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                                                                    EXHIBIT 10.6

                               SECURITY AGREEMENT



                  This SECURITY AGREEMENT (this "Agreement"), is entered into as
of October 22, 1999, by and among QUEEN SAND RESOURCES, INC., a Delaware
corporation ("QSRD"), QUEEN SAND RESOURCES, INC., a Nevada corporation
("Borrower"), QUEEN SAND OPERATING CO., a Nevada corporation formerly known as
Northland Operating Co. ("QS OpCo"), CORRIDA RESOURCES, INC. ("Corrida"; and
together with QSRD, Borrower, QS OpCo, and any Person that becomes an Additional
Debtor hereunder, each a "Debtor" and individually and collectively, jointly and
severally, "Debtors"), on the one hand, and, on the other hand, ABLECO FINANCE
LLC, a Delaware limited liability company, as collateral agent for the Lender
Group (in such capacity, together with its successors, if any, in such capacity,
"Collateral Agent"), with reference to the following:

                  WHEREAS, each of QSRD and Borrower is a party to that certain
Amended and Restated Credit Agreement, dated as of the date hereof (as it may be
amended, restated, supplemented, or otherwise modified from time to time, the
"Credit Agreement"), among QSRD, Borrower, the financial institutions identified
therein as the "Lenders," Foothill Capital Corporation, a California
corporation, as administrative agent thereunder (in such capacity, together with
its successors, if any, in such capacity, "Administrative Agent"), and
Collateral Agent, pursuant to which the Lender Group has agreed to make certain
financial accommodations to Borrower;

                  WHEREAS, each Debtor other than Borrower has executed and
delivered to Collateral Agent for the benefit of the Lender Group a guaranty of
the obligations therein described; and

                  WHEREAS, to induce the Lender Group to make the financial
accommodations provided to Debtors pursuant to the Credit Agreement, each Debtor
desires to pledge, grant, transfer, and assign to Collateral Agent a security
interest in the Collateral (as hereinafter defined) to secure the Secured
Obligations (as hereinafter defined), as provided herein.

                  NOW THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
each intending to be bound hereby, Collateral Agent and Debtors agree as
follows:

                  1. DEFINITIONS AND CONSTRUCTION.

                        1.1. DEFINITIONS. All capitalized terms used herein and
not otherwise defined herein shall have the meanings ascribed to them in the
Credit Agreement. As used in this Agreement, the following terms shall have the
following definitions:

                  "Accounts" all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to one or
more of the Debtors arising out of the sale, license, or lease of goods,
Hydrocarbons, Hydrocarbon Interests, Oil and Gas Properties, or


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General Intangibles or the rendition of services by the Debtors, irrespective of
whether earned by performance, any and all such rights or obligations evidenced
by chattel paper, instruments or documents, and any and all credit insurance,
guaranties, or security therefor.

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

                  "Administrative Agent" has the meaning ascribed thereto in the
preamble to this Agreement.

                  "Agreement" means this Security Agreement and any joinders,
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Security Agreement.

                  "Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.

                  "Code" means the New York Uniform Commercial Code.

                  "Collateral" means all of the Debtors' right, title, and
interest in and to each of the following: the Accounts; Debtors' Books; the
Equipment; the General Intangibles; the Inventory; the Investment Property; the
Negotiable Collateral; any money, or other assets of any Debtor which now or
hereafter come into the possession, custody, or control of Collateral Agent or
any other member of the Lender Group; and the proceeds and products, whether
tangible or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the Collateral, and any and all Accounts, Debtors' Books,
Equipment, General Intangibles, Inventory, Investment Property, Negotiable
Collateral, real property, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or other
disposition of any of the foregoing, or any portion thereof or interest therein,
and the proceeds thereof.

                  "Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of, or a letter in
lieu of transfer order to, any warehouseman, processor, lessor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Oil and Gas Properties, Equipment, or Inventory, in each case, in form
and substance satisfactory to Collateral Agent.

                  "Collateral Agent" has the meaning ascribed thereto in the
preamble to this Agreement.

                  "Credit Agreement" has the meaning ascribed thereto in the
preamble to this Agreement.

                  "Debtor" means, individually and collectively, and jointly and
severally, QSRD, Borrower, QS OpCo, Corrida, and any other Person that now or in
the future that becomes an Additional Debtor hereunder.


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                  "Debtors' Books" means all of Debtors' books and records,
including: ledgers; records indicating, summarizing, or evidencing Debtors'
properties or assets (including the Collateral) or liabilities; all information
relating to Debtors' business operations or financial condition; and all
computer programs, disc or tape files, printouts, runs, or other computer
prepared information in respect of such books and records.

                  "Equipment" means all of Debtors' present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, drill site
equipment (including separators, dehydrators, meters), compressors, gathering
lines, pipelines, furnishings, fixtures, vehicles (including motor vehicles and
trailers), tools, parts, dies, jigs, goods (other than consumer goods, farm
products, or Inventory), wherever located, and any interest of any Debtor in any
of the foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing, wherever
located.

                  "Event of Default" has the meaning ascribed to it in
Section 6.

                  "FEIN" means Federal Employer Identification Number.

                  "General Intangibles" means all of Debtors' present and future
general intangibles and other personal property (including contract rights,
unitization, communication, and pooling declarations, orders, and agreements,
oil sales contracts, casinghead gas sale contracts, gas sales contracts,
processing contracts, gathering contracts, transportation contracts, farm-out
contracts, farm-in contracts, operating agreements, areas of mutual interest
contracts, and all other contracts, agreements, and instruments), rights arising
under common law, statutes, or regulations, choses or things in action,
Hydrocarbons, Hydrocarbon Interests, Oil and Gas Properties, goodwill, patents,
trade names, trademarks, servicemarks, copyrights, source code, mask works,
internet-related general intangibles (including domain names, web sites, and all
contents contained therein and located thereat), blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, rights to payment and other rights under any agreements (whether royalty
agreements, licensing agreements, or any other agreements), infringements
claims, computer programs, information contained in or on computer discs or
computer tapes or other information storage media, all reservoir, reserve,
seismic, geologic or geophysical information and data, all partnerships,
literature, reports, catalogs, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods, Accounts, and Negotiable
Collateral.

                  "Guarantied Obligations" shall mean, with respect to each
Debtor other than Borrower, the "Obligations" (as such term is defined in each
of the Second Amended and Restated Guaranty Agreements executed and delivered by
such Debtor to the Lender Group or the Collateral Agent for the benefit
thereof).

                  "Hydrocarbon Interests" shall mean all rights, titles,
interests and estates now or hereafter acquired in and to oil and gas leases,
oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases,
mineral fee interests, overriding royalty and royalty interests, net profit
interests and production payment interests, including any reserved or residual
interests of whatever nature.


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                  "Hydrocarbons" shall mean oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.

                  "Inventory" means all present and future inventory in which
any Debtor has any interest, including goods held for sale, license, or lease or
to be furnished under a contract of service and all of the Debtors' present and
future raw materials, work in process, piece goods, trim and finished goods, and
packing and shipping materials, wherever located, and any documents of title
representing any of the above, and all such other property the sale, license,
lease, or other disposition of which would give rise to an Account or cash
(including intellectual property the license of which would give rise to an
Account or cash).

                  "Investment Property" means "investment property" as that term
is defined in Section 9-115 of the Code.

                  "Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

                  "Lender Group" means, individually and collectively, each of
the Lenders, Administrative Agent, and Collateral Agent.

                  "Negotiable Collateral" means all of Debtors' present and
future letters of credit, notes, drafts, instruments, Investment Property,
documents, personal property leases (wherein any Debtor is the lessor), chattel
paper, and Debtors' Books relating to any of the foregoing.

                  "Obligations" shall have the meaning ascribed to the term
"Indebtedness" in the Credit Agreement.

                  "Oil and Gas Properties" shall mean: Hydrocarbon Interests;
the Properties now or hereafter pooled or unitized with Hydrocarbon Interests;
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; all operating agreements, contracts and other agreements which relate
to any of the Hydrocarbon Interests or the production, sale, purchase, exchange
or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, the lands
covered thereby and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and Properties in any manner appertaining,
belonging, affixed, or incidental to the Hydrocarbon Interests; and all
Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive


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equipment or other personal property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells, injection wells or other wells, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and rods, surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing.

                  "Permitted Protest" means the right of Debtors to protest any
Lien other than any such Lien that secures the Secured Obligations, tax (other
than payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the books of Debtors in an amount that is
reasonably satisfactory to Collateral Agent, (b) any such protest is instituted
and diligently prosecuted by Debtors in good faith, and (c) Collateral Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Liens of Collateral
Agent in and to the Collateral for the benefit of the Lender Group.

                  "Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.

                  "Secured Obligations" means the Obligations and the Guarantied
Obligations.

                        1.2. CODE. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.

                        1.3. CONSTRUCTION. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the inclusive
meaning represented by the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement.
Section, subsection, clause, schedule, and exhibit references are to this
Agreement unless otherwise specified. Any reference in this Agreement or in any
of the other Loan Documents to this Agreement or any of the other Loan Documents
shall include all alterations, amendments, restatements, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. In the event of a direct conflict between the terms
and provisions of this Agreement and the Credit Agreement, it is the intention
of the parties hereto that both such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of the Credit Agreement shall control and
govern; provided, however, that the inclusion herein of additional obligations
on the part of Debtors and supplemental rights and remedies in favor of
Collateral Agent, in each case in respect of the Collateral, shall not be deemed
a conflict with the Credit Agreement.

                        1.4. SCHEDULES AND EXHIBITS. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.


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                  2. CREATION OF SECURITY INTEREST.

                        2.1. GRANT OF SECURITY INTEREST.

                           (a) Each Debtor, in order to secure the prompt
payment of all of such Debtor's Secured Obligations and the prompt performance
of all covenants and duties of such Debtor under the Loan Documents, hereby
grants to Collateral Agent, for the benefit of the Lender Group, continuing
security interests in all currently existing and hereafter acquired or arising
Collateral.

                           (b) Collateral Agent's security interests in the
Collateral for the benefit of the Lender Group shall attach to all Collateral
without further act on the part of the Lender Group or Debtors.

                           (c) Except as expressly set forth in this Agreement
or any other Loan Document, no Debtor has any authority, express or implied, to
dispose of any item or portion of the Collateral.

                        2.2. NEGOTIABLE COLLATERAL. In the event that any
Collateral, including proceeds, is evidenced by or consists of Negotiable
Collateral, Debtors shall, immediately upon the request of Collateral Agent,
endorse and assign such Negotiable Collateral to Collateral Agent and deliver
physical possession of such Negotiable Collateral to Collateral Agent.

                        2.3. COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES,
NEGOTIABLE COLLATERAL. Upon the occurrence and during the continuation of an
Event of Default, Collateral Agent or Collateral Agent's designee may: (a)
notify customers or Account Debtors of Debtors that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Collateral Agent or
that Collateral Agent has a security interest therein for the benefit of the
Lender Group ; and (b) collect the Accounts, General Intangibles, and Negotiable
Collateral directly and charge, or cause Administrative Agent to charge for the
benefit of Collateral Agent, the collection costs and expenses incurred by
Collateral Agent in connection with any such collection of the Accounts to
Debtors' Loan Account. Debtors agree that they will hold in trust for Collateral
Agent, as Collateral Agent's trustee, any cash receipts, checks, and other items
of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) that any Debtor receives and immediately will deliver
or deposit said cash receipts, checks, and other items of payment as and in the
manner required pursuant to the Credit Agreement.

                        2.4. DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
Debtors shall execute, and deliver to Collateral Agent, prior to or concurrently
with Debtors' execution and delivery of this Agreement and at any time
thereafter at the request of Collateral Agent, all financing statements,
continuation financing statements, fixture filings, security agreements, chattel
mortgages, pledges, mortgages, deeds of trust, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Collateral Agent may reasonably request, in form satisfactory to Collateral
Agent, to perfect and continue perfected Collateral Agent's security interests
in the Collateral for the benefit of the Lender Group and in order to fully
consummate all of the transactions contemplated under the Loan Documents.


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                        2.5. POWER OF ATTORNEY. Each Debtor hereby irrevocably
makes, constitutes, and appoints Collateral Agent (and any of Collateral Agent's
officers, employees, or agents (including Administrative Agent) designated by
Collateral Agent) as Debtor's true and lawful attorney, with power to: (a) if
any Debtor refuses to, or fails timely to execute and deliver any of the
documents described in Section 2.4, sign the name of Debtor on any of the
documents described in Section 2.4 to perfect and continue perfection of the
security interests in the Collateral; (b) at any time that an Event of Default
has occurred and is continuing, (i) sign Debtor's name on any invoice or bill of
lading relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors; (ii) send requests for verification of Accounts; (iii) endorse Debtor's
name on any checks, notices, acceptances, money orders, drafts, or other item of
payment or security that may come into Collateral Agent's or any other member of
the Lender Group's possession; (iv) notify the post office authorities to change
the address for delivery of Debtor's mail to an address designated by Collateral
Agent, to receive and open all mail addressed to Debtor, and to retain all mail
relating to the Collateral and forward all other mail to Debtor; (v) make,
settle, and adjust all claims under Debtor's policies of insurance and make all
determinations and decisions with respect to such policies of insurance; and
(vi) settle and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms which Collateral Agent determines to
be reasonable, and Collateral Agent may cause to be executed and delivered any
documents and releases which Collateral Agent determines to be necessary. The
appointment of Collateral Agent as each Debtor's attorney, and each and every
one of Collateral Agent's rights and powers, being coupled with an interest, is
irrevocable until all of the Secured Obligations have been fully and finally
performed and paid in cash and the obligations of the Lender Group to extend
credit under the Credit Agreement have been irrevocably terminated.

                        2.6. RIGHT TO INSPECT. Collateral Agent (through any of
its officers, employees, or agents) shall have the right, from time to time
hereafter to inspect Debtors' Books and to check, test, and appraise the
Collateral in order to verify Debtors' financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.

                  3. REPRESENTATIONS AND WARRANTIES.

                  Each of the Debtors represents and warrants as follows:

                        3.1. NO PRIOR ENCUMBRANCES. Each Debtor has good and
marketable title to the Collateral, free and clear of all Liens except Liens
expressly permitted in writing by the Lender Group (including Section 9.02 of
the Credit Agreement).

                        3.2. FEIN. Each Debtor's FEIN is set forth on Schedule
3.2 attached hereto.

                        3.3. [INTENTIONALLY OMITTED].

                        3.4. LOCATION OF INVENTORY AND EQUIPMENT. The Inventory
and Equipment (other than such Inventory and Equipment related to or associated
with the Oil and Gas Properties) are not stored with a bailee, warehouseman, or
similar party (without Collateral


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Agent's prior written consent) and are located only at the locations identified
on Schedule 3.4 attached hereto or otherwise permitted by Section 4.3.

                        3.5. INVENTORY RECORDS. Each Debtor now keeps, and
hereafter at all times shall keep, correct and accurate records itemizing and
describing the kind, type, quality, and quantity of the Inventory, and each
Debtor's cost therefor.

                        3.6. RELIANCE BY COLLATERAL AGENT; CUMULATIVE. The
warranties, representations, and agreements set forth herein shall be
conclusively presumed to have been relied upon by Collateral Agent and the
Lender Group, and shall be cumulative and in addition to any and all other
warranties, representations, and agreements which Debtors shall now or
hereinafter give, or cause to be given, to Collateral Agent or the Lender Group.

                  4. AFFIRMATIVE COVENANTS.

                  Each of the Debtors covenants and agrees that, until payment
in full in cash of the Secured Obligations, and unless Collateral Agent shall
otherwise consent in writing, each of the Debtors shall do all of the following:

                        4.1. [INTENTIONALLY OMITTED]

                        4.2. [INTENTIONALLY OMITTED]

                        4.3. LOCATION OF INVENTORY AND EQUIPMENT. Keep the
Inventory and Equipment (other than such Inventory and Equipment related to or
associated with the Oil and Gas Properties) only at the locations identified on
Schedule 3.4 attached hereto; provided, however, that Borrower on behalf of the
Debtors may amend such schedule so long as such amendment occurs by written
notice to Collateral Agent not less than 30 days prior to the date on which the
Inventory or Equipment (other than such Inventory and Equipment related to or
associated with the Oil and Gas Properties) are moved to such new location, so
long as such new location is within the continental United States, and so long
as, at the time of such written notification, Debtors provide any Security
Instruments, financing statements or fixture filings necessary to perfect and
continue perfected Collateral Agent's security interests in such assets and also
provide to Collateral Agent a Collateral Access Agreement.

                        4.4. TITLE TO EQUIPMENT. Upon Collateral Agent's
reasonable request, deliver to Collateral Agent, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment.

                        4.5. MAINTENANCE OF EQUIPMENT. Keep and maintain the
Equipment in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved. No
Debtor shall permit any item of Equipment to become a fixture to real estate or
an accession to other property, and the Equipment is now and shall at all times
remain personal property.

                        4.6. TAXES. Cause all assessments and taxes, whether
real, personal, or otherwise, due or payable by, or imposed, levied, or assessed
against any Debtor or any of its


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property to be paid in full, before delinquency or before the expiration of any
extension period, except to the extent that the validity of such assessment or
tax shall be the subject of a Permitted Protest. Each Debtor shall make due and
timely payment or deposit of all taxes, assessments, or contributions required
of it by law, and will execute and deliver to Collateral Agent, on demand,
appropriate certificates attesting to the payment or deposit thereof. Each
Debtor will make timely payment or deposit of all tax payments and withholding
taxes required of it by applicable laws, and will, upon request, furnish
Collateral Agent with proof satisfactory to Collateral Agent indicating that
each Debtor has made such payments or deposits, other than assessments or taxes
that are the subject of a Permitted Protest. Each Debtor shall deliver
satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (a) such Debtor conducts business or is required to pay
any such excise tax, (b) where such Debtor's failure to pay any such applicable
excise tax would result in a Lien on the properties or assets of such Debtor, or
(c) where such Debtor's failure to pay any such applicable excise tax would have
a Material Adverse Effect.

                        4.7. LENDER GROUP EXPENSES. Debtors shall immediately
and without demand reimburse Collateral Agent for all sums expended by
Collateral Agent which constitute Lender Group Expenses and Debtors hereby
authorize and approve all advances and payments by Collateral Agent for items
constituting Lender Group Expenses.

                        4.8. INSURANCE. (a) The Debtors shall maintain such
insurance as is required by the Credit Agreement.

                           (b) All such policies of insurance shall be in such
form, with such companies, and in such amounts as may be reasonably satisfactory
to Collateral Agent. All such policies of insurance (except those of public
liability and property damage) shall contain a 438BFU lender's loss payable
endorsement, or an equivalent endorsement in a form satisfactory to Collateral
Agent, showing Collateral Agent as a loss payee thereof as its interest may
appear, shall contain a waiver of warranties, and shall specify that the insurer
must give at least ten (10) days prior written notice to Collateral Agent before
canceling its policy for any reason. Debtors shall deliver to Collateral Agent,
promptly upon Collateral Agent's request therefor, certified copies of such
policies of insurance and evidence of the payment of all premiums therefor. All
proceeds payable under any such policy shall be payable to Collateral Agent for
the benefit of the Lender Group and shall be paid or deposited into a Collection
Account or Concentration Account for application to the Secured Obligations or
disbursed to the applicable Debtor, in each case, in accordance with the terms
and provisions of the Credit Agreement.

                  5. NEGATIVE COVENANTS.

                  Each of the Debtors covenants and agrees that until payment in
full of the Secured Obligations, it will not do any of the following without the
prior written consent of the Lender Group:

                        5.1. CHANGE NAME. Change any Debtor's name, FEIN,
business structure, or identity, or add any new fictitious name.


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                        5.2. CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE.
Without thirty (30) days prior written notification to Collateral Agent,
relocate its chief executive office to a new location, unless, at the time of
such written notification, Debtor provides any financing statements or fixture
filings necessary to perfect and continue perfected Collateral Agent's security
interests and also provides to Collateral Agent a Collateral Access Agreement.
None of the Inventory and Equipment (other than such Inventory and Equipment
related to or associated with the Oil and Gas Properties) shall be stored, at
any time now or hereafter, with a bailee, warehouseman, or similar party without
a Collateral Access Agreement in respect thereof in full force and effect in
favor of Collateral Agent or without Collateral Agent's prior written consent.

                  6. EVENTS OF DEFAULT.

                  Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:

                        6.1. The occurrence of an Event of Default (as defined
in the Credit Agreement).

                        6.2. If a notice of lien, levy, or assessment is filed
of record with respect to any of Debtor's properties or assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a lien,
whether choate or otherwise, upon any Debtor's properties or assets and the same
is not paid on the payment date thereof.

                        6.3. If any Debtor makes any payment on account of
indebtedness that has been contractually subordinated in right of payment to the
payment of the Secured Obligations, except to the extent such payment is
permitted by the terms of the Credit Agreement.

                  7. COLLATERAL AGENT'S RIGHTS AND REMEDIES.

                        7.1. RIGHTS AND REMEDIES. Upon the occurrence, and
during the continuation, of an Event of Default, the Majority Lenders (at their
election but without notice of their election and without demand) may, except to
the extent otherwise expressly provided or required below, authorize and
instruct Collateral Agent to do any one or more of the following on behalf of
the Lender Group (and Collateral Agent, acting upon the instructions of the
Majority Lenders, shall do the same on behalf of the Lender Group), all of which
are authorized by Debtors:

                           (a) Proceed directly and at once, without notice,
against the any Debtor to collect and recover the full amount or any portion of
the Secured Obligations, without first proceeding against any other Debtor, or
against any security or collateral for the Secured Obligations.

                           (b) Without notice to Debtors (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9-505 of the Code),
set off and apply to the Secured Obligations


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<PAGE>   11

any and all (i) balances and deposits of any Debtor held by the Lender Group
(including any amounts received in any lockbox or other cash dominion accounts),
or (ii) indebtedness at any time owing to or for the credit or the account of
any Debtor held by the Lender Group;

                           (c) Hold or cause to be held, as cash collateral, any
and all balances and deposits of any Debtor held by the Lender Group, and any
amounts received in any lockbox or other cash dominion accounts, to secure the
full and final repayment in cash of all of the Secured Obligations;

                           (d) May exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein and in the Credit
Agreement and the other Loan Documents or otherwise available to it, all the
rights and remedies available to it at law (including those of a secured party
under the Code) or in equity.

                           (e) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Collateral Agent considers
reasonable, and in such cases, Collateral Agent shall credit, or shall cause
Administrative Agent to credit, Debtors' loan account with only the net amounts
received by Collateral Agent in payment of such disputed Accounts after
deducting all Lender Group Expenses incurred or expended in connection
therewith;

                           (f) Cause Debtors to hold all returned Inventory in
trust for Collateral Agent, segregate all returned Inventory from all other
property of Debtors or in Debtors' possession and conspicuously label said
returned Inventory as the property of Collateral Agent;

                           (g) Without notice or demand, make such payments and
do such acts as Collateral Agent considers necessary or reasonable to protect
its security interest in the Collateral. Debtors agree to assemble the
Collateral if Collateral Agent so requires, and to make the Collateral available
to Collateral Agent as Collateral Agent may designate. Debtors authorize
Collateral Agent to enter the premises where the Collateral is located, to take
and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien which in
Collateral Agent's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With respect
to any Debtor's owned premises, each of the Debtors hereby grants Collateral
Agent a license to enter such premises and to occupy the same, without charge,
for up to one hundred twenty (120) days in order to exercise any of Collateral
Agent's rights or remedies provided herein, at law, in equity, or otherwise;

                           (h) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Collateral Agent is hereby granted a license or
other right to use, without charge, each Debtor's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of advertising for sale and
selling any Collateral, and each Debtor's rights under all licenses and all
franchise agreements shall inure to the Lender Group's benefit;


                                      -11-
<PAGE>   12

                           (i) Sell all or any part of the Collateral at either
a public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
each Debtor's premises) as Collateral Agent determines is commercially
reasonable. It is not necessary that the Collateral be present at any such sale.
Collateral Agent on behalf of the Lender Group shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in any Debtor, which right or
equity is hereby waived or released to the extent permitted by law;

                           (j) Collateral Agent shall give notice of any
disposition of the Collateral as follows:

                                        (i) Collateral Agent shall give Borrower
                    (for the benefit of Debtors) and each holder of a security
                    interest in the Collateral who has filed with Collateral
                    Agent a written request for notice, a notice in writing of
                    the time and place of public sale, or, if the sale is a
                    private sale or some other disposition other than a public
                    sale is to be made of the Collateral, then the time on or
                    after which the private sale or other disposition is to be
                    made;

                                        (ii) The notice shall be personally
                    delivered or mailed, postage prepaid, to Borrower (for the
                    benefit of Debtors) as provided in Section 12.02 of the
                    Credit Agreement, at least 10 days before the date fixed for
                    the sale, or at least 10 days before the date on or after
                    which the private sale or other disposition is to be made;
                    no notice needs to be given prior to the disposition of any
                    portion of the Collateral that is perishable or threatens to
                    decline speedily in value or that is of a type customarily
                    sold on a recognized market. Notice to Persons other than
                    Debtors claiming an interest in the Collateral shall be sent
                    to such addresses as they have furnished in writing to
                    Collateral Agent;

                                        (iii) If the sale is to be a public
                    sale, Collateral Agent also shall give notice of the time
                    and place by publishing a notice one time at least 5 days
                    before the date of the sale in a newspaper of general
                    circulation in the county in which the sale is to be held;

                           (k) By an instrument in writing, appoint a receiver
(which term shall include a receiver and manager) of all or any part of the
Collateral and may remove or replace such receiver from time to time or may
institute proceedings in any court of competent jurisdiction for the appointment
of such receiver;

                           (l) [intentionally omitted]

                           (m) Notify customers or Account Debtors of Debtors
that the Accounts of Debtors, General Intangibles, or Negotiable Collateral have
been assigned to Collateral Agent or that Collateral Agent has a security
interest therein;

                           (n) Collect the Accounts of Debtors, General
Intangibles, and Negotiable Collateral directly, and charge the collection costs
and expenses as Lender Group Expenses; but, unless and until the Lender Group
does so or gives Debtors other written


                                      -12-
<PAGE>   13

instructions, each Debtor shall collect all Accounts of such Debtor, General
Intangibles, and Negotiable Collateral for the Lender Group, receive in trust
all payments thereon as the Lender Group's trustee, and immediately deliver said
payments to Administrative Agent for the benefit of the Lender Group in their
original form as received from such Account Debtor;

                           (o) Any deficiency which exists after disposition of
the Collateral as provided above will be paid immediately by Debtors up to the
maximum amount, if any, of Debtors' liability under the Credit Agreement or any
other Loan Document. Any excess will be returned to Debtors, without interest
and subject to the rights of third parties, by Collateral Agent as provided in
the Loan Documents.

Except as required by law or to the extent (if any) required by the Credit
Agreement, Collateral Agent may take any or all of the foregoing action without
demand, presentment, protest, advertisement or notice of any kind to or upon
Debtors or any other person.

                        7.2. REMEDIES CUMULATIVE. The rights and remedies of
Collateral Agent and the Lender Group under this Agreement, the Loan Documents,
and all other agreements shall be cumulative. Collateral Agent and the Lender
Group shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Collateral Agent
or the Lender Group of one right or remedy shall be deemed an election, and no
waiver by Collateral Agent or the Lender Group of any Event of Default on
Debtors' part shall be deemed a continuing waiver. No delay by Collateral Agent
or the Lender Group shall constitute a waiver, election, or acquiescence by it.

                  8. TAXES AND EXPENSES REGARDING THE COLLATERAL.

                  If any Debtor fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third persons or entities,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, to the extent
that Collateral Agent determines that such failure by such Debtor could have a
Material Adverse Effect on the Lender Group's interests in the Collateral, in
Collateral Agent's discretion and without prior notice to Debtors, Collateral
Agent may do any or all of the following: (a) make payment of the same or any
part thereof; (b) set up, or cause Administrative Agent to set up, such reserves
in Debtors' loan account as Collateral Agent deems necessary to protect the
Lender Group from the exposure created by such failure; or (c) obtain and
maintain insurance policies insuring Debtors' ownership and use of the
Collateral, and take any action with respect to such policies as Collateral
Agent deems prudent. Any amounts paid or deposited by Collateral Agent shall
constitute Lender Group Expenses, shall immediately become additional Secured
Obligations, shall bear interest at the applicable rate described in the Credit
Agreement, and shall be secured by the Collateral. Any payments made by
Collateral Agent shall not constitute an agreement by Collateral Agent to make
similar payments in the future or a waiver by Collateral Agent of any Event of
Default under this Agreement. Collateral Agent need not inquire as to, or
contest the validity of, any such expense, tax, security interest, encumbrance,
or lien and the receipt of the usual official notice for the payment thereof
shall be conclusive evidence that the same was validly due and owing. Collateral
Agent shall use its reasonable efforts to provide notice to Debtors of any
action taken by it under this Section 8.


                                      -13-
<PAGE>   14

                  9. WAIVERS; INDEMNIFICATION.

                        9.1. DEMAND; PROTEST; ETC. To the extent permitted by
law and except as otherwise provided in this Agreement or the Credit Agreement,
Debtors waive demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Collateral Agent
on which any Debtor may in any way be liable.

                        9.2. COLLATERAL AGENT'S LIABILITY FOR COLLATERAL. So
long as Collateral Agent complies with its obligations, if any, under Section
9-207 of the Code, Collateral Agent shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person. All risk of loss,
damage, or destruction of the Collateral shall be borne by Debtors except
losses, damages, or destruction of the Collateral proximately caused by
Collateral Agent's gross negligence, intentional misconduct, or failure to
comply with its obligations under 9-207 of the Code.

                        9.3. [Intentionally Omitted].

                  10. NOTICES.

                  All notices and other communications hereunder to Collateral
Agent shall be in writing and shall be mailed, sent or delivered in accordance
with the Credit Agreement and all notices and other communications hereunder to
Debtors shall be in writing and shall be mailed, sent or delivered to Borrower
for the benefit of Debtors in accordance with the Credit Agreement.

                  11. GOVERNING LAW.

                  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.

                  12. CONSENT TO JURISDICTION, SERVICE OF PROCESS AND VENUE.

                  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH DEBTOR HEREBY IRREVOCABLY ACCEPT IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH DEBTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS


                                      -14-
<PAGE>   15

AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO DEBTORS IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 10, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER
SUCH MAILING. EACH DEBTOR HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF
THE STATE OF NEW YORK AS ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER GROUP
TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY DEBTOR IN ANY OTHER JURISDICTION.
EACH DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT ANY DEBTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH DEBTOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS SECURED OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

                  13. WAIVER OF JURY TRIAL, ETC.

                  EACH DEBTOR AND THE LENDER GROUP HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. EACH DEBTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY
OF COLLATERAL AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT COLLATERAL
AGENT ON BEHALF OF THE LENDER GROUP WOULD NOT, IN THE EVENT OF ANY ACTION,
PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH DEBTOR
HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR COLLATERAL
AGENT'S ENTERING INTO THIS AGREEMENT ON BEHALF OF THE LENDER GROUP.


                                      -15-
<PAGE>   16

                  14. DESTRUCTION OF DEBTOR'S DOCUMENTS.

                  All written information, schedules, agings, reports or similar
papers delivered to Collateral Agent may be destroyed or otherwise disposed of
by Collateral Agent four (4) months after they are delivered to or received by
Collateral Agent, unless Debtors request, in writing, the return of said
documents, schedules or other papers and makes arrangements, at Debtors'
expense, for their return.

                  15. GENERAL PROVISIONS.

                        15.1. EFFECTIVENESS. This Agreement shall be binding and
deemed effective when executed by each Debtor and accepted and executed by
Collateral Agent.

                        15.2. SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Debtors may not assign this Agreement or any
rights or duties hereunder without prior written consent of the Lender Group and
any prohibited assignment shall be absolutely void. No consent to an assignment
by the Lender Group shall release Debtors from their Secured Obligations. On
behalf of the Lender Group, Collateral Agent may assign this Agreement and its
rights and duties hereunder and no consent or approval by Debtors is required in
connection with any such assignment.

                        15.3. SECTION HEADINGS. Headings and numbers have been
set forth herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.

                        15.4. INTERPRETATION. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against
Collateral Agent, the Lender Group, or Debtors, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.

                        15.5. SEVERABILITY OF PROVISIONS. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.

                        15.6. AMENDMENTS IN WRITING. This Agreement can only be
amended by a writing signed by both Collateral Agent and each Debtor.

                        15.7. COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement.

                        15.8. ADDITIONAL DEBTORS. The initial Debtors hereunder
shall be such of the Obligors as are signatories hereto as of the date hereof.
From time to time subsequent to the date hereof, additional Obligors, as
required by the Credit Agreement or the other Loan


                                      -16-
<PAGE>   17

Documents, may become parties hereto, as additional Debtors (each, an
"Additional Debtor"), by executing and delivering a counterpart of, or joinder
to, this Agreement. Upon delivery of any such counterpart or joinder to
Collateral Agent, notice of which is hereby waived by any other Debtor, each
such Additional Debtor shall be a Debtor and shall be as fully a party hereto as
if such Additional Debtor were an original signatory hereof. Each Debtor
expressly agrees that its obligations arising hereunder shall not be affected or
diminished by the addition or release of any other Debtor hereunder, nor by any
election of the Lender Group not to cause any Obligor to become an Additional
Debtor hereunder. This Agreement shall be fully effective as to any Debtor that
is or becomes a party hereto regardless of whether any other Person becomes or
fails to become or ceases to be a Debtor hereunder.

                        15.9. REVIVAL AND REINSTATEMENT OF SECURED OBLIGATIONS.
If the incurrence or payment of the Secured Obligations by Debtors or the
transfer by any Debtor to Collateral Agent or the Lender Group of any property
of any Debtor should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Collateral Agent or the
Lender Group is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that Collateral
Agent or the Lender Group is required or elects to repay or restore, and as to
all reasonable costs, expenses, and attorneys fees of Collateral Agent or the
Lender Group related thereto, the liability of Debtors automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.


                                      -17-
<PAGE>   18


                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.



                          QUEEN SAND RESOURCES, INC., a Delaware corporation


                          By:
                             ---------------------------------------------------
                                 Name:  Robert P. Lindsay
                                 Title: Chief Operating Officer

                          QUEEN SAND RESOURCES, INC., a Nevada corporation


                          By:
                             ---------------------------------------------------
                                 Name:  Ronald I. Benn
                                 Title: Vice President

                          QUEEN SAND OPERATING CO., a Nevada corporation


                          By:
                             ---------------------------------------------------
                                 Name:  Ronald I. Benn
                                 Title: Vice President

                          CORRIDA RESOURCES, INC., a Nevada corporation


                          By:
                             ---------------------------------------------------
                                 Name:  Ronald I. Benn
                                 Title: Vice President



                          ABLECO FINANCE LLC, a Delaware limited liability
                          company, as Collateral Agent



                          By:
                             ---------------------------------------------------
                          Name:  Kevin P. Genda
                          Title: Senior Vice President/Chief Credit Officer



<PAGE>   19

                                  SCHEDULE 3.2



                 [to be prepared by Debtors and attached hereto]



<PAGE>   20



                                  SCHEDULE 3.4



                 [to be prepared by Debtors and attached hereto]