, and all related expenses or liabilities (as used in
                  this Section, collectively, the "Indemnified Matters"),
                  including, without limitation, attorneys' fees and INCLUDING
                  CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF
                  ACTION OF WHATEVER KIND RESULTING FROM BANK'S OWN NEGLIGENCE
                  except to the extent (but only to the extent) caused by Bank's
                  gross negligence or willful misconduct. Upon Bank's receipt of
                  written notice of any such Indemnified Matters, Bank will
                  provide to Debtor notice, in writing accompanied by reasonable
                  detail, of such Indemnified Matter, but any failure by Bank to
                  provide such notice to Debtor shall not impair or otherwise
                  affect the rights of Bank to be indemnified and held harmless
                  under this Section.

4.       DEFAULTS, ENFORCEMENT AND APPLICATION OF PROCEEDS.

         4.1      Upon the occurrence of any "Event of Default" (as defined in
                  the Credit Agreement and used with the same meaning herein),
                  Debtor shall be in default under this Agreement.

         4.2      Upon the occurrence of any Event of Default, Bank may at its
                  discretion and without prior notice to Debtor declare any or
                  all of the Indebtedness to be immediately due and payable, and
                  shall have and may exercise any right or remedy available to
                  it including, without limitation, any one or more of the
                  following rights and remedies:

                  (a)      Exercise all the rights and remedies upon default, in
                           foreclosure and otherwise, available to secured
                           parties under the provisions of the Uniform
                           Commercial Code and other applicable law;

                  (b)      Institute legal proceedings to foreclose upon the
                           lien and security interest granted by this Agreement,
                           to recover judgment for all amounts then due and
                           owing as Indebtedness, and to collect the same out of
                           any Collateral or the proceeds of any sale of it;

                  (c)      Institute legal proceedings for the sale, under the
                           judgment or decree of any court of competent
                           jurisdiction, of any or all Collateral; and/or

                  (d)      Personally or by agents, attorneys, or appointment of
                           a receiver, enter upon any premises where Collateral
                           may then be located, and take possession of all or
                           any of it and/or render it unusable; and without
                           being responsible for loss or damage to such
                           Collateral, hold, operate, sell, lease, or dispose of
                           all or any Collateral at one or more public or
                           private sales, leasings or other dispositions, at
                           places and times and on terms and conditions as Bank
                           may deem fit, without any previous demand or
                           advertisement; and except as provided in this
                           Agreement, all notice of sale, lease or other
                           disposition, and advertisement, and other notice or
                           demand, any right or equity of redemption, and any
                           obligation of a prospective purchaser or lessee to
                           inquire as to the power and authority of Bank to
                           sell, lease, or otherwise dispose of the Collateral
                           or as to the application by Bank of the proceeds of
                           sale or otherwise, which would otherwise be required
                           by, or available to Debtor under, applicable law are
                           expressly waived by Debtor to the fullest extent
                           permitted.

                                       3

<PAGE>

                  At any sale pursuant to this Section 4.2, whether under the
                  power of sale, by virtue of judicial proceedings or otherwise,
                  it shall not be necessary for Bank or a public officer under
                  order of a court to have present physical or constructive
                  possession of Collateral to be sold. The recitals contained in
                  any conveyances and receipts made and given by Bank or the
                  public officer to any purchaser at any sale made pursuant to
                  this Agreement shall, to the extent permitted by applicable
                  law, conclusively establish the truth and accuracy of the
                  matters stated (including, without limit, as to the amounts of
                  the principal of and interest on the Indebtedness, the accrual
                  and nonpayment of it and advertisement and conduct of the
                  sale); and all prerequisites to the sale shall be presumed to
                  have been satisfied and performed. Upon any sale of any
                  Collateral, the receipt of the officer making the sale under
                  judicial proceedings or of Bank shall be sufficient discharge
                  to the purchaser for the purchase money, and the purchaser
                  shall not be obligated to see to the application of the money.
                  Any sale of any Collateral under this Agreement shall be a
                  perpetual bar against Debtor with respect to that Collateral.
                  At any sale or other disposition of the Collateral pursuant to
                  this Section 4.2, Bank disclaims all warranties which would
                  otherwise be given under the Uniform Commercial Code,
                  including without limit a disclaimer of any warranty relating
                  to title, possession, quiet enjoyment or the like, and Bank
                  may communicate these disclaimers to a purchaser at such
                  disposition. This disclaimer of warranties will not render the
                  sale commercially unreasonable.

         4.3      Debtor shall at the request of Bank, after the occurrence and
                  during the continuance of an Event of Default, notify the
                  account debtors or obligors of Bank's security interest in the
                  Collateral and direct payment of it to Bank. Bank may, itself,
                  upon the occurrence of any Event of Default so notify and
                  direct any account debtor or obligor. At the request of Bank,
                  after an Event of Default shall have occurred, Debtor shall
                  immediately take such actions as the Bank shall request to
                  establish exclusive control (as defined in the Uniform
                  Commercial Code) by Bank over any Collateral which is of such
                  a nature that perfection of a security interest may be
                  accomplished by control.

         4.4      The proceeds of any sale or other disposition of Collateral
                  authorized by this Agreement shall be applied by Bank in such
                  order as the Bank, in its discretion, deems appropriate
                  including, without limitation, the following order: first upon
                  all expenses authorized by the Uniform Commercial Code and all
                  reasonable attorneys' fees and legal expenses incurred by
                  Bank; the balance of the proceeds of the sale or other
                  disposition shall be applied in the payment of the
                  Indebtedness, first to interest, then to principal, then to
                  remaining Indebtedness and the surplus, if any, shall be paid
                  over to Debtor or to such other person(s) as may be entitled
                  to it under applicable law. Debtor shall remain liable for any
                  deficiency, which it shall pay to Bank immediately upon
                  demand. Debtor agrees that Secured Party shall be under no
                  obligation to accept any noncash proceeds in connection with
                  any sale or disposition of Collateral unless failure to do so
                  would be commercially unreasonable. If Secured Party agrees in
                  its sole discretion to accept noncash proceeds (unless the
                  failure to do so would be commercially unreasonable), Secured
                  Party may ascribe any commercially reasonable value to such
                  proceeds. Without limiting the foregoing, Secured Party may
                  apply any discount factor in determining the present value of
                  proceeds to be received in the future or may elect to apply
                  proceeds to be received in the future only as and when such
                  proceeds are actually received in cash by Secured Party.

         4.5      Nothing in this Agreement is intended, nor shall it be
                  construed, to preclude Bank from pursuing any other remedy
                  provided by law or in equity for the collection of the
                  Indebtedness or for the recovery of any other sum to which
                  Bank may be entitled for the breach of this Agreement by
                  Debtor. Nothing in this Agreement shall reduce or release in
                  any way any rights or security interests of Bank contained in
                  any existing agreement between Debtor or any Guarantor and
                  Bank.

         4.6      No waiver of default or consent to any act by Debtor shall be
                  effective unless in writing and signed by an authorized
                  officer of Bank. No waiver of any default or forbearance on
                  the part of Bank in enforcing any of its rights under this
                  Agreement shall operate as a waiver of any other default or of
                  the same default on a future occasion or of any rights.

         4.7      Debtor (a) irrevocably appoints Bank or any agent of Bank
                  (which appointment is coupled with an interest) the true and
                  lawful attorney of Debtor (with full power of substitution) in
                  the name, place and stead of, and at the expense of, Debtor
                  and (b) authorizes Bank or any agent of Bank, in its own name,
                  at Debtor's expense, to do any of the following, after the
                  occurrence and during the continuance of an Event of Default,
                  as Bank, in its sole discretion, deems appropriate:

                  (i)      to demand, receive, sue for, and give receipts or
                           acquittances for any moneys due or to become due on
                           any Collateral (including, without limit, to draft
                           against Collateral) and to endorse any item
                           representing any payment on or proceeds of the
                           Collateral;

                  (ii)     to execute and file in the name of and on behalf of
                           Debtor all financing statements or other filings or
                           Collateral control agreements deemed necessary or
                           desirable by Bank to evidence, perfect, or continue
                           the security interests granted in this Agreement; and

                  (iii)    to do and perform any act on behalf of Debtor
                           permitted or required under this Agreement.

         4.8      Upon the occurrence of an Event of Default, Debtor also
                  agrees, upon request of Bank, to assemble the Collateral and
                  make it available to Bank at any place designated by Bank
                  which is reasonably convenient to Bank and Debtor.

         4.9      The following shall be the basis for any finder of fact's
                  determination of the value of any Collateral which is the
                  subject matter of a disposition giving rise to a calculation
                  of any surplus or deficiency under Section 9.615 (f) of the
                  Uniform Commercial Code (as in effect on or after July 1,
                  2001): (a) the Collateral which is the subject matter of the
                  disposition shall be valued in an "as is" condition as of the
                  date of the disposition, without any assumption or expectation
                  that such Collateral will be repaired or improved in any
                  manner; (b) the valuation shall be based upon an assumption
                  that the transferee of such Collateral desires a resale of the
                  Collateral for cash promptly (but no later than 30 days)
                  following the disposition; (c) all reasonable closing costs
                  customarily borne by the seller in commercial sales
                  transactions relating to property similar to such Collateral
                  shall be deducted including, without limitation, brokerage
                  commissions, tax prorations, attorneys' fees, whether inside
                  or outside counsel is used, and marketing costs; (d) the value
                  of the Collateral which is the subject matter of the
                  disposition shall be further discounted to account for any
                  estimated holding costs associated with maintaining such
                  Collateral pending sale (to the extent not accounted for in
                  (c) above), and other maintenance, operational and ownership
                  expenses; and (e) any expert opinion testimony given or
                  considered in connection with a determination of the value of
                  such Collateral must be given by persons having at least 5
                  years experience in appraising property similar to the
                  Collateral and who have conducted and prepared a complete
                  written appraisal of such Collateral taking into consideration
                  the factors set forth above. The "value" of any such
                  Collateral shall be a factor in determining the amount of
                  proceeds which would have been realized in a disposition to a
                  transferee other than a secured party, a person related to a
                  secured party or a secondary obligor under Section 9-615(f) of
                  the Uniform Commercial Code.

5.       MISCELLANEOUS.

         5.1      Until Bank is advised in writing by Debtor to the contrary,
                  all notices, requests and demands required under this
                  Agreement or by law shall be given to, or made upon, Debtor at
                  the following address: 2819 Walnut Hill Lane, Dallas, Texas
                  75229.

         5.2      Debtor will give Bank not less than 90 days prior written
                  notice of all contemplated changes in Debtor's name, location,
                  chief executive office, principal place of business , and/or
                  location of any Collateral, but the giving of this notice
                  shall not cure any Event of Default caused by this change.

                                       4

<PAGE>

         5.3      Bank assumes no duty of performance or other responsibility
                  under any contracts contained within the Collateral.

         5.4      Bank has the right to sell, assign, transfer, negotiate or
                  grant participations or any interest in, any or all of the
                  Indebtedness and any related obligations, including without
                  limit this Agreement, as provided in the Credit Agreement. In
                  connection with the above, but without limiting its ability to
                  make other disclosures to the full extent allowable, Bank may
                  disclose all documents and information which Bank now or later
                  has relating to Debtor, the Indebtedness or this Agreement,
                  however obtained. Debtor further agrees that Bank may provide
                  information relating to this Agreement or relating to Debtor
                  or the Indebtedness to the Bank's parent, affiliates,
                  subsidiaries, and service providers.

         5.5      In addition to Bank's other rights, any indebtedness owing
                  from Bank to Debtor can be set off and applied by Bank on any
                  Indebtedness at any time(s) either before or after maturity or
                  demand without notice to anyone. Any such action shall not
                  constitute acceptance of collateral in discharge of any
                  portion of the Indebtedness.

         5.6      Debtor, to the extent not expressly prohibited by applicable
                  law, waives any right to require the Bank to: (a) proceed
                  against any person or property; (b) give notice or
                  notification of the terms, time and place of, or of any other
                  information relating to, any public or private sale or
                  disposition of personal property security held from Debtor or
                  any other person, or otherwise comply with the provisions of
                  Sections 9.611 or 9.621 of the Uniform Commercial Code; or (c)
                  pursue any other remedy in the Bank's power. Debtor waives
                  notice of acceptance of this Agreement and presentment,
                  demand, protest, notice of protest, dishonor, notice of
                  dishonor, notice of default, notice of intent to accelerate or
                  demand payment or notice of acceleration of any Indebtedness,
                  any and all other notices to which the undersigned might
                  otherwise be entitled, and diligence in collecting any
                  Indebtedness, and agree(s) that the Bank may, once or any
                  number of times, modify the terms of any Indebtedness,
                  compromise, extend, increase, accelerate, renew or forbear to
                  enforce payment of any or all Indebtedness, all without notice
                  to Debtor and without affecting in any manner the
                  unconditional obligation of Debtor under this Agreement.
                  Debtor unconditionally and irrevocably waives each and every
                  defense and setoff of any nature which, under principles of
                  guaranty or otherwise, would operate to impair or diminish in
                  any way the obligation of Debtor under this Agreement, and
                  acknowledges that such waiver is by this reference
                  incorporated into each security agreement, collateral
                  assignment, pledge and/or other document from Debtor now or
                  later securing the Indebtedness, and acknowledges that as of
                  the date of this Agreement no such defense or setoff exists.

         5.7      [Intentionally Omitted.]

         5.8      In the event that applicable law shall obligate Bank to give
                  prior notice to Debtor of any action to be taken under this
                  Agreement, Debtor agrees that a written notice given to Debtor
                  at least ten days before the date of the act shall be
                  reasonable notice of the act and, specifically, reasonable
                  notification of the time and place of any public sale or of
                  the time after which any private sale, lease, or other
                  disposition is to be made, unless a shorter notice period is
                  reasonable under the circumstances. A notice shall be deemed
                  to be given under this Agreement when delivered to Debtor or
                  when placed in an envelope addressed to Debtor and deposited,
                  with postage prepaid, in a post office or official depository
                  under the exclusive care and custody of the United States
                  Postal Service or delivered to an overnight courier. The
                  mailing shall be by overnight courier, certified, or first
                  class mail.

         5.9      Notwithstanding any prior revocation, termination, surrender,
                  or discharge of this Agreement in whole or in part, the
                  effectiveness of this Agreement shall automatically continue
                  or be reinstated in the event that any payment received or
                  credit given by Bank in respect of the Indebtedness is
                  returned, disgorged, or rescinded under any applicable law,
                  including, without limitation, bankruptcy or insolvency laws,
                  in which case this Agreement, shall be enforceable against
                  Debtor as if the returned, disgorged, or rescinded payment or
                  credit had not been received or given by Bank, and whether or
                  not Bank relied upon this payment or credit or changed its
                  position as a consequence of it. In the event of continuation
                  or reinstatement of this Agreement, Debtor agrees upon demand
                  by Bank in writing, accompanied by reasonable detail and
                  explanation, to execute and deliver to Bank those documents
                  which Bank determines are appropriate to further evidence (in
                  the public records or otherwise) this continuation or
                  reinstatement, although the failure of Debtor to do so shall
                  not affect in any way the reinstatement or continuation.

         5.10     This Agreement and all the rights and remedies of Bank under
                  this Agreement shall inure to the benefit of Bank's permitted
                  successors and assigns and to any other holder who derives
                  from Bank title to or an interest in the Indebtedness or any
                  portion of it, and shall bind Debtor and the heirs, legal
                  representatives, successors, and assigns of Debtor. Nothing in
                  this Section 5.10 is deemed a consent by Bank to any
                  assignment by Debtor.

         5.11     If there is more than one Debtor, all undertakings, warranties
                  and covenants made by Debtor and all rights, powers and
                  authorities given to or conferred upon Bank are made or given
                  jointly and severally.

         5.12     Except as otherwise expressly provided in this Agreement, all
                  terms in this Agreement which are defined in the Uniform
                  Commercial Code shall have the meanings assigned to them in
                  Article 9 (or, absent definition in Article 9, in any other
                  Article) of the Uniform Commercial Code, as those meanings may
                  be amended, revised or replaced from time to time. "Uniform
                  Commercial Code" means the Texas Business and Commerce Code as
                  amended, revised or replaced from time to time.
                  Notwithstanding the foregoing, the parties intend that the
                  terms used herein which are defined in the Uniform Commercial
                  Code have, at all times, the broadest and most inclusive
                  meanings possible. Accordingly, if the Uniform Commercial Code
                  shall in the future be amended or held by a court to define
                  any term used herein more broadly or inclusively than the
                  Uniform Commercial Code in effect on the date of this
                  Agreement, then such term, as used herein, shall be given such
                  broadened meaning. If the Uniform Commercial Code shall in the
                  future be amended or held by a court to define any term used
                  herein more narrowly, or less inclusively, than the Uniform
                  Commercial Code in effect on the date of this Agreement, such
                  amendment or holding shall be disregarded in defining terms
                  used in this Agreement.

         5.13     No single or partial exercise, or delay in the exercise, of
                  any right or power under this Agreement, shall preclude other
                  or further exercise of the rights and powers under this
                  Agreement. The unenforceability of any provision of this
                  Agreement shall not affect the enforceability of the remainder
                  of this Agreement. This Agreement constitutes the entire
                  agreement of Debtor and Bank with respect to the subject
                  matter of this Agreement. No amendment or modification of this
                  Agreement shall be effective unless the same shall be in
                  writing and signed by Debtor and an authorized officer of
                  Bank. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
                  ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS,
                  WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

         5.14     [Intentionally Omitted.]

         5.15     Debtor represents and warrants that Debtor's exact name is the
                  name set forth in this Agreement. Debtor further represents
                  and warrants the following and agrees that Debtor is, and at
                  all times shall be, located in the following place :

                  Debtor is a registered organization which is organized under
                  the laws of one of the states comprising the United States
                  (e.g. corporation, limited partnership, registered limited
                  liability partnership or limited liability company), and
                  Debtor is located (as determined pursuant to the Uniform
                  Commercial Code) in the state under the laws of which it was
                  organized, which is: 2819 Walnut Hill Lane, Dallas, Texas
                  75229.

                                       5

<PAGE>

                  The Collateral is located and shall be maintained at the
                  following location(s):

                  2819 Walnut Hill Lane, Dallas, Dallas County, Texas 75229

                  1115 Duncan, Denton, Denton County, Texas 75205

                  2675 East Highway 80, Abilene, Taylor  County, Texas 79601

                  Collateral shall be maintained only at the locations
                  identified in this Section 5.15.

         5.16     A carbon, photographic or other reproduction of this Agreement
                  shall be sufficient as a financing statement under the Uniform
                  Commercial Code and may be filed by Bank in any filing office.

         5.17     This Agreement shall be terminated only by the filing of a
                  termination statement in accordance with the applicable
                  provisions of the Uniform Commercial Code, but the obligations
                  contained in Section 2.13 of this Agreement shall survive
                  termination.

         5.18     Debtor agrees to reimburse the Bank upon demand in writing,
                  accompanied by reasonable detail and explanation, for any and
                  all costs and expenses (including, without limit, court costs,
                  legal expenses and reasonable attorneys' fees, whether inside
                  or outside counsel is used, whether or not suit is instituted
                  and, if suit is instituted, whether at the trial court level,
                  appellate level, in a bankruptcy, probate or administrative
                  proceeding or otherwise) incurred in enforcing or attempting
                  to enforce this Agreement or in exercising or attempting to
                  exercise any right or remedy under this Agreement or incurred
                  in any other matter or proceeding relating to this Security
                  Agreement.

6.       DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
         CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
         CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
         THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
         WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
         THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
         AGREEMENT OR THE INDEBTEDNESS.

7.       THIS IS A TEXAS SPECIFIC PROVISION: THIS WRITTEN LOAN AGREEMENT (AS
         DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE)
         REPRESENTS 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 UNWRITTEN ORAL AGREEMENTS
         BETWEEN THE PARTIES.

8.       SPECIAL PROVISIONS APPLICABLE TO THIS AGREEMENT. (*NONE, IF LEFT BLANK)

DEBTOR:                                       BANK:

PEERLESS MFG. CO.                             COMERICA BANK

By: /s/ Richard L. Travis, Jr.                By: /s/ Deborah T. Purvin
    --------------------------------              ------------------------------
    Richard L. Travis, Jr.                        Deborah T. Purvin
    Chief Financial Officer                       Vice President

                                       6