Security Agreement

Security Agreement

by 3-D Geophysical Inc
December 23rd, 1997
                               SECURITY AGREEMENT

THIS SECURITY AGREEMENT dated for reference November 7,1997.
                                    SECTION 1
                                SECURITY INTEREST

1.1      Creation of Security Interest.

         J.R.S.  EXPLORATION  COMPANY LIMITED (the  "DEBTOR"),  having its chief
executive  office  at 4750 30  Street,  S.E.,  Calgary,  Alberta,  T2B  2Z1  as
continuing security for the repayment and the performance of the Obligations (as
defined herein) of the Debtor to SANWA BUSINESS CREDIT CORPORATION (the "SECURED
PARTY")  having an office at Suite 950,  550 North  Brand  Boulevard,  Glendale,
California, U.S.A. 91203, grants to the Secured Party a continuing, specific and
fixed assignment, transfer, mortgage, charge and security interest in all of the
Debtor's  property,  assets,  rights and  undertaking of every nature,  item and
kind,  now or at any time and from  time to time,  wherever  situate,  including
those described in this clause 1.1, namely:

i)       ACCESSIONS. All increases, additions, accretions and accessions to, and
         all extensions,  reversions,  renewals, continuations or replacement of
         any of the  Collateral (as defined in Section 2. 1)  (collectively  the
         "ACCESSIONS");

ii)      ACCOUNTS.  All debts,  accounts,  claims and monies  which now are,  or
         which  may at any time  hereafter  be,  due or owing to or owned by the
         Debtor OR in which the Debtor now or hereafter has any other  interest,
         and also all securities,  bills,  notes and other documents now held or
         owned or which may be hereafter  taken,  held or owned by the Debtor or
         anyone on behalf of the Debtor in respect of the said debts,  accounts,
         claims and monies, and any part thereof (collectively, the "ACCOUNTS");

iii)     Chattel  Paper.  All chattel paper in which the Debtor now or hereafter
         has an interest, and any part thereof (the "CHATTEL PAPER");

iv)      DOCUMENTS OF TITLE.  All  documents  of title,  whether  negotiable  or
         nonnegotiable,  including,  without limitation,  all warehouse receipts
         and  bills of  lading,  in which the  Debtor  now or  hereafter  has an
         interest,  and  any  part  thereof  (collectively,  the  "DOCUMENTS  OF
         TITLE");

v)       EQUIPMENT.  All  goods in which  the  Debtor  now or  hereafter  has an
         interest  other than  Inventory or consumer goods and any part thereof,
         including,  without limitation, all tools, apparatus,  fixtures, plant,
         machinery, furniture, chattels, vehicles, vessels, air




         conditioning,  heating, ventilating,  electrical, mechanical, plumbing,
         communications  and  data  systems,  elevators,  escalators  and  other
         conveyancing  devices,  boilers,  furnaces,   carpets,  blinds,  window
         coverings,   curtains,  awnings,  lighting  fixtures,  doors,  windows,
         demising  walls  and  partitions,  wiring,  pipes,  conduits,  seasonal
         decorations,  and the equipment described in the Schedule hereto or any
         schedule hereafter annexed hereto (collectively, the "EQUIPMENT');

vi)      INSTRUMENTS.  All  letters of  credit,  advices of credit and all other
         instruments  in which the Debtor now or hereafter has an interest,  and
         any part thereof (collectively, the "INSTRUMENTS");

vii)     INTANGIBLES.  All  intangible  property of  whatever  kind in which the
         Debtor now or hereafter has an interest, including, without limitation,
         all of the Debtor's choses in action,  contractual rights,  agreements,
         leases  of  personal  property,  license  rights,  licenses,   permits,
         goodwill,   patents,  trade  marks,  trade  names,  quotas,  industrial
         designs,  copyrights  and other  industrial  or  intellectual  property
         (collectively, the "INTANGIBLES");

viii)    INVENTORY.   All  personal  property  of  whatever  kind  and  wherever
         situated,  which now or  hereafter  forms part of the  inventory of the
         Debtor, in which the Debtor now or hereafter has an interest, including
         without limitation,  all goods,  merchandise,  raw materials,  goods in
         process,  work in progress,  finished goods and other tangible personal
         property now or hereafter held for sale,  lease,  resale or exchange or
         furnished or to be furnished  under  contracts  for service or that are
         used or consumed in the  business of the Debtor,  and any part  thereof
         (collectively, the "INVENTORY");

ix)      MONEY.  All money in which the Debtor now or hereafter has an interest,
         and any part thereof (the "Money");

x)       PROCEEDS.  All  proceeds  and  personal  property  in any form  derived
         directly or indirectly from any dealing with the Collateral or any part
         thereof   and  all   proceeds  of   proceeds   and  any  part   thereof
         (collectively, the "PROCEEDS");

xi)      RECORDS. All books, papers,  documents,  writings,  tapes,  magnetic or
         other  machine  readable data and records,  and all other  information,
         however  stored,  recording  or  relating  to  any  of  the  Collateral
         (collectively, the "RECORDS"); and

xii)     SECURITIES.  All shares, stock, warrants, bonds, debentures,  debenture
         stock, mortgages and other


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         securities  in which the Debtor now or hereafter  has an interest,  and
         any part thereof (collectively, the "SECURITIES').

1.2      Floating Charge.

         As  security  for  the  repayment  and the  performance  of each of the
Obligations  (as defined  herein),  the Debtor  grants a floating  charge to the
Secured Party on all the Debtor's  interest in real property,  including without
limitation, all fixtures, crops and improvements, both present and future, other
than such as are validly and effectively, charged under Section 1.1 or

1.3      Nature of Security Interests.

         Notwithstanding  the Debtor's  right to deal with the  Inventory in the
ordinary course of business as provided  herein,  the security  interest created
hereby shall  operate as fixed and specific  mortgages and charges of all of the
Collateral presently existing, and with respect to all future Collateral,  shall
operate as fixed and specific  mortgages  and charges of such future  Collateral
which  shall  attach at the  moment the Debtor  acquires  any right or  interest
therein.  The security interest created by Section 1.2 is intended as a floating
charge which shall attach at the time provided in Section 1.4.

1.4      Attachment.

         The  Debtor  acknowledges  that  value  has been  given.  The  security
interests  created hereby are intended to attach, as to all of the Collateral in
which the Debtor  has an  interest,  forthwith  when the  Debtor  executes  this
Security  Agreement,  and, as to all Collateral in which the Debtor acquires any
right or interest  after the  execution  of this  Security  Agreement,  when the
Debtor acquires such right or interest.

1.5      Exceptions.

         Leases - The last day of any term  reserved  by any  lease,  verbal  or
written, or any agreement therefor, now held or hereafter acquired by the Debtor
is hereby  excepted out of the security  interests  created  hereby.  The Debtor
shall assign and dispose of such last day of any term reserved by any such lease
in such  manner as the  Secured  Party may from time to time  direct in writing.
Upon any  sale,  assignment  sublease  or  other  disposition  of such  lease or
agreement  to lease,  the Secured  Party  shall,  for the purpose of vesting the
aforesaid residue of any such term in any purchaser, assignee, sublessee or such
other  acquire of the lease,  agreement  to lease or any  interest  therein,  be
entitled by deed or other written instrument to assign to such other person, the
aforesaid  residue of any such other in lease of the Debtor and to vest the same
freed and discharged from any obligation whatsoever respecting the same.


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1.6      Statement.

         The Debtor acknowledges that a security interest is taken in all of the
Debtor's present and after acquired property.

1.7      Where Consent Required.

         Nothing herein shall  constitute an assignment or attempted  assignment
of any right,  privilege,  benefit contact  permit,  policy or other document or
instrument which by the provisions  thereof or by law is not assignable or which
requires  the  consent  of any  third  party to its  assignment  unless  such is
obtained or is waived by the third  party.  In each such case the Debtor  shall,
unless the  Secured  Party  otherwise  agrees in writing,  forthwith  obtain the
consent  of any  necessary  third  party to its  assignment  hereby  and for its
further  assignment by the Secured party to any third party who may acquire same
as a result  of the  Secured  party's  exercise  or  remedies  after an Event of
Default.  Upon such consents being obtained or waived,  this Security  Agreement
shall apply thereto without regard to this Section 1.7 and without the necessity
of any further assurance to effect the assignment thereof

1.8      Pending Consent.

         In any case to which  Section 1.7 applies,  unless and until consent to
assignment is obtained as therein  provided,  the Debtor shall, to the extent it
may do so by law or  pursuant  to the  provisions  of the  document  or interest
therein  referred to, hold all benefit to be derived  therefrom in trust for the
Secured Party as additional  security for  performance  of the  Obligations  and
shall deliver up all such benefit to the Secured Party  forthwith upon demand by
the Secured Party.

                                    SECTION 2
                                   DEFINITIONS

2.1      Collateral.

         The  property,   assets,  rights  and  undertaking  charged  hereunder,
including all of such Accessions,  Accounts,  Chattel Paper, Documents of Title,
Equipment,  Instruments,  Intangibles,  Inventory,  Money, Proceeds, Records and
Securities together with all increases,  additions,  improvements and accessions
thereto, and all substitutions or any replacements thereof are, unless otherwise
specified, herein referred to as the "COLLATERAL".

2.2      Defined Terms.

         Unless the context  otherwise  requires or unless otherwise  specified,
all the terms used  herein  without  initial  capitals  which are defined in the
Personal Property Security Act (Alberta) or the regulations thereunder,  as they
may be amended, restated or replaced by successor legislation of comparable


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effect (collectively, the "PISA), have the same meaning herein as in the PISA.

2.3      General Terms.

i)       "AGREEMENT"  means any contract,  instrument,  permit,  policy or other
         document forming part of the Collateral,  or creating or evidencing any
         right, privilege or benefit forming part of the Collateral;

ii)      "BUSINESS  PREMISES"  means real property  which the Debtor uses in its
         business, if any;

iii)     "ENVIRONMENTAL  LAWS"  means any laws,  regulations,  orders,  by-laws,
         permits  or lawful  requirements  of any  governmental  authority  with
         respect to environmental  protection or regulating hazardous materials;
         and

iv)      "HAZARDOUS  MATERIALS" means any asbestos material,  urea formaldehyde,
         explosives, radioactive materials, pollutants,  contaminants, hazardous
         substances,  corrosive substances,  toxic substances,  special waste or
         waste of any kind  including,  without  limitation,  compounds known as
         chlorobiphenyls and any substance the storage,  manufacture,  disposal,
         treatment,  generation, use, transport, remediation or release of which
         into the  environment  is  prohibited,  controlled  or  licensed  under
         Environmental Laws.

                                    SECTION 3
                               OBLIGATIONS SECURED

3.1      Obligations Secured.

         The Collateral  constitutes and will constitute continuing security for
the following obligations (collectively, the "OBLIGATIONS') of the Debtor to the
Secured Party:

i)       INDEBTEDNESS.  The prompt payment,  as and when due and payable, of all
         amounts  now or  hereafter  owing by the Debtor to the  Secured  Party,
         including  by way of guarantee  or  indemnity,  whether now existing or
         hereafter incurred,  matured or unmatured,  direct,  indirect, joint or
         several,  or contingent  including any extensions and renewals thereof,
         and all future advances and re-advances; and

ii)      PERFORMANCE OF AGREEMENTS. The strict performance and observance by the
         Debtor of all agreements,  warranties,  representations,  covenants and
         conditions of the Debtor made  pursuant to this  Security  Agreement or
         any other agreement between the Debtor and the Secured Party all as now
         in effect or as hereafter entered into or amended.


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3.2      Reduction of Obligations.

         The  Obligations  may be  reduced  to zero  from  time to time  without
affecting the validity,  perfection or enforceability of this Security Agreement
or the  security  interests  created  hereby  until this  Security  Agreement is
discharged in accordance with Section 9. 1 0.

                                    SECTION 4
                     DEBTOR'S REPRESENTATIONS AND WARRANTIES

4.1      General

         The  Debtor  represents  and  warrants  to and for the  benefit  of the
Secured Party and so long as this  Security  Agreement in effect shall be deemed
to continuously represent and warrant as set out in this Section 4.

4.2      Incorporation, Licenses and Qualifications.

         The Debtor is a body corporate,  duly incorporated,  properly organized
and  validly  existing  under the laws of  Alberta  and is duly  recognized  and
qualified to do business under the laws of each other  jurisdiction in which the
character  of the  properties  owned  by it or  the  nature  of  the  activities
conducted b it make such registration or qualification advisable or necessary.

4.3      Corporate Power.

         The Debtor has full power and lawful  authority to enter this  Security
Agreement and to grant the security interests hereby created.

4.4      Enforceability.

         This  Security  Agreement  constitutes  a  valid  and  legally  binding
obligation of the Debtor  enforceable  against the Debtor in accordance with its
terms,  subject only to  bankruptcy,  insolvency  or other  statutes or judicial
decisions  affecting  the  enforcement  of  creditors'  rights  generally and to
general principles of equity.

4.5      No Actions or Material Adverse Changes.

         There is no action or  proceeding  pending or to the  knowledge  of the
Debtor threatened  against the Debtor before any court,  administrative  agency,
tribunal, arbitrator, government or governmental agency or any fact known to the
Debtor and not  disclosed to the Secured  Party which might involve any material
adverse  change in the  properties,  business,  prospects  or  condition  of the
Debtor,  or which question the validity of this Security  Agreement or any other
material  agreement to which the Debtor is a party (or the  Debtor's  ability to
perform its


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obligations  under  this  Security  Agreement)  and  there  are  no  outstanding
judgments, writs of execution, work orders, injunctions,  directives against the
Debtor or its properties.

4.6      Non-Conflict.

         Neither the execution nor the  performance  of this Security  Agreement
requires the approval of any  regulatory  agency  having  jurisdiction  over the
Debtor nor is this Security  Agreement in  contravention  of or in conflict with
the articles,  by-laws or  resolutions of the directors or  shareholders  of the
Debtor or of the  provisions  of any agreement to which the Debtor is a party or
by which any of its property may be bound or of any statute, regulation, by-law,
ordinance or other law, or of any judgment,  decree,  award,  ruling or order to
which the Debtor or any of its property may be subject.

4.7      No Default.

         The Debtor is not in breach of any agreement to which it is a party.

4.8      Ownership and Collateral Free of Encumbrances.

         The  Debtor is the owner of or has  rights in the  Collateral  free and
clear of all other security interests,  mortgages,  hypothecs,  pledges,  liens,
claims,  charges,  whether fixed or floating,  or other encumbrances  whatsoever
(collectively the "ENCUMBRANCES").

4.9      No Other Corporate Names or Styles.

         The  Debtor  does not now  carry on  business  under or use any name or
style other than the name(s) specified in this Security Agreement.

4.10     Places of Business of the Debtor.

         The place of  business  of the Debtor or the chief place of business if
there are more than one places of business is at 4750 30 Street,  S.E., Calgary,
Alberta,  T2B 2Z1 (the  "PLACE OF  BUSINESS")  where  the  Debtor  conducts  its
business  operations  or keeps or stores the  Collateral  and records in respect
thereof and of the Debtor's business.

4.11     Serial Numbered Goods.

         The complete,  accurate and appropriate  serial number (as specified in
the  regulations  under  the PPSA)  for each  item of  Equipment  that is serial
numbered  goods in which  the  Debtor  now has any  interest,  is set out in the
Schedule hereto.

4.12     Insurance.


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         The Collateral is insured in accordance with the terms hereof.

4.13     Account Debtor.

         Each  Account,  Chattel  Paper,  Security and  Instrument  constituting
Collateral is genuine and  enforceable in accordance  with its terms against the
party obligated to pay thereunder (the "Account Debtor").

4.14     Amounts Due From Account Debtor.

         The amount  represented by the Debtor to the Secured Party from time to
time as owing by each Account  Debtor or by all Account  Debtors  shall,  to the
best  of  the   Debtor's   knowledge   be  the  correct   amount   actually  and
unconditionally owing by such Account Debtor or Account Debtors, save and except
for normal cash discounts where applicable.

4.15     Financial Information.

         In all information and financial statements supplied for the benefit of
the Secured Party, the Debtor has made no untrue statement of any material fact,
and has  revealed  all  material  facts the  omission  of which  would make such
information and statements misleading.  The Debtor has disclosed all facts which
materially  adversely  affect or, so far as the Debtor can  reasonably  foresee,
will  materially  adversely  affect  the  business,  properties,   prospects  or
financial  condition  of the Debtor or the  ability of the Debtor to perform its
obligations  hereunder.  All  accounting  information  and financial  statements
supplied for the benefit of the Secured  Party have been  prepared in accordance
with generally accepted accounting principles.

4.16     Survival and Reliance.

         All  representations and warranties of the Debtor made herein or in any
certificate  or other  document  delivered by or on behalf of the Debtor for the
benefit of the Secured  party are  material,  shall  survive the  execution  and
delivery of this Security  Agreement and shall continue in full force and effect
without  time limit.  The Secured  Party is deemed to have relied upon each such
representation  and warranty  notwithstanding  any  investigation  made by or on
behalf of the Secured Party at any time.

                                    SECTION 5
                               DEBTOR'S COVENANTS

5.1      General.

         Unless compliance with the following covenants is waived by the Secured
Party in writing or unless  non-compliance  with any such covenants is otherwise
consented to by the Secured


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Party by written agreement with the Debtor, the Debtor covenants and agrees with
the Secured  Party to observe and perform each of the  covenants set out in this
Section 5.

5.2      Keep Collateral in Good Repair.

         The  Debtor  will keep the  Collateral  in good  order,  condition  and
repair.

5.3      Conduct of Business.

                  The Debtor will carry on and conduct its  business in a proper
and efficient manner so as to protect and preserve the Collateral.

5.4      Servicing of Payables.

         The Debtor will pay when due all  amounts  are payable by it  howsoever
arising,  including without limiting the generality of.the foregoing, all rents,
charges,  taxes,  rates,  levies,  assessments,  fees and duties of every nature
which may be levied, assessed or imposed against or in respect of the Collateral
or Debtor and will provide the Secured  Party with evidence of such payment upon
request.

5.5      Compliance with Agreements and Laws.

         The Debtor will not use the  Collateral  in violation of this  Security
Agreement  or any other  agreement  relating  to the  Collateral  or any  policy
insuring  the  Collateral  or  any  applicable  statute,   law,  by-law,   rule,
regulation, court order or ordinance.

5.6      Notice of Encumbrances and Proceedings.

         The Debtor will promptly  notify the Secured  Party of any  Encumbrance
made or  asserted  against  any of the  Collateral,  and of any suit,  action or
proceeding affecting any of the Collateral or which could affect the Debtor. The
Debtor will, at its own expense,  defend the Collateral against any and all such
Encumbrances and aging any and all such suits, actions or proceedings.

5.7      No Accessions or Fixtures.

         The Debtor will prevent the  Collateral  from  becoming an accession to
any property  other than the  Collateral or from  becoming a fixture  unless the
security  interests  hereby  created  rank prior to the  interests  of all other
persons in the realty.

5.8      Marking the Collateral.

         The  Debtor  will,  at the  request  of the  Secured  Party,  mark,  or
otherwise take appropriate steps to identify, the


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Collateral  to indicate  clearly  that it is subject to the  security  interests
hereby created.

5.9      Disposition of Collateral.

         The  Debtor  will not  assign,  transfer,  sell,  lease,  exchange,  or
otherwise dispose of the Collateral or any interest therein except for:

i)       Inventory in the ordinary  course of business on customary trade terms;
         and

ii)      Equipment  which has become worn out,  damaged or otherwise  unsuitable
         for its  purpose,  on  condition  that the Debtor  substitute  for such
         Equipment property of equal value free from all Encumbrances, except in
         favour of the Secured  Party.  Such  substituted  property shall become
         part of the  Collateral as soon as the Debtor  acquires any interest in
         it.

5.10     Encumbrances.

         Except for the  Permitted  Encumbrances,  the Debtor  will not  create,
assume or suffer to exist any Encumbrance in, of or on any of the Collateral.

5.11     Change of Place of Business, Collateral and Names.

         The  Debtor  will not  change its Place of  Business,  chief  executive
office, the location of any of the Collateral, or the records in respect thereof
or change  its name or any name or style  under  which it  carries  on  business
without  giving to the Secured Party 20 day's prior written  notice of me change
or of the new name or style, as applicable.

5.12     Serial Numbered Goods.

         The Debtor will, at or before the time that it acquires any interest in
any item of Equipment that is serial  numbered  goods,  give the Secured Party a
written notice setting out the complete,  accurate and appropriate serial number
(as specified in the regulations under the PPSA) of such item of Equipment.

5.13     Notice of Loss of Collateral.

i)       all loss or damage to or loss or possession of the Collateral otherwise
         than by disposition in accordance with the terms hereof; and

ii)      any  failure  of any  Account  Debtor  in  payment  or  performance  of
         obligations due to the Debtor which may affect the Collateral.

5.14     Inspection of Records and Collateral.


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         The Debtor will at all times keep accurate and complete  records of the
Collateral as well as proper books of account for its business all in accordance
with generally accepted accounting principles,  consistently applied. The Debtor
will permit the  Secured  Party or its  authorized  agents to have access to all
premises  occupied by the Debtor or any place where the  Collateral may be found
to inspect  the  Collateral  and to  examine  the books of  accounts,  financial
records and reports of the Debtor and to have temporary  custody of, make copies
of and take extracts from such books, records and reports.

5.15     Access to Computer Information.

         In the event that the use of a computer  system is  required  to access
any  information  and data which the  Secured  Party is  entitled  to access and
examine  hereunder,  the  Debtor  will  allow the  Secured  Party the use of its
computer system for such purpose and will provide  assistance in that regard. If
for any reason  such  information  and data  cannot be  accessed  and  retrieved
Debtor's  premises  the  Secured  Party may  remove  the  medium  in which  such
information  or data is stored  from the  Debtor's  premises  to any other place
which has a computer  system that will give the Secured Party the opportunity to
retrieve,  record or copy such information and data. The Secured Party is hereby
authorized  to reproduce and retain a copy of any such  information  and data in
any format whatsoever.

5.16     Delivery of Documents.

         The Debtor will promptly deliver to the Secured Party upon request:

i)       DOCUMENTS OF TITLE.  Any Chattel Paper,  Instruments,  Securities,  and
         Documents of Title,  and upon such  delivery,  where  applicable,  duly
         endorse  the same for  transfer  in blank or as the  Secured  Party may
         direct;

ii)      BOOKS OF ACCOUNT. All computer software, tapes, discs, drums and cards,
         all books of account and all records, ledgers, reports, correspondence,
         schedules, documents,  statements, lists and other writings relating to
         the Collateral or the Debtor's  business for the purpose of inspecting,
         auditing or copying the same;

iii)     FINANCIAL  STATEMENTS.  All financial statements prepared by or for the
         Debtor regarding the Debtor's business;

iv)      POLICIES OF  INSURANCE.  All  policies  and  certificates  of insurance
         relating to the Collateral;

v)       AGREEMENTS.  All  agreements,  licenses,  and consents  relating to the
         Collateral and the Debtor's business; and


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vi)      OTHER  INFORMATION.  Such  information  concerning the Collateral,  the
         Debtor and the Debtor's  business and affairs as the Secured  Party may
         request.

5.17     Risk and Insurance.

         The Debtor will bear the sole risk of any loss, damage,  destruction or
confiscation of or to the Collateral during the Debtor's  possession  thereof or
otherwise. The Debtor will insure the Collateral with insurers acceptable to the
Secured Party against loss or damage by fire,  theft or other  insurable  perils
customarily insured against by persons having an interest in such Collateral for
the full  insurable  value thereof with the Secured Party as a named insured and
with loss  payable to the Secured  Party as its  interest  may appear.  All such
policies  of  insurance  shall  provide  that the  insurance  coverage  provided
thereunder  shall not be changed or cancelled  except on 30 days' prior  written
notice to the Secured Party. If the Debtor shall fail to so insure,  the Secured
Party may, but shall not be required to, insure the  Collateral and the premiums
for such insurance shall be added to the Obligations and be secured hereby.

5.18     Proceeds In Trust.

         The  Debtor  will and shall be deemed  to hold all  Proceeds  in trust,
separate and apart from other Money, Instruments or property, for the benefit of
the Secured  Party until all  amounts  owing by the Debtor to the Secured  Party
have been paid in full.

5.19     No Amalgamation.

         The Debtor will not change the nature of its business or  amalgamate or
otherwise merge with any person or permit all of or a substantial portion of its
property to become the property of any other person,  whether in one or a series
of  transactions,  and the  Debtor  shall  not do any act or  thing  that  would
materially  adversely  affect its  business,  property,  prospects  or financial
condition.

5.20     Dividends.

         The Debtor will not pay any dividends to the shareholders of any of the
classes  of  shares in die  capital  of the  Debtor,  and the  Debtor  shall not
purchase  or redeem any of the shares in the  capital of the Debtor  without the
prior  written  approval  of the  Secured  Party,  which  approval  will  not be
unreasonably withheld.

5.21     Performance and Default by Debtor.

         The Debtor will observe and perform all the obligations  imposed on the
Debtor by or in respect  of the  Collateral,  maintain  the  Collateral  in good
standing and not do or permit to


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be done  anything to impair,  and not omit to do anything that would prevent the
impairment of, the security  interests  hereby created.  The Debtor will give to
the Secured Party prompt notice of any default by the Debtor in the  performance
of its covenants to the Secured Party under this Security Agreement.


5.22     Default under Agreements.

         The Debtor will not default under any provision of any Agreement or any
other  agreement which creates a security  interest in or otherwise  affects the
Collateral or, without the prior written consent of the Secured Party, amend any
Agreement or give any consent, concession or waiver of the terms of, or exercise
any option of the Debtor  permitted under such terms, or cancel or terminate any
Agreement  or accept the  surrender  thereof The Debtor will give to the Secured
Party  notice of any  default by the  Debtor  under any  Agreement  or any other
agreement  which  creates  a  security  interest  in or  otherwise  affects  the
Collateral,  promptly upon becoming aware of the occurrence of such default, but
in all events,  if the Debtor is aware of the  default,  in  sufficient  time to
afford the Secured  Party an  opportunity  to cure any such default prior to any
other  party  to any  Agreement  or any  such  other  agreement  terminating  or
otherwise  enforcing  its rights and remedies  under the Agreement or such other
agreement.

5.23     Environmental Law.

         The Debtor covenants and agrees with the Secured Party to:

i)       develop  and use the  Business  Premises  only in  compliance  with all
         Environmental Laws;

ii)      permit the Secured  Party to  investigate  the Business  Premises,  any
         goods on the Business Premises and the Debtor's records at any time and
         from time to time to verify such compliance with Environmental Laws and
         this Security Agreement;

iii)     upon the request of the Secured Party,  obtain from time to time at the
         Debtor's  cost a report from an  independent  consultant  designated or
         approved by the Secured Party verifying  compliance with  Environmental
         Laws and this  Security  Agreement or the extent of any  non-compliance
         therewith;

iv)      not store,  manufacture,  dispose,  treat,  generate,  use,  transport,
         remediate  or  release  Hazardous  Materials  on or from  the  Business
         Premises without notifying the Secured Party in writing;


                                     - 13 -




v)       promptly remove any Hazardous Materials from the Business Premises in a
         manner which conforms to  Environmental  Laws governing  their removal;
         and,

vi)      notify the Secured Party in writing of:

         a)       any  enforcement,   clean-up,  removal,  litigation  or  other
                  governmental,  regulatory,  judicial or administrative  action
                  instituted,  contemplated or threatened  against the Debtor or
                  the Business Premises pursuant to any Environmental Laws;

         b)       all  claims,  actions,  orders  or  investigations,   made  or
                  threatened  by any  third  party  against  the  Debtor  or the
                  Business  Premises  relating  to  damage,  contribution,  cost
                  recovery,  compensation,  loss or injuries  resulting from any
                  Hazardous  Materials or any breach of the Environmental  Laws;
                  and

         c)       the discovery of any Hazardous  Materials or any occurrence or
                  condition  on  the  Business  Premises  or any  real  property
                  adjoining or in the vicinity of the  Business  Premises  which
                  could  subject  the  Debtor or the  Business  Premises  to any
                  fines,   penalties,    orders   or   proceedings   under   any
                  Environmental Laws.


                                    SECTION 6
                             COLLECTION OF ACCOUNTS

6.1      Collection of Accounts.

         The  Secured  Party may,  whether  before or after  default  under this
Security  Agreement,  notify and direct any Account  Debtor to make all payments
whatever to the Secured Party.  The Secured Party may hold all amounts  acquired
from any Account Debtor and any Proceeds as part of the Collateral.

6.2      Trust Provision.

         Any  payments   received  by  the  Debtor   whether   before  or  after
notification  to Account  Debtors,  shall be held by the Debtor in trust for the
Secured Party in the same medium in which received, shall not be commingled with
any assets of the Debtor and shall,  at the  request of the  Secured  Party,  be
turned over to the Secured  Party not later than the next business day following
the day of their receipt.

                                    SECTION 7
                                     DEFAULT

7.1      Default.


                                     - 14 -




         The Debtor shall be in default under this Security  Agreement  upon the
occurrence of any of the following events ("EVENTS OF DEFAULT"):

i)       PERFORMANCE  OF  OBLIGATIONS.  The Debtor  defaults  in the  payment or
         performance of any of the Obligations;

ii)      BREACH OF AGREEMENT. The Debtor breaches any term, provision, warranty,
         representation  or covenant under this Security  Agreement or any other
         agreement between the Debtor and the Secured Party, all as in effect or
         as hereafter entered into or amended;

iii)     GUARANTOR  OR  INDEMNITOR  DEFAULT.  Any  person  who from time to time
         guarantees,  assumes or otherwise becomes liable for the Obligations or
         who  covenants  and agrees to indemnify the Secured Party for any loss,
         costs or damages  as a result of the  Debtor's  failure to perform  the
         Obligations (the "GUARANTOR/INDEMNITOR"), commits a breach of, or fails
         to observe or  perform,  any  covenant,  representation  or warranty in
         favour of the Secured Party;

iv)      CEASE TO CARRY ON BUSINESS. The Debtor or  Guarantor/Indemnitor  ceases
         or threatens to cease to carry on business;

v)       BANKRUPTCY,  INSOLVENCY.  The  dissolution,  termination  of existence,
         insolvency,   bankruptcy   or   business   failure  of  the  Debtor  or
         Guarantor/Indemnitor,   or  upon  the   appointment   of  a   receiver,
         receiver-manager or receiver and manager of any part of the property of
         the Debtor or  Guarantor/Indemnitor,  or the commencement by or against
         the  Debtor  or   Guarantor/Indemnitor  of  any  proceeding  under  any
         bankruptcy,  arrangement,  reorganization,   dissolution,  liquidation,
         insolvency  or  similar  law for the relief of or  otherwise  affecting
         creditors of the Debtor or  Guarantor/Indemnitor,  or by or against any
         guarantor or surety for the Debtor or Guarantor/Indemnitor, or upon the
         issue of any writ of  execution,  warrant,  attachment,  sequestration,
         levy,  third party demand,  notice of intention to enforce  security or
         garnishment or similar process against the Debtor, Guarantor/Indemnitor
         or any part of the Collateral;

vi)      COMMIT ACT OF BANKRUPTCY. The Debtor or Guarantor/Indemnitor commits or
         threatens to commit an act of bankruptcy;

vii)     DISSOLUTION,  WINDING UP. The  institution  by or against the Debtor or
         Guarantor/Indemnitor  of any  formal  or  informal  proceeding  for the
         dissolution or liquidation


                                     - 15 -




         of, settlement of claims against or winding up of affairs of the Debtor
         or Guarantor/Indemnitor;

viii)    SALE IN BULK. The Debtor or  Guarantor/Indemnitor  makes or proposes to
         make any sale of its assets in bulk;

ix)      CHARGE  AGAINST  COLLATERAL.  If any right of  distress is levied or is
         threatened to be levied  against the  Collateral or if any  Encumbrance
         affecting the Collateral becomes  enforceable against the Collateral or
         any part thereof;

x)       DESTRUCTION  OF COLLATERAL.  Any material  portion of the Collateral is
         damaged or destroyed;

xi)      OTHER DEFAULT.  The Debtor or any  Guarantor/Indemnitor  defaults under
         any agreement with respect to any  indebtedness or other  obligation to
         any person other than the Secured  Party,  if such default has resulted
         in,  or may  result,  with  notice  or lapse of time or both,  in,  the
         acceleration  of any such  indebtedness  or  obligation or the right of
         such person to realize upon any Collateral; and

xii)     PERFORMANCE  IMPAIRED.  The Secured  Party in good faith  believes  the
         prospect of payment or performance of the  Obligations  hereunder is or
         is about to be  impaired  or that any  Collateral  is or is about to be
         placed in jeopardy.

7.2      Crystallization.

         The floating  charge created by Section 1.2 shall become a fixed charge
as soon as:

i)       the Secured Party gives notice to that effect to the Debtor;

ii)      the Secured Party takes any step to accelerate or demand payment of the
         Obligations,  or gives  notice of its  intention  or takes any steps to
         enforce its security; or

iii)     an Event of Default  described  in  Subsection  7.1(e) or (g) occurs in
         respect of the Debtor.

7.3      Demand Obligations.

         The fact that this  Security  Agreement  provides for Events of Default
and rights of  acceleration  shall not  derogate  from the demand  nature of any
Obligation payable on demand.

7.4      Waiver not to Affect Subsequent Breach.


                                     - 16 -




         The Secured  Party may waive default or any breach by the Debtor of any
of the provisions  contained in this Security Agreement.  No waiver shall extend
to a subsequent breach or default,  whether or not the same as or similar to the
breach or default  waived.  No act or omission of the Secured Party shall extend
to or be taken in any  manner  whatsoever  to affect  any  subsequent  breach or
default of the Debtor or the rights of the Secured  Party  resulting  therefrom.
Any such  waiver  must to be in writing  and signed by the  Secured  Party to be
effective.

                                    SECTION 8
                       SECURED PARTY'S REMEDIES ON DEFAULT

8.1      Indebtedness Due and Rights and Remedies.

         Upon the occurrence of an Event of Default all of the Obligations shall
become immediately due and payable without notice to the Debtor, and the Secured
Party may, at its option, proceed to enforce payment of same and to exercise any
or  all  of  the  rights  and  remedies  contained  herein,  including,  without
limitation,  the  signification  and  collection  of the Debtor's  Accounts,  or
otherwise afforded by law, in equity or otherwise.  The Secured Party shall have
the right to  enforce  one or more  remedies  successively  or  concurrently  in
accordance  with  applicable  law and the Secured  Party  expressly  retains all
rights and remedies not  inconsistent  with the provisions  herein including all
the rights it may have under the PPSA, and,  without  restricting the generality
of the foregoing, the Secured Party may upon such Event of Default:

i)       APPOINTMENT  OF RECEIVER.  Appoint by instrument in writing a receiver,
         receiver  manager or receiver and manager  (herein a "RECEIVER") of the
         Debtor and of all or any part of the  Collateral  and remove or replace
         such  Receiver from time to time or may  institute  proceedings  in any
         court of competent  jurisdiction for the appointment of a Receiver. Any
         Receiver   appointed   by  the   Secured   Party  so  far  as  concerns
         responsibility for its acts shall be deemed the agent of the Debtor and
         not of the Secured  Party.  Where the  Secured  Party is referred to in
         this Section the reference  includes,  where the context  permits,  any
         Receiver so appointed and the officers,  employees,  servants or agents
         of such Receiver;

ii)      ENTER AND REPOSSESS.  Immediately and without notice enter the Debtor's
         premises and repossess, disable or remove the Collateral and the Debtor
         hereby  grants to the Secured Party a license to occupy any premises of
         the Debtor for the purpose of storage of the Collateral;

iii)     RETAIN THE  COLLATERAL.  Retain and  administer  the  Collateral in the
         Secured Party's sole and unfettered


                                     - 17 -




         discretion,  which  the  Debtor  hereby  acknowledges  is  commercially
         reasonable;

iv)      DISPOSE OF THE COLLATERAL. Dispose of any Collateral by public auction,
         private tender or private contract with or without notice,  advertising
         or any other  formality,  all of which are hereby waived by the Debtor.
         The Secured  Party may, at its  discretion  establish the terms of such
         disposition,  including, without limitation, terms and conditions as to
         credit,  upset,  reserve bid or price. The Secured Party may also lease
         the Collateral on such terms as it deems appropriate.  The payments for
         Collateral,  whether on a disposition  or lease,  may be deferred.  All
         payments made pursuant to such  dispositions  shall be credited against
         the Obligations only as they are actually  received.  The Secured Party
         may buy in,  rescind or vary any  contract for the  disposition  of any
         Collateral  and may  dispose  of any  Collateral  again  without  being
         answerable for any loss occasioned  thereby.  Any such  disposition may
         take place whether or not the Secured Party has taken possession of the
         Collateral;

v)       FORECLOSE.  Foreclose  upon  the  Collateral  in  satisfaction  of  the
         Obligations.   The  Secured   Party  may  designate  any  part  of  the
         Obligations to be satisfied by the foreclosure of particular Collateral
         which  the  Secured  Party  considers  to have a net  realizable  value
         approximating the amount of the designated part of the Obligations,  in
         which case only the designated part of the Obligations  shall be deemed
         to be satisfied by the foreclosure of the particular Collateral;

vi)      CARRY ON BUSINESS.  Carry on or concur in the carrying on of all or any
         part of the  business  of the  Debtor  and  may,  m any  event,  to the
         exclusion of all others,  including the Debtor,  enter upon, occupy and
         use all  premises  of or  occupied or used by the Debtor and use any of
         the personal  property (which shall include fixtures) of the Debtor for
         such time and such  purposes as the Secured Party sees fit. The Secured
         Party  shall not be liable to the Debtor for any neglect in so doing or
         in  respect  of any rent,  cost,  charges,  depreciation  or damages in
         connection therewith;

vii)     PAYMENT  OF  ENCUMBRANCES.  Pay any  Encumbrance  that may  exist or be
         threatened against the Collateral. In any such case the amounts so paid
         together  with costs,  charges  and  expenses  incurred  in  connection
         therewith  shall be added to the  Obligations  secured by this Security
         Agreement;

viii)    PAYMENT OF DEFICIENCY. If the proceeds of realization are sufficient to
         pay all monetary Obligations, the


                                     - 18 -




         Debtor shall forthwith pay or cause to be paid to the Secured Party any
         deficiency  and the  Secured  Party may sue the Debtor to  collect  the
         amount of such deficiency; and

ix)      DEALING WITH  COLLATERAL.  Subject to  applicable  law seize,  collect,
         realize,  borrow money on the security  of,  release to third  parties,
         sell (by way of public or private  sale),  lease or otherwise deal with
         the Collateral in such manner, upon such terms and conditions,  at such
         time or times  and place or places  and for such  consideration  as may
         seem to the Secured Party  advisable and without  notice to the Debtor.
         The  Secured  Party may charge on its own behalf and pay to others sums
         for expenses  incurred and for services rendered  (expressly  including
         legal  services,  consulting,  receivers and accounting  fees) in or in
         connection  with  seizing,  collecting,  realizing,  borrowing  on  the
         security of, selling or obtaining payment of the Collateral and may add
         such sums to the Obligations secured by the Security Agreement.

8.2      Assemble the Collateral.

         To assist the Secured  Party in the  implementation  of such rights and
remedies the Debtor will, at its own risk and expense and at the Secured Party's
request,  assemble and prepare for removal such items of the  Collateral  as are
selected for the Secured Party as shall,  in the Secured  Party's sole judgment,
have a value sufficient to cover all the Obligations.

8.3      Secured Party Not Liable for Failure to Exercise Remedies.

         The Secured Party shall not be liable or  accountable  for any delay or
failure to exercise its remedies,  take possession of, seize, collect,  realize,
sell,  lease or otherwise  dispose of or obtain payment for the Collateral.  The
Secured Party shall not be bound to institute  proceedings  for such purposes or
for the  purpose of  preserving  any  rights,  remedies or powers of the Secured
Party,  the Debtor or any other person in respect of the  Collateral  or against
any Account Debtor.

8.4      Allocation of Proceeds.

         All monies collected or received by the Secured Party in respect of the
Collateral  may be held by the  Secured  Party and may be  applied on account of
such parts of the Obligations at the sole discretion of the Secured Party.

8.5      Extension of Time.

         The Secured Party may grant  extensions of time and other  indulgences,
take and give up securities, accept


                                     - 19 -



compositions,  grant  releases and  discharges,  release the Collateral to third
parties and otherwise  deal with the Debtor's  guarantors or sureties and others
and with the  Collateral  and other  securities as the Secured Party may see fit
without  prejudice to the liability of the Debtor to the Secured  Party,  or the
Secured Party's rights, remedies and powers under this Security Agreement.

8.6      Forbearance is not Waiver.

         No extension of time,  forbearance,  indulgence or other  accommodation
now,  heretofore  or  hereafter  given by the Secured  Party to the Debtor shall
operate as a waiver,  alteration  or amendment of the right of the Secured Party
or otherwise preclude the Secured Party from enforcing such rights.

8.7      Effect of Appointment of Receiver.

         As soon as the Secured  Party takes  possession  of any  Collateral  or
appoints a  Receiver,  all  powers,  functions,m  rights and  privileges  of the
directors  and  officers of the Debtor  with  respect to that  Collateral  shall
cease, unless specifically continued by the written consent of the Secured Party
or the Receiver.

8.8      Limitation of Liability.

         The  Secured  Party  shall not be liable by reason of any entry into or
taking  possession of any of the Collateral  hereby charged or intended so to be
or any part  thereof,  to account as  mortgagee  in  possession  or for anything
except actual  receipts or be liable for any loss on  realization  or any act or
omission for which a secured  party in  possession  might be liable.  The Debtor
acknowledges and agrees that any and all payments, responsibilities, obligations
and  liabilities in respect of the  Collateral  shall remain those of the Debtor
and no such payments,  responsibilities  obligations or liabilities are assigned
hereby nor are assumed or incurred by the Secured Party hereunder.

8.9      Release by Debtor.

         The Debtor  hereby  releases and  discharges  the Secured Party and the
Receiver  from every  claim of every  nature,  whether in sounding in damages or
not, which may arise or be caused to the Debtor or any person  claiming  through
or under the  Debtor by  reason  or as a result  of any act or  omission  of the
Secured Party or any successor or assign  claiming  through or under the Secured
Party or the Receiver  under the  provisions of this Security  Agreement  unless
such claim is the result of dishonesty or gross neglect.

8.10     Performance by Secured Party.


                                     - 20 -




         Nothing  herein shall  obligate the Secured  Party to assume or perform
any obligation of the Debtor to any third party in respect or arising out of the
Collateral.  The Debtor  agrees to indemnify and save harmless the Secured Party
from any and all claims of such third parties.  The Secured Party may however at
its option  assume or  perform  any such  obligations  which the  Secured  Party
considers necessary or desirable to obtain the benefit of the Collateral, or any
part  thereof,  free of any set off,  deduction  or  abatement  and any money so
expended by the Secured Party shall form part of the  Obligations and shall bear
interest at the highest  rate per annum from time to time charged by the Secured
party on any of the other Obligations.

                                    SECTION 9
                                  MISCELLANEOUS

9.1      Costs.

         The Debtor will indemnify and reimburse the Secured Party on demand for
all interest,  commissions,  costs of  realization  and other costs and expenses
(including  the full amount of all legal fees and  expenses  paid by the Secured
Party) incurred by the Secured Party or any Receiver in connection with:

i)       the perpetual  registration  of any financing  statement  registered in
         connection with the security interests hereby created;

ii)      the preparation,  execution, perfection, protection, enforcement of and
         advice with respect to this Security Agreement;

iii)     the realization,  disposition of,  retention,  protection,  insuring or
         collection of any Collateral;

iv)      the protection or enforcement of the rights, remedies and powers of the
         Secured  Party  or  any  Receiver,   including,   without   limitation,
         participation,  preparation  and advice with  respect to any actions or
         proceedings  commenced  or  threatened  by or against the Debtor or any
         Guarantor/Indemnitor;

v)       the inspection of the Collateral;

vi)      investigating title to the Collateral;

vii)     the  compliance  by the Secured  Party with all  demands  made upon the
         Secured Party to amend,  extend,  cancel or discharge any registrations
         and filings related hereto; and

viii)    any other cost related hereto.


                                     - 21 -




All amounts for which the Debtor is required  hereunder to reimburse the Secured
Party or any Receiver shall,  from the date of  disbursement  until the date the
Secured Party, or the Receiver receives reimbursement, be deemed advanced to the
Debtor by the Secured Party,  shall be deemed to be  Obligations  and shall bear
interest at the highest  rate per annum from time to time charged by the Secured
Party on any of the other Obligations.

9.2      Appointment of Attorney.

         The Debtor constitutes and appoints the Secured Party, or any Receiver,
the true and  lawful  attorney  of the  Debtor  irrevocably  with full  power of
substitution  to do,  make and execute all such  assignments,  documents,  acts,
matters  or things  with the right to use the name of the  Debtor  whenever  and
wherever it may be deemed  necessary or expedient.  The Debtor  hereby  declares
that the irrevocable  power of attorney  granted  hereby,  being coupled with an
interest, is given for valuable consideration.

9.3      No Obligation to Make Advances.

         Nothing  herein shall obligate the Secured Party to make any advance or
loan or further  advance  or extend  credit to the Debtor  and,  in  particular,
nothing  herein  shall  obligate  the Secured  Party to advance  any  unadvanced
portion of any loan or credit to the Debtor after the  occurrence of an Event of
Default. Except to the extent that the Secured Party:

i)       by accepting bills of exchange drawn on it by the Debtor; or

ii)      by issuing letters of credit or letters of guarantee on the application
         of the Debtor,

is  required  to advance  monies on the  maturity  of those bills or pursuant to
those letters of credit or letters of guarantee, as the case may be, none of the
preparation, execution, perfection or registration of this Security Agreement or
the advance of any monies by the Secured  Party shall bind the Secured  party to
make any further advance.

9.4      Security Interests Effective Immediately.

         Neither the  execution of nor any filing with respect to, this Security
Agreement  shall bind the Secured  Party to grant any credit to the Debtor,  but
the security  interests  hereby  created  shall take effect  forthwith  upon the
execution of this Security Agreement by the Debtor.

9.5      Security in Addition and not in Substitution, Remedies Cumulative.


                                     - 22 -




                  The rights,  remedies and powers  conferred  by this  Security
Agreement  are in addition to, and not in  substitution  for, any other  rights,
remedies or powers the Secured Party may have under this Security Agreement,  at
law, in equity or by or under the PPSA or any other  statute.  The Secured Party
may proceed by way of any action,  suit or other  proceeding at law or in equity
and no right,  remedy or power of the  Secured  Party shall be  exclusive  of or
dependent  on any other.  The  Secured  Party may  exercise  any of its  rights,
remedies or powers separately or in combination and at any time.

9.6      Statutory Waivers.

         To the fullest  extent  permitted by law, the Debtor  waives all of the
rights,  benefits  and  protection  given by the  provisions  of any existing or
future statute which imposes limitations upon the rights,  remedies or powers of
a Secured Party or upon the methods of  realization  of security,  including any
seize or sue or  anti-deficiency  statute or any similar provisions of any other
statute.  In particular,  the Debtor waives all rights,  benefits and protection
given by the Civil  Enforcement Act and sections 47 to 50 of the Law of Property
Act of the Province of Alberta insofar as they extend to or relate to any of the
Collateral.  The Limitation of Civil Rights Act of the Province of  Saskatchewan
shall not apply to the security  interests  hereby created or any of the rights,
remedies powers of the Secured Party or any Receiver.

9.7      Provisions Reasonable.

         The Debtor  acknowledges that the provisions of this Security Agreement
and, in particular,  those respecting rights, remedies and powers of the Secured
Party and any Receiver against the Debtor,  its business and any Collateral upon
an  Event  of  Default,   are   commercially   reasonable   and  not  manifestly
unreasonable.

9.8      Further Assurances.

         The Debtor shall at all times, do, execute,  acknowledge and deliver or
cause to be done,  executed,  acknowledged  or delivered  all such further acts,
deeds, transfers, assignments, security agreements and assurances as the Secured
Party may reasonably  require in order to give effect to the  provisions  hereof
and for the better granting,  transferring,  assigning,  charging, setting over,
assuring, confirming or perfecting the security interests hereby created and the
priority accorded to them by law or under this Security Agreement.

9.9      Notices.

i)       Every notice,  demand and other  communication  in connection with this
         Security Agreement (including,  without limitation, notices required or
         permitted


                                     - 23 -




         under the  Bankruptcy  and  Insolvency  Act) and all legal  process  in
         regard hereto shall be validly given,  made or served if in writing and
         delivered to, or mailed,  postage prepaid,  or telecopied or telexed or
         sent by other similar form of communication  (collectively  "ELECTRONIC
         COMMUNICATION")  to the intended recipient at its address first written
         above and if to the Debtor to the  attention of President and if to the
         Secured  Party to the  attention of Manager or to such other address or
         person as the other may from time to time designate by notice.

ii)      Any  notice,  requisition,  demand  or  other  instrument,  (including,
         without limitation,  notices required or permitted under the Bankruptcy
         and Insolvency Act) if delivered, shall be deemed to have been given or
         made on the day on which  it was  delivered  and if sent by  Electronic
         Communication  shall  be  deemed  to  have  been  given  or made on the
         business  day next  following  the day on which it was so sent,  and if
         mailed shall be deemed to have been given or made on the third business
         day following  the day on which it was so mailed.  Any party hereto may
         give written notice of a change of address in the same manner, in which
         event any notice shall  thereafter be given to it as above  provided at
         such changed address.

9.10     Discharge.

         Upon payment and performance by the Debtor of the  Obligations  secured
hereby the Secured Party shall upon request in writing by the Debtor  deliver up
this  Security  Agreement  to the Debtor and shall at the  expense of the Debtor
cancel and  discharge  the  security  interests  hereby  created and execute and
deliver to the Debtor such  documents as shall be  requisite  to  discharge  the
security interests hereby created.

9.11     Delivery of Copy/Waiver.

The      Debtor hereby acknowledges receiving a copy of this Security Agreement.
         The Debtor  waives all rights to receive from the Secured  Party a copy
         of any financing statement or financing change statement  registered or
         verification  statement  issued at any time in respect of this Security
         Agreement.

9.12     Release of Information.

The      Debtor  hereby  authorizes  the Secured Party to provide a copy of this
         Security  Agreement and such other information  (including full details
         of the  Obligations) as may be requested of me Secured Party by persons
         entitled thereto under the PPSA.

9.13     Inspection, Management and Repairs.


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                  The Debtor  covenants  and agrees that the Secured  Party may,
but shall be under no obligation  to, at such time or times as the Secured Party
deems  necessary and without the  concurrence  of the Debtor or any other person
make such arrangements for the repairing,  finishing and putting in order of the
Business Premises, including, without limitation, such repairs, replacements and
improvements  as are  necessary  so that the  Debtor and the  Business  Premises
comply with Environmental  Laws, and all reasonable costs,  charges and expenses
including,  an  allowance  for the time and services of the Secured  Party,  the
Secured Party's servants or agents or any other person or persons  appointed for
the above purposes including,  without limitation,  the full amount of all legal
fees,  disbursements,  costs, charges and expenses incurred by the Secured Party
and any amount due hereunder  shall be payable  forthwith to the Secured  Party,
shall be deemed an advance to the Debtor by the Secured  Party,  shall be deemed
to be  Obligations,  and shall bear  interest at the highest rate per annum from
time to time charged by the Secured Party on any of the other  Obligations until
paid.

9.14     Hazardous Materials and Environmental Laws.

         The Debtor represents and warrants to the Secured Party that:

i)       the Business  Premises are not insulated with urea  formaldehyde and do
         not contain any asbestos material or underground tanks;

ii)      the Business Premises are free of any Hazardous Materials;

iii)     the Business  Premises are not currently used in a manner,  and, to the
         Debtor's  knowledge,  after having made due  inquiry,  no prior use has
         occurred,  which is contrary to any laws, regulations,  orders, bylaws,
         permits or lawful requirements of any Environmental Laws; and

iv)      there  are  no  existing  or  threatened  claims,  actions,  orders  or
         investigations  under any  Environmental  Laws  against  the  Debtor or
         against the Business Premises.

9.15     Authorization of Inquiries.

         The Debtor hereby  authorizes  the Secured party to make inquiries from
time  to  time  of any  governmental  authority  with  respect  tot he  Debtor's
compliance  with  Environmental  Laws and the Debtor agrees that the Debtor will
from time to time provide to the Secured  Party with such written  authorization
as the Secured Party may reasonably require in order to facilitate the obtaining
of such information.

9.16     Indemnification.


                                     - 25 -



i)       The Debtor shall  indemnify,  reimburse  and save  harmless the Secured
         Party, any receiver,  its directors  officers,  employees,  agents, and
         successors and assigns, from any and all liabilities, actions, damages,
         claims,  losses,  costs  and  expenses  whatsoever  (including  without
         limitation,  the full  amount of all legal  fees,  costs,  charges  and
         expenses  and the cost of removal,  treatment,  storage and disposal of
         any Hazardous Materials and remediation of the Business Premises) which
         may be paid,  incurred or asserted  against the Secured Party for, with
         respect  to or as a direct or  indirect  result of the  presence  on or
         under, or the escape, seepage, leakage, spillage,  discharge,  emission
         or release from, the Business  Premises or into or upon any other land,
         the  atmosphere  or any  watercourse,  body of water or  wetland of any
         Hazardous Materials.

ii)      Any  amount  owing  by the  Debtor  hereunder  shall,  from the date of
         disbursement  until the date the recipient receives  reimbursement,  be
         deemed advanced to the Debtor by the Secured party,  shall be deemed to
         be  obligations  and shall bear  interest at the highest rate per annum
         from  time to time  charged  by the  Secured  party on any of the other
         Obligations until paid.

iii)     The  Debtor  agrees  that the  indemnity  obligations  hereunder  shall
         survive the release of the security of this Security  Agreement and the
         payment and  satisfaction of the  indebtedness  and liabilities  hereby
         secured,  but only  insofar  as such  indemnity  obligations  relate to
         liabilities,  actions,  damages,  claims,  losses,  costs and  expenses
         arising in connection with Hazardous Material that were on the Business
         Premises prior to such release, payment and satisfaction.

                                   SECTION 10
                                 INTERPRETATION

10.1     Entire Agreement/Amendment.

         This  Security  Agreement  contains  the entire  agreement  between the
parties relating to the security interests hereby created. Any amendment of this
Security  Agreement  shall not be binding  unless in  writing  and signed by the
Secured  Party  and  the  Debtor.   The  Debtor   confirms  that  there  are  no
representations,  warranties, covenants or acknowledgements affecting, or relied
upon in entering this Security Agreement.

10.2     Severability.

         Any provision of this Security Agreement prohibited by law or otherwise
ineffective  shall  be  effective  only to the  extent  of such  prohibition  or
ineffectiveness and shall be


                                     - 26 -




severable without invalidating or otherwise affecting the
remaining provisions hereof.

10.3     Joint and Several Liability.

         If more than one person  executes  this  Security  Agreement as Debtor,
their Obligations hereunder and the liability resulting therefrom shall be joint
and several.

10.4     Headings.

         All headings and titles in this  Security  Agreement  are for reference
only and are not to be used in the interpretation of the terms hereof.

10.5     Included Words.

         Wherever the singular or the masculine are used herein,  the same shall
be deemed to include the plural or the feminine or the body politic or corporate
where the context or the parties so require.

10.6     Applicable Law.

         This Security  Agreement shall be construed and enforceable  trader and
in accordance with the laws of Alberta.

10.7     Binding Effect.

         This  Security  Agreement  shall  be  binding  on the  Debtor  and  its
successors,  heirs,  administrators and executors and shall enure to the benefit
of the Secured Party and its successors and assigns.


                                  Execution
                                  Date


Officer                        Y     M     D        Transferor(s) Signature(s)
Signature(s)                                        J.R.S. EXPLORATION
                                                    COMPANY LIMITED
                                                    by its authorized signatory
/s/ Donald E. Janveau
- ---------------------

/s/ Garnet W. Mueller
- ---------------------

                                                    /s/ Donald E. Janveau
                                                    ---------------------------
                                                    DONALD E. JANVEAU
                                                    President


                                     - 27 -