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SECURITY AGREEMENT
<br /> (Forgivable Loan Program)
<br /> This SECURITY AGREEMENT ("Agreement") is made to be effective as of , 2013, by
<br /> PREFERRED POWDER COATING, LLC,a Minnesota limited liability company("Debtor')and THE ECONOMIC
<br /> DEVELOPMENT AUTHORITY OF THE CITY OF ELK RIVER(the"Secured Party").
<br /> AGREEMENT
<br /> In consideration of the above recitals, and the promises set forth in this Agreement, the parties agree as
<br /> follows:
<br /> 1. OBLIGATIONS. "Obligations" means collectively each debt, liability and obligation of every type and
<br /> nature which Debtor may now or at any time hereafter owe to Secured Party(including without limitation the
<br /> obligations created under the loan agreement(the"Loan Agreement')and the promissory note of the Debtor
<br /> to Secured Party of even date herewith and all amendments, replacements, restatements, and substitutions
<br /> therefore), whether now existing or hereafter created or arising, and whether direct or indirect, due or to
<br /> become due, absolute or contingent, and the repayment or performance of any of the foregoing if any such
<br /> payment or performance is at any time avoided,rescinded, set aside, or recovered from or repaid by Secured
<br /> Party,in whole or in part,in any bankruptcy,insolvency,or similar proceeding instituted by or against Debtor
<br /> or any guarantor of any Obligation, or otherwise, including b t limited to all principal, interest, fees,
<br /> expenses and other charges.
<br /> 2. COLLATERAL. "Collateral" means collectively all of the following property of Debtor, whether now
<br /> owned or hereafter acquired and wherever located: (a)equipment specified on the attached Exhibit A;
<br /> (b)accessions, additions and improvements to, replacements of, and substitutions for any of the foregoing;
<br /> (c)all products and proceeds of any of the foregoing; and(d)books,records and data in any form relating to
<br /> any of the foregoing.
<br /> 3. SECURITY INTEREST. Debtor grants to secured Party a sec interest ("Security Interest") in the
<br /> Collateral to secure the payment and performance of the Obligations. The Security Interest continues in effect
<br /> until this Agreement is terminated in writing by Secured Party.
<br /> 4. REPRESENTATIONS,WARRANTIES AND COVENANTS. Debtor represents,warrants and agrees that:
<br /> 4.1 Principal Office/Residence. Debtor's chief executive office/residence is located at the address
<br /> specified on the signature pages to this Agreement. Debtor will give Secured Party written notice
<br /> prior to any change in the location of Debtor's principal office/residence.
<br /> 4.2 Organization;Authority. Debtor is a limited liability company,duly organized,existing and in good
<br /> standing under the laws of the state of its organization and has full power and authority to enter into
<br /> this Agreement. Debtor's state of organization/residence is Minnesota and its exact legal name is as
<br /> set forth on the signature page to this Agreement. Debtor will not change its state of organization,
<br /> form of organization or name without Secured Party's prior written consent.
<br /> 4.3 Perfection of Security Interest. Debtor will execute and deliver, and irrevocably appoints Secured
<br /> Party (which appointment is coupled with an interest) Debtor's attorney-in-fact to execute and
<br /> deliver in Debtor's name, all financing statements (including, but not limited to, amendments,
<br /> terminations and terminations of other security interests in any of the Collateral),control agreements
<br /> and other agreements which Secured Party may at any time reasonably request in order to secure,
<br /> protect,perfect, collect or enforce the Security Interest. Debtor shall, at any time and from time to
<br /> time, take such steps as Secured Party may reasonably request for Secured Party: (i)to obtain an
<br /> acknowledgement, in form and substance reasonably satisfactory to Secured Party, of any bailee
<br /> having possession of any of the Collateral that such bailee holds such Collateral for Secured Party;
<br /> (ii) to obtain "control" of any investment property, deposit accounts, letter-of-credit rights or
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