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                                                                   EXHIBIT 10.28


                               GUARANTY AGREEMENT


                           Dated as of August 1, 1997


                                       By


                           QUEEN SAND RESOURCES, INC.,
                                as the Guarantor,


                                   in favor of



                                BANK OF MONTREAL,
                                    as Agent,

                                       and

         THE LENDERS NOW OR HEREAFTER SIGNATORY TO THE CREDIT AGREEMENT
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                                TABLE OF CONTENTS


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                                    ARTICLE I
                       Definitions and Accounting Matters

Section 1.01  Terms Defined Above......................................................         1
Section 1.02  Certain Definitions......................................................         1
Section 1.03  Credit Agreement Definitions.............................................         2

                                   ARTICLE II
                                  The Guaranty


Section 2.01  Obligations Guaranteed...................................................         2
Section 2.02  Nature of Guaranty.......................................................         2
Section 2.03  Lenders' Rights..........................................................         2
Section 2.04  Guarantor's Waivers......................................................         3
Section 2.05  Maturity of Obligations; Payment.........................................         3
Section 2.06  Lenders' Expenses........................................................         3
Section 2.07  Obligation...............................................................         3
Section 2.08  Events and Circumstances Not Reducing or Discharging the Guarantor's
              Obligations..............................................................         3
Section 2.09  Subrogation..............................................................         5

                                   ARTICLE III
                    Representations and Warranties; Covenants

Section 3.01  Representations and Warranties...........................................         5
Section 3.02  Covenants................................................................         7

                                   ARTICLE IV
                          Subordination of Indebtedness

Section 4.01  Subordination of All Guarantor Claims....................................         8
Section 4.02  Claims in Bankruptcy.....................................................         9
Section 4.03  Payments Held in Trust...................................................         9
Section 4.04  Liens Subordinate........................................................         9
Section 4.05  Notation of Records......................................................         9

                                    ARTICLE V
                                  Miscellaneous

Section 5.01  Successors and Assigns...................................................        10
Section 5.02  Notices..................................................................        10
Section 5.03  Authority of Agent.......................................................        10
Section 5.04  Governing Law; Submission to Jurisdiction................................        10
Section 5.05  Entire Agreement.........................................................        11
Section 5.06  Survival of Obligations..................................................        11
Section 5.07  Designated Senior Indebtedness...........................................        11
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                               GUARANTY AGREEMENT

                  This GUARANTY AGREEMENT dated as of August 1, 1997 is by QUEEN
SAND RESOURCES, INC., a corporation duly organized and validly existing under
the laws of the state of Delaware ("Guarantor"), in favor of each of the
following: each of the financial institutions that is now or hereafter a
signatory to the Credit Agreement (as defined below) (individually, a "Lender"
and, collectively, the "Lenders"); and BANK OF MONTREAL, AS AGENT for the
Lenders (in such capacity, the "Agent").

                                    RECITALS

         A. QUEEN SAND RESOURCES, INC., a corporation duly organized and validly
existing under the laws of the state of Nevada (the "Borrower"), the Agent and
the Lenders have executed that certain Credit Agreement of even date herewith
(such credit agreement, as amended, the "Credit Agreement").

         B. One of the terms and conditions stated in the Credit Agreement for
the making of the loans and extensions of credit described in the Credit
Agreement is the execution and delivery to the Agent and the Lenders of this
Guaranty Agreement.

         C. NOW, THEREFORE, (i) in order to comply with the terms and conditions
of the Credit Agreement, (ii) to induce the Lenders, at any time or from time to
time, to loan monies, with or without security to or for the account of the
Borrower in accordance with the terms of the Credit Agreement, and (iii) for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Guarantor hereby agrees as follows:

                                    ARTICLE I
                       DEFINITIONS AND ACCOUNTING MATTERS

         SECTION 1.01 TERMS DEFINED ABOVE. As used in This Guaranty Agreement,
the terms "Agent", "Borrower", "Credit Agreement", "Guarantor", "Lender" and
"Lenders" shall have the meanings indicated above.

         SECTION 1.02 CERTAIN DEFINITIONS. As used in this Guaranty Agreement,
the following terms shall have the following meanings, unless the context
otherwise requires:

         "Guarantor Claims" shall have the meaning indicated in Section 4.01.

         "Guaranty Agreement" shall mean this Guaranty Agreement, as the same
may from time to time be amended or supplemented.

         "Obligations" shall mean (a) the payment and performance of all present
and future indebtedness, obligations and liabilities of the Borrower and/or the
Guarantor to the Agent and the Lenders under the Credit Agreement, including but
not limited to, (i) the full and punctual payment of the Notes issued
thereunder, and any and all promissory notes given in substitution for such
Notes or in modification, renewal, extension or rearrangement thereof in whole
or in part, and (ii) the reimbursement and other obligations of the Borrower
under and with respect to Letters of Credit and Letter of Credit Agreements now
outstanding or hereafter issued under the Credit Agreement; (b) all obligations
of the Guarantor under this Guaranty Agreement; and (c) all interest (whether
pre or post petition), charges, expenses,

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reasonable attorneys' or other fees and any other sums payable to or incurred by
the Agent and, to the extent provided in the Credit Agreement, the Lenders in
connection with the execution or enforcement of any of their rights and remedies
hereunder or any other Security Instrument.

         SECTION 1.03 CREDIT AGREEMENT DEFINITIONS. Unless otherwise defined
herein, all terms beginning with a capital letter which are defined in the
Credit Agreement shall have the same meanings herein as therein.

                                   ARTICLE II
                                  THE GUARANTY

         SECTION 2.01 OBLIGATIONS GUARANTEED. The Guarantor hereby irrevocably
and unconditionally guarantees the prompt payment at maturity of the
Obligations.

         SECTION 2.02 NATURE OF GUARANTY. This guaranty is an absolute,
irrevocable, completed and continuing guaranty of payment and not a guaranty of
collection, and no notice of the Obligations or any extension of credit already
or hereafter contracted by or extended to the Borrower need be given to the
Guarantor. The guaranty evidenced hereby is joint and several with all other
guarantees of the Obligations. This guaranty may not be revoked by the Guarantor
and shall continue to be effective with respect to debt under the Obligations
arising or created after any attempted revocation by the Guarantor and shall
remain in full force and effect until the Obligations are paid in full and the
Aggregate Commitments are terminated, notwithstanding that from time to time
prior thereto no Obligations may be outstanding. The Borrower, the Agent and the
Lenders may modify, alter, rearrange, extend for any period and/or renew from
time to time, the Obligations and the Agent and the Lenders may waive any
Default or Events of Default without notice to the Guarantor and in such event
the Guarantor will remain fully bound hereunder on the Obligations. This
Guaranty Agreement may be enforced by the Agent and/or the Lenders and any
subsequent holder of the Obligations and shall not be discharged by the
assignment or negotiation of all or part of the Obligations. The Guarantor
hereby expressly waives presentment, demand, notice of non-payment, protest and
notice of protest and dishonor, notice of Event of Default, notice of intent to
accelerate the maturity and notice of acceleration of the maturity and any other
notice in connection with the Obligations, and also notice of acceptance of this
Guaranty Agreement, acceptance on the part of the Agent and the Lenders being
conclusively presumed by their request for this Guaranty Agreement and delivery
of the same to the Agent.

         SECTION 2.03 LENDERS' RIGHTS. Subject to the terms of the Credit
Agreement, the Guarantor authorizes the Lenders (or the Agent on behalf of the
Lenders), without notice or demand and without affecting the Guarantor's
obligation hereunder, to take and hold security for the payment of the
Obligations, and exchange, enforce, waive and release any such security; and to
apply such security and direct the order or manner of sale thereof as the Agent
and the Lenders in their discretion may determine; and to obtain a guaranty of
the Obligations from any one or more Persons and at any time or times to
enforce, waive, rear range, modify, limit or release any of such other Persons
from their obligations under such guaranties.

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         SECTION 2.04 GUARANTOR'S WAIVERS. The Guarantor waives any right to
require the Agent and the Lenders to (a) proceed against the Borrower or any
other Person liable on the Obligations, (b) enforce their rights against any
other guarantor of the Obligations, (c) proceed or enforce their rights against
or exhaust any security given to secure the Obligations, (d) have the Borrower
joined with the Guarantor in any suit arising out of this Guaranty Agreement
and/or the Obligations, or (e) pursue any other remedy whatsoever. Neither the
Agent nor the Lenders shall be required to mitigate damages or take any action
to reduce, collect or enforce the Obligations. The Guarantor waives any defense
arising by reason of any disability, lack of corporate authority or power, or
other defense of the Borrower or any other guarantor of the Obligations, and
shall remain liable hereon regardless of whether the Borrower or any other
guarantor be found not liable thereon for any reason.

         SECTION 2.05 MATURITY OF OBLIGATIONS; PAYMENT. The Guarantor agrees
that if the maturity of the Obligations is accelerated by bankruptcy or
otherwise, such maturity shall also be deemed accelerated for the purpose of
this Guaranty Agreement without demand or notice to the Guarantor. The Guarantor
will, forthwith upon notice from the Agent of the Borrower's failure to pay the
Obligations at maturity, pay to the Agent for the benefit of the Agent and the
Lenders at the Agent's Principal Office, the amount due and unpaid by the
Borrower and guaranteed hereby. The failure of the Agent to give this notice
shall not in any way release the Guarantor hereunder.

         SECTION 2.06 LENDERS' EXPENSES. If the Guarantor fails to pay the
Obligations after notice from the Agent of the Borrower's failure to pay any
Obligations at maturity (whether by acceleration or otherwise), and if
thereafter the Agent or the Lenders obtain the services of an attorney for
collection of amounts owing by the Guarantor hereunder or if suit is filed to
enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy,
receivership or other judicial proceedings for the establishment or collection
of any amount owing by the Guarantor hereunder, or if any amount owing by the
Guarantor hereunder is collected through such proceedings, the Guarantor agrees
to pay to the Agent at its Principal Office, the reasonable attorneys' fees of
the Agent and the Lenders.

         SECTION 2.07 OBLIGATION. It is expressly agreed that the obligation of
the Guarantor for the payment of the Obligations guaranteed hereby shall be
primary and not secondary.

         SECTION 2.08 EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING THE
GUARANTOR'S OBLIGATIONS. The Guarantor hereby consents and agrees to each of the
following to the fullest extent permitted by law, agrees its obligations under
this Guaranty Agreement shall not be released, diminished, impaired, reduced or
adversely affected by any of the following, and waives any rights (including
without limitation rights to notice) which it might otherwise have as a result
of or in connection with any of the following:

         (a) Modifications, etc. Any renewal, extension, modification, or
increase in the amount of the Aggregate Commitments as in effect on the
Effective Date, decrease, alteration or rearrangement of all or any part of the
Obligations, any Security Instrument or any instrument executed in connection
therewith, or any contract or understanding between the Borrower, any Agent
and/or the Lenders, or any other Person, pertaining to the Obligations;


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         (b) Adjustment, etc. Any adjustment, indulgence, forbearance or
compromise that might be granted or given by the Agent or the Lenders to the
Borrower or the Guarantor or any Person liable on the Obligations;

         (c) Condition of the Borrower or the Guarantor. The insolvency,
bankruptcy arrangement, reorganization, adjustment, composition, liquidation,
disability, dissolution or lack of power of the Borrower or the Guarantor or any
other Person at any time liable for the payment of all or part of the
Obligations; or any sale, lease or transfer of any or all of the assets of the
Borrower or the Guarantor, or any changes in the shareholders of the Borrower or
the Guarantor;

         (d) Invalidity of Obligations. The invalidity, illegality or
unenforceability of all or any part of the Obligations or any Security
Instrument, including the Notes, for any reason whatsoever, including without
limitation the fact that the Obligations, or any part thereof, exceed the amount
permitted by law, the act of creating the Obligations or any part thereof is
ultra vires, the officers or representatives executing any Security Instrument
acted in excess of their authority, the Obligations violate applicable usury
laws, the Borrower has valid defenses, claims or offsets (whether at law, in
equity or by agreement) which render the Obligations wholly or partially
uncollectible from the Borrower, the creation, performance or repayment of the
Obligations (or the execution, delivery and performance of any Security
Instrument) is illegal, uncollectible, legally impossible or unenforceable, or
the Credit Agreement, the Notes or other Security Instruments have been forged
or otherwise are irregular or not genuine or authentic;

         (e) Release of Obligors. Any full or partial release of the obligation
of the Borrower on the Obligations or any part thereof, of any co-guarantors, or
any other Person now or hereafter liable, whether directly or indirectly,
jointly, severally, or jointly and severally, to pay, perform, guarantee or
assure the payment of the Obligations or any part thereof, it being recognized,
acknowledged and agreed by the Guarantor that the Guarantor may be required to
pay the Obligations in full without assistance or support of any other Person,
and the Guarantor has not been induced to enter into this Guaranty Agreement on
the basis of a contemplation, belief, understanding or agreement that other
parties other than the Borrower will be liable to perform the Obligations, or
that the Agent and Lenders will look to other parties to perform the
Obligations;

         (f) Other Security. The taking or accepting of any other security,
collateral or guaranty, or other assurance of payment, for all or any part of
the Obligations;

         (g) Release of Collateral, etc. Any release, surrender, exchange,
subordination, deterioration, waste, loss or impairment (including without
limitation negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, Property or security, at any time existing in connection with, or
assuring or securing payment of, all or any part of the Obligations;

         (h) Care and Diligence. The failure of any Agent or Lender or any other
Person to exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, Property or security;

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         (i) Status of Liens. The fact that any collateral, security or Lien
contemplated or intended to be given, created or granted as security for the
repayment of the Obligations shall not be properly perfected or created, or
shall prove to be unenforceable or subordinate to any other Lien, it being
recognized and agreed by the Guarantor that the Guarantor is not entering into
this Guaranty Agreement in reliance on, or in contemplation of the benefits of,
the validity, enforceability, collectability or value of any of the collateral
for the Obligations;

         (j) Payments Rescinded. Any payment by the Borrower to any Agent or
Lender is held to constitute a preference under the bankruptcy laws, or for any
reason an Agent or Lender is required to refund such payment or pay such amount
to the Borrower or someone else; or

         (k) Other Actions Taken or Omitted. Any other action taken or omitted
to be taken with respect to the Credit Agreement or the other Security
Instruments, the Obligations, or the security and collateral therefor, whether
or not such action or omission prejudices the Guarantor or increases the
likelihood that the Guarantor will be required to pay the Obligations pursuant
to the terms hereof; it being the unambiguous and unequivocal intention of the
Guarantor that the Guarantor shall be obligated to pay the Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not otherwise
or particularly described herein, except for the full and final payment and
satisfaction of the Obligations.

         SECTION 2.09 SUBROGATION. The Guarantor shall not exercise any rights
which it may acquire by way of subrogation, reimbursement, exoneration,
indemnification or participation, by any payment made under this Guaranty
Agreement, under any other Security Instrument or otherwise until the
Obligations have been paid in full and the Aggregate Commitments are terminated;
provided that, notwithstanding the foregoing, the Guarantor reserves its rights
of contribution and reimbursement, if any, from its co-guarantors and other
Persons liable on the Obligations or otherwise. Except as described in this
Section 2.10, the Guarantor further waives any benefit of any right to
participate in any security now or hereafter held by the Agent and/or the
Lenders.

                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES; COVENANTS

         SECTION 3.01 REPRESENTATIONS AND WARRANTIES. In order to induce the
Agent and the Lenders to accept this Guaranty Agreement, the Guarantor
represents and warrants to the Agent and the Lenders (which representations and
warranties will survive the creation of the Obligations and any extension of
credit thereunder) that:

         (a) Benefit to the Guarantor. The Borrower is a wholly-owned Subsidiary
of the Guarantor and the Guarantor's guaranty pursuant to this Guaranty
Agreement reasonably may be expected to benefit, directly or indirectly, the
Guarantor; and the Guarantor has determined that this Guaranty Agreement is
necessary and convenient to the conduct, promotion and attainment of the
business of the Guarantor and the Borrower.


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         (b) Corporate Existence; Subsidiaries. The Guarantor: (i) is duly
organized and validly existing under the laws of the jurisdiction of its
formation; (ii) has all requisite power, and has all material governmental
licenses, authorizations, consents and approvals necessary to own its assets and
carry on its business as now being conducted; and (iii) is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify would have
a Material Adverse Effect. Schedule I attached hereto is a true and complete
list of all Subsidiaries of the Guarantor as of the Closing Date.

         (c) No Breach. The execution and delivery by the Guarantor of this
Guaranty Agreement and the other Security Instruments to which it is a party,
the consummation of the transactions herein or therein contemplated, and the
compliance with the terms and provisions hereof will not (i) conflict with or
result in a breach of, or require any consent under (A) the respective charter
or by-laws of the Guarantor, or (B) any applicable law or regulation, or any
order, writ, injunction or decree of any court or other Governmental Authority,
or any material agreement or instrument to which the Guarantor is a party or by
which it is bound or to which it is subject in each case in such manner as could
reasonably be expected to have a Material Adverse Effect; or (ii) constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or Property of the Guarantor in
each case in such manner as could reasonably be expected to have a Material
Adverse Effect.

         (d) Corporate Action. The Guarantor has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Guaranty Agreement and the Security Instruments to which it is a party; and the
execution, delivery and performance by the Guarantor of this Guaranty Agreement
and the other Security Instruments to which such Person is a party have been
duly authorized by all necessary corporate action on its part. This Guaranty
Agreement and the Security Instruments to which the Guarantor is a party
constitute the legal, valid and binding obligation of the Guarantor, enforceable
against the Guarantor in accordance with their terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights and general principals of equity.

         (e) Approvals. Other than consents heretofore obtained or described in
the Credit Agreement, no authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority are necessary for the
execution, delivery or performance by the Guarantor of this Guaranty Agreement
or the Security Instruments to which it is a party or for the validity or
enforceability thereof. It is understood that continued performance by the
Guarantor of this Guaranty Agreement and the other Security Instruments to which
it is a party will require various filings, such as filings related to
environmental matters, ERISA matters, Taxes and intellectual property, filings
required to maintain corporate and similar standing and existence, filings
pursuant to the Uniform Commercial Code and other security filings and
recordings and filings required by the SEC, routine filings in the ordinary
course of business, and filings required in connection with the exercise by the
Lenders and the Agent of remedies in connection with the Security Instruments.


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         (f) Solvency. The Guarantor (i) is not insolvent as of the date hereof
and will not be rendered insolvent as a result of this Guaranty Agreement, (ii)
is not engaged in business or a transaction, or about to engage in a business or
a transaction, for which any Property or assets remaining with the Guarantor is
unreasonably small capital, and (iii) does not intend to incur, or believe it
will incur, debts that will be beyond its ability to pay as such debts mature.

         (g) No Representation by Agent or Lenders. Neither any Agent, any
Lender nor any other Person has made any representation, warranty or statement
to the Guarantor in order to induce the Guarantor to execute this Guaranty
Agreement.

         SECTION 3.02 COVENANTS. The Guarantor covenants and agrees that, so
long as any of the Commitments are in effect and until payment in full of all
Loans thereunder, all interest thereon and all other amounts payable by the
Borrower under the Credit Agreement:

         (a) Maintenance. The Guarantor shall preserve and maintain its
corporate existence and all of its material rights, privileges and franchises;
keep books of record and account in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and activities
in accordance with GAAP; comply with all Governmental Requirements if failure to
comply with such requirements will have a Material Adverse Effect; pay and
discharge all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its Property prior to the date on
which penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; upon
reasonable notice, permit representatives of the Agent or any Lender, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested by such Lender or the Agent
(as the case may be); and keep, or cause to be kept, insured by financially
sound and reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated against loss
or damage of the kinds and in the amounts customarily insured against by such
Persons and carry such other insurance as is usually carried by such Persons
including, without limitation, environmental risk insurance to the extent
reasonably available.

         (b) Debt. The Guarantor will not incur, create, assume or suffer to
exist any Debt, except for Debt of the types and in the amounts which the
Borrower could incur under Section 9.01 of the Credit Agreement with the term
"Borrower" appearing therein being deemed to refer to the Guarantor.

         (c) Liens. The Guarantor will not create, incur, assume or permit to
exist any Lien on any of its Properties (now owned or hereafter acquired),
except for Liens of the types and in the amounts which the Borrower could incur
under Section 9.02 of the Credit Agreement with the term "Borrower" appearing
therein being deemed to refer to the Guarantor.


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         (d) Further Assurances. The Guarantor will cure promptly any defects in
the execution and delivery of the Loan Documents to which it is party and will,
at its expense, promptly execute and deliver to the Agent all such other
documents, agreements and instruments reasonably requested by it to comply with
or accomplish the covenants and agreements of the Guarantor in this Guaranty
Agreement or to correct any omissions herein or to state more fully the
obligations set out herein.

         (e) Subsidiaries. The Guarantor shall not create, acquire or otherwise
suffer to exist any Subsidiaries other than the Borrower and Queen Sand
Resources (Canada), Inc. which are not also Subsidiaries of the Borrower;
provided that the Guarantor may create Non-Recourse Subsidiaries which are not
also Subsidiaries of the Borrower. The Guarantor will not invest, loan or
advance at any one time an aggregate amount of more than $100,000 to or in Queen
Sand Resources (Canada) Inc. or any of its Non-Recourse Subsidiaries.

         (f) Dividends, Distributions and Redemptions. The Guarantor shall not
declare or pay any dividend, purchase, redeem or otherwise acquire for value any
of its capital stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its stockholders, except
(i) for dividends and distributions in accordance with the terms and provisions
of the Earn Up Agreement dated May 6, 1997 between the Parent Company and Joint
Energy Development Investments Limited Partnership and the Earn Up Agreement
dated May 6, 1997 between the Guarantor and Forseti Investments Ltd.; provided
that as a result of any dividends, redemptions or distributions pursuant to any
transaction contemplated thereby, no net change in the Guarantor's cash balance
shall result (except to the extent of related out-of-pocket transaction costs
associated therewith); and (ii) dividends or distributions payable solely in
capital stock of the Guarantor.

         (g) Mergers. The Guarantor will not merge into or with or consolidate
with any other Person, or sell, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
Property or assets to any other Person; provided that the Guarantor may merge
with any of its Subsidiaries (other than a Non-Recourse Subsidiary) so long as
the Guarantor is the surviving entity.

         (h) DEM Subordinated Debt. The Guarantor will not, in any material
respect, amend, supplement or modify or prepay the DEM Subordinated Debt without
the prior written consent of the Majority Lenders.

                                   ARTICLE IV
                          SUBORDINATION OF INDEBTEDNESS

         SECTION 4.01 SUBORDINATION OF ALL GUARANTOR CLAIMS. As used herein, the
term "Guarantor Claims" shall mean all debts and obligations of the Borrower to
the Guarantor, whether such debts and obligations now exist or are hereafter
incurred or arise, or whether the obligation of the Borrower thereon be direct,
contingent, primary, secondary, several, joint and several, or otherwise, and
irrespective of whether such debts or obligations be evidenced by note,
contract, open account, or otherwise, and irrespective of the Person or Persons
in whose favor such debts or obligations may, at their inception, have been, or
may hereafter be created, or the manner in which they have been or may hereafter
be acquired by. Except

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for payments permitted by the Credit Agreement, until the Obligations shall be
paid and satisfied in full, the Aggregate Commitments are terminated and the
Guarantor shall have performed all of its obligations hereunder and under the
other Security Instruments to which it is a party, the Guarantor shall not
receive or collect, directly or indirectly, from the Borrower any amount upon
the Guarantor Claims.

         SECTION 4.02 CLAIMS IN BANKRUPTCY. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving the Borrower, the Agent on behalf of the Agent and the
Lenders shall have the right to prove their claim in any proceeding, so as to
establish their rights hereunder and receive directly from the receiver, trustee
or other court custodian, dividends and payments which would otherwise be
payable upon Guarantor Claims. The Guarantor hereby assigns such dividends and
payments to the Agent for the benefit of the Agent and the Lenders. Should any
Agent or Lender receive, for application upon the Obligations, any such dividend
or payment which is otherwise payable to the Guarantor, and which, as between
the Borrower and the Guarantor, shall constitute a credit upon the Guarantor
Claims, then upon payment in full of the Obligations, the Guarantor shall become
subrogated to the rights of the Agent and the Lenders to the extent that such
payments to the Agent and the Lenders on the Guarantor Claims have contributed
toward the liquidation of the Obligations, and such subrogation shall be with
respect to that proportion of the Obligations which would have been unpaid if
the Agent and the Lenders had not received dividends or payments upon the
Guarantor Claims.

         SECTION 4.03 PAYMENTS HELD IN TRUST. In the event that notwithstanding
Sections 4.01 and 4.02, the Guarantor should receive any funds, payments, claims
or distributions which is prohibited by such Sections, the Guarantor agrees: (a)
to hold in trust for the Agent and the Lenders an amount equal to the amount of
all funds, payments, claims or distributions so received, and (b) that it shall
have absolutely no dominion over the amount of such funds, payments, claims or
distributions except to pay them promptly to the Agent, for the benefit of the
Agent and the Lenders; and the Guarantor covenants promptly to pay the same to
the Agent.

         SECTION 4.04 LIENS SUBORDINATE. The Guarantor agrees that, until the
Obligations are paid in full and the Aggregate Commitments terminated, any Liens
upon the Borrower's assets securing payment of the Guarantor Claims shall be and
remain inferior and subordinate to any Liens upon the Borrower's assets
securing payment of the Obligations, regardless of whether such encumbrances in
favor of the Guarantor, any Agent or Lender presently exist or are hereafter
created or attach. Without the prior written consent of the Agent, the
Guarantor, during the period in which any of the Obligations are outstanding or
the Aggregate Commitments are in effect, shall not (a) exercise or enforce any
creditor's right it may have against the Borrower, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceeding
(judicial or otherwise, including without limitation the commencement of or
joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any Lien on assets of the Borrower held by the
Guarantor.

         SECTION 4.05 NOTATION OF RECORDS. All promissory notes and, upon the
request of the Agent, all accounts receivable ledgers or other evidence of the
Guarantor Claims accepted

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by or held by the Guarantor shall contain a specific written notice thereon that
the indebtedness evidenced thereby is subordinated under the terms of this
Guaranty Agreement.

                                    ARTICLE V
                                  MISCELLANEOUS

         SECTION 5.01 SUCCESSORS AND ASSIGNS. This Guaranty Agreement is and
shall be in every particular available to the successors and assigns of the
Agent and Lenders and is and shall always be fully binding upon the legal
representatives, successors and assigns of the Guarantor, notwithstanding that
some or all of the monies, the repayment of which this Guaranty Agreement
applies, may be actually advanced after any bankruptcy, receivership,
reorganization or other event affecting either the Borrower or the Guarantor.

         SECTION 5.02 NOTICES. Any notice or demand to the Guarantor under or in
connection with this Guaranty Agreement may be given and shall conclusively be
deemed and considered to have been given and received in the manner and to the
address of the Guarantor set forth on the signature page hereto as provided for
in Section 12.02 of the Credit Agreement.

         SECTION 5.03 AUTHORITY OF AGENT. The Guarantor acknowledges that the
rights and responsibilities of the Agent under this Guaranty Agreement with
respect to any action taken by the Agent or the exercise or non-exercise by the
Agent of any option, right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Guaranty Agreement shall, as
between the Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Agent and the Guarantor, the Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting; and the Guarantor shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.

         SECTION 5.04 GOVERNING LAW; SUBMISSION TO JURISDICTION.

         (a) THIS GUARANTY AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE
VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.


         (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY
AGREEMENT OR THE OTHER SECURITY INSTRUMENTS TO WHICH THE GUARANTOR IS A PARTY
MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, HOUSTON DIVISION, AND, BY EXECUTION
AND DELIVERY OF THIS GUARANTY AGREEMENT, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF
AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE

                                       10
<PAGE>   13
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS
SUBMISSION TO JURISDICTION IS NONEXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR
ANY LENDER FROM OBTAINING JURISDICTION OVER THE GUARANTOR IN ANY COURT OTHERWISE
HAVING JURISDICTION.

         (c) THE GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT, AS THE
CASE MAY BE, AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER
SUCH MAILING.

         (d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY AGENT OR ANY LENDER OR
ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY
OTHER JURISDICTION.

         SECTION 5.05 ENTIRE AGREEMENT. This Guaranty Agreement and the other
Security Instruments embody the entire agreement and understanding between the
Lenders, the Agent and the Guarantor and supersede all prior agreements and
understandings between such parties relating to the subject matter hereof and
thereof. There are no unwritten oral agreements between the parties.

         SECTION 5.06 SURVIVAL OF OBLIGATIONS. To the extent that any payments
on the Obligations or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Agent' and the Lenders' Liens, rights, powers and remedies
under this Guaranty Agreement and each Security Instrument to which the
Guarantor is a party shall continue in full force and effect. In such event,
each Security Instrument shall be automatically reinstated and the Guarantor
shall take such action as may be reasonably requested by the Agent and the
Lenders to effect such reinstatement.

         SECTION 5.07 DESIGNATED SENIOR INDEBTEDNESS. The Guarantor hereby
designates all Obligations outstanding under this Guaranty Agreement, the Note
and the other Loan Documents to be "Designated Senior Indebtedness" for purposes
of the DEM Subordinated Debt.



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<PAGE>   14
         WITNESS THE EXECUTION HEREOF, effective as of the date first written
above.


                                     QUEEN SAND RESOURCES, INC., a
                                     Delaware corporation



                                     By: /s/ Robert P. Lindsay
                                         ------------------------------------
                                           Robert P. Lindsay
                                           Chief Operating Officer



                                     By: /s/ Ronald Benn
                                         ------------------------------------
                                           Ronald Benn
                                           Chief Financial Officer


                              Address for Notices:

                                  Queen Sand Resources, Inc.
                                  3500 Oak Lawn Drive, Suite 380
                                  Dallas, Texas 75219
                                  Attention:  Robert P. Lindsay
                                  Telephone:  (214) 521-9959
                                  Facsimile:  (214) 521-9960

                              with copy to:

                                  Queen Sand Resources, Inc.
                                  60 Queen Street, Suite 1400
                                  Ottawa, Canada   KIP 5Y7
                                  Attention:  Mr. Ronald Benn
                                  Telephone:  (613) 230-7211
                                  Facsimile:  (613) 230-6055

                              and

                                  Haynes & Boone LLP
                                  901 Main Street, Suite 3100
                                  Dallas, Texas 75202-3789
                                  Attention:  Mr. William L. Boeing
                                  Telephone:  (214) 651-5553
                                  Facsimile:  (214) 651-5940



                                       12
<PAGE>   15
                                   Schedule I

                            Subsidiaries of Guarantor

Queen Sand Resources, Inc., a Nevada corporation (100% owned by the Guarantor)

   Corrida Resources, Inc., a Nevada corporation (100% owned by the Borrower)

   Northland Operating Co., a Nevada corporation, (100% owned by the Borrower)

 Queen Sand Resources (Canada) Inc., an Ontario corporation (100% owned by the
                                   Guarantor)




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