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                                                                   Exhibit 10.10

                                                                  EXECUTION COPY


                              SECURITY AGREEMENT
                              ------------------


     This SECURITY AGREEMENT (this "Agreement"), dated as of May 11, 2001, is
                                    ---------
entered into by and among Data Race Inc., a Texas corporation doing business as
IP Axess, with headquarters located at 6509 Windcrest Drive, Suite 120, Plano,
Texas 75024 (the "Debtor"), in favor of each of the parties listed in Schedule A
                  ------                                              ----------
attached hereto and made a part hereof (each a "Secured Party," collectively
                                                -------------
(and individually, where applicable) referred to herein as the "Secured
                                                                -------
Parties").

     1.   SECURITY INTEREST.  For good and valuable consideration, the receipt
          -----------------
and adequacy of which are hereby acknowledged, and subject to the applicable
terms of this Agreement, Debtor assigns and grants to Secured Parties, a
security interest and lien in the Collateral (as defined below) to secure the
payment and the performance of the Obligation (as defined below).

     2.   COLLATERAL.  The security interest created hereby is granted in and to
          ----------
all personal property of Debtor (other than fixtures) now owned or hereafter
acquired (the "Collateral") including, but not limited to, the following:
               ----------

     (a)  Accounts.  Any and all accounts, accounts receivable, receivables,
          --------
     contract rights, book debts, checks, notes, drafts, instruments, chattel
     paper, acceptances, choses in action, any and all amounts due to Debtor
     from a factor or other forms of obligations and receivables now existing or
     hereafter arising out of the business of Debtor, as well as any and all
     returned, refused and repossessed goods, and the cash or non-cash proceeds
     resulting therefrom.

     (b)  Inventory.  Any and all of Debtor's inventory, including without
          ---------
     limitation any and all goods held for sale or lease or being processed for
     sale or lease in Debtor's business as now or hereafter conducted, whether
     now owned or hereinafter acquired, including all materials, goods and work
     in process, finished goods, and other tangible property held for sale or
     lease or furnished or to be furnished under contracts of service or used or
     consumed in Debtor's business, along with all documents (including
     documents of title) covering inventory, all cash and non-cash proceeds from
     the sale of inventory including proceeds from insurance.

     (c)  Equipment.  Any and all of Debtor's furnishings and equipment,
          ---------
     wherever located, whether now owned or hereafter acquired, together with
     all increases, parts, fittings, accessories, equipment, and special tools
     now or hereafter used in connection therewith,

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     and all products, additions, substitutions, accessions, and all cash and
     non-cash proceeds, including proceeds from insurance thereof and thereto.

     (d)  Instruments and/or Investment Property.  All investment property,
          --------------------------------------
     negotiable instruments, promissory notes, and documents of title owned or
     to be owned by Debtor, certificates of deposit, and all liens, security
     agreements, leases and other contracts securing or otherwise relating to
     any of said investment property, instruments or documents, and all cash and
     non-cash proceeds and products thereof and such additional property
     receivable or distributed in respect of or in exchange for all or any of
     such investment property, instruments or documents.

     (e)  General Intangibles.  All patents, trademarks, service marks,
          -------------------
     trade secrets, copyrights and exclusive licenses (whether issued or
     pending) and all documents, applications, materials and other matters
     related thereto, all inventions, and all manufacturing, engineering and
     production plans, drawings, specifications, processes and systems, all
     trade names, computer programs, data bases, systems and software (including
     source and object codes), goodwill, choses in action and all other general
     intangibles of Debtor whether now owned or hereafter acquired and all cash
     and non-cash proceeds thereof, and all chattel paper, documents and
     instruments relating to such intangibles.

     (f)  Deposit Accounts and Letters of Credit.  All deposit accounts of
          --------------------------------------
     Debtor, and all interests of Debtor under letters of credit, now owned or
     hereafter acquired.

     (g)  Related Property. All substitutes and replacements for,
          ----------------
     accessions, attachments and other additions to, tools, parts and equipment
     used in connection with, and proceeds and products of, the above Collateral
     (including all income and benefits resulting from any of the above, such as
     dividends payable or distributable in cash, property or stock; interest,
     premium and principal payments; redemption proceeds and subscription of
     rights; all certificates of title, manufacturer's statements of origin,
     other documents, accounts and chattel paper arising from or related to the
     above Collateral, and returned or repossessed Collateral, any of which, if
     received by Debtor, upon request shall be delivered immediately to Secured
     Parties).

     (h)  Claims.  Any claim of Debtor against a third party, 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 a Secured Party
     or any of its agents, affiliates or correspondents, for any purpose, and
     the proceeds of any thereof. Secured Parties shall be deemed to have
     possession of any of the Collateral in transit to or set apart for it or
     any of its agents, affiliates or correspondents.

     (i)  Collateral Not to Include Real Property.  The term Collateral
          ---------------------------------------
     shall not include any real property or leasehold interests owned or held by
     Debtor.

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     3.   OBLIGATION.  The following obligations ("Obligation") are secured by
          ----------                               ----------
this Agreement:

     (a)  All debts, obligations, liabilities and agreements of Debtor to
     Secured Parties, now or hereafter existing, arising directly or indirectly
     between Debtor and Secured Parties whether absolute or contingent, joint or
     several, secured or unsecured, due or not due, contractual or tortious,
     liquidated or unliquidated, arising by operation of law or otherwise, and
     all renewals, extensions or rearrangement of any of the above;

     (b)  the indebtedness evidenced by any of the several 10% Secured
     Convertible Promissory Notes (the "Notes") executed by Borrower and payable
                                        -----
     to the order of a Secured Party pursuant to the terms of that certain
     Securities Purchase Agreement entered into by Debtor and the Secured
     Parties on the date hereof (the "Securities Purchase Agreement").
                                      -----------------------------

     (c)  Secured Parties' participation in any loan or other debt of Debtor
     to another person;

     (d)  All costs incurred by Secured Parties to obtain, preserve, perfect
     and enforce this Agreement and maintain, preserve, collect and enforce the
     Collateral;

     (e)  Interest on the above amounts at the rate set forth in the Notes;

     (f)  All debt, obligations and liabilities of any direct or indirect
     parent company, subsidiary, or affiliate of Debtor (such parent companies,
     subsidiaries, and affiliates, together with the Debtor named above, being
     hereinafter referred to collectively as "Debtor") to Secured Parties of the
                                              ------
     kinds described in this Section 3, now existing or hereafter arising;

     (g)  All expenses of the Secured Parties, including fees and expenses
     of the Secured Parties' counsel, incident to the enforcement of payment of
     all obligations of the Debtor by any action or participation in, or in
     connection with a case or proceeding under the Bankruptcy Code, or any
     successor statute thereto; and

     (h)  All amounts which may be owed to Secured Parties pursuant to all
     other loan documents executed between Secured Parties and any Debtor.

     4.   DEBTOR'S WARRANTIES.  Debtor hereby represents and warrants to Secured
          -------------------
Parties as follows:

          (a)  Authority.  The execution, delivery and performance of this
               ---------
     Agreement and all of the other Transaction Documents (as such term is
     defined in the Securities Purchase Agreement) by Debtor have been duly
     authorized by all necessary corporate action of Debtor.

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          (b)  Accuracy of Information.  All information heretofore, herein or
               -----------------------
     hereafter supplied to Secured Parties by or on behalf of Debtor with
     respect to the Collateral is true and correct.

          (c)  Enforceability.  This Agreement and the other Transaction
               --------------
     Documents constitute legal, valid and binding obligations of Debtor,
     enforceable in accordance with their respective terms, except as limited by
     bankruptcy, insolvency or similar laws of general application relating to
     the enforcement of creditors' rights and except to the extent specific
     remedies may generally be limited by equitable principles.

          (d)  Ownership and Liens. Except as set forth on Schedule B, Debtor
               -------------------                         ----------
     has good and marketable title to the Collateral free and clear of all
     liens, security interests, encumbrances or adverse claims, except for the
     security interest created by this Agreement. No dispute, right of setoff,
     counterclaim or defense exists with respect to all or any part of the
     Collateral. Except as set forth in Schedule B, Debtor has not executed any
                                         ----------
     other security agreement currently affecting the Collateral and no
     financing statement or other instrument similar in effect covering all or
     any part of the Collateral is on file in any recording office except as may
     have been executed or filed in favor of Secured Parties.

          (e)  No Conflicts or Consents. Neither the ownership, the intended use
               ------------------------
     of the Collateral by Debtor, the grant of the security interest by Debtor
     to Secured Parties herein nor the exercise by Secured Parties of their
     rights or remedies hereunder, will (i) conflict with any provision of (A)
     any domestic or foreign law, statute, rule or regulation, (B) the articles
     or certificate of incorporation, charter, bylaws or partnership agreement,
     as the case may be, of Debtor, or (C) any agreement, judgment, license,
     order or permit applicable to or binding upon Debtor or otherwise affecting
     the Collateral, or (ii) result in or require the creation of any lien,
     charge or encumbrance upon any assets or properties of Debtor or of any
     person except as may be expressly contemplated in the Transaction
     Documents. Except as expressly contemplated in the Transaction Documents,
     no consent, approval, authorization or order of, and no notice to or filing
     with, any court, governmental authority or third party is required in
     connection with the grant by Debtor of the security interest herein or the
     exercise by Secured Parties of their rights and remedies hereunder, other
     than such consents, approvals or authorizations that have been heretofore
     obtained, or will have been obtained prior to the time such performance is
     due or request for advance made.

          (f)  Security Interest.  Except as set forth in Schedule B, Debtor has
               -----------------                          ----------
     and will have at all times full right, power and authority to grant a
     security interest in the Collateral to Secured Parties in the manner
     provided herein, free and clear of any lien, security interest or other
     charge or encumbrance. This Agreement creates a legal, valid and binding
     security interest in favor of Secured Parties in the Collateral.


          (g)  Location.  Debtor's residence or chief executive office, as the
               --------
     case may be, and the office where the records concerning the Collateral are
     kept is located at its address set forth on the first page hereof.

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

          (i)  Securities.  Any certificates evidencing securities pledged as
               ----------
     Collateral are valid and genuine and have not been altered. All securities
     pledged as Collateral have been duly authorized and validly issued, are
     fully paid and non-assessable, and were not issued in violation of the
     preemptive rights of any party or of any agreement by which Debtor or the
     issuer thereof is bound. No restrictions or conditions exist with respect
     to the transfer or voting of any securities pledged as Collateral, except
     as has been disclosed to Secured Parties in writing. To the best of
     Debtor's knowledge, no issuer of such securities (other than securities of
     a class which are publicly traded) has any outstanding stock rights, rights
     to subscribe, options, warrants or convertible securities outstanding or
     any other rights outstanding entitling any party to have issued to such
     party capital stock of such issuer, except as has been disclosed to Secured
     Parties in writing.

     5.   DEBTOR'S COVENANTS.  Until full payment and performance of all
          ------------------
Obligations and termination or expiration of any obligation or commitment of
Secured Parties to make advances or loans to Debtor, unless Secured Parties
holding two-thirds or more of the then unpaid aggregate principal amount of the
Notes (a "Supermajority of Secured Parties") otherwise consents in writing:
---------------------------------

     (a)  Obligation and This Agreement.  Debtor shall perform all of its
          -----------------------------
     obligations under the Transaction Documents and in any other agreements
     between Debtor and a Secured Party.

     (b)  Ownership of Collateral.  Debtor shall defend the Collateral against
          -----------------------
     all claims and demands of all persons at any time claiming any interest
     therein adverse to Secured Parties, which have not been expressly disclosed
     in Schedule B. Debtor shall keep such Collateral free from all liens and
        ----------
     security interests except those for property taxes not yet delinquent and
     the security interest created hereby.

     (c)  Insurance.  Debtor shall insure the tangible Collateral with companies
          ---------
     acceptable to a Supermajority of Secured Parties. Such insurance shall be
     in an amount not less than the fair market value of the tangible Collateral
     and shall be against such casualties, with such deductible amounts as a
     Supermajority of Secured Parties shall approve. All insurance policies
     shall be written for the benefit of Debtor and Secured Parties as their
     interests may appear, payable to Secured Parties as loss payees, or in
     other form satisfactory to a Supermajority of Secured Parties, and such
     policies or certificates evidencing the same shall be furnished to Secured
     Parties. All policies of insurance shall provide for written notice to
     Secured Parties at least 30 days prior to cancellation. Risk of

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     loss or damage is Debtor's to the extent of any deficiency in any effective
     insurance coverage.

     (d)  Maintenance.  Debtor shall keep all tangible Collateral in good
          -----------
     condition.

     (e)  Secured Parties' Costs.  Debtor shall pay all costs necessary to
          ----------------------
     obtain, preserve, perfect, defend and enforce the security interest created
     hereby, and to preserve, defend, enforce and collect the Collateral,
     including but not limited to taxes, assessments, insurance premiums,
     repairs, reasonable attorney's fees and legal expenses, feed, rent, storage
     costs and expenses of sales. Whether Collateral is or is not in Secured
     Parties' possession, and without any obligation to do so and without
     waiving Debtor's default for failure to make any such payment, Secured
     Parties may in the discretion of a Supermajority of Secured Parties, pay
     any such costs and expenses, discharge encumbrances on Collateral, and pay
     for insurance of Collateral, and such payment shall be a part of the
     Obligation and bear interest at the rate set out in the Notes. Debtor
     agrees to reimburse Secured Parties on demand for any costs so incurred.

     (f)  Information and Inspection.  Debtor shall (i) promptly furnish
          --------------------------
     Secured Parties any information with respect to Collateral requested by
     Secured Parties; (ii) allow Secured Parties or their representatives to
     inspect the Collateral at any time and wherever located, and to inspect and
     copy, or furnish Secured Parties or their representatives with copies of,
     all records relating to the Collateral and the Obligation; (iii) furnish
     Secured Parties or their representatives such information as Secured
     Parties may request to identify Collateral, at the time and in the form
     requested by Secured Parties; and (iv) deliver upon request to Secured
     Parties shipping and delivery receipts evidencing the shipment of goods and
     invoices evidencing the receipt of, and the payment for, Collateral.

     (g)  Additional Documents.  Debtor will contemporaneously with the
          --------------------
     execution hereof and from time to time thereafter at its expense promptly
     execute and deliver all further instruments and documents and take all
     further action necessary or appropriate or that a Secured Parties may
     request in order (i) to perfect and protect the security interest created
     or purported to be created hereby and the first priority of such security
     interest, (ii) to enable Secured Parties to exercise and enforce their
     rights and remedies hereunder in respect of the Collateral, and (iii) to
     otherwise effect the purposes of this Agreement, including without
     limitation executing and filing any financing or continuation statements,
     or any amendments thereto. If all or any part of the Collateral is
     intellectual property covered by any patent or copyright protection in the
     United States or elsewhere, Debtor covenants and agrees, at a Secured
     Party's request, to prepare, execute and file with the appropriate
     governmental authorities all documents required to perfect a security
     interest in such Collateral.

     (h)  Parties Liable on Collateral.  Debtor will preserve the liability of
          ----------------------------
     all obligors on any Collateral, will preserve the priority of all security
     therefor, and will deliver to Secured Parties the original certificates of
     title on all motor vehicles or other titled vehicles constituting the
     Collateral. Secured Parties shall have no duty to preserve such

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     liability or security, but may do so at the expense of Debtor, without
     waiving Debtor's default.

     (i)  Right of Secured Parties to Notify Debtors.  Upon the occurrence of an
          ------------------------------------------
     Event of Default, Secured Parties may, in the discretion of a Supermajority
     of Secured Parties, notify persons obligated on any Collateral to make
     payments directly to Secured Parties and Secured Parties may take control
     of all proceeds of any Collateral. Until Secured Parties elect to exercise
     such rights, Debtor, as agent of Secured Parties, shall collect and enforce
     all payments owed on Collateral.

     (j)  Records of Collateral.  Debtor at all times will maintain accurate
          ---------------------
     books and records covering the Collateral. Debtor immediately will mark all
     books and records with an entry showing the absolute assignment of all
     Collateral to Secured Parties and Secured Parties are hereby given the
     right to audit the books and records of Debtor relating to Collateral at
     any time and from time to time. The amounts shown as owed to Debtor on
     Debtor's books and on any assignment schedule will be the undisputed
     amounts owing and unpaid.

     (k)  Disposition of Collateral.  No Collateral may be sold, leased,
          -------------------------
     manufactured, processed or otherwise disposed of by Debtor in any manner
     without the prior written consent of a Supermajority of Secured Parties,
     except Collateral sold, leased, licensed, manufactured, processed or
     consumed in the ordinary course of business.

     (l)  Accounts.  Each account held as Collateral will represent the valid
          --------
     and legally enforceable obligation of third parties, and shall not be
     evidenced by any instrument or chattel paper.

     (m)  Location of Collateral.  Debtor shall give Secured Parties written
          ----------------------
     notice of each office of Debtor in which records of Debtor pertaining to
     accounts held as Collateral are kept, and each location at which Collateral
     is or will be kept, and of any change of any such location. If no such
     notice is given, all records of Debtor pertaining to Collateral are and
     shall be kept at Debtor's address as set forth above.

     (n)  Notice of Changes.  Debtor will notify Secured Parties immediately of
          -----------------
     any material change in the Collateral, of a change in Debtor's residence or
     location, of a change in any matter warranted or represented by Debtor in
     this Agreement or furnished to Secured Parties, and of any Event of Default
     (as defined below).

     (o)  Use and Removal of Collateral.  Debtor will not use the Collateral
          -----------------------------
     illegally nor, unless previously indicated as a fixture, permit the
     Collateral to be affixed to real or personal property without the prior
     written consent of a Supermajority of Secured Parties. Debtor will not
     permit any of the Collateral to be removed from the locations specified
     herein without the prior written consent of Secured Parties, except for the
     sale, lease or licenseof inventory in the ordinary course of business.

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     (p)  Possession of Collateral.  Debtor will deliver all other instruments,
          ------------------------
     documents and chattel paper which are part of the Collateral and in
     Debtor's possession to the Secured Parties immediately, or if hereafter
     acquired, immediately following acquisition, appropriately indorsed to
     Secured Parties' order, or with appropriate, executed powers. Debtor waives
     presentment, notice of acceleration, demand, notice of dishonor, protest,
     and all other notices with respect thereto.

     (q)  Consumer Credit.  If any Collateral or proceeds includes obligations
          ---------------
     of third parties to Debtor, the transactions giving rise to the Collateral
     shall conform in all respects to the applicable state or federal law
     including but not limited to consumer credit law. Debtor shall hold
     harmless and indemnify Secured Parties against any cost, loss or expense
     arising from Debtor's breach of this covenant.

     (r)  Change of Name/Status.  Except to the extent described in Schedule
          ---------------------
     5(r), attached hereto, without the written consent of a Supermajority of
     Secured Parties, Debtor shall not change its name, change its corporate
     status, use any trade name or engage in any business in which it was not
     engaged on the date of this Agreement.

     (s)  Power of Attorney.  Effective upon the date of any Event of Default
          -----------------
     and thereafter, Debtor hereby appoints First Capital Group of Texas II,
     L.P., being one of the Secured Parties ("FCGTII") as Debtor's attorney-in-
     fact with full power in Debtor's name and behalf to do every act which
     Debtor is obligated to do or may be required to do hereunder, however,
     nothing in this paragraph shall be construed to obligate FCGT II to take
     any action hereunder nor shall FCGT II or Secured Parties be liable to
     Debtor for failure to take any action hereunder. This appointment shall be
     deemed a power coupled with an interest and shall not be terminable as long
     as the Obligation is outstanding.

     (t)  Waivers by Debtor.  Debtor waives notice of the creation, advance,
          -----------------
     increase, existence, extension or renewal of, and of any indulgence with
     respect to, the Obligation; waives presentment, demand, notice of dishonor,
     and protest; waives notice of the amount of the Obligation outstanding at
     any time, notice of any change in financial condition of any person liable
     for the Obligation or any part thereof, notice of any event of default, and
     all other notices respecting the Obligation; and agrees that maturity of
     the Obligation and any part thereof may be accelerated, extended or renewed
     one or more times by Secured Parties in the discretion of a Supermajority
     of Secured Parties, without notice to Debtor. Debtor waives any right to
     require that any action be brought against any other person or to require
     that resort be had to any other security or to any balance of any deposit
     account. The Debtor further waives any right of subrogation or to enforce
     any right of action against any other Debtor until the Obligation is paid
     in full.

     (u)  Other Parties and Other Collateral.  No renewal or extension of or any
          ----------------------------------
     other indulgence with respect to the Obligation or any part thereof, no
     release of any security, no release of any person (including any maker,
     indorser, guarantor or surety) liable on the Obligation, no delay in
     enforcement of payment, and no delay or omission or lack of diligence or
     care in exercising any right or power with respect to the Obligation or any


                                       8
<PAGE>

     security therefor or guaranty thereof or under this Agreement shall in any
     manner impair or affect the rights of Secured Parties under the law,
     hereunder, or under any other agreement pertaining to the Collateral.
     Secured Parties need not file suit or assert a claim for personal judgment
     against any person for any part of the Obligation or seek to realize upon
     any other security for the Obligation, before foreclosing or otherwise
     realizing upon the Collateral for the purpose of paying the Obligation.
     Debtor waives any right to the benefit of or to require or control
     application of any other security or proceeds thereof, and agrees that
     Secured Parties shall have no duty or obligation to Debtor to apply to the
     Obligation any such other security or proceeds thereof.

     (v)  Collection and Segregation of Accounts. The Secured Parties hereby
          --------------------------------------
     authorize the Debtor to collect the Collateral; provided, however, that
     upon the occurrence of an Event of Default, such authority shall be
     thereafter subject to the direction and control of the Secured Parties, and
     after the occurrence of an Event of Default, the Secured Parties may,
     without cause or notice, curtail or terminate said authority at any time.
     Upon written notice by a Supermajority of Secured Parties following the
     occurrence of an Event of Default, the Debtor shall forthwith upon receipt
     of all checks, drafts, cash, and other remittances in payment of or on
     account of the Collateral, deposit the same in one or more special accounts
     maintained with the Secured Parties over which the Secured Parties alone
     shall have the power of withdrawal. The remittance of the proceeds of such
     Collateral shall not, however, constitute payment or liquidation of such
     Collateral until the Secured Parties shall receive good funds for such
     proceeds. Funds placed in such special accounts shall be held by the
     Secured Parties as security for all Obligations secured hereunder. Such
     proceeds shall be deposited in precisely the form received, except for the
     indorsement of the Debtor where necessary to permit collection of items,
     which indorsement the Debtor agrees to make, and which indorsement FCGT II
     is also hereby authorized, as attorney-in-fact, to make on behalf of the
     Debtor. In the event the Secured Parties have notified the Debtor to make
     deposits to a special account, pending such deposit, the Debtor agrees that
     it will not commingle any such checks, drafts, cash or other remittances
     with any funds or other property of the Debtor, but will hold them separate
     and apart therefrom, and upon an express trust for the Secured Parties
     until deposit thereof is made in the special account. The Secured Parties
     will, from time to time, apply the whole or any part of the Collateral
     funds on deposit in this special account against such Obligations as are
     secured hereby as the Secured Parties may in the discretion of a
     Supermajority of Secured Parties, elect. In the discretion of a
     Supermajority of Secured Parties, any portion of said funds on deposit in
     the special account which a Supermajority of Secured Parties shall elect
     not to apply to the Obligations, may be paid over by the Secured Parties to
     the Debtor.

6.   RIGHTS AND POWERS OF SECURED PARTIES
     ------------------------------------

     (a)  General.
          -------

              (i)    Secured Parties, without liability to Debtor may, upon the
           occurrence of an Event of Default, (A) obtain from any person
           information regarding Debtor or Debtor's

                                       9
<PAGE>

          business, which information any such person also may furnish without
          liabi lity to Debtor; (B) require Debtor to give possession or control
          of any Collateral to Secured Parties; (C) indorse as Debtor's agent
          any instruments, documents or chattel paper in Collateral or
          representing proceeds of Collateral; (D) contact account debtors
          directly to verify information furnished by Debtor; (E) take control
          of proceeds, including stock received as dividends or by reason of
          stock splits; (F) take control of funds generated by the Collateral,
          such as cash dividends, interest and proceeds or refunds from
          insurance, and use same to reduce any part of the Obligation and
          exercise any other rights which an owner of such Collateral may
          exercise, except the right to vote or dispose of Collateral before an
          event of default; and (G) demand, collect, convert, redeem, receipt
          for, settle, compromise, adjust, sue for, foreclose or realize upon
          Collateral, in its own name or in the name of Debtor, as Secured
          Parties may determine.

              (ii)   Secured Parties may, at any time, (A) release Collateral in
          its possession to any Debtor, temporarily or otherwise; and (B) reject
          as unsatisfactory any property hereafter offered by Debtor as
          Collateral.

              (iii)  Secured Parties shall not be liable for failure to collect
          any account or instruments, or for any act or omission on the part of
          the Secured Parties, its officers, agents or employees, except willful
          misconduct and gross negligence. The foregoing rights and powers of
          Secured Parties will be in addition to, and not a limitation upon, any
          rights and powers of Secured Parties given by law, elsewhere in this
          Agreement, or otherwise. If Debtor fails to maintain any required
          insurance, to the extent permitted by applicable law Secured Parties
          may (but are not obligated to) purchase single interest insurance
          coverage for the Collateral which insurance may in the discretion of a
          Supermajority of Secured Parties, (i) protect only Secured Parties and
          not provide any remuneration or protection for Debtor directly and
          (ii) provide coverage only after the Obligation has been declared due
          as herein provided. The premiums for any such insurance purchased by
          Secured Parties shall be a part of the Obligation and shall bear
          interest at the rate set forth in the Note.

     (b)  Convertible Collateral.  Secured Parties may present for conversion
          ----------------------
     any Collateral which is convertible into any other instrument or investment
     property or a combination thereof with cash, but Secured Parties shall not
     have any duty to present for conversion any Collateral unless it shall have
     received from Debtor detailed written instructions to that effect at a time
     reasonably far in advance of the final conversion date to make such
     conversion possible.

     (c)  Actions of Secured Parties.  With respect to all rights, obligations
          --------------------------
     and actions reserved to the discretion, option or opinion of the Secured
     Parties under this Agreement, except as otherwise expressly provided
     herein, Secured Parties shall act upon such rights, obligations and
     discretionary matters only upon the consent of a Supermajority of Secured
     Parties.

7.   DEFAULT
     -------

                                       10
<PAGE>

     (a)  Event of Default.  An "Event of Default" shall occur if: (i) there is
          ----------------       ----------------
     a loss, theft, damage or destruction of any material portion of the
     Collateral for which there is no insurance coverage or for which, in the
     opinion of the Secured Parties there is insufficient insurance coverage; or
     (ii) any Debtor or any other obligor on the Obligation shall fail to timely
     and properly pay to Secured Parties any indebtedness that is part of the
     Obligation when due or fail to timely or properly observe, keep or perform
     any term, covenant, agreement or condition in this Agreement or in any
     other agreement between Debtor and any other obligor on the Obligation,
     including in any other note or instrument, loan agreement, security
     agreement, deed of trust, mortgage, promissory note, assignment or other
     agreement or instrument concerning the Obligation.

     (b)  Rights and Remedies.  If any Event of Default shall occur, then, in
          -------------------
     each and every such case, the Secured Parties may, without presentment,
     demand, or protest, notice of default, dishonor, demand, non-payment, or
     protest, notice of intent to accelerate all or any part of the Obligation,
     notice of acceleration of all or any part of the Obligation, or notice of
     any other kind, all of which Debtor hereby expressly waives, (except for
     any notice required under this Agreement, any other loan document or
     applicable law), at any time thereafter exercise and/or enforce any of the
     following rights and remedies:

              (i)     Possession and Collection of Collateral. At the option of
                      ---------------------------------------
          a Supermajority of Secured Parties: (i) take possession or control of,
          store, lease, operate, manage, sell or otherwise dispose of, all or
          any part of the Collateral; (ii) notify all parties under any account
          or contract right forming all or any part of the Collateral to make
          any payments otherwise due to Debtor directly to the Secured Parties;
          (iii) in the Secured Parties' own name, or in the name of Debtor,
          demand, collect, receive, sue for, and give receipts and releases for,
          any and an amounts due under such accounts and contract rights; (iv)
          indorse as the agent of the Debtor any check, note, chattel paper,
          documents, or instruments forming all or any part of the Collateral;
          (v) make formal application for transfer to the Secured Parties (or to
          any assignee of the Secured Parties to any purchaser of any of the
          Collateral) of all of the Debtor's permits, licenses, approvals,
          agreements, and the like relating to the Collateral or to the Debtor's
          business; (vi) take any other action which the Secured Parties deem
          necessary or desirable to protect and realize upon its security
          interest in the Collateral; and (vii) in addition to the foregoing,
          and not in substitution therefor, exercise any one or more of the
          rights and remedies exerciseable by the Secured Parties under any
          other provision of this Agreement, under any of the other loan
          documents, or as provided by applicable law (including, without
          limitation, the Texas Uniform Commercial Code (hereinafter referred to
          as the "UCC")).  In taking possession of the Collateral the Secured
                  ---
          Parties may enter the Debtor premises and otherwise proceed without
          legal process, if this can be done without breach of the peace.  The
          Debtor shall, upon the Secured Parties' demand, promptly make the
          Collateral or other security available to the Secured Parties at a
          place designated by the Secured Parties, which place shall be
          reasonably convenient to both parties.  The Secured Parties

                                       11
<PAGE>

          shall not be liable for, nor be prejudiced by any loss, depreciation
          or other damages to the Collateral, unless caused by the Secured
          Parties' willful and malicious act. The Secured Parties shall have no
          duty to take any action to preserve or collect the Collateral.

              (ii)   Receiver.  Obtain the appointment of a receiver for all or
                     --------
          any of the Collateral, the Debtor hereby consenting to the appointment
          of such a receiver and agreeing not to oppose any such appointment.

              (iii)  Right of Set Off.  Without notice or demand to the Debtor,
                     ----------------
          set off and apply against any and all of the Obligations any and all
          deposits (general or special, time or demand, provisional or final)
          and any other indebtedness, at any time held or owing by the Secured
          Parties to or for the credit of the account of the Debtor.

              (iv)   Books and Records.  Secured Parties shall be entitled to
                     -----------------
          immediate possession of all books and records evidencing any
          Collateral or pertaining to chattel paper covered by this Agreement
          and it or its representatives shall have the authority to enter upon
          any premises upon which any of the same, or any Collateral, may be
          situated and remove the same therefrom without liability.

              (v)    Insurance.  Secured Parties may surrender any insurance
                     ---------
          policies in Collateral and receive the unearned premium thereon.
          Debtor shall be entitled to any surplus and shall be liable to Secured
          Parties for any deficiency.

              (vi)   Proceeds of Disposition.  The proceeds of any disposition
                     -----------------------
          after default available to satisfy the Obligation shall be applied to
          the Obligation in such order and in such manner as Secured Parties in
          their discretion shall decide.

  8.  GENERAL
      -------

     (a)  Parties Bound.  Secured Parties' rights hereunder shall inure to the
          -------------
     benefit of their successors and assigns, and in the event of any assignment
     or transfer of any of the Obligation or the Collateral, Secured Parties
     thereafter shall be fully discharged from any responsibility with respect
     to the Collateral so assigned or transferred, but Secured Parties shall
     retain all rights and powers hereby given with respect to any of the
     Obligation or Collateral not so assigned or transferred. All
     representations, warranties and agreements of Debtor if more than one are
     joint and several and all shall be binding upon the personal
     representatives, heirs, successors and assigns of Debtor.

     (b)  Waiver.  No delay by Secured Parties in exercising any power or right
          ------
     shall operate as a waiver thereof; nor shall any single or partial exercise
     of any power or right preclude other or further exercise thereof or the
     exercise of any other power or right. No waiver by Secured Parties of any
     right hereunder or of any Event of Default by Debtor shall be binding upon
     Secured Parties unless in writing, and no failure by Secured Parties

                                       12
<PAGE>

     to exercise any power or right hereunder or waiver of any default by Debtor
     shall operate as a waiver of any other or further exercise of such right or
     power or of any further Event of Default. Each right, power and remedy of
     the Secured Parties as provided for in any of the Transaction Documents, or
     which shall now or hereafter exist at law or in equity or by statute or
     otherwise, shall be cumulative and concurrent and shall be in addition to
     every other such right, power or remedy. The exercise or beginning of the
     exercise by the Secured Parties of any one or more of such rights, powers
     or remedies shall not preclude the simultaneous or later exercise by the
     Secured Parties of any or an other such rights, powers or remedies.

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

     (d)  Definitions.  Unless the context indicates otherwise, definitions in
          -----------
     the UCC apply to words and phrases in this Agreement; if UCC definitions
     conflict, definitions set forth in Chapter 9 of the UCC apply.

     (e)  Notice.  Notice shall be deemed reasonable if mailed postage prepaid
          ------
     at least 10 days before the related action (or if the UCC elsewhere
     specifies a longer period, such longer period) to the address of Debtor
     given above.

     (f)  Modifications.  No provision hereof shall be modified or limited
          -------------
     except by a written agreement expressly referring hereto and to the
     provisions so modified or limited and signed by the Debtor and a
     Supermajority of Secured Parties, nor by course of conduct, usage of trade.

     (g)  Partial Invalidity.  The unenforceability or invalidity of any
          ------------------
     provision of this Agreement shall not affect the enforceability or validity
     of any other provision herein and the invalidity or unenforceability of any
     provision of any loan document to any person or circumstance shall not
     affect the enforceability or validity of such provision as it may apply to
     other persons or circumstances.

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

     (i)  Applicable Law and Venue.  This Agreement has been delivered in the
          ------------------------
     State of Texas and shall be construed in accordance with the laws of that
     State. It is performable by Debtor in the county or city of Debtor's
     address set out above and Debtor expressly waives any objection as to venue
     in any such location. Wherever possible each provision

                                       13
<PAGE>

     of this Agreement shall be interpreted in such manner as to be effective
     and valid under applicable law, but if any provision of this Agreement
     shall be prohibited by or invalid under applicable law, such provision
     shall be ineffective to the extent of such prohibition or invalid ity,
     without invalidating the remainder of such provisions or the remaining
     provisions of this Agreement.

     (j)  Financing Statement.  To the extent permitted by applicable law, a
          -------------------
     carbon, photographic or other reproduction of this Agreement or any
     financing statement covering the Collateral shall be sufficient as a
     financing statement.

     (k)  Counterparts.  This Agreement may be executed in any number of
          ------------
     counterparts, each of which shall be considered to be an original, but all
     of which shall constitute one in the same instrument. As used herein "this
     Agreement" shall include all schedules, exhibits and attachments and
     addenda hereto (if any).

     (l)  NOTICE OF FINAL AGREEMENT.  THIS WRITTEN AGREEMENT AND THE OTHER
     TRANSACTION 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 UNWRITTEN OR ORAL AGREEMENTS
     BETWEEN THE PARTIES.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed under seal by their duly authorized representatives as of the date
first above written.


DEBTOR:                              SECURED PARTIES:
------                               ---------------

DATA RACE, INC.,                     FIRST CAPITAL GROUP OF TEXAS II, L.P.
a Texas corporation                     By:  First Capital Group Investment,
                                         Partners LP, its General Partner
                                        By:  First Capital Group Management
                                              Company, LP, its General Partner

By:                                     By:
   ----------------------------------     --------------------------------------
  James G. Scogin, Vice President and     Jeffrey P. Blanchard, Managing Partner
  Chief Financial Officer



                                    ICN Capital Ltd.

                                    By:                     ,  its
                                       --------------------        --------

                                       14
<PAGE>

                                    By:
                                        -------------------------------------
                                    Name:
                                          -----------------------------------
                                    Title:
                                          -----------------------------------

                                       15
<PAGE>

                                 Schedule 5(r)

                          Description of Name Change

  In April, 2000 the board of directors of the Company adopted a resolution to
change the Company's name to "IP AXESS, Inc."  At the Company's Annual Meeting
of Shareholders held on November 9, 2000, the shareholders approved the name
change.  Therefore, the Company may operate under the name IPAXESS, Inc.

                                       16
<PAGE>

                                  SCHEDULE A
                                      TO
                         PLEDGE AND SECURITY AGREEMENT



                          SCHEDULE OF SECURED PARTIES
                          ---------------------------




               Name                               Contact Information
----------------------------------------------------------------------------
First Capital Group of Texas II, L.P.       750 E. Mulberry, Suite 305
                                            San Antonio, TX 78212
                                            Attention: Jeffrey P. Blanchard
                                            (p) 210-736 4233
                                            (f) 210-736-5449
-----------------------------------------------------------------------------
ICN Capital Ltd.                            19 Mount Havelock
                                            Douglas, Isle of Man
                                            United Kingdom
                                            1M1 2QG
                                            Attn: Ann Nicholson
                                            (p)011-44-1624-623911
                                            (f)011-44-1624-677313
-----------------------------------------------------------------------------

                                       17
<PAGE>

                                  SCHEDULE B
                                      TO
                         PLEDGE AND SECURITY AGREEMENT


                                     LIENS

The Uniform Commercial Code index maintained by the Texas Secretary of State
reflects the following effective filings regarding IP AXESS:

          1.  UCC Financing Statement Number 01-00014861 filed on January 22,
              2001 at 08:00 A.M. The secured party is listed as The Manifest
              Group, 100 E. Saratoga, Marshall, Minnesota 56258-1714.


The Uniform Commercial Code index maintained by the Texas Secretary of State
reflects the following effective filings regarding DATA RACE INC:

          1.  UCC Financing Statement Number 96-00248283 filed on December 16,
              1996 at 08:00 A.M. The secured party is listed as Imperial Bank,
              226 Airport Parkway, San Jose, California 95110.

          2.  UCC Financing Statement Number 00-00523541 filed on June 16, 2000
              at 08:00 A.M. The secured party is listed as Ameritech Credit
              Corporation, 2550 W. Golf Road, Rolling Meadows, Illinois 60008.

          3.  UCC Financing Statement Number 00-00540732 filed on July 11, 2000
              at 08:00 A.M. The secured party is listed as NEC America, Inc.,
              300 Frank W. Burr Boulevard, Teaneck, New Jersey 07666.

                                       18