SECURITY AGREEMENT


      THIS SECURITY AGREEMENT (the "Agreement"), is entered into and made
effective as of October 14, 2005, by and between POWER TECHNOLOGY, a Nevada
corporation with its principal place of business located at 109 North Post Oak
Lane, Suite 422, Houston, Texas 77024 (the "Company"), and the BUYER(S) listed
on Schedule I attached to the Securities Purchase Agreement dated the date
hereof (the "Secured Party").

      WHEREAS, the Company shall issue and sell to the Secured Party, as
provided in the Securities Purchase Agreement of even date herewith between the
Company and the Secured Party (the "Securities Purchase Agreement"), and the
Secured Party shall purchase up to Eighty Seven Thousand Dollars ($87,000) of
secured convertible debentures (the "Convertible Debentures"), which shall be
convertible into shares of the Company's common stock, par value $0.001 (the
"Common Stock") (as converted, the "Conversion Shares") in the respective
amounts set forth opposite each Buyer(s) name on Schedule I attached to the
Securities Purchase Agreement;

      WHEREAS, to induce the Secured Party to enter into the transaction
contemplated by the Securities Purchase Agreement, the Convertible Debentures,
and the Investor Registration Rights Agreement of even date herewith between the
Company and the Secured Party (the "Investor Registration Rights Agreement"),
(collectively referred to as the "Transaction Documents"), the Company hereby
grants to the Secured Party a security interest in and to the pledged property
identified on Exhibit A hereto (collectively referred to as the "Pledged
Property") until the satisfaction of the Obligations, as defined herein below.

      WHEREAS, the Company has previously executed a Security Agreement made
effective as of August 27, 2004, by and between the Company and CORNELL CAPITAL
PARTNERS, LP relating to Convertible Debentures in the original principal sum of
Five Hundred Thousand Dollars ($500,000.00) (the "Cornell Security Agreement").

      NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, and for other good and valuable consideration, the adequacy
and receipt of which are hereby acknowledged, the parties hereto hereby agree as
follows:

                                   ARTICLE 1.

                         DEFINITIONS AND INTERPRETATIONS

      Section 1.1.      Recitals.

      The above recitals are true and correct and are incorporated herein, in
their entirety, by this reference.

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      Section 1.2.      Interpretations.

      Nothing herein expressed or implied is intended or shall be construed to
confer upon any person other than the Secured Party any right, remedy or claim
under or by reason hereof.

      Section 1.3.      Obligations Secured.

      The obligations secured hereby are any and all obligations of the Company
now existing or hereinafter incurred to the Secured Party, whether oral or
written and whether arising before, on or after the date hereof including,
without limitation, those obligations of the Company to the Secured Party under
this Agreement, the Transaction Documents, and any other amounts now or
hereafter owed to the Secured Party by the Company thereunder or hereunder
(collectively, the "Obligations").

                                   ARTICLE 2.

               PLEDGED PROPERTY, ADMINISTRATION OF COLLATERAL
                      AND TERMINATION OF SECURITY INTEREST

      Section 2.1.      Pledged Property.

            (a) Subject to the prior lien, security interest and encumbrance
created by the Cornell Security Agreement, the Company hereby pledges to the
Secured Party, and creates in the Secured Party for its benefit, a security
interest for such time until the Obligations are paid in full, in and to all of
the property of the Company as set forth in Exhibit "A" attached hereto and the
products thereof and the proceeds of all such items (collectively, the "Pledged
Property"):

            (b) Simultaneously with the execution and delivery of this
Agreement, the Company shall make, execute, acknowledge, file, record and
deliver to the Secured Party any documents reasonably requested by the Secured
Party to perfect its security interest in the Pledged Property. Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge and deliver to the Secured Party such documents and
instruments, including, without limitation, financing statements, certificates,
affidavits and forms as may, in the Secured Party's reasonable judgment, be
necessary to effectuate, complete or perfect, or to continue and preserve, the
security interest of the Secured Party in the Pledged Property, and the Secured
Party shall hold such documents and instruments as secured party, subject to the
terms and conditions contained herein.

      Section 2.2.      Rights; Interests; Etc.

            (a) So long as no Event of Default (as hereinafter defined) shall
have occurred and be continuing:

                  (i) the Company shall be entitled to exercise any and all
rights pertaining to the Pledged Property or any part thereof for any purpose
not inconsistent with the terms hereof; and


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                  (ii) the Company shall be entitled to receive and retain any
and all payments paid or made in respect of the Pledged Property.

            (b) Upon the occurrence and during the continuance of an Event of
Default:

                  (i) All rights of the Company to exercise the rights which it
would otherwise be entitled to exercise pursuant to Section 2.2(a)(i) hereof and
to receive payments which it would otherwise be authorized to receive and retain
pursuant to Section 2.2(a)(ii) hereof shall be suspended, and all such rights
shall thereupon become vested in the Secured Party who shall thereupon have the
sole right to exercise such rights and to receive and hold as Pledged Property
such payments; provided, however, that if the Secured Party shall become
entitled and shall elect to exercise its right to realize on the Pledged
Property pursuant to Article 5 hereof, then all cash sums received by the
Secured Party, or held by Company for the benefit of the Secured Party and paid
over pursuant to Section 2.2(b)(ii) hereof, shall be applied against any
outstanding Obligations; and

                  (ii) All interest, dividends, income and other payments and
distributions which are received by the Company contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of the
Secured Party, shall be segregated from other property of the Company and shall
be forthwith paid over to the Secured Party; or

                  (iii) The Secured Party in its sole discretion shall be
authorized to sell any or all of the Pledged Property at public or private sale
in order to recoup all of the outstanding principal plus accrued interest owed
pursuant to the Convertible Debenture as described herein

            (c) An "Event of Default" shall be deemed to have occurred under
this Agreement upon an Event of Default under the Convertible Debentures.

                                   ARTICLE 3.

                          ATTORNEY-IN-FACT; PERFORMANCE

      Section 3.1.      Secured Party Appointed Attorney-In-Fact.

      Upon the occurrence of an Event of Default, the Company hereby appoints
the Secured Party as its attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company or otherwise, from time to
time in the Secured Party's discretion to take any action and to execute any
instrument which the Secured Party may reasonably deem necessary to accomplish
the purposes of this Agreement, including, without limitation, to receive and
collect all instruments made payable to the Company representing any payments in
respect of the Pledged Property or any part thereof and to give full discharge
for the same. The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Pledged Property as
and when the Secured Party may determine. To facilitate collection, the Secured
Party may notify account debtors and obligors on any Pledged Property to make
payments directly to the Secured Party.

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      Section 3.2.      Secured Party May Perform.

      If the Company fails to perform any agreement contained herein, the
Secured Party, at its option, may itself perform, or cause performance of, such
agreement, and the expenses of the Secured Party incurred in connection
therewith shall be included in the Obligations secured hereby and payable by the
Company under Section 8.3.

                                   ARTICLE 4.

                         REPRESENTATIONS AND WARRANTIES

      Section 4.1.      Authorization; Enforceability.

      Each of the parties hereto represents and warrants that it has taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the transactions contemplated hereby; and upon execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
respective party, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights or by the principles
governing the availability of equitable remedies.

      Section 4.2.      Ownership of Pledged Property.

      The Company has previously executed a Security Agreement made effective as
of August 27, 2004, by and between the Company and CORNELL CAPITAL PARTNERS, LP
relating to Convertible Debentures in the original principal sum of Five Hundred
Thousand Dollars ($500,000) (the "Cornell Security Agreement"). The security
interest created by this Agreement is subordinate to and subject to prior lien,
security interest and encumbrance created by the Cornell Security Agreement. The
Company warrants and represents that it is the legal and beneficial owner of the
Pledged Property, which is free and clear of any lien, security interest, option
or other charge or encumbrance except for except for the prior lien, security
interest and encumbrance created by the Cornell Security Agreement and the
security interest created by this Agreement.

                                   ARTICLE 5.

                   DEFAULT; REMEDIES; SUBSTITUTE COLLATERAL

      Section 5.1.      Default and Remedies.

            (a) If an Event of Default occurs, then in each such case the
Secured Party may declare the Obligations to be due and payable immediately, by
a notice in writing to the Company, and upon any such declaration, the
Obligations shall become immediately due and payable.

            (b) Upon the occurrence of an Event of Default, the Secured Party
shall: (i) be entitled to receive all distributions with respect to the Pledged
Property, (ii) to cause the Pledged Property to be transferred into the name of
the Secured Party or its nominee, (iii) to dispose of the Pledged Property, and
(iv) to realize upon any and all rights in the Pledged Property then held by the
Secured Party.

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      Section 5.2.      Method of Realizing Upon the Pledged Property: Other
                        Remedies.

      Upon the occurrence of an Event of Default, in addition to any rights and
remedies available at law or in equity, the following provisions shall govern
the Secured Party's right to realize upon the Pledged Property:

            (a) Any item of the Pledged Property may be sold for cash or other
value in any number of lots at brokers board, public auction or private sale and
may be sold without demand, advertisement or notice (except that the Secured
Party shall give the Company ten (10) days' prior written notice of the time and
place or of the time after which a private sale may be made (the "Sale
Notice")), which notice period is hereby agreed to be commercially reasonable.
At any sale or sales of the Pledged Property, the Company may bid for and
purchase the whole or any part of the Pledged Property and, upon compliance with
the terms of such sale, may hold, exploit and dispose of the same without
further accountability to the Secured Party. The Company will execute and
deliver, or cause to be executed and delivered, such instruments, documents,
assignments, waivers, certificates, and affidavits and supply or cause to be
supplied such further information and take such further action as the Secured
Party reasonably shall require in connection with any such sale.

            (b) Any cash being held by the Secured Party as Pledged Property and
all cash proceeds received by the Secured Party in respect of, sale of,
collection from, or other realization upon all or any part of the Pledged
Property shall be applied as follows:

                  (i) to the payment of all amounts due the Secured Party for
the expenses reimbursable to it hereunder or owed to it pursuant to Section 8.3
hereof;

                  (ii) to the payment of the Obligations then due and unpaid.

                  (iii) the balance, if any, to the person or persons entitled
thereto, including, without limitation, the Company.

            (c) In addition to all of the rights and remedies which the Secured
Party may have pursuant to this Agreement, the Secured Party shall have all of
the rights and remedies provided by law, including, without limitation, those
under the Uniform Commercial Code.

                  (i) If the Company fails to pay such amounts due upon the
occurrence of an Event of Default which is continuing, then the Secured Party
may institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company and collect the monies adjudged or decreed
to be payable in the manner provided by law out of the property of Company,
wherever situated.

                  (ii) The Company agrees that it shall be liable for any
reasonable fees, expenses and costs incurred by the Secured Party in connection
with enforcement, collection and preservation of the Transaction Documents,
including, without limitation, reasonable legal fees and expenses, and such
amounts shall be deemed included as Obligations secured hereby and payable as
set forth in Section 8.3 hereof.

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      Section 5.3.      Proofs of Claim.

            In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relating to the Company or the property of the Company
or of such other obligor or its creditors, the Secured Party (irrespective of
whether the Obligations shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Secured Party shall
have made any demand on the Company for the payment of the Obligations), subject
to the rights of Previous Security Holders, shall be entitled and empowered, by
intervention in such proceeding or otherwise:

                  (i) to file and prove a claim for the whole amount of the
Obligations and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Secured Party (including any claim
for the reasonable legal fees and expenses and other expenses paid or incurred
by the Secured Party permitted hereunder and of the Secured Party allowed in
such judicial proceeding), and

                  (ii) to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by the
Secured Party to make such payments to the Secured Party and, in the event that
the Secured Party shall consent to the making of such payments directed to the
Secured Party, to pay to the Secured Party any amounts for expenses due it
hereunder.

      Section 5.4.      Duties Regarding Pledged Property.

      The Secured Party shall have no duty as to the collection or protection of
the Pledged Property or any income thereon or as to the preservation of any
rights pertaining thereto, beyond the safe custody and reasonable care of any of
the Pledged Property actually in the Secured Party's possession.

                                   ARTICLE 6.

                              AFFIRMATIVE COVENANTS

      The Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4 hereof):

      Section 6.1.      Existence, Properties, Etc.

            (a) The Company shall do, or cause to be done, all things, or
proceed with due diligence with any actions or courses of action, that may be
reasonably necessary (i) to maintain Company's due organization, valid existence
and good standing under the laws of its state of incorporation, and (ii) to
preserve and keep in full force and effect all qualifications, licenses and
registrations in those jurisdictions in which the failure to do so could have a
Material Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company's corporate power or authority
(i) to carry on the Company's business as now conducted, and (ii) to execute or
deliver this Agreement or any other document delivered in connection herewith,
including, without limitation, any UCC-1 Financing Statements required by the
Secured Party to which it is or will be a party, or perform any of its
obligations hereunder or thereunder. For purpose of this Agreement, the term
"Material Adverse Effect" shall mean any material and adverse affect as
determined by Secured Party in its sole discretion, whether individually or in
the aggregate, upon (a) the Company's assets, business, operations, properties
or condition, financial or otherwise; (b) the Company's to make payment as and
when due of all or any part of the Obligations; or (c) the Pledged Property.

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      Section 6.2.      Financial Statements and Reports.

      The Company shall furnish to the Secured Party within a reasonable time
such financial data as the Secured Party may reasonably request, including,
without limitation, the following:

            (a) The balance sheet of the Company as of the close of each fiscal
year, the statement of earnings and retained earnings of the Company as of the
close of such fiscal year, and statement of cash flows for the Company for such
fiscal year, all in reasonable detail, prepared in accordance with generally
accepted accounting principles consistently applied, certified by the chief
executive and chief financial officers of the Company as being true and correct
and accompanied by a certificate of the chief executive and chief financial
officers of the Company, stating that the Company has kept, observed, performed
and fulfilled each covenant, term and condition of this Agreement during such
fiscal year and that no Event of Default hereunder has occurred and is
continuing, or if an Event of Default has occurred and is continuing, specifying
the nature of same, the period of existence of same and the action the Company
proposes to take in connection therewith;

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            (b) A balance sheet of the Company as of the close of each month,
and statement of earnings and retained earnings of the Company as of the close
of such month, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently applied,
certified by the chief executive and chief financial officers of the Company as
being true and correct; and

            (c) Copies of all accountants' reports and accompanying financial
reports submitted to the Company by independent accountants in connection with
each annual examination of the Company.

      Section 6.3.      Accounts and Reports.

      The Company shall maintain a standard system of accounting in accordance
with generally accepted accounting principles consistently applied and provide,
at its sole expense, to the Secured Party the following:

            (a) as soon as available, a copy of any notice or other
communication alleging any nonpayment or other material breach or default, or
any foreclosure or other action respecting any material portion of its assets
and properties, received respecting any of the indebtedness of the Company in
excess of $15,000 (other than the Obligations), or any demand or other request
for payment under any guaranty, assumption, purchase agreement or similar
agreement or arrangement respecting the indebtedness or obligations of others in
excess of $15,000, including any received from any person acting on behalf of
the Secured Party or beneficiary thereof; and

            (b) within fifteen (15) days after the making of each submission or
filing, a copy of any report, financial statement, notice or other document,
whether periodic or otherwise, submitted to the shareholders of the Company, or
submitted to or filed by the Company with any governmental authority involving
or affecting (i) the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Property; or (iv) any of the
transactions contemplated in this Agreement or the Loan Instruments.

      Section 6.4.      Maintenance of Books and Records; Inspection.

      The Company shall maintain its books, accounts and records in accordance
with generally accepted accounting principles consistently applied, and permit
the Secured Party, its officers and employees and any professionals designated
by the Secured Party in writing, at any time to visit and inspect any of its
properties (including but not limited to the collateral security described in
the Transaction Documents and/or the Loan Instruments), corporate books and
financial records, and to discuss its accounts, affairs and finances with any
employee, officer or director thereof.

      Section 6.5.      Maintenance and Insurance.

            (a) The Company shall maintain or cause to be maintained, at its own
expense, all of its assets and properties in good working order and condition,
making all necessary repairs thereto and renewals and replacements thereof.

            (b) The Company shall maintain or cause to be maintained, at its own
expense, insurance in form, substance and amounts (including deductibles), which
the Company deems reasonably necessary to the Company's business, (i) adequate
to insure all assets and properties of the Company, which assets and properties
are of a character usually insured by persons engaged in the same or similar
business against loss or damage resulting from fire or other risks included in
an extended coverage policy; (ii) against public liability and other tort claims
that may be incurred by the Company; (iii) as may be required by the Transaction
Documents and/or applicable law and (iv) as may be reasonably requested by
Secured Party, all with adequate, financially sound and reputable insurers.

      Section 6.6.      Contracts and Other Collateral.

      The Company shall perform all of its obligations under or with respect to
each instrument, receivable, contract and other intangible included in the
Pledged Property to which the Company is now or hereafter will be party on a
timely basis and in the manner therein required, including, without limitation,
this Agreement.

      Section 6.7.      Defense of Collateral, Etc.

      The Company shall defend and enforce its right, title and interest in and
to any part of: (a) the Pledged Property; and (b) if not included within the
Pledged Property, those assets and properties whose loss could have a Material
Adverse Effect, the Company shall defend the Secured Party's right, title and
interest in and to each and every part of the Pledged Property, each against all
manner of claims and demands on a timely basis to the full extent permitted by
applicable law.

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      Section 6.8.      Payment of Debts, Taxes, Etc.

      The Company shall pay, or cause to be paid, all of its indebtedness and
other liabilities and perform, or cause to be performed, all of its obligations
in accordance with the respective terms thereof, and pay and discharge, or cause
to be paid or discharged, all taxes, assessments and other governmental charges
and levies imposed upon it, upon any of its assets and properties on or before
the last day on which the same may be paid without penalty, as well as pay all
other lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due

      Section 6.9.      Taxes and Assessments; Tax Indemnity.

      The Company shall (a) file all tax returns and appropriate schedules
thereto that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or levies
that, if unpaid, might become a lien or charge upon any of its properties;
provided, however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect thereto.

      Section 6.10.     Compliance with Law and Other Agreements.

      The Company shall maintain its business operations and property owned or
used in connection therewith in compliance with (a) all applicable federal,
state and local laws, regulations and ordinances governing such business
operations and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound. Without limiting the
foregoing, the Company shall pay all of its indebtedness promptly in accordance
with the terms thereof.

      Section 6.11.     Notice of Default.

      The Company shall give written notice to the Secured Party of the
occurrence of any default or Event of Default under this Agreement, the
Transaction Documents or any other Loan Instrument or any other agreement of
Company for the payment of money, promptly upon the occurrence thereof.

      Section 6.12.     Notice of Litigation.

      The Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen (15)
days of the commencement thereof, between the Company on the one hand and any
governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.

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                                   ARTICLE 7.

                               NEGATIVE COVENANTS

      The Company covenants and agrees that, from the date hereof until the
Obligations have been fully paid and satisfied, the Company shall not, unless
the Secured Party shall consent otherwise in writing:

      Section 7.1.      Indebtedness.

      The Company shall not directly or indirectly permit, create, incur,
assume, permit to exist, increase, renew or extend on or after the date hereof
any indebtedness on its part, including commitments, contingencies and credit
availabilities, or apply for or offer or agree to do any of the foregoing.

      Section 7.2.      Liens and Encumbrances.

      The Company shall not directly or indirectly make, create, incur, assume
or permit to exist any assignment, transfer, pledge, mortgage, security interest
or other lien or encumbrance of any nature in, to or against any part of the
Pledged Property or of the Company's capital stock, or offer or agree to do so,
or own or acquire or agree to acquire any asset or property of any character
subject to any of the foregoing encumbrances (including any conditional sale
contract or other title retention agreement), or assign, pledge or in any way
transfer or encumber its right to receive any income or other distribution or
proceeds from any part of the Pledged Property or the Company's capital stock;
or enter into any sale-leaseback financing respecting any part of the Pledged
Property as lessee, or cause or assist the inception or continuation of any of
the foregoing.

      Section 7.3.      Certificate of Incorporation, By-Laws, Mergers,
                        Consolidations, Acquisitions and Sales.

      Without the prior express written consent of the Secured Party, the
Company shall not: (a) Amend its Certificate of Incorporation or By-Laws; (b)
issue or sell its stock, stock options, bonds, notes or other corporate
securities or obligations; (c) be a party to any merger, consolidation or
corporate reorganization, (d) purchase or otherwise acquire all or substantially
all of the assets or stock of, or any partnership or joint venture interest in,
any other person, firm or entity, (e) sell, transfer, convey, grant a security
interest in or lease all or any substantial part of its assets, nor (f) create
any subsidiaries nor convey any of its assets to any subsidiary.

      Section 7.4.      Management, Ownership.

      The Company shall not materially change its ownership, executive staff or
management without the prior written consent of the Secured Party. The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.

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      Section 7.5.      Dividends, Etc.

      The Company shall not declare or pay any dividend of any kind, in cash or
in property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.

      Section 7.6.      Guaranties; Loans.

      The Company shall not guarantee nor be liable in any manner, whether
directly or indirectly, or become contingently liable after the date of this
Agreement in connection with the obligations or indebtedness of any person or
persons, except for (i) the indebtedness currently secured by the liens
identified on the Pledged Property identified on Exhibit A hereto and (ii) the
endorsement of negotiable instruments payable to the Company for deposit or
collection in the ordinary course of business. The Company shall not make any
loan, advance or extension of credit to any person other than in the normal
course of its business.

      Section 7.7.      Debt.

      The Company shall not create, incur, assume or suffer to exist any
additional indebtedness of any description whatsoever in an aggregate amount in
excess of $25,000 (excluding any indebtedness of the Company to the Secured
Party, trade accounts payable and accrued expenses incurred in the ordinary
course of business and the endorsement of negotiable instruments payable to the
Company, respectively for deposit or collection in the ordinary course of
business).

      Section 7.8.      Conduct of Business.

      The Company will continue to engage, in an efficient and economical
manner, in a business of the same general type as conducted by it on the date of
this Agreement.

      Section 7.9.      Places of Business.

      The location of the Company's chief place of business is 109 North Post
Oak Lane, Suite 422, Houston, TX 77024. The Company shall not change the
location of its chief place of business, chief executive office or any place of
business disclosed to the Secured Party or move any of the Pledged Property from
its current location without thirty (30) days' prior written notice to the
Secured Party in each instance.

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                                   ARTICLE 8.

                                  MISCELLANEOUS

      Section 8.1.      Notices.

      All notices or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be considered as duly
given on: (a) the date of delivery, if delivered in person, by nationally
recognized overnight delivery service or (b) five (5) days after mailing if
mailed from within the continental United States by certified mail, return
receipt requested to the party entitled to receive the same:

If to the Secured Party:     CSI Business Finance, Inc.
                             109 North Post Oak Lane, Suite 422
                             Houston, TX 77024
                             Attention:  Timothy J. Connolly, President & CEO
                             Telephone:  (713) 621-2737
                             Facsimile:  (713) 586-6678
                             CSI Business Finance, Inc.

And if to the Company:       Power Technology, Inc.
                             109 North Post Oak Lane, Suite 422
                             Houston, Texas 77024
                             Attention:  Bernard J. Walter
                             Telephone:  (713) 621-4310
                             Facsimile:  (713) 586-6678

With a copy to:              Stephen A. Zrenda, Jr., P.C.
                             100 N. Broadway, Suite 2440
                             Oklahoma City, OK 73102
                             Attention:  Stephen A. Zrenda, Jr.
                             Telephone:  (405) 235-2111
                             Facsimile:  (405) 235-2157

      Any party may change its address by giving notice to the other party
stating its new address. Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party's address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.

      Section 8.2.      Severability.

      If any provision of this Agreement shall be held invalid or unenforceable,
such invalidity or unenforceability shall attach only to such provision and
shall not in any manner affect or render invalid or unenforceable any other
severable provision of this Agreement, and this Agreement shall be carried out
as if any such invalid or unenforceable provision were not contained herein.

                                       12
<PAGE>

      Section 8.3.      Expenses.

      In the event of an Event of Default, the Company will pay to the Secured
Party the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel, which the Secured Party may incur in
connection with: (i) the custody or preservation of, or the sale, collection
from, or other realization upon, any of the Pledged Property; (ii) the exercise
or enforcement of any of the rights of the Secured Party hereunder or (iii) the
failure by the Company to perform or observe any of the provisions hereof.

      Section 8.4.      Waivers, Amendments, Etc.

      The Secured Party's delay or failure at any time or times hereafter to
require strict performance by Company of any undertakings, agreements or
covenants shall not waiver, affect, or diminish any right of the Secured Party
under this Agreement to demand strict compliance and performance herewith. Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type. None of the undertakings,
agreements and covenants of the Company contained in this Agreement, and no
Event of Default, shall be deemed to have been waived by the Secured Party, nor
may this Agreement be amended, changed or modified, unless such waiver,
amendment, change or modification is evidenced by an instrument in writing
specifying such waiver, amendment, change or modification and signed by the
Secured Party.

      Section 8.5.      Continuing Security Interest.

      This Agreement shall create a continuing security interest in the Pledged
Property and shall: (i) remain in full force and effect until payment in full of
the Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its successors and
assigns. Upon the payment or satisfaction in full of the Obligations, the
Company shall be entitled to the return, at its expense, of such of the Pledged
Property as shall not have been sold in accordance with Section 5.2 hereof or
otherwise applied pursuant to the terms hereof.

      Section 8.6.      Independent Representation.

      Each party hereto acknowledges and agrees that it has received or has had
the opportunity to receive independent legal counsel of its own choice and that
it has been sufficiently apprised of its rights and responsibilities with regard
to the substance of this Agreement.

      Section 8.7.      Applicable Law:  Jurisdiction.

      This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Texas without regard to the principles of conflict of laws.
The parties further agree that any action between them shall be heard in Harris
County, Texas, and expressly consent to the jurisdiction and venue of the
District Courts of Texas, sitting in Harris County and the United States
District Court for the Southern District of Texas sitting in Houston, Texas for
the adjudication of any civil action asserted pursuant to this Paragraph.

                                       13
<PAGE>

      Section 8.8.      Waiver of Jury Trial.

      AS A FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT
AND TO MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO
THIS AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.

      Section 8.9.      Entire Agreement.

      This Agreement constitutes the entire agreement among the parties and
supersedes any prior agreement or understanding among them with respect to the
subject matter hereof.



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                                       14
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the date first above written.


                                        COMPANY:
                                        POWER TECHNOLOGY, INC.

                                       By:
                                        Name: Bernard J. Walter
                                        Title:      Chief Executive Officer


                                        SECURED PARTY:
                                        CSI BUSINESS FINANCE, INC.

                                       By:
                                        Name: Timothy J. Connolly
                                        Title:      President & CEO


                                       15
<PAGE>

                                    EXHIBIT A
                         DEFINITION OF PLEDGED PROPERTY


      For the purpose of securing prompt and complete payment and performance by
the Company of all of the Obligations, the Company unconditionally and
irrevocably hereby grants to the Secured Party a continuing security interest in
and to, and lien upon, the following Pledged Property of the Company:


            (a) all goods of the Company, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company or in which the Company may have or may hereafter
acquire any interest, and all replacements, additions, accessions, substitutions
and proceeds thereof, arising from the sale or disposition thereof, and where
applicable, the proceeds of insurance and of any tort claims involving any of
the foregoing;


            (b) all inventory of the Company, including, but not limited to, all
goods, wares, merchandise, parts, supplies, finished products, other tangible
personal property, including such inventory as is temporarily out of Company's
custody or possession and including any returns upon any accounts or other
proceeds, including insurance proceeds, resulting from the sale or disposition
of any of the foregoing;


            (c) all contract rights and general intangibles of the Company,
including, without limitation, goodwill, trademarks, trade styles, trade names,
leasehold interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;


            (d) all documents, warehouse receipts, instruments and chattel paper
of the Company whether now owned or hereafter created;


            (e) all accounts and other receivables, instruments or other forms
of obligations and rights to payment of the Company (herein collectively
referred to as "Accounts"), together with the proceeds thereof, all goods
represented by such Accounts and all such goods that may be returned by the
Company's customers, and all proceeds of any insurance thereon, and all
guarantees, securities and liens which the Company may hold for the payment of
any such Accounts including, without limitation, all rights of stoppage in
transit, replevin and reclamation and as an unpaid vendor and/or lienor, all of
which the Company represents and warrants will be bona fide and existing
obligations of its respective customers, arising out of the sale of goods by the
Company in the ordinary course of business;


            (f) to the extent assignable, all of the Company's rights under all
present and future authorizations, permits, licenses and franchises issued or
granted in connection with the operations of any of its facilities;


            (g) all products and proceeds (including, without limitation,
insurance proceeds) from the above-described Pledged Property.