<PAGE>

                                                                   EXHIBIT 10.46

THIS SECURITY AGREEMENT IS SUBJECT TO AN INTERCREDITOR AGREEMENT, DATED AS OF
DECEMBER 21, 2001, AMONG FLEET CAPITAL CORPORATION, A RHODE ISLAND CORPORATION,
PETROCON ENGINEERING, INC., AND EQUUS II INCORPORATED, A DELAWARE CORPORATION,
ET AL. THIS SECURITY AGREEMENT IS SUBORDINATED IN RIGHT AND TIME OF PAYMENT TO
THE PRIOR PAYMENT IN FULL IN CASH OF ALL SENIOR DEBT (AS DEFINED IN THE
INTERCREDITOR AGREEMENT) IN ACCORDANCE WITH, AND TO THE EXTENT SPECIFIED IN,
SUCH INTERCREDITOR AGREEMENT AND EACH HOLDER OF THIS SECURITY AGREEMENT, BY ITS
ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE TERMS AND PROVISIONS
OF SUCH INTERCREDITOR AGREEMENT.


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

THIS SECURITY AGREEMENT (the "Agreement") dated as of December 21, 2001,
                              ---------
between EACH OF THE UNDERSIGNED (each, a "Grantor"), in favor of and for the
                                          -------
benefit of EQUUS II INCORPORATED, a Delaware corporation ("Lender").
                                                           ------

                                    RECITALS

     A.   Pursuant to that certain Settlement Agreement and Plan of
Reorganization dated as of July 31, 2001, by and among INDUSTRIAL DATA SYSTEMS
CORPORATION, a Nevada corporation ("IDS"), PETROCON ENGINEERING, INC., a Texas
corporation ("Debtor"), PEI ACQUISITION, INC., a Texas corporation, and a
              ------
wholly owned and indirect subsidiary of IDS ("Sub") and Lender (the "Settlement
                                              ---                    ----------
Agreement"), Equus has agreed to renew, rearrange and extend $3,000,000 of its
---------
existing loan to PEI (the "Loan") as evidenced by that certain Promissory Note
                           ----
from PEI to Lender in the principal amount of $3,000,000 dated as of December
21, 2001 (the "Note").
               ----

     B.   IDS, Sub, IDS Engineering Management, LC, a Texas limited liability
company ("LC") and PEI have entered into that certain Agreement and Plan of
Merger on or about July 31, 2001, whereby Sub will merge with and into PEI and
PEI will be the surviving corporation (the "Plan of Merger").
                                            --------------

     C.   It is a condition of the Note and the Settlement Agreement that
Grantors' obligations thereunder be secured by this Agreement.

     NOW, THEREFORE, in consideration of the premises and in order to induce
Lender to renew, rearrange and extend its loans to Debtor, each Grantor hereby
agrees with Lender as follows:

SECTION 1.   Definitions
             -----------

Security Agreement - Page 1
<PAGE>

     1.1  Certain Defined Terms. Terms defined in the Note and not otherwise
          ---------------------
defined herein have the respective meanings provided for in the Note. The
following terms, as used herein, have the meanings set forth below:


     "Accounts" means with respect to any Person, all accounts, accounts
      --------
receivable, contract rights, including without limitation rights under
contracts for the purchase of supplies (in any such case to the extent a
security interest can be granted in particular contracts), instruments, notes,
drafts, acceptances, documents, chattel paper, any right of or to payment for
goods sold or leased or for services rendered, whether arising out of the sale
of Inventory (as hereinafter defined) or otherwise and whether or not earned by
performance, and all other forms of obligations owing to such Person, and all
of such Person's rights to any merchandise (including without limitation any
returned or repossessed goods and the right of stoppage in transit which is
represented by, arises from or is related to any of the foregoing) whether now
existing or hereafter arising, and however evidenced or acquired, in which such
Person now has or hereafter acquires any interest or rights.

     "Account Debtor" means with respect to any Person, any other Person who is
      --------------
or may become obligated under or on account of an Account of Grantor owing to
such Person.

     "Collateral" has the meaning assigned to that term in Section 2.
     ----------

     "Copyright License" means any written agreement now or hereafter in
      -----------------
existence granting to any Grantor any right to use any Copyright (excluding any
such agreement if and to the extent that any attempt to grant a security
interest hereunder in any such agreement without the consent of a third party
would constitute a breach thereof or such consent has not been obtained by any
Grantor) including, without limitation, the agreements described in Schedule 1
of the Copyright Security Agreement.

     "Copyrights" means collectively all of the following: (a) all copyrights,
      ----------
rights and interests in copyrights, works protectable by copyright, copyright
registrations and copyright applications now owned or hereafter created or
acquired by each Grantor, including, without limitation, those listed on
Schedule 1 of the Copyright Security Agreement; (b) all renewals of any of the
foregoing; (c) all income, royalties, damages and payments now or hereafter due
and/or payable under any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the foregoing;
(d) the right to sue for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the foregoing throughout the
world; and (f) all goodwill associated with and symbolized by any of the
foregoing.

     "Copyright Security Agreement" means the copyright security agreement to
      ----------------------------
be executed and delivered by any Grantor to Lender, substantially in the form
of Exhibit A, as such agreement may hereafter be amended, supplemented or
   ---------
otherwise modified from time to time.

     "Documents" means all "documents" (as defined in the UCC) or other
      ---------
receipts covering, evidencing or representing goods now owned or hereafter
acquired by any Grantor.

Security Agreement - Page 2
<PAGE>

     "Equipment" means with respect to any Person, all machinery, apparatus,
      ---------
equipment, fittings, furniture, fixtures, motor vehicles and other tangible
personal Property (other than Inventory) of every kind and description used in
the operations of such Person or owned by such Person or in which such Person
has an interest, whether now owned or hereafter acquired by such Person and
wherever located, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements therefor.

     "Fixtures" means all "Fixtures" (as defined in the UCC) now owned or
      --------
hereafter acquired by any Grantor including, without limitation, all plant
Fixtures; business Fixtures; other Fixtures and storage office facilities,
wherever located; and all additions and accessions thereto and replacements
therefor.

     "General Intangibles" means with respect to any Person, all general
      -------------------
intangibles of such Person, whether now owned or hereafter created or acquired
by such Person, including, without limitation, all payment intangibles, all
choses in action, causes of action, corporate or other business records,
deposit accounts, inventions, designs, patents, patent applications,
trademarks, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, tax refund claims, computer programs, all
claims under guaranties, security interests or other security held by or
granted to such Person to secure payment of any of the Accounts owing to such
Person by an Account Debtor, all rights to indemnification and all other
intangible property of every kind and nature (other than Accounts owing to such
Person).

     "Instruments" means all "instruments", "chattel paper" or "letters of
      -----------
credit" (each as defined in the UCC) including, but not limited to, promissory
notes, drafts, bills of exchange and trade acceptances, now owned or hereafter
acquired by any Grantor.

     "Intellectual Property" shall mean collectively all of the following:
      ---------------------
Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses.

     "Inventory" means with respect to any Person, all inventory of such
      ---------
Person, whether now owned or hereafter acquired including, but not limited to,
all goods intended for sale or lease by such Person, or for display or
demonstration; all work in process; all raw materials and other materials and
supplies of every nature and description used or which might be used in
connection with the manufacture, printing, packing, shipping, advertising,
selling, leasing or furnishing of such goods or otherwise used or consumed in
such Person's business; and all documents evidencing and General Intangibles
relating to any of the foregoing, whether now owned or hereafter acquired by
such Person.

     "Investment Property" means with respect to any Person, all of such
      -------------------
Person's investment property, whether now owned or hereinafter acquired by such
Person, including, without limitation, all securities (certificated or
uncertificated), securities accounts, securities entitlements, commodity
accounts and contracts.

     "Lien" means any interest in Property securing an obligation owed to, or a
      ----
claim by, a Person other than the owner of the Property, whether such interest
is based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments,

Security Agreement - Page 3
<PAGE>

easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting Property.

     "Obligations" means all loans and all other advances, debts, liabilities,
      -----------
obligations, covenants and duties to Lender arising in connection with the Note
together with all interest, fees and other charges thereon, owing, arising, due
or payable from Debtor to Lender of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under the Note or any other loan documents whether direct or indirect
(including those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and however
acquired.

     "Obligor" means any maker of the Note or any guarantor of the Obligations.
      -------

     "Patent License" means any written agreement now or hereafter in existence
      --------------
granting to any Grantor any right to use any invention on which a Patent is in
existence (excluding any such agreement if and to the extent that any attempt
to grant a security interest hereunder in any such agreement without the
consent of a third party would constitute a breach thereof and such consent has
not been obtained by any Grantor) including, without limitation, the agreements
described in Schedule 1 of the Patent Security Agreement.

     "Patents" means collectively all of the following: (a) all patents and
      -------
patent applications now owned or hereafter created or acquired by any Grantor
including, without limitation, those listed on Schedule l of the Patent
Security Agreement and the inventions and improvements described and claimed
therein, and patentable inventions; (b) the reissues, divisions, continuations,
renewals, extensions and continuations-in-part of any of the foregoing; (c) all
income, royalties, damages or payments now and hereafter due and/or payable
under any of the foregoing with respect to any of the foregoing, including,
without limitation, damages or payments for past or future infringements of any
of the foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; (e) all rights corresponding to any of
the foregoing throughout the world; and (f) all goodwill associated with any of
the foregoing.

     "Patent Security Agreement" means a patent security agreement executed and
      -------------------------
delivered by any Grantor to Lender, substantially in the form of Exhibit B, as
                                                                 ---------
such agreement may be amended, supplemented or otherwise modified from time to
time.

     "Person" means a an individual, partnership, corporation, limited
      ------
liability company, joint stock company, land trust, business trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.

     "Proceeds" means all proceeds of, and all other profits, rentals or
      --------
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, any
Collateral including, without limitation, all claims of any Grantor against
third parties for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of insurance with respect
to any Collateral, and any condemnation or requisition payments with respect to
any Collateral, in each case whether now existing or hereafter arising.

Security Agreement - Page 4
<PAGE>

     "Property" means any interest in any kind of property or asset, whether
      --------
real (including immovable), personal (including movable) or mixed, or tangible
or intangible.

     "Secured Obligations" has the meaning assigned to that term in Section 3.
      -------------------

     "Security Interests" means the security interests granted pursuant to
      ------------------
Section 2, as well as all other security interests created or assigned by any
Grantor as additional security for the Secured Obligations pursuant to the
provisions of this Agreement.

     "Senior Debt" has the meaning assigned to that term in the Note.
      -----------

     "Senior Lender" means Fleet Capital Corporation, a Rhode Island
      -------------
corporation or any successor or assignee thereof and any Person providing
refinancing re replacement of the Senior Debt.

     "Trademark License" means any written agreement now or hereafter in
      -----------------
existence granting to any Grantor any right to use any Trademark (excluding any
such agreement if and to the extent that any attempt to grant a security
interest hereunder in any such agreement without the consent of a third party
would constitute a breach thereof and such consent has not been obtained by
such Grantor), including, without limitation, the agreements described in
Schedule 1 to the Trademark Security Agreement.

     "Trademarks" means collectively all of the following now owned or
      ----------
hereafter created or acquired by any Grantor: (a) all trademarks, trade names,
corporate names, company names, business names, fictitious business names,
trade styles, service marks, logos, other business identifiers, prints and
labels on which any of the foregoing have appeared or appear, all registrations
and recordings thereof, and all applications in connection therewith including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof,
including, without limitation, those described in Schedule 1 of the Trademark
Security Agreement; (b) all reissues, extensions or renewals thereof; (c) all
income, royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing or with respect to any of the foregoing including
damages or payments for past or future infringements of any of the foregoing;
(d) the right to sue for past, present and future infringements of any of the
foregoing; (e) all rights corresponding to any of the foregoing throughout the
world; and (f) all goodwill associated with and symbolized by any of the
foregoing.

     "Trademark Security Agreement" means the trademark security agreement
      ----------------------------
executed and delivered by any Grantor to Lender substantially in the form of
Exhibit C, as such agreement may hereafter be amended, supplemented or
---------
otherwise modified from time to time.

     "UCC" means the Uniform Commercial Code as in effect on the date hereof in
      ---
the State of Texas, as amended from time to time, and any successor statute;
provided that if by reason of mandatory provisions of law, the perfection or
--------
the effect of perfection or non-perfection of the Security Interest in any
Collateral is governed by the Uniform Commercial Code as in effect on or after
the date hereof in any other jurisdiction, "UCC" means the Uniform Commercial
Code as

Security Agreement - Page 5
<PAGE>

in effect from time to time in such other jurisdiction for purposes of
the provision hereof relating to such perfection or effect of perfection or
non-perfection.

     1.2     Other Definition Provisions.  References to "Sections",
             ---------------------------
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. All references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.


SECTION 2.   Grant of Security Interests
             ---------------------------

     To secure the prompt payment and performance to Lender of the Obligations,
each Grantor hereby grants, subject to Applicable Law, to Lender a continuing
Lien upon all of such Grantor's assets, including all of the following Property
and interests in Property of such Grantor whether now owned or existing or
hereafter created, acquired or arising and wheresoever located (all being
collectively referred to as the "Collateral"):
                                 ----------
          (A)  Accounts;

          (B)  Inventory;

          (C)  Equipment;

          (D)  General Intangibles;

          (E)  Investment Property;

          (F)  All monies and other Property of each Grantor of any kind now or
     at any time or times hereafter in the possession or under the control of
     Lender or a bailee of Lender;

          (G)  All accessions to, substitutions for and all replacements,
     products and cash and non-cash proceeds of (A) through (F) above,
     including, without limitation, proceeds of and unearned premiums with
     respect to insurance policies insuring any of the Collateral; and

          (H)  All books and records (including, without limitation, customer
     lists, credit files, computer programs, print-outs, and other computer
     materials and records) of each Grantor pertaining to any of (A) through (G)
     above.

SECTION 3.   Security for Obligations
             ------------------------

     This Agreement secures the payment and performance of the Note and all
obligations of every nature of Debtor now or hereafter existing under this
Agreement and under the Note

Security Agreement - Page 6
<PAGE>

and all renewals, extensions, restructurings and refinancings of any of the
above (all such debts, obligations and liabilities of Debtor being collectively
called the "Secured Obligations").
            -------------------

SECTION 4.   Debtor Remains Liable
             ---------------------

     Anything herein to the contrary notwithstanding: (a) each Grantor shall
remain liable under the contracts and agreements included in the Collateral to
the extent set forth therein to perform all of its respective duties and
obligations thereunder to the same extent as if this Agreement had not been
executed; (b) the exercise by Lender of any of the rights hereunder shall not
release any Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral; and (c) Lender shall not have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Lender be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.

SECTION 5.   Representations and Warranties
             ------------------------------

     In order to induce Lender to renew, rearrange and extend the loan
contemplated by the Note, each Grantor represents and warrants to Lender that
the following statements are and will be true, correct and complete:

     5.1  Location of Equipment, Fixtures and Inventory.  All of the Equipment
          ---------------------------------------------
and Inventory is located at the places specified in Section B and C of Schedule
                                                                       --------
I or at such other locations as are specified in the Security Agreements
-
executed by other Obligors in favor of Lender. All Fixtures are located at the
place specified in Section B of Schedule I. Schedule I correctly identifies the
                                ----------  ----------
landlords (other than Lender), if any, of each Grantor's respective locations
identified on Schedule I. Schedule I sets forth the names and addresses of all
              ----------  ----------
Persons other than any Grantor who have possession of any of the Collateral.
None of the Collateral has been located in any location within the past four
months other than as set forth on Schedule I. None of the Equipment is
                                  -----------
evidenced by a certificate of title other than Equipment with an aggregate book
value not to exceed $50,000.

     5.2  Ownership of Collateral.  Except for the matters disclosed on Schedule
          -----------------------                                       --------
II, the Liens in favor of the Senior Lender and the Security Interests and
--
Liens otherwise permitted under the documents and agreements governing the
Senior Debt and the Obligations, each Grantor owns its Collateral free and
clear of any Lien. No effective financing statement or other form of lien
notice covering all or any part of the Collateral is on file in any recording
office, except for those in favor of Senior Lender and Lender and as disclosed
on Schedule II.
   -----------

     5.3  Jurisdiction of Organization; Office Locations; Fictitious Names.
          ----------------------------------------------------------------
Debtor is organized under the laws of the State of Texas. The chief executive
offices and the offices where each Grantor keeps its respective books and
records are located at the place or places specified in Section A of Schedule
                                                                     --------
I. Section B of Schedule I sets forth all other locations where each Grantor
-               ----------
has a place of business. No Grantor does business or has done business during
the past five years from the date hereof under any trade-name or fictitious
business name except as disclosed on Schedule III.
                                     ------------

Security Agreement - Page 7
<PAGE>

     5.4  Perfection. This Agreement and the Trademark Security Agreement, the
          ----------
Patent Security Agreement and the Copyright Security Agreement executed
pursuant hereto create a valid and enforceable security interest in the
Collateral, securing the payment of the Secured Obligations, including, without
limitation, all extensions, renewals and other modifications thereof. Upon the
filing of Uniform Commercial Code Financing Statements naming each Grantor as a
debtor and Lender as secured party in the jurisdictions set forth in Schedule
                                                                     --------
IV hereto, the delivery to Lender of all Collateral the possession of which is
--
necessary to perfect the security interest therein, the notation of Lender's
security interest on all certificates of title evidencing Equipment, the
release or assignment to Lender of the security interests described on Schedule
                                                                       --------
V hereto, the Filing of the Trademark Security Agreement with the United States
-
Patent and Trademark Office, the Filing of the Patent Security Agreement with
the United States Patent and Trademark Office, and the Filing of the Copyright
Security Agreement with the United States Copyright Office, the security
interests created hereby shall constitute perfected security interests upon all
the Collateral (other than Trademarks and Trademark Licenses registered in
countries other than the United States).

     5.5  Intellectual Property.  The Copyrights, Copyright Licenses, Patents,
          ---------------------
Patent Licenses, Trademarks and Trademark Licenses listed on the respective
schedules to each of the Copyright Security Agreement, the Trademark Security
Agreement and the Patent Security Agreement in the forms attached hereto as
exhibits constitute all of the material Intellectual Property owned and
currently in use by any Grantor.

SECTION 6.   Further Assurances: Covenants
             ------------------

     6.1  Other Documents and Actions. Each Grantor will, from time to time, at
          ---------------------------
its expense, promptly execute and deliver all further instruments and documents
and take all further action that may be necessary or desirable, or that Lender
may reasonably request, in order to perfect and protect any Security Interests
granted or purported to be granted hereby or to enable Lender to exercise and
enforce its rights and remedies hereunder, with respect to any Collateral or to
carry out the provisions and purposes hereof. Without limiting the generality
of the foregoing, each Grantor will: (a) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, and as Lender may request, in order
to perfect and preserve the Security Interests granted or purported to be
granted hereby; (b) at any reasonable time, upon demand by Lender make the
Collateral available for inspection by Lender or Persons designated by Lender;
and (c) upon Lender's request, appear in and defend any action or proceeding
that may affect such Grantor's title to or Lender's Security Interests in the
Collateral. Notwithstanding the foregoing, no Grantor shall be required to
execute any document or take any action to perfect the Lender's Lien in any
foreign Intellectual Property under the laws of the applicable foreign
jurisdiction.

     6.2  Lender Authorized. Each Grantor hereby authorizes Lender to file one
          -----------------
or more financing or continuation statements, and amendments thereto (or
similar documents required by any laws of any applicable jurisdiction),
relating to all or any part of the Collateral without the signature of any
Grantor.

     6.3  Corporate or Name Change. Each Grantor will notify Lender in writing
          ------------------------
thirty (30) days prior to any change in such Grantor's name, identity or
corporate structure.

Security Agreement - Page 8
<PAGE>

     6.4  Business Locations.  Except for sales of Inventory in the ordinary
          ------------------
course of business and the movement of Equipment between such locations and any
other location specified by any Obligor in any other Security Agreement
executed by Obligor in favor of Lender and movements permitted by the
documentation governing the Senior Debt, each Grantor will keep the Collateral
at the locations specified on Schedule I.
                              ----------

     6.5  Third Parties in Possession of Collateral.  Each Grantor shall not
          -----------------------------------------
permit Inventory having an aggregate value of $50,000 to be held by any third
Person.

     6.6  Instruments.  Subject to the prior rights of the Senior Lender, each
          -----------
Grantor will deliver and pledge to Lender all Instruments duly endorsed and/or
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Lender except that each Grantor may retain for
collection and use in the ordinary course of business any checks representing
Proceeds of Accounts received in the ordinary course of business. When all the
obligations of each Grantor or issuer, as applicable, under any Instrument
delivered to Lender hereunder have been satisfied or otherwise terminated,
Lender agrees to return such Instrument to such Grantor, without recourse or
warranty, duly endorsed and/or accompanied by duly executed instruments of
transfer or assignment.

     6.7  Certificates of Title; Equipment.  Subject to the prior rights of the
          --------------------------------
Senior Lender and at Lender's request, each Grantor shall promptly deliver to
Lender any and all certificates of title, applications for title or similar
evidence of ownership of all Equipment and shall cause Lender to be named as
lienholder on any such certificate of title or other evidence or ownership.

     6.8  Intellectual Property Covenants. Each Grantor shall concurrently
          -------------------------------
herewith deliver to Lender the Copyright Security Agreement, the Trademark
Security Agreement and the Patent Security Agreement and all other documents,
instruments and other items as may be necessary for Lender to file such
agreements with the United States Copyright Office, the United States Patent
and Trademark Office and any similar domestic or foreign office, department or
agency except as otherwise provided in Section 6.1. If, before the Secured
Obligations are paid in full, any Grantor obtains any new Intellectual Property
or rights thereto or becomes entitled to the benefit of any Intellectual
Property which is (a) not listed on the schedules to the Copyright Security
Agreement, the Trademark Security Agreement or the Patent Security Agreement,
as the form of such agreements are attached hereto as Exhibits, and (b) should
be listed thereon to perfect or protect the Security Interest therein, then
such Grantor shall give to Lender prompt written notice thereof, and shall
amend the applicable Intellectual Property security agreement to include any
such new Intellectual Property and shall deliver all other documentation and
other items as may be necessary for Lender to file such agreements with the
United States Copyright Office, the United States Patent and Trademark Office
and/or any similar domestic or foreign office, department or agency except as
otherwise provided in Section 6.1. Each Grantor shall: (a) prosecute diligently
any copyright, patent, trademark or license application at any time pending to
the extent the Intellectual Property relating to such application has a
material value or is material to the conduct of such Grantor's business; (b)
make application on all new material copyrights, patents and trademarks as
reasonably deemed appropriate by such Grantor; (c) preserve and maintain all
rights in the Intellectual Property to the extent such Intellectual Property
has a material value or is material to the conduct of such Grantor's business;
and (d)

Security Agreement - Page 9
<PAGE>

upon and after the occurrence of an Event of Default, use its best efforts to
obtain any consents, waivers or agreements necessary to enable Lender to
exercise its remedies with respect to the Intellectual Property. No Grantor
shall abandon any right to file a copyright, patent or trademark application
nor shall any Grantor abandon any pending copyright, patent or trademark
application, or Copyright, Copyright License, Patent, Patent License, Trademark
or Trademark License unless such Intellectual Property has no material value
and is not material to the conduct of such Grantor's business.

     6.9  Insurance of Collateral.  Each Grantor shall maintain and pay for
          -----------------------
insurance upon all Collateral owned by it wherever located and with respect to
such Grantor's business, covering casualty, hazard, public liability and such
other risks in such amounts and with such insurance companies as are reasonably
satisfactory to Lender. Notwithstanding the foregoing, to the extent Grantor
maintains insurance in compliance with the provisions of the documentation
governing the Senior Debt, the requirements of this Section 6.9 shall be deemed
satisfied.

     6.10 Dispositions of Equipment. No Grantor will sell, lease or otherwise
          -------------------------
dispose of or transfer any of the Equipment of such Grantor or any part thereof
without the prior written consent of Lender; provided, however, that the
                                             --------  -------
foregoing restriction shall not apply (a) to dispositions permitted by the
provisions of the documentation governing the Senior Debt, (b) for so long as
no Event of Default exists, to (i) bona fide sales of Inventory to customers
for fair value in the ordinary course of business and dispositions of obsolete
Equipment not used or useful in the business, (ii) sales, discounts or
transfers of delinquent accounts receivable in the ordinary course of business
for purposes of collection, (iii) leases (as lessor) of real or personal
property, so long as the assets subject to any such lease are not necessary for
the conduct of such Grantor's business, (iv) dispositions of any Grantor's
Equipment which, in the aggregate in respect to all such dispositions by such
Grantor during any consecutive twelve-month period, has a fair market value or
book value, whichever is less, of One Hundred Fifty Thousand Dollars and No/100
($150,000) or less, and (v) any other sale, lease or disposition of or transfer
of any of the Equipment or other assets permitted under the terms of the
agreements and documents governing the Senior Debt or the Obligations.

SECTION 7.   Transfers and Other Liens
             -------------------------

     Except as otherwise permitted herein, by the Note or the other documents
and agreements evidencing the Obligations, no Grantor shall:

          (a)  sell, assign (by operation of law or otherwise) or otherwise
     dispose of, or grant any option with respect to, any of the Collateral to
     any Person who is not an Obligor; or

          (b)  create or suffer to exist any lien, security interest or other
     charge or encumbrance upon or with respect to any of the Collateral to
     secure indebtedness of any Person except for the Security Interest
     created by this Agreement and the liens, security interest and other
     charges to secure the Senior Debt and any other liens, and security
     interests permitted under the terms of the agreements and documents
     governing the Senior Debt or the Obligations.

Security Agreement - Page 10
<PAGE>

SECTION 8.   Remedies
             --------

     Subject to the rights of the Senior Lender, if any Event of Default shall
have occurred and be continuing, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may: (a) require each Grantor to, and each Grantor hereby
agrees that it will, at its expense and upon request of Lender forthwith,
assemble all or part of the Collateral as directed by Lender and make it
available to Lender at a place to be designated by Lender which is reasonably
convenient to both parties; (b) without notice or demand or legal process,
enter upon any premises of any Grantor and take possession of the Collateral;
and (c) without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any of the
Lender's offices or elsewhere, at such time or times, for cash, on credit or
for future delivery, and at such price or prices and upon such other terms as
Lender may deem commercially reasonable. Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least fifteen days notice to
such Grantor of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. At any
sale of the Collateral, if permitted by law, Lender may bid (which bid may be,
in whole or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof for the account of Lender.
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which
it was so adjourned. To the extent permitted by law and to the extent Lender's
rights hereunder may be impaired, each Grantor hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under any law
now existing or hereafter enacted.

SECTION 9.   License of Intellectual Property
             --------------------------------

     Each Grantor hereby assigns, transfers and conveys to Lender, effective
upon the occurrence of any Event of Default, the nonexclusive right and license
to use all Intellectual Property owned or used by such Grantor together with
any goodwill associated therewith, all to the extent necessary to enable Lender
and any successor or assign to enjoy the benefits of the Collateral. This right
and license shall inure to the benefit of all successors, assigns and
transferees of Lender and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed
in lieu of foreclosure or otherwise. Such right and license is granted free of
charge, without requirement that any monetary payment whatsoever be made to
such Grantor by Lender.

SECTION 10.  Limitation on Duty of Lender With Respect to Collateral
             -------------------------------------------------------

     Beyond the safe custody thereof, Lender shall have no duty with respect to
any Collateral in its possession or control (or in the possession or control of
any agent or bailee) or with respect to any income thereon or the preservation
of rights against prior parties or any other rights pertaining thereto;
provided, however, that any Intellectual Property that is confidential shall be
kept confidential by Lender. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment

Security Agreement - Page 11
<PAGE>

substantially equal to that which it accords its own property. Lender shall not
be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of
any warehouseman, carrier, forwarding agency, consignee or other agent or
bailee selected by Lender in good faith.

SECTION 11.  Expenses
             --------

     Each Grantor shall pay all insurance expenses and all expenses of
protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, all costs, fees and expenses of perfecting and
maintaining the Security Interests, any and all excise, property, sales and use
taxes imposed by any federal, state, local or foreign authority on any of the
Collateral, or with respect to periodic appraisals and inspections of the
Collateral, or with respect to the sale or other disposition thereof. If any
Grantor fails to promptly pay any portion of the above expenses when due or to
perform any other obligation of such Grantor under this Agreement, Lender may,
at its option, but shall not be required to, pay or perform the same and charge
such Grantor's account for all costs and expenses incurred therefor, and such
Grantor agrees to reimburse Lender therefor on demand. All sums so paid or
incurred by Lender for any of the foregoing, any and all other sums for which
such Grantor may become liable hereunder and all costs and expenses (including
reasonable attorneys' fees, legal expenses and court costs) incurred by Lender
in enforcing or protecting the Security Interests or any of their rights or
remedies under this Agreement shall be payable on demand, shall constitute
Obligations, shall bear interest until paid at the highest rate provided in the
Note and shall be secured by the Collateral.

SECTION 12.  Termination of Security Interests: Release of Collateral
             --------------------------------------------------------
     Upon payment in full of all Secured Obligations, the Security Interests
shall terminate and all rights to the Collateral shall revert to Grantors. Upon
such termination of the Security Interests or release of any Collateral, Lender
will, at the expense of each Grantor, execute and deliver to each Grantor such
documents as such Grantor shall reasonably request to evidence the termination
of the Security Interests or the release of such Collateral, as the case may be.

SECTION 13.  Notices
             -------

     All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the notice provisions of the Note.

SECTION 14.  Waivers: Non-Exclusive Remedies
             -------------------------------

     No failure on the part of Lender to exercise, and no delay in exercising
and no course of dealing with respect to, any power, privilege or right under
the Note or this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by Lender of any power, privilege or right under the
Note or this Agreement preclude any other or further exercise thereof or the
exercise of any other power, privilege or right. The powers, privileges and
rights in this Agreement and the Note are cumulative and are not exclusive of
any other remedies provided by law.

Security Agreement - Page 12
<PAGE>

SECTION 15.  Successors and Assigns
             ----------------------

     This Agreement is for the benefit of Lender and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the Secured
Obligations so assigned, may be transferred with such Secured Obligations. This
Agreement shall be binding on each Grantor and its respective successors and
assigns.

SECTION 16.  Changes in Writing
             ------------------

     No amendment, modification, termination or waiver of any provision of this
Agreement or consent to any departure by Grantors therefrom, shall in any event
be effective without the written concurrence of Lender and each Grantor.

SECTION 17.  Applicable Law
             --------------

     THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.

SECTION 18.  Failure or Indulgence Not Waiver: Remedies Cumulative
             -----------------------------------------------------
     No failure or delay on the part of Lender in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or any other right, power or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.

SECTION 19.  Headings
             --------

     Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose or be given any substantive effect.

SECTION 20.  Counterparts
             ------------

     This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same agreement and any of the
parties hereto may execute this Agreement by signing any such counterpart.

                            [Signature page follows]

Security Agreement - Page 13
<PAGE>

     Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the day first above written.

                                 GRANTORS:

                                 INDUSTRIAL DATA SYSTEMS
                                 CORPORATION, a Nevada corporation

                                 By:___________________________________
                                       William A. Coskey, President

                                 IDS ENGINEERING, INC.,
                                 a Texas corporation

                                 By:___________________________________
                                       William A. Coskey
                                       President and Chief Executive Officer

                                 IDS ENGINEERING MANAGEMENT, LC,
                                 a Texas limited liability company

                                 By:___________________________________
                                       William A. Coskey
                                       Chief Executive Officer

                                 THERMAIRE, INC. d/b/a THERMAL CORP.,
                                 a Texas corporation

                                 By:___________________________________
                                       William A. Coskey
                                       President and Chief Executive Officer

                                 CONSTANT POWER MANUFACTURING,
                                 INC., a Texas corporation

                                 By:___________________________________
                                       William A. Coskey
                                       President and Chief Executive Officer

Security Agreement - Signature Page
<PAGE>

                                 INDUSTRIAL DATA SYSTEMS,INC.,
                                 a Texas corporation

                                 By:___________________________________
                                       William A. Coskey
                                       Chief Executive Officer

                                 PETROCON ENGINEERING, INC.,
                                 a Texas corporation

                                 By:___________________________________
                                       Michael L. Burrow,
                                       President and Chief Executive Officer

                                 TRIANGLE ENGINEERS &
                                 CONSTRUCTORS, INC., a Texas corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

                                 PETROCON SYSTEMS, INC.,
                                 a Texas corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

                                 PETROCON TECHNOLOGIES, INC.,
                                 a Texas corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

                                 PETROCON ENGINEERING OF LOUISIANA,
                                 INC., a Louisiana corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

Security Agreement - Signature Page
<PAGE>

                                 R.P.M. ENGINEERING, INC.,
                                 a Louisiana corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

                                 ALLIANCE ENGINEERING ASSOCIATES,
                                 INC., a Texas corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

                                 PETROCON CONSTRUCTION RESOURCES,
                                 INC., a Texas corporation

                                 By:___________________________________
                                       Robert W. Raiford, Secretary

                                 SECURED PARTY:

                                 EQUUS II INCORPORATED,
                                 a Delaware corporation

                                 By:___________________________________
                                       Randall B. Hale, Vice President

Security Agreement  -  Signature Page
<PAGE>

                                   SCHEDULE I
                                       TO
                               SECURITY AGREEMENT

                  Locations of Equipment, Inventory, Books and
                Records, Chief Executive Office, Other Locations
                ------------------------------------------------

1.   Grantors currently have the following business locations, and no others:

     Chief Executive Office:
     ----------------------

     Industrial Data Systems          600 Century Plaza Drive, Building 140,
                                      Houston,
     Corporation:                     TX 77073-6033

     Other Locations (Operations offices):
     ------------------------------------

     IDS Engineering, Inc.:           600 Century Plaza Drive, Building 140,
                                      Houston,
                                      TX 77073-6033 and
                                      11008 East 51st Street, Tulsa, OK 74146

     Constant Power Manufacturing:    757 Kenrick, Suite 100, Houston, TX 77060-
                                      3639

     Thermaire, Inc. dba
        Thermal Corporation:          10500 Windfern Rd, Houston, TX 77064

     Industrial Data Systems, Inc.:   15031 Woodham Drive, Suite 360, Houston,
                                      TX 77073-6026

     Chief Executive Office:
     ----------------------

     Petrocon Engineering, Inc.       3155 Executive Blvd.
                                      Beaumont, Texas 77705-0150
                                      (Jefferson County)

     Other Locations:
     ---------------

     Petrocon Engineering, Inc.       8901 Market Street
                                      Houston, Texas 77029
                                      (Harris County)

                                      3105 Executive Blvd.
                                      Beaumont, Texas 77705-1097
                                      (Jefferson County)

Security Agreement - Schedule
<PAGE>

                                      2580 North 11th Street
                                      Spaces F and G
                                      Beaumont, Texas 77703-4604
                                      (Jefferson County)

     Chief Executive Office:
     ----------------------

     Triangle Engineers and           3155 Executive Blvd.
     Constructors, Inc.               Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Other Location:
     --------------

     Triangle Engineers and           None
     Constructors, Inc.

     Chief Executive Office:
     ----------------------

     R.P.M. Engineering, Inc.         3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Other Locations:
     ---------------

     R.P.M. Engineering, Inc.         10252 Mayfair
                                      Baton Rouge, Louisiana 70809-2505
                                      (East Baton Rouge Parish)

                                      9969 Professional Blvd.
                                      Baton Rouge, Louisiana 70809-2500
                                      (East Baton Rouge Parish)

                                      Hibernia Tower
                                      Suite 1895
                                      Lake Charles, Louisiana

     Chief Executive Office:
     ----------------------

     Petrocon Systems, Inc.           3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

Security Agreement - Schedule
<PAGE>

     Other Location:
     --------------

     Petrocon Systems, Inc.           3255 Executive Blvd.
                                      Suites 100 & 101
                                      Beaumont, Texas 77705-1051
                                      (Jefferson County)

     Chief Executive Office:
     ----------------------

     Petrocon Engineering of          3155 Executive Blvd.
     Louisiana, Inc.                  Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Other Location:
     --------------

     Petrocon Engineering of          One Lakeshore Drive
     Louisiana, Inc.                  Lake Charles, Louisiana  70629
                                      (Calcasieu Parish)

     Chief Executive Office:
     ----------------------

     Alliance Engineering             3155 Executive Blvd.
     Associates, Inc.                 Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Other Location:
     --------------

     Alliance Engineering             None
     Associates, Inc.

     Chief Executive Office:
     ----------------------

     Petrocon Construction            3155 Executive Blvd.
     Resources, Inc.                  Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Other Location:
     --------------

     Petrocon Construction            None
     Resources, Inc.

     Chief Executive Office:
     ----------------------

     Petrocon Technologies, Inc.      3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

Security Agreement - Schedule
<PAGE>

     Other Location:
     --------------

     Petrocon Technologies, Inc.      None

2.   Grantors maintain their books and records relating to Accounts and General
     Intangibles at:

     Industrial Data Systems          15031 Woodham Drive,
     Corporation                      Suite 360, Houston, Texas 77073-6026

     Petrocon Engineering, Inc.       3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Triangle Engineers and           3155 Executive Blvd.
     Constructors, Inc.               Beaumont, Texas 77705-1050
                                      (Jefferson County)

     R.P.M. Engineering, Inc.         3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Petrocon Systems, Inc.           3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Petrocon Engineering of          3155 Executive Blvd.
     Louisiana, Inc.                  Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Alliance Engineering             3155 Executive Blvd.
     Associates, Inc.                 Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Petrocon Construction            3155 Executive Blvd.
     Resources, Inc.                  Beaumont, Texas 77705-1050
                                      (Jefferson County)

     Petrocon Technologies, Inc.      3155 Executive Blvd.
                                      Beaumont, Texas 77705-1050
                                      (Jefferson County)

3.   Grantors have had no office, place of business or agent for process located
     in any county other than as set forth above, except:

Security Agreement - Schedule
<PAGE>

     Registered Agents:
     -----------------

        Entity                    Registered Agent        Registered Office


Industrial Data Systems        Leisa Stillwell      11270 Winter Cottage Place
Corporation                                         Las Vegas, NV 89135

IDS Engineering, Inc.          Johnny J. Williams   13831 Northwest Freeway,
                                                    Ste. 155
Constant Power                                      Houston, TX 77040
Manufacturing, Inc.

Thermaire, Inc.

Industrial Data Systems, Inc.

IDS Engineering Management,    William A. Coskey   600 Century Plaza Drive,
LC                                                 Bldg. 140
                                                   Houston, TX 77073
PEI Acquisition, Inc.

4.   No bailee, warehouseman or similar party or cosignee holds inventory of any
     Grantor.

Security Agreement - Schedule
<PAGE>

                                  SCHEDULE II
                                       TO
                               SECURITY AGREEMENT

                      Other Liens, Security Interests and
                              Financing Statements
                              --------------------

1.   Capitalized leases:
     ------------------

Lessee           Lessor                     Terms of Lease     Property Covered

Thermal          Citicapital                60 months          Press Brake
Thermal          Unicapital                 60 months          Flexspander
Constant Power   Great American Leasing     60 months          Phone  System
Thermal          CIT Group Equipment        36 months          Fork Lift
Constant Power                                                 CADD Plodder
                 ---------------            --------------

2.   Operating leases:
     ----------------

<TABLE>
<CAPTION>
Lessee                  Lessor       Terms of Lease       Property Covered
<S>                     <C>          <C>                  <C>

IDS-Eng  Houston        G E Capital  48 Months Eff 09/01  Xerox Printing System
IDS-Eng  Houston        Panasonic    48 Months Eff 05/01  Panasonic Copier FP 60552
IDS-Eng  Houston        G E Capital  48 Months            Toshiba Copier 5550
Industrial Data System  G E Capital  36 Months Eff 02/00  Toshiba Copier 6550
Constant Power Mfg.     Stargel      36 Months            Toshiba Copier
</TABLE>

3.   Real Estate Leases:
     ------------------

     1.   Lease dated August 18, 1997, and all amendments thereto, between 319
          Century Plaza Associates, Ltd. and Industrial Data Systems, Inc.

     2.   Lease dated September 1, 1998, and all amendments thereto, between 600
          C.C. Business Park Ltd. and Industrial Data Systems, Inc.

     3.   Business Park Lease dated September 1, 2000, between Wilshire Square
          and IDS Engineering, Inc.

     4.   Master Lease Agreement dated January 3, 2001, between Citicorp Capital
          and Thermaire, Inc.

     5.   Standard Industrial Lease Agreement between Constant Power
          Manufacturing, Inc. and Houston Industrial Assets, L.P.

Security Agreement - Schedule
<PAGE>

4.

--------------------------------------------------------------------------------
Holder of Indebtedness      Description of Indebtedness    Maturity Date
--------------------------------------------------------------------------------
Chase Bank of Texas, N.A.   Mortgage loan on Thermaire,    2-28-02 (balloon of
                            Inc. land and building--debt   $362,432.63)
                            to be paid off at closing
--------------------------------------------------------------------------------

5.   Other equipment leases entered into in the ordinary course of business and
     consistent with past practice.

6.

--------------------------------------------------------------------------------
   Holder of Indebtedness     Description of Indebtedness         Maturity Date
--------------------------------------------------------------------------------
Wall Street Financial, LP  $190,916.47 owed to Wall Street      6/30/2002
                           Financial, LP by Petrocon
                           Engineering, Inc. pursuant to a
                           finance agreement dated October
                           16, 2001, related to premiums for
                           commercial insurance for the
                           period from September 30, 2001
                           to September 30, 2002.
--------------------------------------------------------------------------------
Petrocon Arabia, Ltd.      $937,230.00 Non-Negotiable           6/1/2004
                           Subordinated Promissory Note
                           from Petrocon Engineering to
                           Petrocon Arabia, Ltd. dated
                           March 9, 2000.
--------------------------------------------------------------------------------
CNA Insurance Companies    $193,180.56 owed to CNA by
                           Petrocon pursuant to a finance
                           agreement dated October 26, 2001
                           related to premiums for
                           commercial insurance for the
                           period from September 30, 2001
                           to September 30, 2002.
--------------------------------------------------------------------------------
David Seldford             Vehicle Financing, Ford F-150        12/2003
                           VIN: 1FTZF17241NA28178
--------------------------------------------------------------------------------
CARLTECH, INC.             $1,759,881.24 owed to                05/2002
CPW, INC.                  subcontractors on the ARAMCO
GAS UNLIMITED, INC.        project pursuant to Debt
PETROTECH SERVICES, INC.   Restructure Agreement dated
TACI                       August 11, 1999
--------------------------------------------------------------------------------

Security Agreement - Schedule
<PAGE>

--------------------------------------------------------------------------------
    Holder of Indebtedness       Description of Indebtedness       Maturity Date
--------------------------------------------------------------------------------
ABB AUTOMATION               $1,435,351.90 owed to equipment    05/2002
YOKOGAWA ELECTRIC            supplies on the ARAMCO project
                             Agreement dated June, 2000.
--------------------------------------------------------------------------------

7.

--------------------------------------------------------------------------------
                 Filing Jurisdiction: Iowa Secretary of State
--------------------------------------------------------------------------------
Secured Party              Debtor                               Nature of Lien
--------------------------------------------------------------------------------
                  Petrocon Construction                         None of Record
                  Resources, Inc.
--------------------------------------------------------------------------------
               Filing Jurisdiction: Illinois Secretary of State
--------------------------------------------------------------------------------
Secured Party              Debtor                               Nature of Lien
--------------------------------------------------------------------------------
                  Petrocon Construction                         None of Record
                  Resources, Inc.
--------------------------------------------------------------------------------
               Filing Jurisdiction: Louisiana Statewide Search
--------------------------------------------------------------------------------
Secured Party              Debtor                               Nature of Lien
--------------------------------------------------------------------------------
                  AMEC Engineering, Inc.                        None of Record
--------------------------------------------------------------------------------
                  Barnard & Burke                               None of Record
                  Engineering, Inc.
--------------------------------------------------------------------------------
                  Petrocon Construction                         None of Record
                  Resources, Inc.
IBM Credit        R.P.M. Engineering, Inc.                   IBM Equipment lien
Corporation
--------------------------------------------------------------------------------
IBM Credit        R.P.M. Engineering, Inc.                   IBM Equipment lien
Corporation
--------------------------------------------------------------------------------
               Filing Jurisdiction: Calcasieu Parish, Louisiana
--------------------------------------------------------------------------------
Secured Party              Debtor                               Nature of Lien
--------------------------------------------------------------------------------
                  Petrocon Engineering, Inc.                    None of Record
--------------------------------------------------------------------------------
                  Petrocon Engineering of                       None of Record
                  Louisiana, Inc.
--------------------------------------------------------------------------------

Security Agreement - Schedule
<PAGE>

--------------------------------------------------------------------------------
                 Filing Jurisdiction: East Baton Rouge Parish, Louisiana
--------------------------------------------------------------------------------
    Secured Party              Debtor                          Nature of Lien
--------------------------------------------------------------------------------
                      AMEC Engineering, Inc.                   None of Record
--------------------------------------------------------------------------------
                      Barnard & Burk                           None of Record
                      Engineering, Inc.
--------------------------------------------------------------------------------
                Filing Jurisdiction: North Dakota Secretary of State
--------------------------------------------------------------------------------
    Secured Party             Debtor                           Nature of Lien
--------------------------------------------------------------------------------
                      AMEC Engineering, Inc.                   None of Record
--------------------------------------------------------------------------------
                      Barnard & Burk                           None of Record
                      Engineering
--------------------------------------------------------------------------------
                      R.P.M. Engineering, Inc.                 None of Record
--------------------------------------------------------------------------------
                Filing Jurisdiction: Texas Secretary of State
--------------------------------------------------------------------------------
    Secured Party            Debtor                            Nature of Lien
--------------------------------------------------------------------------------
Sunbelt National      Alliance Engineering            PMSI in custom computer
Bank                  Associates, Inc. (also                 network system.
                      Alliance Engineering, Inc.)
--------------------------------------------------------------------------------
                      AMEC Engineering, Inc.                    None of Record
--------------------------------------------------------------------------------
                      Barnard & Burk                            None of Record
                      Engineering, Inc.
--------------------------------------------------------------------------------
                      Petrocon of Arabia, Ltd.                  None of Record
--------------------------------------------------------------------------------
Texas Commerce        Petrocon Construction                     1995 Ford F150
Bank - National       Resources, Inc.
Association
--------------------------------------------------------------------------------
Sanwa Leasing Corp.   Petrocon Engineering, Inc.        Sharp duplicator and
                                                               copiers.
--------------------------------------------------------------------------------
Lease Partners, Inc.  Petrocon Engineering, Inc.      Equipment lease for phone
                                                                 system
--------------------------------------------------------------------------------
Lease Partners, Inc.  Petrocon Engineering, Inc.     Equipment lease for routers
                                                            and voice mail
--------------------------------------------------------------------------------
Sharp Electronic      Petrocon Engineering, Inc.            Sharp copier systems
Credit Co.
--------------------------------------------------------------------------------
Tokai Financial       Petrocon Engineering, Inc.            Royal copier systems
Services, Inc.
--------------------------------------------------------------------------------

Security Agreement - Schedule
<PAGE>

--------------------------------------------------------------------------------
Ervin Leasing          Petrocon Engineering, Inc.          Xerox equipment
Company
--------------------------------------------------------------------------------
Technology             Petrocon Engineering, Inc.    Computer equipment and
Integration Financial                                accessories under lease
Services,
Inc.(Assigned to
NationsCredit
Commercial Corp.)
--------------------------------------------------------------------------------
                       Petrocon FSC, Ltd.                  None of Record
--------------------------------------------------------------------------------
                       R.P.M. Engineering, Inc.            None of Record
--------------------------------------------------------------------------------
                         Filing Jurisdiction: Harris County, Texas
--------------------------------------------------------------------------------
Secured Party                   Debtor                     Nature of Lien
--------------------------------------------------------------------------------
                       Alliance Engineering, Inc.          None of Record
--------------------------------------------------------------------------------
                       Alliance Engineering                None of Record
                       Associates, Inc.
--------------------------------------------------------------------------------
Technology             Petrocon Engineering, Inc.    Computer equipment and
Integration Financial                                accessories under lease
Services,
Inc.(Assigned to
NationsCredit
Commercial Corp.)
--------------------------------------------------------------------------------
                         Filing Jurisdiction: Jefferson County, Texas
--------------------------------------------------------------------------------
Secured Party                   Debtor                     Nature of Lien
--------------------------------------------------------------------------------
Technology             Petrocon Engineering, Inc.    Computer equipment and
Integration Financial                                accessories under lease
Services, Inc.
(Assigned to
NationsCredit
Commercial Corp.)
--------------------------------------------------------------------------------

Security Agreement - Schedule
<PAGE>

                                  SCHEDULE III
                                       TO
                               SECURITY AGREEMENT

                        Trade-names and Fictitious Names
                          (Present and Past Five Years)
                           ---------------------------

1.   Exact Corporate Name                     Trade Names
     --------------------                     -----------

     Petrocon Engineering, Inc.               Milltech
                                              Petrocon West
                                              All Resources
                                              Total Staffing Services

2.   Mergers/Acquisition Targets:

     OEI International, Inc. (Petrocon was the successor of a merger with OEI
     International, Inc. pursuant to a Plan and Agreement of Merger between
     OEI and Petrocon dated February 5, 1999 in connection with that certain
     Agreement and Plan of Reorganization by and among OEI, Petrocon and Equus
     II Incorporated dated February, 1999)

HTC Systems, Inc. (assets acquired by Petrocon Engineering, Inc.)

Temple Associates, Inc. (assets acquired by Petrocon Engineering, Inc.)

Pressure Technologies, Inc. (acquired and dissolved)

     Total Staffing Services, Inc. (a former company subsidiary which was
     merged with and into Petrocon Engineering, Inc. effective December 24,
     1997).

R.P.M. Engineering, Inc.

Merger/Acquisition Targets:

AMEC Engineering, Inc.

Barnard & Burk Engineering, Inc.

     RPM Investments, Ltd (assets acquired by R.P.M. Engineering, Inc.
     contemporaneously with PEI acquisition of R.P.M. Engineering, Inc.).

Alliance Engineering Associates, Inc.*

     Energy Integration Services, Inc. (former wholly-owned subsidiary of
     Petrocon Engineering, Inc. which merged with and into Alliance
     Engineering Associates, Inc. effective January 31, 1997).

Security Agreement - Schedule
<PAGE>

Alliance Engineering Incorporated (assumed name)

Alliance Engineering Associates Incorporated d/b/a Alliance Engineering, Inc.

Petrocon Construction Resources, Inc.

     Petrocon Plant Services, Inc. (former company subsidiary which was merged
     with and into Petrocon Construction Resources, Inc. effective December
     24, 1997).

     Petrocon Arabia Ltd.

          Eagleton Saudi Arabia Limited (former name)

*Acquired in reverse triangular merger with transitory subsidiary of Petrocon
 Engineering, Inc.

3.   Exact Corporate Name                          Fictitious or Trade Name
     --------------------                          ------------------------
      Industrial Data Systems                       None
       Corporation
      IDS Engineering, Inc.                         None
      Thermaire, Inc.                               Thermal Corporation
      Constant Power Manufacturing,                 None
       Inc.
      Industrial Data Systems, Inc.                 None
      IDS Engineering Management,                   None
       LC
      PEI Acquisition, Inc.                         None

Security Agreement - Schedule
<PAGE>

                                  SCHEDULE IV
                                       TO
                               SECURITY AGREEMENT

                            UCC Filing Jurisdictions
                            ------------------------

     Debtor                                           Jurisdiction
     ------                                           ------------

Industrial Data Systems Corporation                   Nevada

IDS Engineering, Inc.                                 Texas

IDS Engineering Management, LC                        Texas

Thermaire, Inc. d/b/a Thermal Corp.                   Texas

Constant Power Manufacturing, Inc.                    Texas

Industrial Data Systems, Inc.                         Texas

Petrocon Engineering, Inc.                            Texas

Triangle Engineers & Constructors, Inc.               Texas

Petrocon Systems, Inc.                                Texas

Petrocon Technologies, Inc.                           Texas

Petrocon Engineering of Louisiana, Inc.               Louisiana

R.P.M. Engineering, Inc.                              Louisiana

Alliance Engineering Associates, Inc.                 Texas

Petrocon Construction Resources, Inc.                 Texas

Security Agreement - Schedule
<PAGE>

                                   SCHEDULE V
                                       TO
                               SECURITY AGREEMENT

                            Releases and Assignments
                            ------------------------

None

Security Agreement - Schedule
<PAGE>

                                    EXHIBIT A

                          COPYRIGHT SECURITY AGREEMENT

     WHEREAS, [___________________________], a [____________] corporation
("Grantor") owns the Copyright registrations and Copyright applications listed
  -------
on Schedule 1 annexed hereto, and is a party to the Copyright Licenses listed
   ----------
on Schedule 1 annexed hereto; and
   ----------

     WHEREAS, Grantor has executed that certain Promissory Note dated as of
______________, 2001, payable to the order of Equus II Incorporated, a Delaware
corporation ("Lender") in the principal sum of $3,000,000 (the "Note";
              ------                                            ----
capitalized terms defined therein and not otherwise defined herein being used
herein as therein defined); and

     WHEREAS, pursuant to the terms of the Security Agreement dated as of
___________, 2001, (as said Security Agreement may be amended and in effect from
time to time, the "Security Agreement"), between Grantor and Lender (in such
                   ------------------
capacity, together with its successors in such capacity, the "Grantee"),
                                                              -------
Grantor has granted to Grantee a security interest in substantially all the
assets of Grantor including all right, title and interest of Grantor in, to and
under all now owned and hereafter acquired Copyrights (as defined in the
Security Agreement), Copyright registrations, Copyright applications and
Copyright Licenses (as defined in the Security Agreement), together with the
goodwill of the business symbolized by Grantor's Copyrights and all proceeds
thereof, to secure, inter alia, the payment of all amounts owing by Grantor
                    ----------
under the Note.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of its respective right, title
and interest in, to and under the following (all of the following items or
types of property being herein collectively referred to as the "Copyright
                                                                ---------
Collateral"), whether presently existing or hereafter created or acquired:
----------

          (1)   each Copyright, Copyright application and Copyright
     registration, together with any reissues, extensions or renewals thereof,
     including, without limitation, the Copyright, Copyright registrations and
     Copyright applications referred to in Schedule 1 annexed hereto, and all
                                           ----------
     of the goodwill of the business connected with the use of, and symbolized
     by, each Copyright, Copyright registration and Copyright application;

          (2)   each Copyright License and all of the goodwill of the business
     connected with the use of, and symbolized by, each Copyright License; and

          (3)   all products and proceeds of the foregoing, including, without
     limitation, any claim by Grantor against third parties for past, present
     or future (a) infringement or dilution of any Copyright or Copyright
     registration including,

Security Agreement - Exhibit A
<PAGE>

     without limitation, the Copyright and Copyright registrations referred to
     in Schedule 1 annexed hereto, the Copyright registrations issued with
        ----------
     respect to the Copyright applications referred in Schedule 1 and the
                                                       ----------
     Copyright licensed under the Copyright License, or (b) injury to the
     goodwill associated with any Copyright, Copyright registration or
     Copyright licensed under any Copyright License.

     This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor hereby
acknowledges and affirms that the rights and remedies of Grantee with respect
to the security interest in the Copyright Collateral made and granted hereby
are more fully set forth in the Security Agreement, the terms and provisions of
which are incorporated by reference herein as if fully set forth herein.

Security Agreement - Exhibit A
<PAGE>

    IN WITNESS WHEREOF, Grantor has caused this Copyright Security Agreement
to be duly executed by its duly authorized officer as of the ------- day of
--------, 2001.

                                            GRANTOR:

                                            [________________________________]

                                            By:________________________________
                                            Name:______________________________
                                            Title:_____________________________

ACKNOWLEDGED:

EQUUS II INCORPORATED

By:________________________________
Name:______________________________
Title:_____________________________

Security  Agreement - Exhibit A
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF _________  (S)
                    (S)
COUNTY OF ________  (S)

     On the _____ day of ___________, 2001, before me personally appeared
____________________, to me personally known or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
foregoing instrument as ___________________________ of
[______________________________], a Texas corporation, who being by me duly
sworn, did depose and say that he is ___________________________ of
[_______________________________], the corporation described in and which
executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that the said instrument was signed and sealed on behalf of said
corporation by order of its Board of Directors; that he signed his name
thereto by like order; and that he acknowledged said instrument to be the
free act and deed of said corporation.

     (Seal)                      _____________________________________________
                                 Notary Public in and for the State of Texas

My commission expires:_____________

Security  Agreement - Exhibit A
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF __________  (S)
                     (S)
COUNTY OF _________  (S)

     On the _____ day of ____________, 2001 before me personally appeared
___________________, to me personally known proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
foregoing instrument as __________________ of EQUUS II INCORPORATED, a Delaware
corporation, who being by me duly sworn, did depose and say that he is
____________________ of EQUUS II INCORPORATED, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that the said instrument was signed and sealed on behalf of said corporation by
order of its Board of Directors; that he signed his name thereto by like order;
and that he acknowledged said instrument to be the free act and deed of said
corporation.

     (Seal)                       _____________________________________________
                                  Notary Public in and for the State of Texas

My commission expires:___________

Security  Agreement - Exhibit A
<PAGE>

                                   Schedule 1
                                  to Copyright
                               Security Agreement
                               ------------------

                                   COPYRIGHTS
                                   ----------

Grantor           Work        Reg. No.           Date
-------           ----        --------
                                                 Registered
                                                 ----------

                             COPYRIGHT APPLICATIONS
                             ----------------------

                               COPYRIGHT LICENSES
                               ------------------

Security  Agreement - Exhibit A
<PAGE>

                                    EXHIBIT B

                            PATENT SECURITY AGREEMENT
                            -------------------------

     WHEREAS, [______________________________], a [____________] corporation
("Grantor") owns the Patents and Patent Applications listed on Schedule 1
  -------                                                      ----------
annexed hereto, is a party to the Patent Licenses listed on Schedule 1
annexed hereto; and

     WHEREAS, Grantor has executed that certain Promissory Note dated as of
______________, 2001, payable to the order of Equus II Incorporated, a Delaware
corporation ("Lender") in the principal sum of $3,000,000 (the "Note";
                                                                ----
capitalized terms defined therein and not otherwise defined herein being used
herein as therein defined); and

     WHEREAS, pursuant to the terms of the Security Agreement dated as of
_______________, 2001, (as said Security Agreement may be amended and in effect
from time to time, the "Security Agreement"), between Grantor and
                        ------------------
Lender (in such capacity, together with its successors in such capacity, the
"Grantee"), Grantor has granted to Grantee a security interest in
 -------
substantially all the assets of Grantor including all right, title and
interest of Grantor in, to and under all now owned and hereafter acquired
Patents (as defined in the Security Agreement), Patent applications and Patent
Licenses (as defined in the Security Agreement), and all products and proceeds
thereof, to secure, inter alia, the payment of all amounts
                    ----- ----
owing by Grantor under the Note.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of its respective right, title
and interest in, to and under the following (all of the following items or
types of property being herein collectively referred to as the "Patent
                                                                ------
Collateral"), whether presently existing or hereafter created or
----------
acquired:

          (1)  each Patent and Patent application, including, without
     limitation, each Patent and Patent application referred to in Schedule 1
                                                                   ----------
     annexed hereto, together with any reissues, continuations or extensions
     thereof;

          (2)  each Patent License, including, without limitation, each Patent
     License listed on Schedule 1 annexed hereto; and
                       ----------

          (3)  all products and proceeds of the foregoing, including, without
     limitation, any claim by any Grantor against third parties for past,
     present or future infringement of any Patent, including, without
     limitation, any Patent referred to in Schedule 1 annexed hereto, any
                                           ----------
     Patent issued pursuant to a Patent Applications referred to in Schedule 1
                                                                    ----------
     and any Patent licensed under any Patent License listed on Schedule 1
                                                                ----------
     annexed hereto.

     This security interest is granted in conjunction with the security11
interests granted to Grantee pursuant to the Security Agreement. Grantor
hereby acknowledges and affirms that the rights and remedies of Grantee
with respect to the security interest in the Patent

Security  Agreement - Exhibit B
<PAGE>

Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provision of which are incorporated by reference
herein as if fully set forth herein.

Security  Agreement - Exhibit B
<PAGE>

     IN WITNESS WHEREOF, Grantor has caused this Patent Security Agreement to
be duly executed by its duly authorized officer thereunto as of the ______
day of _______________, _____.

                                            GRANTOR:

                                            [________________________________]

                                            By:________________________________
                                            Name:______________________________
                                            Title:_____________________________

ACKNOWLEDGED:

EQUUS II INCORPORATED

By:________________________________
Name:______________________________
Title:_____________________________

Security  Agreement - Exhibit B
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF _________  (S)
                    (S)
COUNTY OF ________  (S)

     On the _____ day of ______________, 2001, before me personally appeared
________________, to me personally known or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
foregoing instrument as _____________________ of [__________________________],
a Texas corporation, who being by me duly sworn, did depose and say that he is
__________________ of [_____________________], the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that the said instrument was signed and sealed on behalf of said corporation by
order of its Board of Directors; that he signed his name thereto by like order;
and that he acknowledged said instrument to be the free act and deed of said
corporation.

     (Seal)                       _____________________________________________
                                  Notary Public in and for the State of Texas

My commission expires:_____________

Security  Agreement - Exhibit B
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF _________  (S)
                    (S)
COUNTY OF ________  (S)

     On the ______ day of ___________, 2001, before me personally appeared
--------------------, to me personally known or proved to me on the basis
of satisfactory evidence to be the person described in and who executed
the foregoing instrument as _____________________ of EQUUS II INCORPORATED, a
Delaware corporation, who being by me duly sworn, did depose and say that
he is ____________________ of EQUUS II INCORPORATED, the corporation described
in and which executed the foregoing instrument; that he knows the seal of
said corporation; that the seal affixed to said instrument is such
corporate seal; that the said instrument was signed and sealed on behalf
of said corporation by order of its Board of Directors; that he signed his
name thereto by like order; and that he acknowledged said instrument to be
the free act and deed of said corporation.

     (Seal)                       _____________________________________________
                                  Notary Public in and for the State of Texas

My commission expires:________________

Security  Agreement - Exhibit B
<PAGE>

                                   Schedule 1
                                    to Patent
                               Security Agreement
                               ------------------

                              UNITED STATES PATENTS
                              ---------------------

                                                    Patent        Issue
Grantor          Country         Description        Number        Date
-------          -------         -----------        ------        ----

                              PATENT APPLICATIONS
                              -------------------

                                PATENT LICENSES
                                ---------------

Security  Agreement - Exhibit B
<PAGE>

                                    EXHIBIT C

                          TRADEMARK SECURITY AGREEMENT
                          ----------------------------

     WHEREAS, [________________________], a [__________________] corporation
("Grantor") owns the Trademarks, Trademark registrations, and Trademark
  -------
applications listed on Schedule 1 annexed hereto, and is a party to the
                       ----------
Trademark Licenses listed on Schedule 1 annexed hereto;
                             ----------

     WHEREAS, Grantor has executed that certain Promissory Note dated as of
_________________, 2001, payable to the order of Equus II Incorporated, a
Delaware corporation ("Lender") in the principal sum of $3,000,000 (the
                       ------
"Note"; capitalized terms defined therein and not otherwise defined herein
 ----
being used herein as therein defined); and

     WHEREAS, pursuant to the terms of the Security Agreement dated as of
--------------, 2001, (as said Security Agreement may be amended and in
effect from time to time, the "Security Agreement"), between Grantor and
                               ------------------
Lender (in such capacity, together with its successors in such capacity,
the "Grantee"), Grantor has granted to Grantee a security interest in
     -------
substantially all the assets of Grantors including all right, title and
interest of Grantor in, to and under all now owned and hereafter acquired
Trademarks (as defined in the Security Agreement), Trademark
registrations, Trademark applications and Trademark Licenses (as defined
in the Security Agreement), together with the goodwill of the business
symbolized by Grantor's Trademarks, and all proceeds thereof, to secure,
inter alia, the payment of all amounts owing by Grantor under the Note.
      ----

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantor does hereby grant to
Grantee a continuing security interest in all of its respective right,
title and interest in, to and under the following (all of the following
items or types of property being herein collectively referred to as the
"Trademark Collateral"), whether presently existing or hereafter created
 --------------------
or acquired:

          (1)  each Trademark, Trademark registration and Trademark application,
     including, without limitation, the Trademarks, Trademark registrations
     (together with any reissues, continuations or extensions thereof and
     Trademark applications referred to in Schedule 1 annexed hereto, and all
                                           ----------
     of the goodwill of the business connected with the use of, and symbolized
     by, each Trademark, Trademark registration and Trademark application;

          (2)  each Trademark License and all of the goodwill of the business
     connected with the use of, and symbolized by, each Trademark License; and

          (3)  all products and proceeds of the foregoing, including, without
     limitation, any claim by Grantor against third parties for past, present
     or future

Security  Agreement - Exhibit C
<PAGE>

     (a) infringement or dilution of any Trademark or Trademark
     registration including, without limitation, the Trademarks and Trademark
     registrations referred to in Schedule 1 annexed hereto, the Trademark
                                  ----------
     registrations issued with respect to the Trademark applications referred
     in Schedule 1 and the Trademarks licensed under any Trademark License, or
        ----------
     (b) injury to the goodwill associated with any Trademark, Trademark
     registration or Trademark licensed under any Trademark License.

     This security interest is granted in conjunction with the security
interests granted to Grantee pursuant to the Security Agreement. Grantor
hereby acknowledges and affirms that the rights and remedies of Grantee
with respect to the security interest in the Trademark Collateral made and
granted hereby are more fully set forth in the Security Agreement, the
terms and provisions of which are incorporated by reference herein as if
fully set forth herein.

Security  Agreement - Exhibit C
<PAGE>

     IN WITNESS WHEREOF, Grantor has caused this Trademark Security Agreement
to be duly executed by its duly authorized officer thereunto as of the ____
day of __________________, 2001.

                                                                     GRANTOR:

                                            [_______________________________]

                                            By:________________________________
                                            Name:______________________________
                                            Title:_____________________________

ACKNOWLEDGED:

EQUUS II INCORPORATED

By:________________________________
Name:______________________________
Title:_____________________________

Security  Agreement - Exhibit C
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF _________  (S)
                    (S)
COUNTY OF ________  (S)

     On the _____ day of _______________, 2001, before me personally appeared
____________________, to me personally known or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
foregoing instrument as _____________________________________ of
[_______________________________], a Texas corporation, who being by me duly
sworn, did depose and say that he is ______________________________ of
[___________________________], the corporation described in and which executed
the foregoing instrument; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that the said
instrument was signed and sealed on behalf of said corporation by order of
its Board of Directors; that he signed his name thereto by like order; and
that he acknowledged said instrument to be the free act and deed of said
corporation.

     (Seal)                       _____________________________________________
                                  Notary Public in and for the State of Texas

My commission expires:_____________

Security  Agreement - Exhibit C
<PAGE>

                                 ACKNOWLEDGMENT

STATE OF _________  (S)
                    (S)
COUNTY OF ________  (S)

     On the _____ day of ________________, 2001, before me personally appeared
________________, to me personally known or proved to me on the basis of
satisfactory evidence to be the person described in and who executed the
foregoing instrument as _________________ of EQUUS II INCORPORATED, a Delaware
corporation, who being by me duly sworn, did depose and say that he is
___________________ of EQUUS II INCORPORATED, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that the said instrument was signed and sealed on behalf of said
corporation by order of its Board of Directors; that he signed his name
thereto by like order; and that he acknowledged said instrument to be the
free act and deed of said corporation.

     (Seal)                       ____________________________________________
                                  Notary Public in and for the State of Texas

My commission expires:_____________

Security  Agreement - Exhibit C
<PAGE>

                                   Schedule 1
                                  to Trademark
                               Security Agreement
                               ------------------

                      UNITED STATES TRADEMARK REGISTRATIONS
                      -------------------------------------

                                               Registration   Registration
Grantor           Mark       Country           Number                 Date
-------           ----       -------           ------                 ----

                      UNITED STATES TRADEMARK APPLICATIONS
                      ------------------------------------

                                               Application     Date of
Grantor            Mark       Country          Number          Filing
-------            ----       -------          ------          ------

                        FOREIGN TRADEMARK REGISTRATIONS
                        -------------------------------

                         FOREIGN TRADEMARK APPLICATIONS
                         ------------------------------

                               TRADEMARK LICENSES
                               ------------------

                            UNREGISTERED TRADEMARKS
                            -----------------------

Security Agreement - Exhibit C