scoutexh10_3.htm


    
      

    

    Exhibit 10.3

    
 

    THIS
GENERAL SECURITY AGREEMENT made this 18th day of
June, 2008, (hereinafter the “Agreement”).

    


    BY:

    


    


    KERRISDALE
RESOURCES LTD.

    (hereinafter
referred to as the "Debtor")

    


    - in favour of -

    


    


    BRIAN
MAHOOD

    (hereinafter
referred to as the "Secured
Party")

    


    


    


    GENERAL SECURITY
AGREEMENT

    


    WHEREAS all of the shares of
the Debtor (hereinafter “the Shares”) were sold by the Secured Party to Scout
Exploration Inc. (hereinafter the “Purchaser”)
pursuant to a Share Purchase Agreement dated effective the 1st day of January,
2008 (hereinafter the “Effective Date”).

    


    AND WHEREAS Three Hundred
Fifty Thousand ($350,000.00) Dollars of the purchase price for the Shares
remained outstanding following the closing of the above-referenced share
purchase transaction (hereinafter the “Principal
Amount”) and the Debtor has assumed and accepted the obligation of the
Purchaser to the Secured Party of all the Purchaser’s obligations to the Secured
Party under the Share Purchase Agreement including the obligation to issue this
Agreement to the Secured Party;

    


    AND WHEREAS, due to the
Debtor’s assumption of the obligations of the Purchaser to the Secured Party,
the Debtor intends to grant to the Secured Party a security interest in all of
real and personal assets of the Debtor owned as of the date upon which this
Agreement is executed, specifically including a number of oil and gas leases
owned by the Debtor or in which the Debtor holds beneficial interests to
petroleum and natural gas leases legally described in Schedule “B“ attached
hereto and made a part hereof;

    


    NOW THEREFORE IN CONSIDERATION
of the recitals hereto, included herein, the representations, warranties,
covenants and agreements set forth in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

    



    
      
         


      

      
         


        
          

        

      

      
        -
2 -  

      

    


                          

       

      
        	1.	Definitions


      

       

    

    In
construing this Agreement:

    


    
      	
               
      

            	
              (a)

            	
              “Act”
      means the Personal
      Property Security Act, Statutes of Alberta, 2000, c. P-7 as
      amended;

            


    

    


    
      	
               
      

            	
              (b)

            	
              “Collateral”
      means all personal property of the Debtor as of the date this Agreement is
      executed including all Goods, Chattel Paper, Securities, Documents of
      Title, Instruments, Money, Intangibles; and all real property of the
      Debtor including all charges on land or interests in land and petroleum
      and natural gas leases described in Schedule "A" attached hereto and
      forming part of this Agreement; and all parts, accessories, attachments,
      equipment, additions, accretions thereto and property thereof, together
      with any equipment or accessories placed upon or repairs made to the
      foregoing during the continuance of this
  Agreement;

            


    

    


    
      	
               
      

            	
              (c)

            	
              “Indebtedness”
      means the Principal Amount or aggregate outstanding at any given time of
      all loans and advances made or credit granted, or which may be made or
      granted, by the Secured Party to the Debtor under the Share Purchase
      Agreement and otherwise and interest on such loans and advances or credit
      granted and all costs, charges and expenses of, or incurred by the Secured
      Party, in connection with protecting, preserving, realizing upon or
      collecting the Collateral or attempting to do so or otherwise and all
      other obligations and liabilities, present or future, direct or indirect,
      absolute or contingent, matured or not, of the Debtor to the Secured Party
      arising from this or any other agreement or dealings between the Secured
      Party and the Debtor or from any agreement or dealings with any person by
      which the Secured Party may be or become in any manner whatsoever a
      creditor of the Debtor or otherwise howsoever arising and whether the
      Debtor be bound alone or with another or others and whether as principal
      or surety including all reasonable legal fees and disbursements incurred
      by the Secured Party in connection with all of the foregoing as between a
      solicitor and his own client;

            


    

    


    
      	
               
      

            	
              (d)

            	
              Unless
      specifically defined herein, all capitalized terms used herein shall have
      the same meaning as ascribed to them in the
Act.

            


    

    


    



    
      
         


      

      
         


        
          

        

      

      
        -
3 -  

      

    

           

      
        	2.	Security
      Interest


      

    

    


    For Value
given by the Secured Party to the Debtor, the receipt and sufficiency of which
the Debtor hereby acknowledges, the Debtor hereby grants to the Secured Party a
Security Interest in the Collateral and Proceeds to secure payment of the
Indebtedness and performance of any and all obligations of the Debtor to the
Secured Party.

     

    
      
        	3.	Covenants


      

    

    


    The
Debtor covenants and agrees with the Secured Party:

    


    
      	
               
      

            	
              (a)

            	
              that
      on execution of this Agreement the Debtor will be in possession of the
      Collateral or be entitled to possession of the
  Collateral;

            


    

    


    
      	
               
      

            	
              (b)

            	
              to
      do, execute, acknowledge and deliver such financing statements and further
      assignments, transfers, conveyances, documents, acts, matters and things
      as may be reasonably requested by the Secured Party of or with respect to
      the Collateral in order to give effect to these presents and to pay all
      costs for searches and filings in connection therewith and for the
      preparation of this Agreement, including solicitor's fees and
      disbursements incurred by the Secured Party in connection with the
      foregoing, as between a solicitor and his own client; and including the
      issuance of notices of the filing of a financing statement in the PPR
      Alberta in respect of this Agreement to the lessors of freehold petroleum
      and natural gas leases included in the real property interests described
      in Schedule “A” hereto and the filing of Security Notices with Alberta
      Energy in respect of all Alberta Crown petroleum and natural gas leases
      included in the real property interests described in Schedule “A” hereto
      in which the Corporation holds a working interest of record with Alberta
      Energy;

            


    

    


    
      	
               
      

            	
              (c)

            	
              to
      deliver to the Secured Party from time to time, forthwith upon request,
      any Documents of Title, Instruments, Securities and Chattel Paper
      constituting, representing or relating to the
  Collateral;

            


    

    


    
      	
               
      

            	
              (d)

            	
              to
      give the Secured Party prompt and immediate notice
  of:

            


    

    


    
      	
               
      

            	
              (i)

            	
              the
      occurrence of any event of default hereunder or of any other event which,
      with the giving of notice or the lapse of time, would constitute an event
      of default hereunder;

            


    

    


    
      	
               
      

            	
              (ii)

            	
              any
      loss or damage to the Collateral;

            


    

    


    
      	
               
      

            	
              (iii)

            	
              any
      change of the Debtor's name; and,

            


    

    


    
      	
               
      

            	
              (iv)

            	
              any
      change in the information contained herein or in the Schedules hereto
      relating to the Debtor's business or the
  Collateral;

            


    

    



    
      
         


      

      
         


        
          

        

      

      
        -
4 -  

      

    


    
      	
               
      

            	
              (e)

            	
              to
      prevent the Collateral, or any part thereof, from being or becoming an
      Accession or Fixture to other property not covered by this Agreement, if
      applicable;

            


    

    


    
      	
               
      

            	
              (f)

            	
              that
      if by reason of location of the Collateral or otherwise the creation,
      validity or perfection of the Security Interest provided for herein is
      governed by a law of a jurisdiction other than Alberta, then the Debtor
      shall take such steps and execute and deliver such papers as the Secured
      Party may from time to time request to comply with the Personal Property
      Security Act and other laws of another province or provinces, or the laws
      of Canada.

            


    

    


    
      	
               
      

            	
              (g)

            	
              To
      diligently maintain, use and operate the Collateral and to conduct the
      Debtor’s affairs in a proper and efficient manner so as to preserve and
      protect the Collateral and the earnings, income, rents and profits
      thereof;

            


    

    


    
      	
               
      

            	
              (h)

            	
              Not
      to sell, exchange, transfer, assign, lease or otherwise dispose of the
      Collateral or any interest therein other than in the ordinary course of
      the Debtor’s business UNLESS with the prior written consent of the Secured
      Party had and delivered, not to be unreasonably
  withheld;

            


    

    


    
      	
               
      

            	
              (i)

            	
              To
      maintain insurance on all of the Collateral which is of a character
      usually insured in comparable circumstances with reputable insurers
      against loss or damage by fire or other hazards and to deliver to the
      Secured Party evidence of such insurance satisfactory to the Secured
      Party;

            


    

    


    
      	
               
      

            	
              (j)

            	
              To
      pay all rents, taxes, rates, levies, assessments and government fees or
      dues lawfully levied, assessed or imposed in respect of the Collateral or
      any part thereof as and when the same shall become due and payable and to
      exhibit to the Secured Party, on demand, the receipts and vouchers
      establishing such payments;

            


    

    


    
      	
               
      

            	
              (k)

            	
              To
      keep proper books of accounts in accordance with generally accepted
      accounting principals, consistently applied,  and to furnish to
      the Secured Party, within 48 hours following the Secured Party’s request
      during normal business hours,  such financial information and
      statements relating to the Collateral as the Secured Party may from time
      to time require;

            


    

    


    
      	
               
      

            	
              (l)

            	
              To
      notify the Secured Party promptly
of:

            


    

    


    
      	
               
      

            	
              (i)

            	
              Any
      significant default in the payment to the Debtor of accounts which are
      part of the Collateral; and

            


    

    


    
      	
               
      

            	
              (ii)

            	
              All
      litigation before any court, administrative board or other tribunal
      affecting the Debtor or the
Collateral;

            


    

    


    
      	
               
      

            	
              (m)

            	
              To
      furnish to the Secured Party such other information with respect to the
      Collateral as the Secured Party may from time to time
    require;

            


    

    


    
      	
               
      

            	
              (n)

            	
              Not
      to, without the prior written consent of the Secured Party, create any
      other

            


    


    
      
         


      

      
         


        
          

        

      

      
        -
5 -  

      

    


    
      	
               
      

            	
              security
      interest, mortgage, hypothec charge, lien or other encumbrance upon the
      Collateral or any part thereof ranking or purporting to rank in priority
      to or equally with the Security Interest;
and

            


    

    


    
      	
               
      

            	
              (o)

            	
              To
      defend the title to the Collateral against all persons and, upon demand by
      the Secured Party, to furnish such further assurance of title and to
      execute any written instruments or do any other acts necessary to make
      effective the purposes and provisions of this
  Agreement.

            


    

     

    
      
        	4.	Default


      

       

    

    The
happening of any of the following shall constitute default by the Debtor
hereunder:

    


    
      	
               
      

            	
              (a)

            	
              if
      the Debtor shall default in making any payment due to the Secured Party
      with respect to the Indebtedness;

            


    

    


    
      	
               
      

            	
              (b)

            	
              if
      the Debtor shall be in default under or be in breach of any provision of
      this Agreement or of any other agreement between the Debtor and the
      Secured Party including any promissory
note;

            


    

    


    
      	
               
      

            	
              (c)

            	
              if
      the Debtor shall fail to pay any charges, rents, taxes, or rates on
      leasehold property, or other charges of a like nature, or if the Debtor
      fails to observe and perform any of the covenants, payments or conditions
      in any lease, license, concession, agreement, mortgage, agreement for
      sale, charge or encumbrance;

            


    

    


    
      	
               
      

            	
              (d)

            	
              if
      the Debtor makes default in the payment of the principal or interest
      forming part of the Indebtedness;

            


    

    


    
      	
               
      

            	
              (e)

            	
              if
      an order shall be made or an effective resolution passed for the winding
      up of the Debtor, or if a petition is filed for the winding-up of the
      Debtor;

            


    

    


    
      	
               
      

            	
              (f)

            	
              if
      the Debtor shall make an assignment for the benefit of creditors or be
      declared bankrupt, or if a custodian or receiver or receiver and manager
      or other officer with similar powers be appointed with respect to the
      Debtor or any of the Debtor's property or if the Debtor voluntarily files
      a petition in bankruptcy, or commits any act of bankruptcy or proposes to
      take the benefit of any provision of the Companies Creditors Arrangement
      Act as now or hereafter in force or makes any arrangement with its
      creditors pursuant to the terms of the Business Corporations Act of
      Alberta or the Canada Business Corporations Act as now or hereafter in
      force;

            


    

    


    
      	
               
      

            	
              (g)

            	
              if
      the Debtor ceases or demonstrates an intention to cease carrying on
      business;

            


    

    


    
      	
               
      

            	
              (h)

            	
              if
      the Debtor passes or purports to pass any resolution or takes or purports
      to take any corporate proceedings to enable it to take proceedings for its
      dissolution, liquidation or
amalgamation;

            


    


    
      
         


      

      
         


        
          

        

      

      
        - 6
-  

      

    

     

    
      	
               
      

            	
              (i)

            	
              if
      the Debtor shall lose its charter by expiration, forfeiture or otherwise
      or if a receiver or a receiver-manager for all or any part of the Debtor's
      assets or any other party with like powers shall be
    appointed;

            


    

    


    
      	
               
      

            	
              (j)

            	
              except
      for sales of Inventory in the ordinary course of business, if any assets
      of the Debtor are either directly or indirectly (including, without
      limitation, by way of transfer or sale of shares) sold, transferred,
      removed, alienated or disposed of in any manner whatsoever by the Debtor
      without the written consent of the Secured Party, not to be unreasonably
      withheld, or if the Secured Party, in its sole discretion, deems the
      Debtor's assets or any part thereof are in danger of being sold,
      transferred, assigned, conveyed, removed, alienated or disposed
      of;

            


    

    


    
      	
               
      

            	
              (k)

            	
              if
      the Secured Party, acting commercially reasonably, deems itself insecure
      or decides that the Collateral is or is likely to be in jeopardy or the
      Secured Party has commercially reasonable grounds to believe that the
      prospect of payment or performance of the obligations of the Debtor is or
      is likely to be impaired;

            


    

    


    
      	
               
      

            	
              (l)

            	
              if
      the Security Interest granted to the Secured Party hereunder shall cease
      to be in full force and effect or the validity thereof or of any of the
      obligations of the Debtor hereunder shall be disaffirmed by or on behalf
      of the Debtor;

            


    

    


    
      	
               
      

            	
              (m)

            	
              Any
      of the representations and warranties in this agreement were incorrect in
      any material respect when made or deemed to have been
  made;

            


    

    


    
      	
               
      

            	
              (n)

            	
              Any
      encumbrancer takes possession or purports to or attempts to take
      possession of the Collateral or any part thereof without the prior written
      consent of the Secured Party had and
received;

            


    

    


    
      	
               
      

            	
              (o)

            	
              Any
      execution or other process of any court becomes enforceable against the
      Debtor or any distress or analogous process is levied upon the Collateral
      or any part thereof.

            


    

     

    
      
        	5. 	Remedies


      

       

    

    Upon
default by the Debtor hereunder:

    


    
      	
               
      

            	
              (a)

            	
              the
      Secured Party, at its sole discretion, may declare any or all of the
      Indebtedness, which is not by its terms payable on demand, to be
      immediately due and payable, without demand or notice of any
      kind.  Notwithstanding the foregoing, the Debtor acknowledges
      that the Secured Party may in its sole, absolute and unfettered discretion
      demand payment with respect to any portion of the Indebtedness which may
      now or hereafter be payable on
demand;

            


    

    


    
      	
               
      

            	
              (b)

            	
              the
      Debtor will forthwith upon demand transfer to the Secured Party title to
      all of the Collateral. In any event, at its option, the Secured Party may
      take such steps as it considers necessary or desirable to obtain
      possession of all or any part of the
Collateral;

            


    


    
      
         


      

      
         


        
          

        

      

      
        -
7 -  

      

    

     

    
      	
               
      

            	
              (c)

            	
              the
      Secured Party may proceed to enforce payment of the Indebtedness and
      exercise all of the rights and remedies of the Secured Party provided for
      in this Agreement and in the Act, as well as any and all other rights and
      remedies available to the Secured Party at law or in equity, and may
      proceed to enforce any other Security Agreement entered into between the
      Debtor and the Secured Party;

            


    

    


    
      	
               
      

            	
              (d)

            	
              the
      Debtor agrees to assign to the Secured Party, in writing, at the Secured
      Party's option, any rental or royalty payments due or to become due to the
      Debtor from or under any lease of the Collateral, if
      applicable;

            


    

    


    
      	
               
      

            	
              (e)

            	
              the
      Secured Party may by instrument in writing appoint any person or persons,
      a Receiver or Manager or Receiver and Manager (hereinafter called the
      "Receiver") of the Collateral or any part thereof and may remove the
      Receiver so appointed by it and appoint another or others in his or their
      stead or may take proceedings in any court of competent jurisdiction for
      the appointment of a Receiver of all or any part of the Collateral
      and:

            


    

    


    
      	
               
      

            	
              (i)

            	
              the
      Secured Party may from time to time fix the remuneration of the
      Receiver;

            


    

    


    
      	
               
      

            	
              (ii)

            	
              the
      Receiver shall so far as concerns responsibility for his acts and
      omissions be deemed to be the agent of the Debtor and not the agent of the
      Secured Party and the Secured Party shall not be responsible in any way
      for any misconduct or negligence on the part of the
    Receiver;

            


    

    


    
      	
               
      

            	
              (iii)

            	
              the
      Debtor shall cooperate fully with and assist the Receiver forthwith upon
      request and shall promptly confirm and ratify all acts of the
      Receiver;

            


    

    


    
      	
               
      

            	
              (iv)

            	
              the
      Secured Party shall not be responsible or liable for any debts contracted
      by the Receiver or for damages to persons or property or for salaries or
      for non-fulfillment of contracts during any period when the Receiver is in
      possession of the Collateral;

            


    

    


    
      	
               
      

            	
              (v)

            	
              the
      Debtor shall yield up possession of the Collateral and the conduct of the
      Debtor's business in connection therewith to the Receiver upon demand to
      the extent that possession or management is, in the sole discretion of the
      Receiver, necessary for or incidental to realizing on or dealing with the
      Collateral or the exercise of any rights or duties granted to or imposed
      upon the Receiver under this Agreement and the Debtor shall facilitate by
      all legal means the actions of the Receiver and shall not interfere with
      the carrying out of the powers hereby granted to the Receiver and the
      Debtor shall forthwith execute such documents and transfers as may be
      necessary to place the Receiver in legal possession of the
      Collateral;

            


    

    


    
      	
               
      

            	
              (vi)

            	
              the
      Secured Party or any subsidiary, agent or representative thereof may
      become purchasers at any sale of the Collateral whether such sale is
      made

            


    


    
      
         


      

      
         


        
          

        

      

      
        -
8 -  

      

    


    
      	
               
      

            	
              under
      any power of sale contained in this Agreement or pursuant to judicial
      proceedings;

            


    

    


    
      	 	
              (vii)

            	
              to
      enable the Receiver to exercise the powers granted pursuant to the terms
      of this Agreement the Debtor hereby irrevocably appoints the Receiver
      attorney on the Debtor's behalf to do all acts and things on behalf of and
      in the name of the Debtor as may be authorized by the provisions of this
      Agreement, including carrying out any sale of any or all of the Collateral
      and affixing the seal of the Debtor, if a corporation, to any deeds,
      transfers, conveyances, assignments, assurances, documents and things
      which in the Receiver's discretion ought to be executed to complete any
      sale or transfer of any or all of the Collateral or alternatively, to
      execute the same under the Receiver's own seal, by conveying in the name
      of and on behalf of the Debtor; and any deed, transfer or other instrument
      signed by the Receiver under his seal shall have the same effect as if it
      were validly executed by the
Debtor;

            


    

    


    
      	
               
      

            	
              (f)

            	
              subject
      to the Act, all monies collected or received by the Secured Party pursuant
      to or in exercise of any right it possesses with respect to the Collateral
      shall be applied to the Indebtedness in such manner as the Secured Party
      deems appropriate or, at the option of the Secured Party, may be held
      unappropriated in a collateral account or released to the Debtor, all
      without prejudice to the liability of the Debtor or the rights of the
      Secured Party hereunder and any surplus shall be accounted for as required
      by law;

            


    

    


    
      	
               
      

            	
              (g)

            	
              at
      the option of the Secured Party, and to the extent and in the manner
      provided in the Act, the Secured Party may elect to retain all or any part
      of the Collateral in satisfaction of the Indebtedness or any part
      thereof;

            


    

    


    
      	
               
      

            	
              (h)

            	
              in
      the event of the Secured Party’s taking possession of the Collateral, or
      any part thereof, in accordance with the provisions of this Agreement, if
      applicable, the Secured Party shall have the right to maintain the same
      upon the premises on which the Collateral may then be situate, and for the
      purpose of such maintaining shall be entitled to the free use and
      enjoyment of all necessary buildings, premises, housing, and accommodation
      for the proper maintaining, housing and protection of the
      Collateral;

            


    

    


    
      	
               
      

            	
              (i)

            	
              the
      Secured Party shall not be liable or accountable for any failure to seize,
      collect, realize, sell or obtain possession or payment of the Collateral
      or any part thereof and shall not be bound to institute proceedings for
      the purpose of seizing, collecting, realizing or obtaining possession or
      payment of the same or for the purpose of preserving any rights of the
      Secured Party, the Debtor or any other person, firm or corporation in
      respect to the same;

            


    

    


    
      	
               
      

            	
              (j)

            	
              the
      Secured Party may grant extensions of time and other indulgences, take and
      give up securities, accept compositions, grant releases and discharges,
      release any part of the Collateral to third parties and otherwise deal
      with the debtors of the Debtor,

            


    


    
      
         


      

      
         


        
          

        

      

      
        -
9 -

      

    


    
      	
               
      

            	
              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 or the
      Secured Party's right to hold and realize the
  Collateral;

            


    

    


    
      	
               
      

            	
              (k)

            	
              the
      Secured Party may, either directly or through its agents or nominees,
      exercise any or all of the powers and rights given to a Receiver under
      this Agreement;

            


    

    


    
      	
               
      

            	
              (l)

            	
              the
      rights and remedies herein conferred upon the Secured Party shall be
      cumulative and not alternative and shall be in addition to and not in
      substitution or derogation of rights and remedies conferred by the Act and
      any other applicable law.

            


    

     

    
      
        	6.	Powers of
      Receiver


      

       

    

    Any
Receiver appointed by the Secured Party shall have the power:

    


    
      	
               
      

            	
              (a)

            	
              to
      take possession of and get in all or any part of the
      Collateral;

            


    

    


    
      	
               
      

            	
              (b)

            	
              to
      carry on, manage and conduct or to concur in the carrying on, management
      and conduct of the business of the Debtor and to receive the revenues,
      incomes, issues and profits of the Collateral and of carrying on the
      business of the Debtor and to pay therefrom all expenses, charges and
      borrowings incurred or payable in carrying on the business or
      otherwise;

            


    

    


    
      	
               
      

            	
              (c)

            	
              to
      borrow monies for the purposes of the business of the Debtor, the
      maintenance and preservation of the Collateral or any part thereof and in
      so doing the Receiver may issue certificates payable when the Receiver
      thinks expedient and bearing interest as stated therein and the amounts
      from time to time payable thereunder shall charge the Collateral in
      priority to this Agreement;

            


    

    


    
      	
               
      

            	
              (d)

            	
              to
      sell and dispose of any or all of the Collateral at public auction, by
      public or private tender or by private sale at such time and on such terms
      and conditions as to credit or otherwise and as to upset or reserve bid or
      price, and as to method of payment whether by way of deferred payment or
      otherwise, as the Receiver shall in its sole discretion determine and to
      deliver to the purchaser or purchasers of the Collateral good and
      sufficient deeds or title documents for the same, the Receiver being
      hereby constituted the irrevocable attorney of the Debtor for the purpose
      of making such sale and executing such deeds and transfer documents and
      any such sale shall be absolute and conclusive as against the Debtor or
      any person claiming by, from, through or under the Debtor and the Debtor's
      assigns;

            


    

    


    
      	
               
      

            	
              (e)

            	
              to
      make any arrangement or compromise which the Receiver shall deem
      expedient;

            


    

    


    
      	
               
      

            	
              (f)

            	
              to
      sue or defend any action in the name of the
  Debtor;

            


    

    


    
      	
               
      

            	
              (g)

            	
              to
      lease or concur in the leasing of the whole or any part of the
      Collateral;

            


    


    
      
         


      

      
         


        
          

        

      

      
        -
10 -

      

    

    
       

      
        	  	(h) 	to exercise all or
      any of the powers or rights incident to the ownership of the
      Collateral;


      

    

    


    
      	
               
      

            	
              (i)

            	
              to
      employ or retain for the execution of the duties and powers conferred upon
      him hereunder such agents, assistants, professional advisors or other
      persons as required on the terms and at the remuneration the Receiver
      considers proper;

            


    

    


    
      	
               
      

            	
              (j)

            	
              to
      release any of the Collateral which in the Receiver's opinion is
      unprofitable or unrealizable or a source of loss or
  danger;

            


    

    


    
      	
               
      

            	
              (k)

            	
              to
      exercise all rights and powers of the Secured Party hereunder and to act
      generally in relation to the Collateral in such manner and on such terms
      as may be expedient and in the best interests of the Secured
      Party;

            


    

    


    
      	
               
      

            	
              (l)

            	
              to
      agree to any modification, compromise, release or waiver of the rights of
      the Secured Party against the Debtor or against the Collateral whether
      such rights shall arise under this Agreement or
  otherwise;

            


    

    


    
      	 	
              (m)

            	
              if
      a sale is on credit, the Receiver shall not be accountable for any monies
      until actually received.

            


    

     

    
      
        	7.	Perform Obligations
      of Debtor


      

    

    


    The
Secured Party shall have the right, but shall not be obliged to perform any of
the obligations of the Debtor hereunder and the Debtor shall forthwith pay to
the Secured Party upon written demand therefor, an amount equal to the expense
incurred by the Secured Party in so doing, together with interest from the date
such expense is incurred until it is paid at a rate equal to six and three
quarters (6.75%) percent per annum and which shall be added to the Indebtedness
secured by this Agreement.

     

    
      
        	8. 	Proceeds in
      Trust


      

       

    

    All
Proceeds from the sale or other disposition of the Collateral hereunder realized
by the Secured Party or any agent on the Debtor's behalf shall be held in trust
by the Debtor for the Secured Party.

     

    
      
        	9. 	Collection of
      Debts


      

       

    

    In the
event of a default under this Agreement, the Secured Party may notify all or any
Account Debtors of the Security Interest and may also direct such Account
Debtors to make all payments on the Collateral to the Secured
Party.

     

    
      
        	10.	No Obligation to
      Advance


      

       

    

    Nothing
herein shall obligate the Secured Party to make any advance or loan or future
advance or loan or to renew any note or extend any time for payment of any
indebtedness or liability of the Debtor to the Secured Party.


    
      
         


      

      
         


        
          

        

      

      
        -
11 -

      

    

    
       

      
        	11. 	Notice


      

       

    

    Any
demand or notice referred to in this Agreement may be effectively given in the
manner provided for in the Act.

     

    
      
        	
                12. 

              	Governing
    Law


      

       

    

    This
Agreement shall be governed and construed in accordance with the laws of the
Province of Alberta and the parties hereby attorn to the exclusive jurisdiction
of the courts of the Province of Alberta.

    
       

      
        	13. 	Joint and
      Several


      

       

    

    If one or
more persons executes this Security Agreement, their obligation shall be joint
and several and each shall remain liable hereunder until all are released in
full.

     

    
      
        	14.	No
  Waiver


      

    

    


    No
consent or waiver, express or implied, by the Secured Party of any breach or
default by the Debtor in the performance by the Debtor of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance of the Debtor's obligations
hereunder.  Failure by the Secured Party to complain of any act or
failure to act on the part of the Debtor or to declare the Debtor in default,
irrespective of how long such failure continues, shall not constitute a waiver
by the Secured Party of its rights hereunder.

     

    
      
        	15.	Number and
      Gender


      

    

    


    Wherever
the singular, plural, masculine, feminine or neuter is used throughout this
Agreement, the same shall be construed as meaning the singular, plural,
masculine, feminine, neuter, body politic or body corporate where the facts or
context so requires.

     

    
      
        	16. 	Headings


      

       

    

    The
headings in this Agreement have been inserted for reference and as a matter of
convenience only and in no way define, limit or enlarge the scope or meaning of
this Agreement or any provisions hereof.

     

    
      
        	
                17. 

              	Time of
      Essence


      

    

    


    Time
shall be of the essence of this Agreement.

     

    
      
        	18.	No
      Modification


      

       

    

    No
modification, variation or amendment of any provision of this Agreement shall be
made except by a written agreement executed by the parties hereto and no waiver
of any provision hereof shall be effective unless in writing.


    
      
         


      

      
         


        
          

        

      

      
        -
12 -

      

    

    
       

      
        	19.	No
      Representations


      

    

    


    There are
no representations, warranties, agreements or conditions, express or implied,
statutory or otherwise, affecting the rights and liabilities of the parties
hereto or the attributes of the Collateral other than as specifically contained
or referred to herein, or as specifically contained in other Security Agreements
now or hereafter entered into between the Secured Party and the
Debtor.

    


    
       

      
        	20.	Continuing
      Security


      

       

    

    This
Agreement and the security afforded hereby is in addition to and not in
substitution for any other security now or hereafter held by the Secured Party
and is intended to be a continuing security agreement and shall remain in full
force and effect until the Indebtedness is repaid and the obligations of the
Debtor to the Secured Party performed notwithstanding that the Indebtedness is
reduced from time to time and thereafter increased or entirely extinguished, or
the Secured Party, by instrument in writing terminates this
Agreement.

     

    
      
        	21. 	Attachment


      

       

    

    The
Security Interest created hereby is intended to attach when this Agreement is
signed by the Debtor and delivered to the Secured Party.

     

    
      
        	22. 	Unenforceable
      Terms


      

       

    

    If any
term, covenant or condition of this Agreement or the application thereof to any
party or circumstance shall be invalid or unenforceable to any extent the
remainder of this Agreement or the application of such term, covenant or
condition to a party or a circumstance other than those to which it is held
invalid or unenforceable shall not be affected thereby and each remaining term,
covenant or condition of this Agreement shall be valid and shall be enforceable
to the fullest extent permitted by law.


    
       

      
        	23. 	Assignment


      

       

    

    This
Agreement is not assignable by the Debtor without the express prior written
consent of the Secured Party, not to be unreasonably withheld.

    
       

      
        	24. 	Law of Property
      Act


      

       

    

    The
Debtor covenants and agrees that the provisions of the Law of Property Act of
the Province of Alberta shall apply to this Agreement and to the Collateral
secured hereby or to any agreement or instrument renewing or extending or
collateral to this Agreement or to the Collateral.


    
       

      
        	25.	Unreasonable


      

       

    

    Nothing
in this Agreement shall be construed to mean that the Secured Party may act in a
commercially unreasonable manner or in bad faith.


    
      
         


      

      
         


        
          

        

      

      
        -
13 -

      

    


    
       

      
        	26. 	Enurement


      

       

    

    This
Agreement shall enure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.

     

    
      
        	
                27.

              	Acknowledgement of
      Receipt


      

       

    

    The
Debtor acknowledges having received a duplicate executed copy of this Agreement
on the date of its execution and the Debtor waives any right it may have to
receive a Financing Statement or Financing Change Statement.

     

    
      
        	28. 	Preamble and
      Schedules


      

       

    

    The Preamble to this Agreement and all
of the schedules attached hereto form a part of this Agreement and are binding
on the parties hereto.

    


    IN WITNESS WHEREOF the Debtor has
executed this Agreement the day and year first above written.

    


    KERRISDALE
RESOURCES LTD.

    


    


    


    Per:
_______________________________________

    JASON WALSH

     

     

     

    
 

    
      
         


      

      
         


        
          

        

      

      
        
        

      

    


    SCHEDULE
"A"

    


    


    Description of
Collateral

    


    


    1.           All
of the Debtor's present personal property being Goods, Documents of Title,
Securities, Chattel Paper, Instruments, Money and Intangibles, including,
without limitation, the following:

    


    
      	 	
              (a)

            	
              All
      present Equipment, and any Proceeds therefrom, including, without limiting
      the generality of the foregoing, all fixtures, plant, machinery, tools and
      furniture owned or acquired as of the Effective
  Date.

            


    

    


    
      	 	
              (b)

            	
              All
      present Inventory and any Proceeds therefrom, including, without limiting
      the generality of the foregoing, all raw materials, Goods in process,
      finished Goods and packaging material and Goods acquired or held for sale
      or furnished or to be furnished under contracts of rental or service;
      and

            


    

    


    
      	 	
              (c)

            	
              All
      present Intangibles and Proceeds therefrom, including, without limiting
      the generality of the foregoing, all debts, accounts, choses in action,
      claims, demands and monies now due or owing or accruing due or which may
      hereafter become due or owing to the Debtor, including (without limiting
      the foregoing) claims against the Crown in the Right of Canada or of any
      province, monies which may become payable under any policy or insurance in
      respect of any loss by fire or other cause which has been or may be
      incurred by the Debtor (collectively called "Book Debts"), together with
      all contracts, securities, bills, notes, lien notes, judgments, chattel
      mortgages, mortgages and all other rights, benefits and documents now or
      hereafter taken, vested in or held by the Debtor in respect of or as
      security for the Book Debts hereby assigned or intended so to be or any
      part thereof and the full benefit and advantage
  thereof.

            


    

     

    2.         
Notwithstanding the generality of the foregoing, the Collateral shall
specifically include all of the presently owned and earned leasehold Mineral
interests of the Debtor on all of those lands legally described in Schedule “B”
attached hereto (hereinafter the “Leases”), and any and all Proceeds therefrom,
including, and without limiting the generality of the foregoing, any royalties
earned by the Debtor pursuant to any of the Leases, and all proceeds from a
conveyance, transfer or sub-lease of any of the Leases.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    DATED:
18th
day of June, 2008.

    
      

    

     

    BETWEEN:

    
 

    KERRISDALE RESOURCES
LTD.

     

                              
- and -

     

                   
BRIAN
MAHOOD

    


    
 

    


    
      

    

     

    GENERAL SECURITY AGREEMENT

     

    
      
 


    


    


    
 

    


    
       

      
        	
                HUSTWICK HODGSON &
      PAYNE

                
                  BARRISTERS
      & SOLICITORS

                  600
      CAPITAL PLACE

                  9707
      - 110 STREET

                  EDMONTON,
      ALBERTA

                  T5K
      2L9

                   

                   

                   

                  FILE:  76950
      LRC

                

              


      

       

    

    


    


    


     

    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      Schedule
"B"

       

      Real
Property Assets of Kerrisdale Resources Ltd.

    

     

    
      	 
      	 
      	 
      	 
      	 
      	
              Working
      Interests

            
	
              Lands

            	
              P&NG
      Rights

            	
              Wells

            	
              Well
      Status

            	
              Producing
      Zone

            	
              and GORR
      received

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              SW1⁄4
      26-18-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              6-26-18-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              100%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              SE1⁄4
      26-18-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              8-26-18-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              20%
      BPO, 30% APO + 5%

            
	 
      	 
      	 
      	 
      	 
      	
              non-convertible
      GORR

            
	 
      	 
      	 
      	 
      	 
      	
              (Paid
      Out)

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NW1⁄4
      26-18-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              14-26-18-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              10%
      W.I. + 10%

            
	 
      	 
      	 
      	 
      	 
      	
              non-convertible
      GORR

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NE1⁄4
      26-18-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              16-26-18-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              20%
      BPO, 30% APO + 5%

            
	 
      	 
      	 
      	 
      	 
      	
              non-convertible
      GORR

            
	 
      	 
      	 
      	 
      	 
      	
              (Paid
      Out)

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              SE1⁄4
      8-19-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              8-8-18-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              20%
      BPO, 30% APO + 5%

            
	 
      	 
      	 
      	 
      	 
      	
              non-convertible
      GORR

            
	 
      	 
      	 
      	 
      	 
      	
              (Paid
      Out)

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              SW1⁄4
      8-19-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              6-8-19-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              100%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NE1⁄4
      8-19-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              10-8-19-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              100%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NW1⁄4
      8-19-1W4

            	
              P&NG
      to Base Medicine Hat

            	
              13-8-19-1W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              20%
      BPO, 30% APO + 5%

            
	 
      	 
      	 
      	 
      	 
      	
              non-convertible
      GORR

            
	 
      	 
      	 
      	 
      	 
      	
              (Paid
      Out)

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              SE1⁄4
      26-20-4W4

            	
              P&NG
      to Base Medicine Hat

            	
              8-26-20-4W4

            	
              Producing
      gas

            	
              Milk
      River

            	
              20%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              SW1⁄4
      26-20-4W4

            	
              P&NG
      to Base Medicine Hat

            	
              6-26-20-4W4

            	
              Producing
      gas

            	
              Milk
      River

            	
              20%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NE1⁄4
      26-20-4W4

            	
              P&NG
      to Base Medicine Hat

            	
              16-26-20-4W4

            	
              Producing
      gas

            	
              Milk
      River

            	
              20%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NW1⁄4
      26-20-4W4

            	
              P&NG
      to Base Medicine Hat

            	
              14-26-20-4W4

            	
              Producing
      gas

            	
              Milk
      River

            	
              20%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              NE1⁄4
      26-20-8W4

            	
              P&NG
      to Base Medicine Hat

            	
              10-26-20-8W4

            	
              Producing
      gas

            	
              Milk
      River & Medicine Hat

            	
              100%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              12-46-11W4

            	
              P&NG
      to Base Mannville

            	
              6-12-46-11W4

            	
              Producing
      gas

            	
              Colony

            	
              10%
      BPO, 6% APO

            
	 
      	
              except
      Nat Gas in Viking

            	 
      	 
      	
              Sparky

            	
              (Paid
      Out)

            
	 
      	 
      	 
      	 
      	
              Lloydminster

            	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
              6-57-21W4

            	
              P&NG
      below Base of Viking

            	
                 Nil

            	 
      	 
      	
              25%

            
	 
      	
              to
      Basement

            	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
              S1⁄2
      & NW1⁄4 31-39-4W4

            	
              P&NG
      to Base Mannville

            	
              2-31-39-4W4

            	
              Abandoned

            	 
      	
              5%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              10-47-21W4

            	
              P&NG
      to Base Edmonton

            	
              6-10-47-21W4

            	
              Standing

            	
              Edmonton

            	
              25%

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              W1⁄2
      & all 32-6-6W2

            	
              N.A.

            	 
      	
              Producing
      oil

            	
              Mississippian

            	
              2.0%
      GORR

            
	 
      	 
      	 
      	 
      	 
      	 
      
	
              Lsd
      5 & N1⁄2 33-3-31W1

            	
              N.A.

            	 
      	
              Producing
      oil

            	
              Mississippian

            	
              1.0%
      GORR