Document:

SECURITY  AGREEMENT

     THIS  SECURITY  AGREEMENT (this "Agreement") is made and entered into as of
August  18,  2000  by MERLIN SOFTWARE TECHNOLOGIES INTERNATIONAL, INC., a Nevada
corporation  (the  "Borrower" or the "Grantor"), in favor of the Holders (as set
forth  in  Schedule 2) of the Notes (each a "Secured Party" and collectively the
"Secured Parties").  All capitalized terms used but not otherwise defined herein
shall  have  the  respective meanings assigned thereto in the Purchase Agreement
(as  defined  below):

                        W  I  T  N  E  S  S  E  T  H  :

     WHEREAS,  the  Borrower  and  the  Secured  Parties  have entered into that
certain Note and Warrant Purchase Agreement dated as of August 18, 2000 (as from
time  to  time  amended,  supplemented  or  otherwise  modified,  the  "Purchase
Agreement");  and

     WHEREAS,  as  collateral  security  for  payment  and  performance  of  its
obligations  under  the  Purchase Agreement, the Notes and the Related Documents
the  Borrower  is willing to grant to the Secured Parties a security interest in
certain  of  its  personal  property  and  assets;  and

     NOW,  THEREFORE,  in  order to induce the Secured Parties to enter into the
Purchase  Agreement  and  the  Related  Documents  and  in  consideration of the
premises  and  the  mutual covenants contained herein, the parties hereto hereby
agree  follows:

     1.     GRANT  OF  SECURITY INTEREST. As collateral security for the payment
and  satisfaction  of  all  of  the  Borrower's  Obligations  under the Purchase
Agreement,  the  Notes  and  the  Related  Documents (collectively, the "Secured
Obligations"),  the  Grantor  hereby  affirms,  grants,  pledges and assigns, or
reaffirms,  regrants  and continues its pledge and collateral assignment, as the
case  may  be,  to  the  Secured Parties and continues and grants to the Secured
Parties  a  continuing  first  priority  security  interest in and to all of the
following  property  of  Grantor,  whether  now  owned  or existing or hereafter
acquired  or  arising  and  wheresoever  located:

     (a)     All  accounts,  accounts  receivable,  contracts,  notes,  bills,
acceptances,  chooses in action, chattel paper, instruments, documents and other
forms  of obligations at any time owing to the Grantor arising out of goods sold
or  leased  or for services rendered by Grantor, the proceeds thereof and all of
Grantor's  rights  with respect to any goods represented thereby, whether or not
delivered,  goods  returned  by  customers and all rights as an unpaid vendor or
lienor,  including rights of stoppage in transit and of recovering possession by
proceedings  including  replevin  and  reclamation,  together  with all customer
lists,  books  and  records, ledger and account cards, computer tapes, software,
disks,  printouts  and  records,  whether now in existence or hereafter created,
relating  thereto  (collectively  referred  to
hereinafter  as  "Accounts");

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     (b)     All  inventory  of  the  Grantor, including without limitation, all
goods  manufactured  or  acquired  for  sale  or lease, and any piece goods, raw
materials,  work  in  process  and  finished  merchandise, findings or component
materials,  and  all  supplies,  goods,  incidentals, office supplies, packaging
materials  and  any  and  all  items  used  or  consumed in the operation of the
business  of  Grantor  or which may contribute to the finished product or to the
sale,  promotion  and  shipment  thereof,  in  which  Grantor now or at any time
hereafter  may have an interest, whether or not the same is in transit or in the
constructive,  actual or exclusive occupancy or possession of Grantor or is held
by  Grantor  or  by  others  for  Grantor's  account  (collectively  referred to
hereinafter  as  "Inventory");

     (c)     All  goods  of  the  Grantor,  including  without  limitation,  all
machinery,  equipment,  parts, supplies, apparatus, appliances, tools, patterns,
molds, dies, blueprints, fittings, furniture, furnishings, fixtures and articles
of tangible personal property of every description now or hereafter owned by the
Grantor  or  in which Grantor may have or may hereafter acquire any interest, at
any  location  (collectively  referred  to  hereinafter  as  "Equipment");

     (d)     All general intangibles of the Grantor in which the Grantor now has
or  hereafter  acquires  any  rights,  including  but  not limited to, causes of
action,  corporate  or  business  records,  inventions, designs, patents, patent
applications,  trademarks,  trademark  registrations  and applications therefor,
goodwill,  trade  names,  trade  secrets, trade processes, copyrights, copyright
registrations and applications therefor, licenses, permits, franchises, customer
lists, computer programs, all claims under guaranties, tax refund claims, rights
and  claims  against  carriers  and  shippers,  leases,  claims  under insurance
policies,  all  rights  to  indemnification  and  all  other intangible personal
property  and  intellectual  property  of  every  kind  and nature (collectively
referred  to  hereinafter  as  "General  Intangibles");

     (e)     All  rights  now  or  hereafter  accruing  to  the  Grantor  under
contracts,  leases, agreements or other instruments to perform services, to hold
and  use land and facilities, and to enforce all rights thereunder (collectively
referred  to  hereinafter  as  "Contract  Rights");

     (f)     All  books  and  records  relating  to  any  of  the Collateral (as
hereinafter defined) (including without limitation, customer data, credit files,
computer  programs,  printouts,  and other computer materials and records of the
Grantor  pertaining  to  any  of  the  foregoing);  and

     (g)     All accessions to, substitutions for and all replacements, products
and  proceeds  of  the  foregoing,  including  without  limitation  proceeds  of
insurance  policies  insuring  the  Collateral  (as  hereinafter  defined).

     All  of the property and interests in property described in subsections (a)
through  (g)  and  all  other  property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred  to  as  the  "Collateral."

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     2.     FINANCING  STATEMENTS.  At  the time of execution of this Agreement,
the  Grantor  shall  have  furnished  the Secured Parties with properly executed
financing  statements,  amendments  and assignments as prescribed by the Uniform
Commercial  Code  or the British Columbia Personal Property Security Act, as the
case  may  be,  as  presently  in  effect  in the states and provinces where the
Collateral  is located, prepared and approved by the Secured Parties in form and
number  sufficient  for filing wherever required with respect to the Collateral,
in  order  that  the  Secured Parties have a duly perfected security interest of
record  in  the Collateral, to the extent a security interest in such Collateral
can  be  perfected by filing a financing statement, following the filing of such
financing  statements  with  the  appropriate  local  and  state  governmental
authorities,  subject  only  to  Permitted  Liens.  The Grantor shall execute as
reasonably  required  by the Secured Parties any additional financing statements
or  other documents to effect the same, together with any necessary continuation
statements  so  long  as  this  Agreement  remains  in  effect.

     3.     MAINTENANCE  OF  SECURITY  INTEREST.  The Grantor will, from time to
time,  upon  the request of the Secured Parties, deliver specific assignments of
Collateral,  together  with  such  other  instruments  and  documents, financing
statements,  amendments  thereto,  assignments  or other writings as the Secured
Parties  may  reasonably  request to carry out the terms of this Agreement or to
protect  or  enforce  the  Secured Parties' security interest in the Collateral.

     With  respect  to  any  and all Collateral to be secured and conveyed under
this  Agreement,  the  Grantor  agrees  to  do  and  cause to be done all things
necessary  to  perfect  and  keep in full force the security interest granted in
favor  of the Secured Parties, including, but not limited to, the prompt payment
of all fees and expenses incurred in connection with any filings made to perfect
or  continue  a  security  interest  in  the  Collateral in favor of the Secured
Parties.

     The  Grantor  agrees  to  make  appropriate  entries  upon  its  financial
statements  and  books  and  records  disclosing  the  Secured Parties' security
interest  granted  hereunder.

     4.     RECEIPT OF PAYMENT. In the event an Event of Default (as hereinafter
defined)  shall  occur  and  be  continuing  and  the  Grantor  (or  any  of its
affiliates,  subsidiaries,  stockholders,  directors,  officers,  employees  or
agents)  shall  receive any proceeds of Collateral, including without limitation
monies,  checks,  notes, drafts or any other items of payment, the Grantor shall
hold  all  such  items  of  payment in trust for the Secured Parties, and as the
property  of the Secured Parties, separate from the funds of the Grantor, and no
later  than  the  first  Business Day following the receipt thereof, the Grantor
shall  cause the same to be forwarded to the Secured Parties for its custody and
possession  as  additional  Collateral.

5.     COLLECTIONS.  The  Grantor  hereby authorizes the Secured Parties, at all
times  after  the  occurrence and during the continuation of an Event of Default
(a)  to  open  Grantor's mail and collect any and all amounts due to the Grantor
from Persons obligated on any Accounts ("Account Debtors"); and (b) to take over
the  Grantor's  post  office  boxes  or  make  other arrangements as the Secured
Parties  deem  necessary  to receive the Grantor's mail, including notifying the
post

<PAGE>

     office authorities to change the address for delivery of the Grantor's mail
to  such  address  as  the  Secured  Parties  may  designate.

     6.     ASSIGNMENTS  OF  ACCOUNTS; NOTICE TO ACCOUNT DEBTORS. Simultaneously
with  the  execution  hereof,  Grantor  shall have executed and delivered to the
Secured  Parties  (i)  an  Assignment of Collateral substantially in the form of
Exhibit  "A"  attached  hereto  ("Assignment"),  and (ii) sufficient copies of a
Notice  of  Assignment  and  Irrevocable  Authority substantially in the form of
Exhibit "B" attached hereto ("Notice of Assignment"), which shall be retained by
the  Secured  Parties  for  use  upon  the  occurrence  of  an Event of Default.

     Upon  the occurrence of an Event of Default or in the event of a "Change in
Control"  (as hereinafter defined), Grantor shall be deemed to have assigned the
Collateral  to  the  Secured Parties pursuant to the Assignment and the Borrower
shall  irrevocably  instruct  all  account debtors to make payment of all monies
payable  pursuant  to  the  respective Accounts to the Secured Parties.  In this
respect,  Grantor  shall  notify  each  Account Debtor of the assignment of such
proceeds to the Secured Parties hereunder pursuant to the Notices of Assignment,
which,  in  such  event,  the  Secured  Parties  are expressly authorized by the
Grantor to deliver to each such Account Debtor.  For purposes of this Agreement,
"Change  in  Control"  shall  mean any one or more of the following: (i) a sale,
transfer  or  other disposition of all or substantially all of the capital stock
of  the  Grantor;  (ii)  a  sale,  transfer  or  other  disposition  of  all  or
substantially  all  of  the  assets  of  the  Grantor;  or  (iii)  any  merger,
consolidation  or  other  combination that includes the Borrower, whether or not
the  Grantor  is  the surviving entity of any such transaction.  For purposes of
this  Agreement,  the  Grantor  hereby appoints the Secured Parties as Grantor's
attorney-in-fact  with  full  power  of  substitution  to execute and deliver on
behalf  of Grantor the Assignment and Notice of Assignment herein described upon
the  occurrence  of  an Event of Default or in the event of a Change in Control,
which  power  of  attorney  is  coupled  with  an  interest  and is irrevocable.

     7.     COVENANTS.  The Grantor covenants with the Secured Parties that from
and after the date of this Agreement until termination hereof in accordance with
Section  28  hereof:

    (a)     INSPECTION.  Upon  the occurrence of an Event of Default or an event
that  with  the giving of notice or the passage of time would be deemed an Event
of Default, the Secured Parties (by any of their officers, employees and agents)
shall  have  the  right upon its request and prior notice, and at any reasonable
times  during the Grantor's usual business hours, to inspect the Collateral, all
records  related thereto (and to make extracts or copies from such records), and
the  premises  upon  which  any  of  the  Collateral  is located, to discuss the
Grantor's  affairs and finances with any Person (other than Account Debtors) and
to  verify  with  any  Person  other  than  Account Debtors the amount, quality,
quantity,  value  and  condition  of,  or  any  other  matter  relating  to, the
Collateral  and,  if  an  Event  of  Default  has occurred and is continuing, to
discuss Grantor's affairs and finances with the Grantor's Account Debtors and to
verify the amount, quality, value and condition of, or any other matter relating
to,  the  Collateral  and such Account Debtors. Upon or after the occurrence and
during  the  continuation of an Event of Default, the Secured Parties may at any
time  and  from  time  to  time  employ and maintain on the Grantor's premises a
custodian  selected  by  the

<PAGE>

     Secured  Parties  who shall have full authority to do all acts necessary to
protect  the  Secured  Parties  interest.  All  expenses incurred by the Secured
Parties  by  reason  of  the  employment  of such custodian shall be paid by the
Grantor,  added  to  the  Secured  Obligations  and  secured  by the Collateral.

     (b)     ASSIGNMENTS,  RECORDS  AND SCHEDULES OF ACCOUNTS. The Grantor shall
keep  accurate and complete records of its Accounts ("Account Records") and from
time  to  time  at intervals designated by the Secured Parties the Grantor shall
provide  the  Secured  Parties with a schedule of Accounts in form and substance
acceptable to the Secured Parties describing all Accounts created or acquired by
the  Grantor  ("Schedule  of  Accounts");  provided, however, that the Grantor's
failure to execute and deliver any such Schedule of Accounts shall not affect or
limit  the  Secured  Parties'  security  interest  or other rights in and to any
Accounts.  If  requested  by  the Secured Parties, the Grantor shall furnish the
Secured Parties with copies of proof of delivery and other documents relating to
the  Accounts so scheduled, including without limitation repayment histories and
present status reports (collectively, "Account Documents") and such other matter
and  information relating to the status of then existing Accounts as the Secured
Parties  shall  request.  The  Grantor  shall  not remove any Account Records or
Account  Documents  or  change  its  chief executive offices from Suite 420-6450
Roberts  Street, Burnaby, British Columbia, Canada V5G 4E1 (the "Chief Executive
Office")  hereto  without 30 days prior written notice to the Secured Parties as
provided  in  Section  21  hereof  and  delivery  to  the Secured Parties by the
applicable  Grantor  prior  to  such  removal  of executed financing statements,
amendments  and  other  documents  necessary  to maintain the security interests
granted  hereunder.

     (c)     NOTICE  REGARDING  DISPUTED  ACCOUNTS. In the event any amounts due
and owing in excess of $10,000 are in dispute between any Account Debtor and the
Grantor  (which  shall include without limitation any dispute in which an offset
claim or counterclaim may result), the Grantor shall provide the Secured Parties
with  written  notice  thereof  as soon as practicable, explaining in detail the
reason  for  the  dispute,  all  claims  related  thereto  and  the  amount  in
controversy.

     (d)     VERIFICATION  OF ACCOUNTS.  If an Event of Default has occurred and
is  continuing, each of the Secured Parties' officers, employees or agents shall
have  the  right,  at  any  reasonable  time  or times hereafter, to verify with
Account  Debtors  the  validity,  amount  or  any  other  matter relating to any
Accounts  and,  whether  or  not  an  Event of Default has occurred, each of the
Secured  Parties'  officers,  employees or agents shall have the right to verify
the  same  with  the  Grantor.

     (e)     CHANGE OF TRADE STYLES.  Grantor shall not  change,  amend,  alter,
terminate,  or  cease  using  its  material trade names or styles under which it
sells  Inventory  as  of  the  date  of  this Agreement ("Trade Styles"), or use
additional  Trade  Styles,  without giving the Secured Parties at least 30 days'
prior  written  notice  and  delivery  to  the Secured Parties by the applicable
Grantor  prior  to  such  removal,  change,  amendment,  alteration,  or use, of
executed  financing

<PAGE>

     statements,  amendments  and  other  documents  necessary  to  maintain the
security  interests  granted  hereunder.

     (f)     SAFEKEEPING OF INVENTORY.  The Grantor shall be responsible for the
safekeeping  of  its  Inventory,  and, subject to Section 16 hereof, in no event
shall  the  Secured  Parties  have  any  responsibility  for:

     (i)   Any loss or damage  to  Inventory or destruction thereof occurring or
arising  in  any  manner  or  fashion  from  any  cause;

     (ii)  Any  diminution  in  the  value  of  Inventory;  or

     (iii) Any act or default of any carrier, warehouseman, bailee or forwarding
agency  thereof  or  other Person in any way dealing with or handling Inventory.

     (g)     LOCATION,  RECORDS  AND  SCHEDULES OF INVENTORY.  The Grantor shall
keep  correct  and  accurate  records  itemizing  and describing the kind, type,
location  and  quantity of Inventory, its cost therefor and the selling price of
Inventory  held  for  sale,  and  the  daily withdrawals therefrom and additions
thereto,  and  shall  furnish  to  the  Secured  Parties  from  time  to time at
reasonable  intervals  designated  by the Secured Parties, a current schedule of
Inventory  ("Schedule  of  Inventory")  based  upon  its  most  recent  physical
inventory  and its daily inventory records. The Grantor shall conduct a physical
inventory,  no less than annually, and shall furnish to the Secured Parties such
other  documents  and  reports  thereof  as the Secured Parties shall reasonably
request  with respect to the Inventory.  Subject to compliance at all times with
Sections  10(c),  (d) and (e), the Grantor shall not, other than in the ordinary
course  of  business,  remove  any  material  amount of Inventory from the Chief
Executive  Office without 30 days prior written notice to the Secured Parties as
provided in Section 21 hereof and delivery to the Secured Parties by the Grantor
prior  to  such  removal  of executed financing statements, amendments and other
documents  necessary  to  maintain  the  security  interests  granted hereunder.

     (h)     RETURNS  OF INVENTORY.  If any Account Debtor returns any Inventory
to  the  Grantor  after  shipment thereof, and such return generates a credit in
excess  of  $10,000  in the aggregate on any Account or Accounts of such Account
Debtor,  the  Grantor  shall  notify  the Secured Parties of the same as soon as
practicable.

     (i)     EVIDENCE  OF  OWNERSHIP  OF  EQUIPMENT.  The  Grantor,  as  soon as
practicable  following  a request therefor by the Secured Parties, shall deliver
to the Secured Parties any and all evidence of ownership of any of the Equipment
(including without limitation certificates of title and applications for title).

     (j)     LOCATION,  RECORDS AND SCHEDULES OF EQUIPMENT.  The  Grantor  shall
maintain  accurate,  itemized  records  itemizing and describing the kind, type,
quality,

<PAGE>

     quantity  and  value of its Equipment and shall furnish the Secured Parties
upon  request with a current schedule containing the foregoing information, but,
other  than  during  the continuance of an Event of Default, not more often than
once  per  fiscal quarter.  The Grantor shall not remove any material portion of
the  Equipment  from  the Chief Executive Office without at least 30 days' prior
written  notice  to  the  Secured  Parties  as provided in Section 21 hereof and
delivery to the Secured Parties by the Grantor prior to such removal of executed
financing  statements,  amendments and other documents necessary to maintain the
security  interests  granted  hereunder.

     (k)     SALE  OR  MORTGAGE OF EQUIPMENT.  Other than in the ordinary course
of  business with respect to disposition of obsolescent Equipment or replacement
of  Equipment  with  other  Equipment  performing  similar  functions and having
similar  or  better  utility  and value, and except as permitted by the Purchase
Agreement  prior  to  the occurrence and continuance of an Event of Default, the
Grantor shall not sell, exchange, lease, mortgage, encumber, pledge or otherwise
dispose  of  or  transfer  any  of the Equipment or any part thereof without the
prior  written  consent  of  the  Secured  Parties.

     (l)     MAINTENANCE  OF EQUIPMENT.  The Grantor shall keep and maintain its
Equipment  in  good  operating  condition  and  repair,  ordinary  wear and tear
excepted.  The  Grantor  shall  not permit any such items to become a fixture to
real  property  (unless  Grantor  has granted the Secured Parties a lien on such
real  property)  or  accessions  to  other  personal  property.

     8.     GENERAL  WARRANTIES  AND  REPRESENTATIONS

     (a)     The  Grantor  warrants  and  represents  that  it is and, except as
permitted  by  the  Purchase  Agreement,  will  continue  to be the owner of the
Collateral  hereunder,  now owned and upon the acquisition of the same, free and
clear of all Liens, claims (other than those claims set forth in Schedule 3.9 to
the  Purchase  Agreement),  encumbrances  and  security interests other than the
security interest in favor of the Secured Parties hereunder and Permitted Liens,
and  that  it  will defend such Collateral and any products and proceeds thereof
against  all  claims and demands of all Persons (other than holders of Permitted
Liens)  at  any  time  claiming  the same or any interest therein adverse to the
Secured  Parties.

     (b)     The  Grantor  has  the full legal right and power and all authority
and approval required to enter into,  execute  and deliver this Agreement and to
perform  fully each of its respective obligations hereunder.  This Agreement has
been  duly  executed  and  delivered  and  constitutes  the  valid  and  binding
obligation  of  the  Grantor enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation  or  similar  laws  relating  to  creditor's  rights  generally.  No
approval  or  consent  of  any  foreign, federal, state, country, local or other
governmental  or regulatory body, and no approval or consent of any other person
is required in connection with the execution and delivery by the Grantor of this
Agreement,  and  the  consummation and performance by each of the undersigned of
the  transactions  contemplated  hereby.  The  execution  and  delivery  of this
Agreement  and  the  consummation  of  the  transactions contemplated under this
Agreement  will  not  conflict  with or result in the breach or violation of any

<PAGE>

     of  the  terms  or conditions of, or constitute (or with notice or lapse of
time or both would constitute) a default under any instrument, contract or other
agreement  to  which  either  the Grantor is a party or by or to which it or its
assets  or  properties  are  bound  or subject or any statute or any regulation,
order,  judgment  or  decree  of  any  court or governmental or regulatory body.

     9.     ACCOUNT  WARRANTIES  AND  REPRESENTATIONS.  With  respect  to  its
Accounts,  the  Grantor  warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by Grantor on
or  with  respect  to  any Schedule of Accounts prepared and delivered by it and
that:

     (a)     All  Account  Records and Account Documents are located only at the
Chief  Executive  Office;

     (b)     The  Accounts are genuine, are in all respects what they purport to
be,  are  not  evidenced  by  an  instrument  or document or, if evidenced by an
instrument  or  document,  are  only  evidenced  by  one  original instrument or
document;

     (c)     The  Accounts  cover  bona  fide  sales and deliveries of Inventory
usually  dealt  in  by  Grantor,  or the rendition by Grantor of services, to an
Account  Debtor  in  the  ordinary  course  of  business  or as permitted by the
Purchase  Agreement;

     (d)     The  amounts of the face value shown on any Schedule of Accounts or
invoice  statement delivered to the Secured Parties with respect to any Account,
are  actually  owing to Grantor and are not contingent for any reason; and there
are  no setoffs, discounts, allowances, claims, counterclaims or disputes of any
kind  or  description in an amount greater than $10,000 in the aggregate for all
Account  Debtors, or greater than $2,500 individually, existing or asserted with
respect  thereto  and Grantor has not made any agreement with any Account Debtor
thereunder  for any deduction therefrom, except as may be stated in the Schedule
of  Accounts  and  reflected  in  the  calculation  of  the  face  value of each
respective  invoice  related  thereto;

     (e)     Except  for  conditions  generally applicable to Grantor's industry
and  markets,  there  are  no  facts,  events,  or  occurrences known to Grantor
pertaining  particularly  to  any  Accounts  which  are  reasonably  expected to
materially  impair  in  any  way  the validity, collectibility or enforcement of
Accounts  that  would  reasonably be likely, in the aggregate, to be of material
economic  value,  or  in  the  aggregate  materially  reduce  the amount payable
thereunder  from  the  amount of the invoice face value shown on any Schedule of
Accounts, and on all contracts, invoices and statements delivered to the Secured
Parties,  with  respect  thereto;

     (f)     The  goods or services giving rise thereto are not, and were not at
the  time  of  the  sale  or  performance  thereof,  subject to any Lien, claim,
encumbrance  or security interest, except those of the Secured Parties and those
removed  or  terminated  prior  to  the  date  hereof  and  Permitted  Liens;

<PAGE>

     (g)     The  Accounts have not been pledged to any Person other than to the
Secured Parties under this Agreement and will be owned by Grantor free and clear
of any Liens, claims, encumbrances or security interests except Permitted Liens;

     (h)     The  Secured Parties' security interest therein will not be subject
to  any  offset, deduction, counterclaim, Lien or other adverse condition, other
than  Permitted  Liens;  and

     (i)     The Grantor shall deliver to the Secured Parties written notice not
less  than  30  days  prior to any change of the location of the Chief Executive
Office  or  status  of  places  of  business  or  residency.

     10.     INVENTORY  WARRANTIES  AND  REPRESENTATIONS.  With  respect  to its
Inventory,  the  Grantor warrants and represents to the Secured Parties that the
Secured  Parties  may  rely  on  all  statements  or representations made by the
Grantor  on  or  with  respect  to  any  Inventory  and  that:

     (a)     All  Inventory  is  located  only  at  the  locations  set forth on
Schedule  1  hereto;

     (b)     None  of  its  Inventory  is  or will be subject to any Lien, claim
(other  than  those claims set forth in Schedule 3.9 to the Purchase Agreement),
encumbrance or security interest whatsoever, except for the security interest of
the  Secured  Parties  hereunder  and  Permitted  Liens;

     (c)     No Inventory of the Grantor that would reasonably be likely, in the
aggregate  with  the  Inventory  of all other Account Debtors, to be of value in
excess  of  $10,000  is, and shall not at any time or times hereafter be, stored
with a bailee, warehouseman, or similar party without the Secured Parties' prior
written  consent  and,  if  the  Secured Parties give such consent, Grantor will
concurrently  therewith cause any such bailee, warehouseman, or similar party to
issue  and  deliver  to the Secured Parties upon their request therefor, in form
and  substance  reasonably acceptable to the Secured Parties, warehouse receipts
therefor in the Secured Parties' name and take such other action and be party to
such  document as deemed necessary or prudent by the Secured Parties to maintain
the  security  interest  of  the  Secured  Parties  in  such  Inventory;

     (d)     No  Inventory  is, and shall not at any time or times hereafter be,
under  consignment  to  any Person, the value of which, when aggregated with all
other  Inventory  under  consignment  of  the Grantor, would exceed $10,000; and

     (e)     No  Inventory is at or shall be kept at any location that is leased
by the Grantor from any other Person with contractual, statutory or other rights
to obtain a lien or security interest, or other right in any Inventory which may
take  priority over the lien or security interest of the Secured Parties, unless
such  lessor  waives  its  rights  with  respect  to  such Inventory in form and
substance  acceptable  to  the  Secured  Parties and delivered in writing to the
Secured  Parties  prior  to  such  amount of Inventory being at such one or more
locations.

<PAGE>

     11.     EQUIPMENT  REPRESENTATIONS  AND  WARRANTIES.  With  respect  to its
Equipment,  the  Grantor warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by Grantor on
or  with  respect  to  any  Equipment  and  that:

     (a)     All  Equipment  (except for any aircraft of the Grantor) is located
only  at  the  locations  set  forth  in  Schedule  1  hereto;

     (b)     None  of  its  Equipment  is  or will be subject to any Lien, claim
(other  than  those claims set forth in Schedule 3.9 to the Purchase Agreement),
encumbrance or security interest whatsoever, except for the security interest of
the  Secured  Parties,  hereunder  and  Permitted  Liens;

     (c)     No Equipment of Grantor is at or shall be kept at any location that
is  leased by Grantor from any other Person with contractual, statutory or other
rights  to  obtain  a lien or security interest, or other right in any Equipment
which  may  take  priority  over  the  lien  or security interest of the Secured
Parties,  unless such lessor waives its rights with respect to such Equipment in
form and substance acceptable to the Secured Parties and delivered in writing to
the  Secured Parties prior to such amount of Equipment being at such one or more
locations.

     12.     CASUALTY  AND  LIABILITY  INSURANCE  REQUIRED.

     (a)     The  Grantor  will keep the Collateral continuously insured against
such  risks  as  are  customarily insured against by businesses of like size and
type  engaged  in the same or similar operations including, without limiting the
generality  of  any  other  covenant  herein  contained:

(i)     casualty  insurance  on the Inventory and the Equipment in an amount not
less  than  the  full  insurable value thereof, against loss or damage by theft,
fire  and  lightning  and  other hazards ordinarily included under uniform broad
form standard extended coverage policies, limited only as may be provided in the
standard  broad  form of extended coverage endorsement at the time in use in the
states  in  which  the  Collateral  is  located;

(ii)     comprehensive  general  liability  insurance  against claims for bodily
injury,  death  or property damage occurring with or about such Collateral (such
coverage to include provisions waiving subrogation against the Secured Parties),
with  the  Secured  Parties as additional insured parties and as loss payees, in
amounts  as  shall  be  reasonably  satisfactory  to  the  Secured  Parties;

(iii)     liability  insurance  with  respect to the operation of its facilities
under  the  workers' compensation laws of the states in which such Collateral is
located;  and

<PAGE>

(iv)     business  interruption  insurance.

     (b)     Each  insurance policy obtained in satisfaction of the requirements
of  Section  12(a)  hereof:

(i)     may  be  provided by blanket policies now or hereafter maintained by the
Grantor;

(ii)     shall  be  issued by such insurer (or insurers) as shall be financially
responsible,  of  recognized  standing  and reasonably acceptable to the Secured
Parties;

(iii)     shall  be  in  such  form  and have such provisions (including without
limitation  the  loss  payable  clause,  the  waiver  of subrogation clause, the
deductible  amount,  if  any, and the standard mortgagee endorsement clause), as
are  generally considered standard provisions for the type of insurance involved
and  are  reasonably  acceptable  in  all  respects  to  the  Secured  Parties;

(iv)     shall prohibit cancellation or substantial modification, termination or
lapse  in coverage by the insurer without at least 30 days' prior written notice
to  the  Secured  Parties, except for non-payment of premium, in which case such
policies  shall  provide  ten  (10)  days'  prior  written  notice;

(v)     without limiting the generality of the foregoing, all insurance policies
where applicable under Section 12(a)(i) carried on the Collateral shall name the
Secured  Parties,  as  loss  payees  and the Secured Parties  as insured parties
thereunder.

     (c)     Prior  to  the  expiration  of  any  such policy, the Grantor shall
furnish  the  Secured  Parties with evidence satisfactory to the Secured Parties
that  the  policy  or  certificate  has been renewed or replaced or is no longer
required  by  this  Agreement.

     (d)     The  Grantor hereby irrevocably makes, constitutes and appoints the
Secured Parties (and all officers, employees or agents designated by the Secured
Parties) effective upon the occurrence and during the continuance of an Event of
Default,  as  the Grantor's true and lawful attorney (and agent-in-fact) for the
purpose  of  making,  settling  and  adjusting  claims  under  such  policies of
insurance,  endorsing the name of the Grantor on any check, draft, instrument or
other  item  or  payment  for the proceeds of such policies of insurance and for
making  all  determinations  and  decisions  with  respect  to  such policies of
insurance.

<PAGE>

     (e)     In  the  event the Grantor shall fail to maintain, or fail to cause
to  be  maintained, the full insurance coverage required hereunder or shall fail
to  keep  any of its Collateral in good repair and good operating condition, the
Secured  Parties  may  (but shall be under no obligation to), without waiving or
releasing  any  Secured  Obligation  or  Event  of Default by Grantor hereunder,
contract for the required policies of insurance and pay the premiums on the same
or  make  any  required  repairs,  renewals  and  replacements;  and all sums so
disbursed  by  the  Secured Parties, including reasonable attorneys' fees, court
costs, expenses and other charges related thereto, shall be payable on demand by
Grantor  to  the  Secured  Parties  and  shall be additional Secured Obligations
secured  by  the  Collateral.

     (f)     The  Grantor  agrees  that  to  the  extent that it shall not carry
insurance required by Section 12(a) hereof, it shall in the event of any loss or
casualty pay promptly to the Secured Parties, for application in accordance with
the  provisions of Section 12(h) hereof, such amount as would have been received
as  Net  Proceeds  (as  hereinafter  defined)  by the Secured Parties, under the
provisions of Section 12(h) hereof had such insurance been carried to the extent
required.

     (g)     The  Net  Proceeds  of  the  insurance  carried  pursuant  to  the
provisions  of  Sections  12(a)(ii)  and  12(a)(iii)  hereof shall be applied by
Grantor  toward  extinguishment  of  the  defect or claim or satisfaction of the
liability  with  respect  to  which  such  insurance  proceeds  may  be  paid.

     (h)     The  Net  Proceeds  of  the  insurance  carried with respect to the
Collateral  pursuant  to the provisions of Section 12(a)(i) hereof shall be paid
to Grantor and held by Grantor in a separate account and applied as follows: (i)
as  long as no Event of Default shall have occurred and be continuing, after any
loss under any such insurance and payment of the proceeds of such insurance, the
Grantor  shall  have a period of 30 days after payment of the insurance proceeds
with  respect  to  such  loss  to  elect  to  either  (x)  repair or replace the
Collateral  so damaged, (y) deliver such Net Proceeds to the Secured Parties, as
additional  Collateral  or  (z)  apply  such  Net Proceeds to the acquisition of
tangible  assets  used  or useful in the conduct of the business of the Grantor,
subject  to the provisions of this Agreement. If the Grantor elects to repair or
replace  the  Collateral  so  damaged,  Grantor  agrees  the Collateral shall be
repaired  to  a condition substantially similar to its condition prior to damage
or  replaced  with  Collateral  in  a  condition  substantially  similar  to the
condition  of  the Collateral so replaced prior to damage; and (ii) at all times
during  which  an  Event of Default shall have occurred and be continuing, after
any  loss  under  such  insurance and payment of the proceeds of such insurance,
Grantor  shall  immediately deliver such Net Proceeds to the Secured Parties, as
additional  Collateral.

     (i)     "Net  Proceeds"  when  used  with respect to any insurance proceeds
shall  mean  the  gross proceeds from such proceeds, award or other amount, less
all  taxes,  fees  and  expenses  (including  attorneys'  fees)  incurred in the
realization  thereof.

     (j)     In case of any material damage to or destruction of all or any part
of the Collateral pledged hereunder  by  the  Grantor, Grantor shall give prompt
notice  thereof  to  the  Secured

<PAGE>

     Parties.  Each  such  notice shall describe generally the nature and extent
of  such  damage,  destruction,  taking,  loss, proceeding or negotiations.  The
Grantor  is  hereby  authorized  and  empowered to adjust or compromise any loss
under  any  such  insurance.

     13.     EVENTS OF DEFAULT.  It is understood and agreed that the occurrence
of  any  one  or  more  of  the following shall constitute an "Event of Default"
hereunder  and  shall  entitle  the  Secured Parties to take such actions as are
elsewhere  provided  in  this  Agreement in respect of Events of Default: (a) an
"Event of Default" as defined in the Note shall have occurred and be continuing;
or  (b)  Grantor shall have failed to pay the Secured Parties all of the Secured
Obligations  owed  to  it  in accordance with the Purchase Agreement and Related
Documents  on  the  Business Day on which the Secured Parties have demanded such
payment;  or  (c)  any representation or warranty made by Grantor herein, in the
Purchase  Agreement  in or in any other existing or future agreement with any of
the  Secured  Parties (including the Related Documents) shall prove to have been
false  in  any  material  respect when made; or (d) any covenant made by Grantor
herein  (other  than  those  covenants  contained  in  Sections  7(a) hereof) is
breached,  violated,  or  not  complied  with and not cured within 30 days after
notice  thereof  from  the  Secured Parties; provided, however, that any breach,
violation  or  non-compliance with any covenant contained in Section 7(a) hereof
shall  immediately  result  in  an Event of Default; or (e) any covenant made by
Grantor  in  any other Related Document or any future agreement with the Secured
Parties  is  breached,  violated,  or not complied with and not cured within any
grace period applicable thereto, or if no grace period is applicable and default
thereunder  does  not result immediately from such noncompliance, then not cured
within  30  days after notice thereof from the Secured Parties, and results in a
material adverse change to the Collateral taken as a whole or its value taken as
a  whole;  or (f) any material uninsured damage to or loss, theft or destruction
of  any  of  the  Collateral  shall  occur.

     14.     RIGHTS  AND  REMEDIES  UPON AN EVENT OF DEFAULT.  Upon and after an
Event  of  Default,  the  Secured  Parties  shall  have the following rights and
remedies  in  addition  to  any  rights and remedies set forth elsewhere in this
Agreement,  all  of  which  may be exercised with or, if allowed by law, without
notice  to  Grantor:

     (a)     All of the rights and remedies of a secured party under the Uniform
Commercial  Code  of  the  state where such rights and remedies are asserted, or
under  other  applicable  law,  all  of  which  rights  and  remedies  shall  be
cumulative,  and  none  of  which shall be exclusive, to the extent permitted by
law,  in  addition to any other rights and remedies contained in this Agreement,
or  any  other  Related  Document;

     (b)     The  right  to foreclose the Liens and security instruments created
under  this  Agreement  by  any available judicial procedure or without judicial
process;

     (c)     The  right  to (i) enter upon the premises of Grantor through self-
help  and  without judicial process, without first obtaining a final judgment or
giving  Grantor  notice  and  opportunity  for  a hearing on the validity of the
Secured Parties' claim and without any obligation to pay rent to Grantor, or any
other place  or  places  where  any  Collateral  is  located  and  kept,  and

<PAGE>

     remove  the  Collateral therefrom to the premises of the Secured Parties or
any  agent  of  the  Secured  Parties,  for such time as the Secured Parties may
desire, in order effectively to collect or liquidate the Collateral, and/or (ii)
require  Grantor to assemble the Collateral and make it available to the Secured
Parties  at  a  place to be designated by the Secured Parties that is reasonably
convenient  to  both  parties;

     (d)     The  right  to  (i)  demand  payment  of the Accounts; (ii) enforce
payment  of  the Accounts, by legal proceedings or otherwise; (iii) exercise all
of  the  Grantor's  rights  and  remedies  with respect to the collection of the
Accounts;  (iv)  settle,  adjust,  compromise, extend or renew the Accounts; (v)
settle,  adjust  or  compromise  any  legal  proceedings  brought to collect the
Accounts;  (vi) if permitted by applicable law, sell or assign the Accounts upon
such  terms,  for  such amounts and at such time or times as the Secured Parties
deem  advisable;  (vii) discharge and release the Accounts; (viii) take control,
in  any  manner,  of  any  item  of payment or proceeds referred to in Section 4
above;  (ix)  prepare,  file  and  sign  Grantor's  name  on a Proof of Claim in
bankruptcy or similar document against any Account Debtor; (x) prepare, file and
sign Grantor's name on any notice of Lien, assignment or satisfaction of Lien or
similar  document  in  connection  with  the  Accounts; (xi) endorse the name of
Grantor  upon  any  chattel  paper, document, instrument, invoice, freight bill,
bill  of  lading  or  similar  document or agreement relating to the Accounts or
Inventory;  (xii) use Grantor's stationery for verifications of the Accounts and
notices  thereof  to  Account Debtors; (xiii) use the information recorded on or
contained  in  any  data processing equipment and computer hardware and software
relating  to  any  Collateral to which Grantor has access; and (xiv) do all acts
and  things  and  execute  all documents necessary, in the Secured Parties' sole
discretion,  to  collect  the  Accounts;  and

     (e)     The  right to sell, assign, lease or to otherwise dispose of all or
any  Collateral  in  its  then  existing  condition,  or  after  any  further
manufacturing or processing  thereof, at public or private sale or  sales,  with
such notice as may be required by law, in lots or in bulk, for cash or on credit
with or without representations  and  warranties, all as the Secured Parties, in
their sole discretion, may deem  advisable.  The  Secured Parties shall have the
right  to  conduct  such sales on Grantor's premises or elsewhere and shall have
the right to use  Grantor's premises without charge for such sales for such time
or times as the  Secured  Parties may see fit.  The Secured Parties may, if they
deem it reasonable,  postpone or adjourn any sale of the Collateral from time to
time  by  an  announcement  at the time and place of such postponed or adjourned
sale,  and  such sale may, without further notice, be made at the time and place
to which it was so adjourned.  The  Grantor  agrees  that  the  Secured  Parties
have  no obligation to preserve rights  to  the Collateral against prior parties
or to marshall any Collateral for the benefit of any Person. The Secured Parties
are hereby granted a license or  other  right  to use, without charge, Grantor's
labels,  patents,  copyrights,  rights  of use of any name, trade secrets, trade
names,  trademarks  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 Grantor's rights under any license and any
franchise  agreement shall inure to the Secured Parties' benefit.  If any of the
Collateral shall require repairs, maintenance, preparation or the like, or is in
process or other unfinished state, the Secured Parties shall have the right, but
shall  not  be  obligated,  to  perform  such repairs, maintenance, preparation,
processing  or  completion  of

<PAGE>

     manufacturing  for the purpose of putting the same in such saleable form as
the  Secured  Parties shall deem appropriate, but the Secured Parties shall have
the  right  to  sell  or  dispose of the Collateral without such processing.  In
addition,  Grantor agrees that in the event notice is necessary under applicable
law,  written  notice mailed to Grantor in the manner specified herein seven (7)
days  prior  to the date of public sale of any of the Collateral or prior to the
date after which any private sale or other disposition of the Collateral will be
made  shall constitute commercially reasonable notice to Grantor.  All notice is
hereby  waived  with respect to any of the Collateral which threatens to decline
speedily  in value or is of a type customarily sold on a recognized market.  The
Secured  Parties may purchase all or any part of the Collateral at public or, if
permitted  by  law,  private  sale,  free  from any right of redemption which is
hereby  expressly  waived  by  Grantor  and,  in  lieu of actual payment of such
purchase  price,  may  set  off  the  amount  of  such price against the Secured
Obligations.  The  net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied first to the
expenses  (including  all  attorneys'  fees)  of  retaking,  holding,  storing,
processing  and  preparing  for  sale,  selling, collecting, liquidating and the
like,  and  then  to  the  satisfaction of all Secured Obligations.  Any sale or
other  disposition  of  the Collateral and the possession thereof by the Secured
Parties  shall be in compliance with all provisions of applicable law (including
applicable  provisions  of  the  Uniform Commercial Code).  The Grantor shall be
liable  to  the Secured Parties, and shall pay to the Secured Parties, on demand
any  deficiency  which  may  remain  after such sale, disposition, collection or
liquidation  of  the  Collateral.  The Secured Parties shall remit to Grantor or
other  Person  entitled  thereto  any surplus remaining after this Agreement has
been  terminated  in  accordance  with  Section  28  hereof.

     15.     ANTI-MARSHALLING  PROVISIONS.  The right is hereby given by Grantor
to the Secured Parties, to make releases (whether in whole or in part) of all or
any  part  of the Collateral agreeable to the Secured Parties without notice to,
or  the consent, approval or agreement of other parties and interests, including
junior lienors, which releases shall not impair in any manner the validity of or
priority  of  the  Liens  and  security  interests  in  the remaining Collateral
conferred  under such documents, nor release Grantor from personal liability for
the  Secured  Obligations  hereby secured.  Notwithstanding the existence of any
other  security  interest  in  the  Collateral  held by the Secured Parties, the
Secured  Parties shall have the right to determine the order in which any or all
of the Collateral shall be subjected to the remedies provided in this Agreement.
The proceeds realized upon the exercise of the remedies provided herein shall be
applied  by  the Secured Parties, in the manner herein provided.  Grantor hereby
waives any and all right to require the marshalling of assets in connection with
the  exercise  of  any  of  the remedies permitted by applicable law or provided
herein.

16.     APPOINTMENT  OF  THE  SECURED  PARTIES  AS  GRANTOR'S  LAWFUL  ATTORNEY.
Without  limitation  of any other provision of this Agreement, upon and after an
Event  of  Default,  Grantor  irrevocably  designates,  makes,  constitutes  and
appoints  the  Secured  Parties  (and  all  Persons  designated  by  the Secured
Parties),  as Grantor's true and lawful attorney (and agent-in-fact) to take all
actions  and to do all things required to be taken or done by Grantor under this
Agreement.  All acts of the Secured Parties or their designees taken pursuant to
this Section 16 are hereby ratified and confirmed and the Secured Parties or its
designees  shall  not  be  liable  for  any

<PAGE>

     acts  of omission or commission nor for any error of judgment or mistake of
fact  or  law,  other  than  as  a  result  of  its  gross negligence or willful
misconduct.  This  power,  being  coupled  with  an  interest, is irrevocable by
Grantor  until  this Agreement has been terminated in accordance with Section 28
hereof.

     17.     RIGHTS  AND  REMEDIES CUMULATIVE; NON-WAIVER; ETC.  The enumeration
of  the  rights and remedies of the Secured Parties, set forth in this Agreement
is  not  intended  to be exhaustive and the exercise by the Secured Party of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative, and shall be in addition to any other right or
remedy  given  hereunder,  or  under any other agreement between Grantor and the
Secured Party or which may now or hereafter exist in law or in equity or by suit
or  otherwise.  No  delay  or  failure to take action on the part of the Secured
Party  in  exercising  any  right,  power or privilege shall operate as a waiver
thereof,  nor  shall  any single or partial exercise of any such right, power or
privilege  preclude  other  or  further  exercise thereof or the exercise of any
other  right,  power  or  privilege  or shall be construed to be a waiver of any
Event  of  Default.  No waiver by a party hereunder shall be effective unless it
is  in  writing and signed by the party making such waiver, and then only to the
extent  specifically  stated  in  such  writing.  No  course  of dealing between
Grantor  and  the  Secured  Parties  or the Secured Parties' agents or employees
shall  be  effective  to  change,  modify  or  discharge  any  provision of this
Agreement  or  to  constitute  a  waiver  of  any Event of Default.  The Secured
Parties  shall  not  have  any liability for any error, omission or delay of any
kind  occurring  in  the  handling  or  liquidation of the Collateral or for any
damages  resulting  therefrom, other than as a result of its gross negligence or
willful  misconduct.

     18.     SUPPLEMENTAL  DOCUMENTATION.  At  the Secured Parties' request, the
Grantor  shall  execute and deliver to the Secured Parties, at any time or times
hereafter,  all documents, instruments and other written matter that the Secured
Parties  may  request  to  perfect  and  maintain perfected the Secured Parties'
security  interest  in  the  Collateral, in form and substance acceptable to the
Secured  Parties, and pay all charges, expenses and fees the Secured Parties may
reasonably  incur  in  filing  any  of  such  documents,  and all taxes relating
thereto.  Grantor  agrees  that  a  carbon,  photographic,photostatic,  or other
reproduction  of  this  Agreement  or  a  financing statement is sufficient as a
financing  statement  and  may  be  filed  by  the Secured Parties in any filing
office.

     19.     WAIVERS.  In  addition  to  the  other  waivers  contained  herein,
Grantor hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or  dishonor,  notice  of  payments  and  nonpayments  and all other notices and
consents to any action taken by the Secured Parties unless expressly required by
this  Agreement.

     20.     TRADE  NAMES.  Grantor  represents  that  it  has no trade names or
styles.

     21.     NOTICE.  Any  notice  shall  be  conclusively  deemed  to have been
received  by  any party hereto and be effective on the day on which delivered to
such  party  (against  receipt therefor)  at the address set forth below or such
other address as  such  party  shall  specify  to  the  other  parties

<PAGE>

     in  writing  (or,  in  the  case of telephonic notice or notice by telecopy
(where the receipt of such message is verified by return) expressly provided for
hereunder,  when  received at such telephone or telecopy number as may from time
to  time be specified in written notice to the other parties hereto or otherwise
received),  or  if  sent  prepaid by certified or registered mail return receipt
requested  on  the  third Business Day after the day on which mailed, or if sent
prepaid by a national overnight courier service, on the first Business Day after
the  day  on which delivered to such service against receipt therefor, addressed
to  such  party  at  said  address:

(a)     if to Grantor:

Merlin Software Technologies International, Inc.
Suite  420-6450  Roberts  Street
Burnaby,  British  Columbia,  Canada  V5G  4E1
Attention:  Robert  Heller
Telephone:  (604)  320-7227
Telefacsimile:  (604)  320-7277

with  a  copy  to:

Clark,  Wilson
HSBC  Building,  800-885  West  Georgia  Street
Vancouver,  British  Columbia,  Canada  VGC  3H1
Telephone:  (604)  687-5700
Telefacsimile:  (604)  687-6314
Attention:  Virgil  Z.  Hlus,  Esq.

(b)     if  to  the  Secured  Parties:

Narragansett  Asset  Management,  LLC
375  Park  Avenue
New  York,  New  York  10152
Attn:  Managing  Director
Telephone:  (212)  521-5027
Telefacsimile:  (212)  521-5029

with  a  copy  to:

Kane  Kessler,  P.C.
1350  Avenue  of  the  Americas
New  York,  New  York  10019
Attention:  Robert  L.  Lawrence,  Esq.
Telephone:  (212)  541-6222
Telefacsimile:  (212)  245-3009

or  to  such other address as each party may designate for itself by like notice
given  in  accordance  with  this  Section  21.

22.     DEFINITIONS.  All  terms  used  herein  and  not defined in the Purchase
Agreement  shall  be  defined  in  accordance  with  the appropriate definitions
appearing  in  the  Uniform  Commercial

<PAGE>

     Code as in effect in New York, and such definitions are hereby incorporated
herein  by  reference  and  made  a  part  hereof.

     23.     ENTIRE  AGREEMENT.  This  Agreement,  together  with  the  Purchase
Agreement  and  other  Related  Documents,  constitutes and expresses the entire
understanding  between  the  parties  hereto  with respect to the subject matter
hereof,  and  supersedes  all  prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained.  The  express  terms  hereof  control  and  supersede  any  course of
performance  or  usage  of  the trade inconsistent with any of the terms hereof.
Neither  this  Agreement  nor  any  portion  or provision hereof may be changed,
altered,  modified,  supplemented,  discharged, canceled, terminated, or amended
orally  or  in  any  manner other than by an agreement, in writing signed by the
parties  hereto.

     24.     LEASE ASSIGNMENT AND LANDLORD WAIVER.  If at any time Grantor moves
a  significant portion of its Inventory from any location identified in Schedule
1 hereto to a leased or rented building, warehouse or other facility of whatever
description not identified in Schedule 1 (each a "New Leased Facility"), Grantor
hereby  agrees  that  it  will  execute  and  deliver to the Secured Parties, an
assignment  of the Grantor's interest in the lease with respect to each such New
Leased Facility to the extent that such landlord has any, as applicable, in form
and  substance  satisfactory to the Secured Parties.  The Grantor further agrees
that  at  such time, and as applicable, it will deliver or cause to be delivered
to  the Secured Parties, a landlord's waiver executed by the owner, or any other
Person  serving as landlord, of such New Leased Facility, to the extent that any
such landlord has any contractual, statutory or other rights to obtain a lien or
security  interest, or other right in any Inventory which may take priority over
the  lien  or  security  interest  of the Secured Parties, in form and substance
reasonably  satisfactory  to  the  Secured  Parties.

     25.     SEVERABILITY.  The  provisions of this Agreement are independent of
and  separable  from each other. If any provision hereof shall for any reason be
held  invalid  or  unenforceable,  such invalidity or unenforceability shall not
affect  the  validity  or enforceability of any other provision hereof, but this
Agreement  shall  be construed as if such invalid or unenforceable provision had
never  been  contained  herein.

     26.     SUCCESSORS  AND  ASSIGNS.  This Agreement shall be binding upon the
successors  and  assigns  of  the Grantor, and the rights, remedies, powers, and
privileges  of  the  Secured Parties hereunder shall inure to the benefit of the
successors  and  assigns of the Secured Parties; provided, however, that Grantor
shall  not  make  any assignment hereof without the prior written consent of the
Secured  Parties.

     27.     COUNTERPARTS.  This  Agreement  may  be  executed  in any number of
counterparts  and  all  the  counterparts  taken  together  shall  be  deemed to
constitute  one  and  the  same  instrument.

     28.     TERMINATION; RELEASE. Upon the indefeasible payment  in full of all
Obligations,  this  Agreement and all obligations of the Grantor hereunder shall
terminate  without

<PAGE>

     delivery  of any instrument or performance of any act by any party, and the
Collateral  shall  automatically  be  released  from  the  Liens created by this
Agreement  and  all  rights  to  such  Collateral  shall automatically revert to
Grantor.  Notwithstanding  the  immediately  preceding  sentence,  upon  such
termination  of this Agreement, the Secured Parties shall reassign and redeliver
such  Collateral then held by or for the Secured Parties and execute and deliver
to  the  Grantor  such  documents  as  the  Grantor  shall reasonably request to
evidence  such  termination.

     29.     GOVERNING  LAW.

     (A)     This  agreement  shall  be governed by, and construed in accordance
with,  the  laws of the state of Nevada applicable to contracts executed, and to
be  fully  performed,  in  such  state.

     (B)     Each  party  hereby  expressly  and irrevocably agrees and consents
that any suit, action or proceeding arising out of or relating to this agreement
and  the  transactions  contemplated  herein  may  be instituted in any state or
federal  court  sitting  in  the  county  of New York, state of New York, United
States  of  America  and,  by the execution and delivery of this agreement, each
party  expressly  waives  any objection that it may have now or hereafter to the
laying  of  the  venue  or  to  the  jurisdiction  of  any  such suit, action or
proceeding,  and  irrevocably  submits  generally  and  unconditionally  to  the
jurisdiction  of  any  such  court  in  any  such  suit,  action  or proceeding.

     (C)     Each  party  agrees that service of process may be made by personal
service  of  a  copy  of the summons and complaint or other legal process in any
such  suit,  action  or  proceeding, or by registered or certified mail (postage
prepaid)  to  the address of such party provided by section 21 hereof, or by any
other  method of service provided for under the applicable laws in effect in the
state  of  new  york.

     (D)     Nothing  contained  in subsections (b) or (c) hereof shall preclude
any  party  from  bringing  any  suit,  action  or  proceeding arising out of or
relating  to  this  agreement  or  the other loan documents in the courts of any
place  where any party or any of such party's property or assets may be found or
located.  To  the  extent  permitted  by  the  applicable  laws  of  any  such
jurisdiction,  each  party hereby irrevocably submits to the jurisdiction of any
such  court  and  expressly  waives,  in  respect  of  any  such suit, action or
proceeding,  the  jurisdiction  of  any  other  court  or  courts  which  now or
hereafter,  by  reason  of  its present or future domicile, or otherwise, may be
available  to  it.

<PAGE>

     (E)     In  any  action  or  proceeding to enforce or defend any  rights or
remedies  under  or  related  to  this  agreement  or any amendment, instrument,
document  or  agreement  delivered  or  that  may  in the future be delivered in
connection with the foregoing, each party hereby agrees, to the extent permitted
by  applicable  law,  that any such action or proceeding shall be tried before a
court  and  not  before  a  jury  and  each  party  hereby waives, to the extent
permitted  by applicable law, any objection that it may have that each action or
proceeding  has  been  brought  in  an  inconvenient  forum.

     IN  WITNESS WHEREOF, the parties have duly executed this Security Agreement
on  the  day  and  year  first  written  above.

     MERLIN  SOFTWARE  TECHNOLOGIES
INTERNATIONAL,  INC.

     By:  /s/  Robert  Heller
          -------------------
     Name:    Robert  Heller
     Title:   President

PROVINCE  OF  BRITISH  COLUMBIA     )
                                    )ss.
CANADA                              )

     Before me, the undersigned, a Notary Public in and for the county aforesaid
on  this 21st day of August, 2000, personally appeared Robert Heller to me known
personally,  and  who,  being  by me duly sworn, deposes and says that he is the
President  of  Merlin  Software  Technologies  International,  Inc.,  and  that
foregoing  instrument  was  signed on behalf of said corporation by authority of
its  Board  of Directors, and said Robert Heller acknowledged said instrument to
be  the  free  act  and  deed  of  said  corporation.

     /s/  Virgil  Z.  Hlus
     ---------------------
Notary  Public
My  commission  expires:  N/A
Virgil  Z.  Hlus
Barrister  and  Solicitor
800  -  885  West  Georgia  Street
Vancouver,  B.C.  V6C  3H1
Telephone:  (604)  687-5700

     SIGNATURE  PAGE  1  OF  2

<PAGE>

SECURED  PARTIES:

NARRAGANSETT  I,  L.P.

By:  /s/  Joseph  L.  Dowling
     ------------------------
     Name:  Joseph  L.  Dowling
     Title: Managing  Member

NARRAGANSETT  OFFSHORE,  L.P.
by  its  Investment  Manager,
Leo  Holding,  L.L.C.

By:  /s/  Joseph  L.  Dowlin
     -----------------------
      Name:  Joseph  L.  Dowling
      Title: Managing  Member

PEQUOT  SCOUT  FUND,  L.P.
by  its  Investment  Advisor,
Pequot  Capital  Management,  Inc.

By:  /s/  David  J.  Malat
     ---------------------
     Name:  David  J.  Malat
     Title:  Chief  Accounting  Officer

SDS  MERCHANT  FUND,  L.P.
by  its  Managing  Member,
SDS  Capital  Partners,  L.L.C.

By:  /s/  Steven  Derby
     ------------------
     Name:  Steven  Derby
     Title: Managing  Member

     SIGNATURE  PAGE  2  OF  2

<PAGE>

     SCHEDULE  1

Canadian  Office:          Suite  420  -  6450  Roberts  Street
     Burnaby,  British  Columbia  Canada  V5G  4E1

<PAGE>

     SCHEDULE  2
     HOLDERS

Narragansett  I,  L.P.

Narragansett  Offshore  Ltd.

Pequot  Scout  Fund,  L.P.

SDS  Merchant  Fund,  L.P.

<PAGE>

     EXHIBIT  A

     ASSIGNMENT  OF  COLLATERAL

     This  ASSIGNMENT  is  made  by  Merlin Software Technologies International,
Inc.,  as  of  the  ________________  2000,  as  follows:

     1.     ASSIGNMENT:  For  good  and valuable consideration, receipt of which
is  hereby  acknowledged,  the  undersigned  Merlin  Software  Technologies
International,  Inc. ("Assignor") does hereby assign to Narragansett I and L.P.,
Narragansett  Offshore  Ltd.,  Pequot  Scout  Fund,  L.P. and SDS Merchant Fund,
L.P.,  (the  "Assignees")  and  its successors and assigns forever, for security
purposes  pursuant  to  that  certain  Security  Agreement  between Assignor and
Assignees  dated as of August ___, 2000 ("Security Agreement") all of Assignor's
right,  title  and interest in and to the Collateral (as defined in the Security
Agreement).

     2.     WARRANTIES.  Assignor  represents and warrants to the Assignees that
(i)  Assignor  owns  all  rights in and to the Collateral; (ii) Assignor has not
assigned,  licensed or in any other manner encumbered, diminished or impaired or
disposed  of  any  rights  in respect of the Collateral which it acquired at any
time;  (iii)  Assignor  has  the right to enter into and perform this Agreement;
(iv)  all  sums  due  and  payable  to  date  by Assignor in connection with the
Collateral  have been paid; and (v) there are no liens on the Collateral imposed
by  third  parties which would conflict with or interfere with Assignor's rights
thereto  or  Assignees'  rights  hereunder.

     3.     PERFECTION.  Concurrently  with  the  execution and delivery of this
Assignment,  Assignor  will  deliver  to Assignees the following documents (each
satisfactory  in  form  and  substance  to  the  Assignees):

     (a)     UCC-1  filing certificates from all appropriate jurisdictions (each
satisfactory  in  form and substance to the Assignees) confirming and perfecting
Assignor's  right,  title  and  interest  in  and  to  the  Collateral;  and

     (b)     executed  UCC  Assignments  for  filing  by  the  Assignees  in all
appropriate  jurisdictions  for  purposes  of  perfecting  the security interest
granted  to  the  Assignees  hereunder.

     4.     NO PERFORMANCE REQUIRED BY ASSIGNEE: The Assignees do  not and shall
not  at  any  time have any obligation in respect of the Collateral by reason or
arising  out  of this Assignment or any document or action relating thereto, nor
shall  the  Assignees  be  required  or  obligated  in any manner to perform any
obligation of Assignor or to present or file any claim, or take any other action
to  collect  or  enforce the payment of any amounts in respect of the Collateral
which  may  have been assigned to the Assignees or to which the Assignees are or
may  be  entitled  to  hereunder.

<PAGE>

     5.     FURTHER  ASSURANCES:  Assignor  hereby  agrees,  promptly  upon
Assignees'  request,  to execute such further documents and other instruments as
shall  be  required  by  the  Assignees  from  time  to  time.

MERLIN  SOFTWARE  TECHNOLOGIES
INTERNATIONAL,  INC.

     By:  /s/  Robert  Heller
          -------------------
   Name:  Robert  Heller
   Title: President

PROVINCE  OF  BRITISH  COLUMBIA     )
                                    )ss.
CANADA                              )

     Before me, the undersigned, a Notary Public in and for the county aforesaid
on  this 21st day of August, 2000, personally appeared Robert Heller to me known
personally,  and  who,  being  by me duly sworn, deposes and says that he is the
President  of  Merlin  Software  Technologies  International,  Inc.,  and  that
foregoing  instrument  was  signed on behalf of said corporation by authority of
its  Board  of Directors, and said Robert Heller acknowledged said instrument to
be  the  free  act  and  deed  of  said  corporation.

     /s/  Virgil  Z.  Hlus
     ---------------------
Notary  Public
My  commission  expires:  N/A
Virgil  Z.  Hlus
Barrister  and  Solicitor
800  -  885  West  Georgia  Street
Vancouver,  B.C.  V6C  3H1
Telephone:  (604)  687-5700

<PAGE>

                                   EXHIBIT "B"

                             NOTICE  OF  ASSIGNMENT
                                       AND
                             IRREVOCABLE  AUTHORITY

From:

To:

Date:     _____________________

Ladies  and  Gentlemen:

     Reference is hereby made to those certain payment obligations between us as
set  forth  in  Schedule  1 attached hereto, (the "Obligations") relating, among
other  things,  to  the  __________________________________.

     We  have  assigned  the  benefit  and  proceeds  of  said  Obligations  to
Narragansett  I,  L.P., Narragansett Offshore Ltd.,  Pequot Scout Fund, L.P. and
SDS  Merchant  Fund,  L.P., (the "Secured Parties") and this will constitute our
irrevocable  authority  and instruction to you to pay to the Secured Parties all
monies  from  time to time owing or to become due from you to us with respect to
the  Obligations.

     The  monies  are  to  be  sent  by  telegraphic  transfer  to:

     This  authority  and instruction is coupled with an interest and may not be
revoked  or altered without the prior consent in writing of the Secured Parties.

     Please  sign  the  acknowledgment and confirmation as enclosed herewith and
return it as soon as possible to the Secured Parties at the address indicated on
such acknowledgment, including your confirmation of the amounts to become due in
accordance  with  said  Obligations:

By:_____________________________
   Name:
   Title:SUBSIDIARY  SECURITY  AGREEMENT

     THIS  SECURITY  AGREEMENT (this "Agreement") is made and entered into as of
August 18, 2000 by MERLIN SOFTWARE TECHNOLOGIES, Inc., a Nevada corporation (the
"Grantor"),  in  favor  of the Holders (as set forth in Schedule 2) of the Notes
(each  a  "Secured  Party"  and  collectively  the  "Secured  Parties").  All
capitalized  terms  used  but  not  otherwise  defined  herein  shall  have  the
respective  meanings  assigned  thereto  in  the  Purchase Agreement (as defined
below):

     W  I  T  N  E  S  S  E  T  H  :

     WHEREAS, the Grantor, Merlin Software Technologies International, Inc. (the
"Borrower")  and  the  Secured  Parties  have entered into that certain Note and
Warrant  Purchase  Agreement  dated  as of August 18, 2000 (as from time to time
amended,  supplemented  or  otherwise  modified,  the "Purchase Agreement"); and

     WHEREAS,  as  collateral  security  for  payment  and  performance  of  the
Borrower's  obligations  under the Purchase Agreement, the Notes and the Related
Documents,  Grantor  is  willing  to  grant  to  the  Secured Parties a security
interest  in  certain  of  its  personal  property  and  assets;  and

     NOW,  THEREFORE,  in  order to induce the Secured Parties to enter into the
Purchase  Agreement  and  the  Related  Documents  and  in  consideration of the
premises  and  the  mutual covenants contained herein, the parties hereto hereby
agree  follows:

     1.     GRANT  OF  SECURITY INTEREST. As collateral security for the payment
and  satisfaction  of  all  of  the  Borrower's  Obligations  under the Purchase
Agreement,  the  Notes  and  the  Related  Documents (collectively, the "Secured
Obligations"),  the  Grantor  hereby  affirms,  grants,  pledges and assigns, or
reaffirms,  regrants  and continues its pledge and collateral assignment, as the
case  may  be,  to  the  Secured Parties and continues and grants to the Secured
Parties  a  continuing  first  priority  security  interest in and to all of the
following  property  of  Grantor,  whether  now  owned  or existing or hereafter
acquired  or  arising  and  wheresoever  located:

     (a)     All  accounts,  accounts  receivable,  contracts,  notes,  bills,
acceptances,  chooses in action, chattel paper, instruments, documents and other
forms  of obligations at any time owing to the Grantor arising out of goods sold
or  leased  or for services rendered by Grantor, the proceeds thereof and all of
Grantor's  rights  with respect to any goods represented thereby, whether or not
delivered,  goods  returned  by  customers and all rights as an unpaid vendor or
lienor,  including rights of stoppage in transit and of recovering possession by
proceedings  including  replevin  and  reclamation,  together  with all customer
lists,  books  and  records, ledger and account cards, computer tapes, software,
disks,  printouts  and  records,  whether now in existence or hereafter created,
relating  thereto  (collectively  referred  to hereinafter  as  "Accounts");

<PAGE>

     (b)     All  inventory  of  the  Grantor, including without limitation, all
goods  manufactured  or  acquired  for  sale  or lease, and any piece goods, raw
materials,  work  in  process  and  finished  merchandise, findings or component
materials,  and  all  supplies,  goods,  incidentals, office supplies, packaging
materials  and  any  and  all  items  used  or  consumed in the operation of the
business  of  Grantor  or which may contribute to the finished product or to the
sale,  promotion  and  shipment  thereof,  in  which  Grantor now or at any time
hereafter  may have an interest, whether or not the same is in transit or in the
constructive,  actual or exclusive occupancy or possession of Grantor or is held
by  Grantor  or  by  others  for  Grantor's  account  (collectively  referred to
hereinafter  as  "Inventory");

     (c)     All  goods  of  the  Grantor,  including  without  limitation,  all
machinery,  equipment,  parts, supplies, apparatus, appliances, tools, patterns,
molds, dies, blueprints, fittings, furniture, furnishings, fixtures and articles
of tangible personal property of every description now or hereafter owned by the
Grantor  or  in which Grantor may have or may hereafter acquire any interest, at
any  location  (collectively  referred  to  hereinafter  as  "Equipment");

     (d)     All general intangibles of the Grantor in which the Grantor now has
or  hereafter  acquires  any  rights,  including  but  not limited to, causes of
action,  corporate  or  business  records,  inventions, designs, patents, patent
applications,  trademarks,  trademark  registrations  and applications therefor,
goodwill,  trade  names,  trade  secrets, trade processes, copyrights, copyright
registrations and applications therefor, licenses, permits, franchises, customer
lists, computer programs, all claims under guaranties, tax refund claims, rights
and  claims  against  carriers  and  shippers,  leases,  claims  under insurance
policies,  all  rights  to  indemnification  and  all  other intangible personal
property  and  intellectual  property  of  every  kind  and nature (collectively
referred  to  hereinafter  as  "General  Intangibles");

     (e)     All  rights  now  or  hereafter  accruing  to  the  Grantor  under
contracts,  leases, agreements or other instruments to perform services, to hold
and  use land and facilities, and to enforce all rights thereunder (collectively
referred  to  hereinafter  as  "Contract  Rights");

     (f)     All  books  and  records  relating  to  any  of  the Collateral (as
hereinafter defined) (including without limitation, customer data, credit files,
computer  programs,  printouts,  and other computer materials and records of the
Grantor  pertaining  to  any  of  the  foregoing);  and

     (g)     All accessions to, substitutions for and all replacements, products
and  proceeds  of  the  foregoing,  including  without  limitation  proceeds  of
insurance  policies  insuring  the  Collateral  (as  hereinafter  defined).

     All  of the property and interests in property described in subsections (a)
through  (g)  and  all  other  property and interests in personal property which
shall, from time to time, secure the Secured Obligations are herein collectively
referred  to  as  the  "Collateral."

<PAGE>

     2.     FINANCING  STATEMENTS.  At  the time of execution of this Agreement,
the  Grantor  shall  have  furnished  the Secured Parties with properly executed
financing  statements,  amendments  and assignments as prescribed by the Uniform
Commercial  Code  or the British Columbia Personal Property Security Act, as the
case  may  be,  as  presently  in  effect  in the states where the Collateral is
located,  prepared  and  approved  by  the  Secured  Parties  in form and number
sufficient for filing wherever required with respect to the Collateral, in order
that  the  Secured  Parties have a duly perfected security interest of record in
the  Collateral,  to  the  extent  a security interest in such Collateral can be
perfected  by  filing  a  financing  statement,  following  the  filing  of such
financing  statements  with  the  appropriate  local  and  state  governmental
authorities,  subject  only  to  Permitted  Liens.  The Grantor shall execute as
reasonably  required  by the Secured Parties any additional financing statements
or  other documents to effect the same, together with any necessary continuation
statements  so  long  as  this  Agreement  remains  in  effect.

     3.     MAINTENANCE  OF  SECURITY  INTEREST.  The Grantor will, from time to
time,  upon  the request of the Secured Parties, deliver specific assignments of
Collateral,  together  with  such  other  instruments  and  documents, financing
statements,  amendments  thereto,  assignments  or other writings as the Secured
Parties  may  reasonably  request to carry out the terms of this Agreement or to
protect  or  enforce  the  Secured Parties' security interest in the Collateral.

     With  respect  to  any  and all Collateral to be secured and conveyed under
this  Agreement,  the  Grantor  agrees  to  do  and  cause to be done all things
necessary  to  perfect  and  keep in full force the security interest granted in
favor  of the Secured Parties, including, but not limited to, the prompt payment
of all fees and expenses incurred in connection with any filings made to perfect
or  continue  a  security  interest  in  the  Collateral in favor of the Secured
Parties.

     The  Grantor  agrees  to  make  appropriate  entries  upon  its  financial
statements  and  books  and  records  disclosing  the  Secured Parties' security
interest  granted  hereunder.

     4.     RECEIPT OF PAYMENT. In the event an Event of Default (as hereinafter
defined)  shall  occur  and  be  continuing  and  the  Grantor  (or  any  of its
affiliates,  subsidiaries,  stockholders,  directors,  officers,  employees  or
agents)  shall  receive any proceeds of Collateral, including without limitation
monies,  checks,  notes, drafts or any other items of payment, the Grantor shall
hold  all  such  items  of  payment in trust for the Secured Parties, and as the
property  of the Secured Parties, separate from the funds of the Grantor, and no
later  than  the  first  Business Day following the receipt thereof, the Grantor
shall  cause the same to be forwarded to the Secured Parties for its custody and
possession  as  additional  Collateral.

5.     COLLECTIONS.  The  Grantor  hereby authorizes the Secured Parties, at all
times  after  the  occurrence and during the continuation of an Event of Default
(a)  to  open  Grantor's mail and collect any and all amounts due to the Grantor
from Persons obligated on any Accounts ("Account Debtors"); and (b) to take over
the  Grantor's  post  office  boxes  or  make  other arrangements as the Secured
Parties  deem  necessary  to receive the Grantor's mail, including notifying the
post

<PAGE>

     office authorities to change the address for delivery of the Grantor's mail
to  such  address  as  the  Secured  Parties  may  designate.

     6.     ASSIGNMENTS  OF  ACCOUNTS; NOTICE TO ACCOUNT DEBTORS. Simultaneously
with  the  execution  hereof,  Grantor  shall have executed and delivered to the
Secured  Parties  (i) a Subsidiary Assignment of Collateral substantially in the
form  of  Exhibit  "A"  attached  hereto  ("Subsidiary  Assignment"),  and  (ii)
sufficient copies of a Subsidiary Notice of Assignment and Irrevocable Authority
substantially  in the form of Exhibit "B" attached hereto ("Subsidiary Notice of
Assignment"),  which  shall  be retained by the Secured Parties for use upon the
occurrence  of  an  Event  of  Default.

     Upon  the occurrence of an Event of Default or in the event of a "Change in
Control"  (as hereinafter defined), Grantor shall be deemed to have assigned the
Collateral  to the Secured Parties pursuant to the Subsidiary Assignment and the
Grantor  shall  irrevocably  instruct all account debtors to make payment of all
monies  payable  pursuant to the respective Accounts to the Secured Parties.  In
this respect, Grantor shall notify each Account Debtor of the assignment of such
proceeds  to the Secured Parties hereunder pursuant to the Subsidiary Notices of
Assignment,  which,  in such event, the Secured Parties are expressly authorized
by  the  Grantor  to  deliver to each such Account Debtor.  For purposes of this
Agreement,  "Change in Control" shall mean any one or more of the following: (i)
a sale, transfer or other disposition of all or substantially all of the capital
stock  of  the  Grantor;  (ii)  a  sale, transfer or other disposition of all or
substantially  all  of  the  assets  of  the  Grantor;  or  (iii)  any  merger,
consolidation or other combination that includes the Grantor, whether or not the
Grantor  is  the surviving entity of any such transaction.  For purposes of this
Agreement,  the  Grantor  hereby  appoints  the  Secured  Parties  as  Grantor's
attorney-in-fact  with  full  power  of  substitution  to execute and deliver on
behalf  of Grantor the Subsidiary Assignment and Subsidiary Notice of Assignment
herein described upon the occurrence of an Event of Default or in the event of a
Change  in  Control,  which power of attorney is coupled with an interest and is
irrevocable.

     7.     COVENANTS.  The Grantor covenants with the Secured Parties that from
and after the date of this Agreement until termination hereof in accordance with
Section  28  hereof:

     (a)    INSPECTION.  Upon  the occurrence of an Event of Default or an event
that  with  the giving of notice or the passage of time would be deemed an Event
of Default, the Secured Parties (by any of their officers, employees and agents)
shall  have  the  right upon its request and prior notice, and at any reasonable
times  during the Grantor's usual business hours, to inspect the Collateral, all
records  related thereto (and to make extracts or copies from such records), and
the  premises  upon  which  any  of  the  Collateral  is located, to discuss the
Grantor's  affairs and finances with any Person (other than Account Debtors) and
to  verify  with  any  Person  other  than  Account Debtors the amount, quality,
quantity,  value  and  condition  of,  or  any  other  matter  relating  to, the
Collateral  and,  if  an  Event  of  Default  has occurred and is continuing, to
discuss Grantor's affairs and finances with the Grantor's Account Debtors and to
verify the amount, quality, value and condition of, or any other matter relating
to,  the  Collateral  and such Account Debtors. Upon or after the occurrence and
during  the  continuation of an Event of Default, the Secured Parties may at any
time

<PAGE>

     and  from  time  to  time  employ  and maintain on the Grantor's premises a
custodian  selected  by  the Secured Parties who shall have full authority to do
all  acts  necessary  to  protect  the  Secured  Parties interest.  All expenses
incurred  by  the  Secured Parties by reason of the employment of such custodian
shall  be  paid  by the Grantor, added to the Secured Obligations and secured by
the  Collateral.

     (b)     ASSIGNMENTS,  RECORDS  AND SCHEDULES OF ACCOUNTS. The Grantor shall
keep  accurate and complete records of its Accounts ("Account Records") and from
time  to  time  at intervals designated by the Secured Parties the Grantor shall
provide  the  Secured  Parties with a schedule of Accounts in form and substance
acceptable to the Secured Parties describing all Accounts created or acquired by
the  Grantor  ("Schedule  of  Accounts");  provided, however, that the Grantor's
failure to execute and deliver any such Schedule of Accounts shall not affect or
limit  the  Secured  Parties'  security  interest  or other rights in and to any
Accounts.  If  requested  by  the Secured Parties, the Grantor shall furnish the
Secured Parties with copies of proof of delivery and other documents relating to
the  Accounts so scheduled, including without limitation repayment histories and
present status reports (collectively, "Account Documents") and such other matter
and  information relating to the status of then existing Accounts as the Secured
Parties  shall  request.  The  Grantor  shall  not remove any Account Records or
Account  Documents  or  change  its  chief executive offices from Suite 420-6450
Roberts  Street, Burnaby, British Columbia, Canada V5G 4E1 (the "Chief Executive
Office")  hereto  without 30 days prior written notice to the Secured Parties as
provided  in  Section  21  hereof  and  delivery  to  the Secured Parties by the
applicable  Grantor  prior  to  such  removal  of executed financing statements,
amendments  and  other  documents  necessary  to maintain the security interests
granted  hereunder.

     (c)     NOTICE  REGARDING  DISPUTED  ACCOUNTS. In the event any amounts due
and owing in excess of $10,000 are in dispute between any Account Debtor and the
Grantor  (which  shall include without limitation any dispute in which an offset
claim or counterclaim may result), the Grantor shall provide the Secured Parties
with  written  notice  thereof  as soon as practicable, explaining in detail the
reason  for  the  dispute,  all  claims  related  thereto  and  the  amount  in
controversy.

     (d)     VERIFICATION  OF ACCOUNTS.  If an Event of Default has occurred and
is  continuing, each of the Secured Parties' officers, employees or agents shall
have  the  right,  at  any  reasonable  time  or times hereafter, to verify with
Account  Debtors  the  validity,  amount  or  any  other  matter relating to any
Accounts  and,  whether  or  not  an  Event of Default has occurred, each of the
Secured  Parties'  officers,  employees or agents shall have the right to verify
the  same  with  the  Grantor.

     (e)     CHANGE OF TRADE STYLES. Grantor shall  not  change,  amend,  alter,
terminate,  or  cease  using  its  material trade names or styles under which it
sells  Inventory  as  of  the  date  of  this Agreement ("Trade Styles"), or use
additional  Trade  Styles,  without giving the Secured Parties at least 30 days'
prior  written  notice  and  delivery  to  the Secured Parties by the applicable
Grantor  prior  to  such  removal,  change,  amendment,  alteration,  or use, of
executed  financing

<PAGE>

     statements,  amendments  and  other  documents  necessary  to  maintain the
security  interests  granted  hereunder.

     (f)     SAFEKEEPING OF INVENTORY.  The Grantor shall be responsible for the
safekeeping  of  its  Inventory,  and, subject to Section 16 hereof, in no event
shall  the  Secured  Parties  have  any  responsibility  for:

     (i)     Any loss or damage to Inventory or destruction thereof occurring or
arising  in  any  manner  or  fashion  from  any  cause;

     (ii)    Any  diminution  in  the  value  of  Inventory;  or

     (iii)   Any  act  or  default  of  any  carrier,  warehouseman,  bailee  or
forwarding  agency  thereof  or other Person in any way dealing with or handling
Inventory.

     (g)     LOCATION,  RECORDS  AND  SCHEDULES OF INVENTORY.  The Grantor shall
keep  correct  and  accurate  records  itemizing  and describing the kind, type,
location  and  quantity of Inventory, its cost therefor and the selling price of
Inventory  held  for  sale,  and  the  daily withdrawals therefrom and additions
thereto,  and  shall  furnish  to  the  Secured  Parties  from  time  to time at
reasonable  intervals  designated  by the Secured Parties, a current schedule of
Inventory  ("Schedule  of  Inventory")  based  upon  its  most  recent  physical
inventory  and its daily inventory records. The Grantor shall conduct a physical
inventory,  no less than annually, and shall furnish to the Secured Parties such
other  documents  and  reports  thereof  as the Secured Parties shall reasonably
request  with respect to the Inventory.  Subject to compliance at all times with
Sections  10(c),  (d) and (e), the Grantor shall not, other than in the ordinary
course  of  business,  remove  any  material  amount of Inventory from the Chief
Executive  Office without 30 days prior written notice to the Secured Parties as
provided in Section 21 hereof and delivery to the Secured Parties by the Grantor
prior  to  such  removal  of executed financing statements, amendments and other
documents  necessary  to  maintain  the  security  interests  granted hereunder.

     (h)     RETURNS  OF INVENTORY.  If any Account Debtor returns any Inventory
to  the  Grantor  after  shipment thereof, and such return generates a credit in
excess  of  $10,000  in the aggregate on any Account or Accounts of such Account
Debtor,  the  Grantor  shall  notify  the Secured Parties of the same as soon as
practicable.

     (i)     EVIDENCE  OF  OWNERSHIP  OF  EQUIPMENT.  The  Grantor,  as  soon as
practicable  following  a request therefor by the Secured Parties, shall deliver
to the Secured Parties any and all evidence of ownership of any of the Equipment
(including without limitation certificates of title and applications for title).

     (j)     LOCATION, RECORDS AND SCHEDULES OF  EQUIPMENT.  The  Grantor  shall
maintain  accurate,  itemized  records  itemizing and describing the kind, type,
quality,

<PAGE>

     quantity  and  value of its Equipment and shall furnish the Secured Parties
upon  request with a current schedule containing the foregoing information, but,
other  than  during  the continuance of an Event of Default, not more often than
once  per  fiscal quarter.  The Grantor shall not remove any material portion of
the  Equipment  from  the Chief Executive Office without at least 30 days' prior
written  notice  to  the  Secured  Parties  as provided in Section 21 hereof and
delivery to the Secured Parties by the Grantor prior to such removal of executed
financing  statements,  amendments and other documents necessary to maintain the
security  interests  granted  hereunder.

     (k)     SALE  OR  MORTGAGE OF EQUIPMENT.  Other than in the ordinary course
of  business with respect to disposition of obsolescent Equipment or replacement
of  Equipment  with  other  Equipment  performing  similar  functions and having
similar  or  better  utility  and value, and except as permitted by the Purchase
Agreement  prior  to  the occurrence and continuance of an Event of Default, the
Grantor shall not sell, exchange, lease, mortgage, encumber, pledge or otherwise
dispose  of  or  transfer  any  of the Equipment or any part thereof without the
prior  written  consent  of  the  Secured  Parties.

     (l)     MAINTENANCE  OF EQUIPMENT.  The Grantor shall keep and maintain its
Equipment  in  good  operating  condition  and  repair,  ordinary  wear and tear
excepted.  The  Grantor  shall  not permit any such items to become a fixture to
real  property  (unless  Grantor  has granted the Secured Parties a lien on such
real  property)  or  accessions  to  other  personal  property.

     8.     GENERAL  WARRANTIES  AND  REPRESENTATIONS

     (a)     The  Grantor  warrants  and  represents  that  it is and, except as
permitted  by  the  Purchase  Agreement,  will  continue  to be the owner of the
Collateral  hereunder,  now owned and upon the acquisition of the same, free and
clear  of  all Liens, claims (other thatn those claims set forth in Schedule 3.9
to  the  Purchase Agreement), encumbrances and security interests other than the
security interest in favor of the Secured Parties hereunder and Permitted Liens,
and  that  it  will defend such Collateral and any products and proceeds thereof
against  all  claims and demands of all Persons (other than holders of Permitted
Liens)  at  any  time  claiming  the same or any interest therein adverse to the
Secured  Parties.

     (b)    The Grantor has the full legal right and power and all authority and
approval  required  to  enter  into,  execute  and deliver this Agreement and to
perform  fully each of its respective obligations hereunder.  This Agreement has
been  duly  executed  and  delivered  and  constitutes  the  valid  and  binding
obligation  of  the  Grantor enforceable in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation  or  similar  laws  relating  to  creditor's  rights  generally.  No
approval  or  consent  of  any  foreign, federal, state, country, local or other
governmental  or regulatory body, and no approval or consent of any other person
is required in connection with the execution and delivery by the Grantor of this
Agreement,  and  the  consummation and performance by each of the undersigned of
the  transactions  contemplated  hereby.  The  execution  and  delivery  of this
Agreement  and  the  consummation  of  the  transactions contemplated under this
Agreement  will  not  conflict  with or result in the breach or violation of any

<PAGE>

     of  the  terms  or conditions of, or constitute (or with notice or lapse of
time or both would constitute) a default under any instrument, contract or other
agreement  to  which  either  the Grantor is a party or by or to which it or its
assets  or  properties  are  bound  or subject or any statute or any regulation,
order,  judgment  or  decree  of  any  court or governmental or regulatory body.

     9.     ACCOUNT  WARRANTIES  AND  REPRESENTATIONS.  With  respect  to  its
Accounts,  the  Grantor  warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by Grantor on
or  with  respect  to  any Schedule of Accounts prepared and delivered by it and
that:

     (a)     All  Account  Records and Account Documents are located only at the
Chief  Executive  Office;

     (b)     The  Accounts are genuine, are in all respects what they purport to
be,  are  not  evidenced  by  an  instrument  or document or, if evidenced by an
instrument  or  document,  are  only  evidenced  by  one  original instrument or
document;

     (c)     The  Accounts  cover  bona  fide  sales and deliveries of Inventory
usually  dealt  in  by  Grantor,  or the rendition by Grantor of services, to an
Account  Debtor  in  the  ordinary  course  of  business  or as permitted by the
Purchase  Agreement;

     (d)     The  amounts of the face value shown on any Schedule of Accounts or
invoice  statement delivered to the Secured Parties with respect to any Account,
are  actually  owing to Grantor and are not contingent for any reason; and there
are  no setoffs, discounts, allowances, claims, counterclaims or disputes of any
kind  or  description in an amount greater than $10,000 in the aggregate for all
Account  Debtors, or greater than $2,500 individually, existing or asserted with
respect  thereto  and Grantor has not made any agreement with any Account Debtor
thereunder  for any deduction therefrom, except as may be stated in the Schedule
of  Accounts  and  reflected  in  the  calculation  of  the  face  value of each
respective  invoice  related  thereto;

     (e)     Except  for  conditions  generally applicable to Grantor's industry
and  markets,  there  are  no  facts,  events,  or  occurrences known to Grantor
pertaining  particularly  to  any  Accounts  which  are  reasonably  expected to
materially  impair  in  any  way  the validity, collectibility or enforcement of
Accounts  that  would  reasonably be likely, in the aggregate, to be of material
economic  value,  or  in  the  aggregate  materially  reduce  the amount payable
thereunder  from  the  amount of the invoice face value shown on any Schedule of
Accounts, and on all contracts, invoices and statements delivered to the Secured
Parties,  with  respect  thereto;

     (f)     The  goods or services giving rise thereto are not, and were not at
the  time  of  the  sale  or  performance  thereof,  subject to any Lien, claim,
encumbrance  or security interest, except those of the Secured Parties and those
removed  or  terminated  prior  to  the  date  hereof  and  Permitted  Liens;

<PAGE>

     (g)     The  Accounts have not been pledged to any Person other than to the
Secured Parties under this Agreement and will be owned by Grantor free and clear
of any Liens, claims, encumbrances or security interests except Permitted Liens;

     (h)     The  Secured Parties' security interest therein will not be subject
to  any  offset, deduction, counterclaim, Lien or other adverse condition, other
than  Permitted  Liens;  and

     (i)     Grantor  shall  deliver  to  the Secured Parties written notice not
less  than  30  days  prior to any change of the location of the Chief Executive
Office  or  status  of  places  of  business  or  residency.

     10.     INVENTORY  WARRANTIES  AND  REPRESENTATIONS.  With  respect  to its
Inventory,  the  Grantor warrants and represents to the Secured Parties that the
Secured  Parties  may  rely  on  all  statements  or representations made by the
Grantor  on  or  with  respect  to  any  Inventory  and  that:

     (a)     All  Inventory  is  located  only  at  the  locations  set forth on
Schedule  1  hereto;

     (b)     None  of the Grantor's Inventory is or will be subject to any Lien,
claim  (other  than  those  claims  set  forth  in  Schedule 3.9 to the Purchase
Agreement), encumbrance or security interest whatsoever, except for the security
interest  of  the  Secured  Parties  hereunder  and  Permitted  Liens;

     (c)     No Inventory of the Grantor that would reasonably be likely, in the
aggregate with the Inventory of all Account Debtors, to be of value in excess of
$10,000  is,  and  shall  not  at  any time or times hereafter be, stored with a
bailee,  warehouseman,  or  similar  party  without  the  Secured Parties' prior
written  consent  and,  if  the  Secured Parties give such consent, Grantor will
concurrently  therewith cause any such bailee, warehouseman, or similar party to
issue  and  deliver  to the Secured Parties upon their request therefor, in form
and  substance  reasonably acceptable to the Secured Parties, warehouse receipts
therefor in the Secured Parties' name and take such other action and be party to
such  document as deemed necessary or prudent by the Secured Parties to maintain
the  security  interest  of  the  Secured  Parties  in  such  Inventory;

     (d)     No  Inventory  is, and shall not at any time or times hereafter be,
under  consignment  to  any Person, the value of which, when aggregated with all
other  Inventory  under  consignment  of the Grantor,  would exceed $10,000; and

     (e)     No  Inventory is at or shall be kept at any location that is leased
by the Grantor from any other Person with contractual, statutory or other rights
to obtain a lien or security interest, or other right in any Inventory which may
take  priority over the lien or security interest of the Secured Parties, unless
such  lessor  waives  its  rights  with  respect  to  such Inventory in form and
substance  acceptable  to  the  Secured  Parties and delivered in writing to the
Secured  Parties  prior  to  such  amount of Inventory being at such one or more
locations.

<PAGE>

     11.     EQUIPMENT  REPRESENTATIONS  AND  WARRANTIES.  With  respect  to its
Equipment,  the  Grantor warrants and represents to the Secured Parties that the
Secured Parties may rely on all statements or representations made by Grantor on
or  with  respect  to  any  Equipment  and  that:

     (a)     All  Equipment  (except for any aircraft of the Grantor) is located
only  at  the  locations  set  forth  in  Schedule  1  hereto;

     (b)     None  of  its  Equipment  is  or will be subject to any Lien, claim
(other  than  those claims set forth in Schedule 3.9 to the Purchase Agreement),
encumbrance or security interest whatsoever, except for the security interest of
the  Secured  Parties,  hereunder  and  Permitted  Liens;

     (c)     No Equipment of Grantor is at or shall be kept at any location that
is  leased by Grantor from any other Person with contractual, statutory or other
rights  to  obtain  a lien or security interest, or other right in any Equipment
which  may  take  priority  over  the  lien  or security interest of the Secured
Parties,  unless such lessor waives its rights with respect to such Equipment in
form and substance acceptable to the Secured Parties and delivered in writing to
the  Secured Parties prior to such amount of Equipment being at such one or more
locations.

     12.     CASUALTY  AND  LIABILITY  INSURANCE  REQUIRED.

     (a)     The  Grantor  will keep the Collateral continuously insured against
such  risks  as  are  customarily insured against by businesses of like size and
type  engaged  in the same or similar operations including, without limiting the
generality  of  any  other  covenant  herein  contained:

(i)     casualty  insurance  on the Inventory and the Equipment in an amount not
less  than  the  full  insurable value thereof, against loss or damage by theft,
fire  and  lightning  and  other hazards ordinarily included under uniform broad
form standard extended coverage policies, limited only as may be provided in the
standard  broad  form of extended coverage endorsement at the time in use in the
states  in  which  the  Collateral  is  located;

(ii)     comprehensive  general  liability  insurance  against claims for bodily
injury,  death  or property damage occurring with or about such Collateral (such
coverage to include provisions waiving subrogation against the Secured Parties),
with  the  Secured  Parties as additional insured parties and as loss payees, in
amounts  as  shall  be  reasonably  satisfactory  to  the  Secured  Parties;

(iii)     liability  insurance  with  respect to the operation of its facilities
under  the  workers' compensation laws of the states in which such Collateral is
located;  and

<PAGE>

(iv)     business  interruption  insurance.

     (b)     Each  insurance policy obtained in satisfaction of the requirements
of  Section  12(a)  hereof:

(i)     may  be  provided by blanket policies now or hereafter maintained by the
Grantor;

(ii)     shall  be  issued by such insurer (or insurers) as shall be financially
responsible,  of  recognized  standing  and reasonably acceptable to the Secured
Parties;

(iii)     shall  be  in  such  form  and have such provisions (including without
limitation  the  loss  payable  clause,  the  waiver  of subrogation clause, the
deductible  amount,  if  any, and the standard mortgagee endorsement clause), as
are  generally considered standard provisions for the type of insurance involved
and  are  reasonably  acceptable  in  all  respects  to  the  Secured  Parties;

(iv)     shall prohibit cancellation or substantial modification, termination or
lapse  in coverage by the insurer without at least 30 days' prior written notice
to  the  Secured  Parties, except for non-payment of premium, in which case such
policies  shall  provide  ten  (10)  days'  prior  written  notice;

(v)     without limiting the generality of the foregoing, all insurance policies
where applicable under Section 12(a)(i) carried on the Collateral shall name the
Secured  Parties  as  loss  payees  and  as  insured  parties  thereunder.

     (c)     Prior  to  the  expiration  of  any  such policy, the Grantor shall
furnish  the  Secured  Parties with evidence satisfactory to the Secured Parties
that  the  policy  or  certificate  has been renewed or replaced or is no longer
required  by  this  Agreement.

     (d)     The  Grantor hereby irrevocably makes, constitutes and appoints the
Secured Parties (and all officers, employees or agents designated by the Secured
Parties) effective upon the occurrence and during the continuance of an Event of
Default,  as  the Grantor's true and lawful attorney (and agent-in-fact) for the
purpose  of  making,  settling  and  adjusting  claims  under  such  policies of
insurance,  endorsing the name of the Grantor on any check, draft, instrument or
other  item  or  payment  for the proceeds of such policies of insurance and for
making  all  determinations  and  decisions  with  respect  to  such policies of
insurance.

<PAGE>

     (e)     In  the  event the Grantor shall fail to maintain, or fail to cause
to  be  maintained, the full insurance coverage required hereunder or shall fail
to  keep  any of its Collateral in good repair and good operating condition, the
Secured  Parties  may  (but shall be under no obligation to), without waiving or
releasing  any  Secured  Obligation  or  Event  of Default by Grantor hereunder,
contract for the required policies of insurance and pay the premiums on the same
or  make  any  required  repairs,  renewals  and  replacements;  and all sums so
disbursed  by  the  Secured Parties, including reasonable attorneys' fees, court
costs, expenses and other charges related thereto, shall be payable on demand by
Grantor  to  the  Secured  Parties  and  shall be additional Secured Obligations
secured  by  the  Collateral.

     (f)     The  Grantor  agrees  that  to  the  extent that it shall not carry
insurance required by Section 12(a) hereof, it shall in the event of any loss or
casualty pay promptly to the Secured Parties, for application in accordance with
the  provisions of Section 12(h) hereof, such amount as would have been received
as  Net  Proceeds  (as  hereinafter  defined)  by the Secured Parties, under the
provisions of Section 12(h) hereof had such insurance been carried to the extent
required.

     (g)     The  Net  Proceeds  of  the  insurance  carried  pursuant  to  the
provisions  of  Sections  12(a)(ii)  and  12(a)(iii)  hereof shall be applied by
Grantor  toward  extinguishment  of  the  defect or claim or satisfaction of the
liability  with  respect  to  which  such  insurance  proceeds  may  be  paid.

     (h)     The  Net  Proceeds  of  the  insurance  carried with respect to the
Collateral  pursuant  to the provisions of Section 12(a)(i) hereof shall be paid
to Grantor and held by Grantor in a separate account and applied as follows: (i)
as  long as no Event of Default shall have occurred and be continuing, after any
loss under any such insurance and payment of the proceeds of such insurance, the
Grantor  shall  have a period of 30 days after payment of the insurance proceeds
with  respect  to  such  loss  to  elect  to  either  (x)  repair or replace the
Collateral  so damaged, (y) deliver such Net Proceeds to the Secured Parties, as
additional  Collateral  or  (z)  apply  such  Net Proceeds to the acquisition of
tangible  assets  used  or useful in the conduct of the business of the Grantor,
subject  to the provisions of this Agreement. If the Grantor elects to repair or
replace  the  Collateral  so  damaged,  Grantor  agrees  the Collateral shall be
repaired  to  a condition substantially similar to its condition prior to damage
or  replaced  with  Collateral  in  a  condition  substantially  similar  to the
condition  of  the Collateral so replaced prior to damage; and (ii) at all times
during  which  an  Event of Default shall have occurred and be continuing, after
any  loss  under  such  insurance and payment of the proceeds of such insurance,
Grantor  shall  immediately deliver such Net Proceeds to the Secured Parties, as
additional  Collateral.

     (i)     "Net  Proceeds"  when  used  with respect to any insurance proceeds
shall  mean  the  gross proceeds from such proceeds, award or other amount, less
all  taxes,  fees  and  expenses  (including  attorneys'  fees)  incurred in the
realization  thereof.

     (j)     In case of any material damage to or destruction of all or any part
of the Collateral pledged hereunder  by  the  Grantor, Grantor shall give prompt
notice  thereof  to  the  Secured

<PAGE>

     Parties.  Each  such  notice shall describe generally the nature and extent
of  such  damage,  destruction,  taking,  loss, proceeding or negotiations.  The
Grantor  is  hereby  authorized  and  empowered to adjust or compromise any loss
under  any  such  insurance.

     13.     EVENTS OF DEFAULT.  It is understood and agreed that the occurrence
of  any  one  or  more  of  the following shall constitute an "Event of Default"
hereunder  and  shall  entitle  the  Secured Parties to take such actions as are
elsewhere  provided  in  this  Agreement in respect of Events of Default: (a) an
"Event  of  Default"  as  defined  in  the  Notes  shall  have  occurred  and be
continuing; or (b) the Borrower shall have failed to pay the Secured Parties all
of  the Secured Obligations owed by it to the Secured Parties in accordance with
the  Purchase Agreement, the Notes and the Related Documents on the Business Day
on  which  the  Secured  Parties  have  demanded  such  payment;  or  (c)  any
representation  or warranty made by Grantor herein, in the Purchase Agreement in
or  in  any  other  existing or future agreement with any of the Secured Parties
(including the Related Documents) shall prove to have been false in any material
respect  when made; or (d) any covenant made by Grantor herein (other than those
covenants  contained  in  Sections  7(a)  hereof)  is breached, violated, or not
complied with and not cured within 30 days after notice thereof from the Secured
Parties;  provided,  however,  that any breach, violation or non-compliance with
any  covenant  contained  in  Section 7(a) hereof shall immediately result in an
Event  of  Default;  or  (e)  any  covenant made by Grantor in any other Related
Document or any future agreement with the Secured Parties is breached, violated,
or  not  complied with and not cured within any grace period applicable thereto,
or  if  no  grace  period  is  applicable and default thereunder does not result
immediately  from such noncompliance, then not cured within 30 days after notice
thereof  from  the  Secured Parties, and results in a material adverse change to
the  Collateral  taken  as  a  whole  or  its value taken as a whole; or (f) any
material  uninsured  damage  to  or  loss,  theft  or  destruction of any of the
Collateral  shall  occur.

     14.     RIGHTS  AND  REMEDIES  UPON AN EVENT OF DEFAULT.  Upon and after an
Event  of  Default,  the  Secured  Parties  shall  have the following rights and
remedies  in  addition  to  any  rights and remedies set forth elsewhere in this
Agreement,  all  of  which  may be exercised with or, if allowed by law, without
notice  to  Grantor:

     (a)     All of the rights and remedies of a secured party under the Uniform
Commercial  Code  of  the  state where such rights and remedies are asserted, or
under  other  applicable  law,  all  of  which  rights  and  remedies  shall  be
cumulative,  and  none  of  which shall be exclusive, to the extent permitted by
law,  in  addition to any other rights and remedies contained in this Agreement,
the  Purchase  Agreement,  the  Notes  or  the  Related  Documents;

     (b)     The  right  to foreclose the Liens and security instruments created
under  this  Agreement  by  any available judicial procedure or without judicial
process;

     (c)    The  right  to  (i) enter upon the premises of Grantor through self-
help  and  without judicial process, without first obtaining a final judgment or
giving  Grantor  notice  and  opportunity  for  a hearing on the validity of the
Secured Parties' claim and without any obligation to pay rent to Grantor, or any
other place  or  places  where  any  Collateral  is  located  and  kept,  and

<PAGE>

     remove  the  Collateral therefrom to the premises of the Secured Parties or
any  agent  of  the  Secured  Parties,  for such time as the Secured Parties may
desire, in order effectively to collect or liquidate the Collateral, and/or (ii)
require  Grantor to assemble the Collateral and make it available to the Secured
Parties  at  a  place to be designated by the Secured Parties that is reasonably
convenient  to  both  parties;

     (d)     The  right  to  (i)  demand  payment  of the Accounts; (ii) enforce
payment  of  the Accounts, by legal proceedings or otherwise; (iii) exercise all
of  the  Grantor's  rights  and  remedies  with respect to the collection of the
Accounts;  (iv)  settle,  adjust,  compromise, extend or renew the Accounts; (v)
settle,  adjust  or  compromise  any  legal  proceedings  brought to collect the
Accounts;  (vi) if permitted by applicable law, sell or assign the Accounts upon
such  terms,  for  such amounts and at such time or times as the Secured Parties
deem  advisable;  (vii) discharge and release the Accounts; (viii) take control,
in  any  manner,  of  any  item  of payment or proceeds referred to in Section 4
above;  (ix)  prepare,  file  and  sign  Grantor's  name  on a Proof of Claim in
bankruptcy or similar document against any Account Debtor; (x) prepare, file and
sign Grantor's name on any notice of Lien, assignment or satisfaction of Lien or
similar  document  in  connection  with  the  Accounts; (xi) endorse the name of
Grantor  upon  any  chattel  paper, document, instrument, invoice, freight bill,
bill  of  lading  or  similar  document or agreement relating to the Accounts or
Inventory;  (xii) use Grantor's stationery for verifications of the Accounts and
notices  thereof  to  Account Debtors; (xiii) use the information recorded on or
contained  in  any  data processing equipment and computer hardware and software
relating  to  any  Collateral to which Grantor has access; and (xiv) do all acts
and  things  and  execute  all documents necessary, in the Secured Parties' sole
discretion,  to  collect  the  Accounts;  and

     (e)  The right to sell, assign, lease or to otherwise dispose of all or any
Collateral in its then existing condition, or after any further manufacturing or
processing  thereof, at public or private sale or sales, with such notice as may
be  required  by law, in lots or in bulk, for cash or on credit, with or without
representations  and  warranties,  all  as  the  Secured  Parties, in their sole
discretion,  may  deem  advisable.  The  Secured Parties shall have the right to
conduct  such  sales on Grantor's premises or elsewhere and shall have the right
to  use  Grantor's premises without charge for such sales for such time or times
as  the  Secured  Parties may see fit.  The Secured Parties may, if they deem it
reasonable,  postpone or adjourn any sale of the Collateral from time to time by
an  announcement  at the time and place of such postponed or adjourned sale, and
such sale may, without further notice, be made at the time and place to which it
was  so  adjourned.  The  Grantor  agrees  that  the  Secured  Parties  have  no
obligation  to  preserve  rights  to  the Collateral against prior parties or to
marshall  any Collateral for the benefit of any Person.  The Secured Parties are
hereby  granted  a  license  or  other  right  to use, without charge, Grantor's
labels,  patents,  copyrights,  rights  of use of any name, trade secrets, trade
names,  trademarks  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 Grantor's rights under any license and any
franchise  agreement shall inure to the Secured Parties' benefit.  If any of the
Collateral shall require repairs, maintenance, preparation or the like, or is in
process or other unfinished state, the Secured Parties shall have the right, but
shall  not  be  obligated,  to  perform  such repairs, maintenance, preparation,
processing  or  completion  of

<PAGE>

     manufacturing  for the purpose of putting the same in such saleable form as
the  Secured  Parties shall deem appropriate, but the Secured Parties shall have
the  right  to  sell  or  dispose of the Collateral without such processing.  In
addition,  Grantor agrees that in the event notice is necessary under applicable
law,  written  notice mailed to Grantor in the manner specified herein seven (7)
days  prior  to the date of public sale of any of the Collateral or prior to the
date after which any private sale or other disposition of the Collateral will be
made  shall constitute commercially reasonable notice to Grantor.  All notice is
hereby  waived  with respect to any of the Collateral which threatens to decline
speedily  in value or is of a type customarily sold on a recognized market.  The
Secured  Parties may purchase all or any part of the Collateral at public or, if
permitted  by  law,  private  sale,  free  from any right of redemption which is
hereby  expressly  waived  by  Grantor  and,  in  lieu of actual payment of such
purchase  price,  may  set  off  the  amount  of  such price against the Secured
Obligations.  The  net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied first to the
expenses  (including  all  attorneys'  fees)  of  retaking,  holding,  storing,
processing  and  preparing  for  sale,  selling, collecting, liquidating and the
like,  and  then  to  the  satisfaction of all Secured Obligations.  Any sale or
other  disposition  of  the Collateral and the possession thereof by the Secured
Parties  shall be in compliance with all provisions of applicable law (including
applicable  provisions  of  the  Uniform Commercial Code).  The Grantor shall be
liable  to  the Secured Parties, and shall pay to the Secured Parties, on demand
any  deficiency  which  may  remain  after such sale, disposition, collection or
liquidation  of  the  Collateral.  The Secured Parties shall remit to Grantor or
other  Person  entitled  thereto  any surplus remaining after this Agreement has
been  terminated  in  accordance  with  Section  28  hereof.

     15.     ANTI-MARSHALLING  PROVISIONS.  The right is hereby given by Grantor
to the Secured Parties, to make releases (whether in whole or in part) of all or
any  part  of the Collateral agreeable to the Secured Parties without notice to,
or  the consent, approval or agreement of other parties and interests, including
junior lienors, which releases shall not impair in any manner the validity of or
priority  of  the  Liens  and  security  interests  in  the remaining Collateral
conferred  under such documents, nor release Grantor from personal liability for
the  Secured  Obligations  hereby secured.  Notwithstanding the existence of any
other  security  interest  in  the  Collateral  held by the Secured Parties, the
Secured  Parties shall have the right to determine the order in which any or all
of the Collateral shall be subjected to the remedies provided in this Agreement.
The proceeds realized upon the exercise of the remedies provided herein shall be
applied  by  the Secured Parties, in the manner herein provided.  Grantor hereby
waives any and all right to require the marshalling of assets in connection with
the  exercise  of  any  of  the remedies permitted by applicable law or provided
herein.

     16.     APPOINTMENT OF THE PARTIES  AS  GRANTOR'S  LAWFUL  ATTORNEY.
Without  limitation  of any other provision of this Agreement, upon and after an
Event  of  Default,  Grantor  irrevocably  designates,  makes,  constitutes  and
appoints  the  Secured  Parties  (and  all  Persons  designated  by  the Secured
Parties),  as Grantor's true and lawful attorney (and agent-in-fact) to take all
actions  and to do all things required to be taken or done by Grantor under this
Agreement.  All acts of the Secured Parties or their designees taken pursuant to
this Section 16 are hereby ratified and confirmed and the Secured Parties or its
designees  shall  not  be  liable  for  any

<PAGE>

     acts  of omission or commission nor for any error of judgment or mistake of
fact  or  law,  other  than  as  a  result  of  its  gross negligence or willful
misconduct.  This  power,  being  coupled  with  an  interest, is irrevocable by
Grantor  until  this Agreement has been terminated in accordance with Section 28
hereof.

     17.     RIGHTS  AND  REMEDIES CUMULATIVE; NON-WAIVER; ETC.  The enumeration
of  the  rights and remedies of the Secured Parties, set forth in this Agreement
is  not  intended  to be exhaustive and the exercise by the Secured Party of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative, and shall be in addition to any other right or
remedy  given  hereunder,  or  under any other agreement between Grantor and the
Secured Party or which may now or hereafter exist in law or in equity or by suit
or  otherwise.  No  delay  or  failure to take action on the part of the Secured
Party  in  exercising  any  right,  power or privilege shall operate as a waiver
thereof,  nor  shall  any single or partial exercise of any such right, power or
privilege  preclude  other  or  further  exercise thereof or the exercise of any
other  right,  power  or  privilege  or shall be construed to be a waiver of any
Event  of  Default.  No waiver by a party hereunder shall be effective unless it
is  in  writing and signed by the party making such waiver, and then only to the
extent  specifically  stated  in  such  writing.  No  course  of dealing between
Grantor  and  the  Secured  Parties  or the Secured Parties' agents or employees
shall  be  effective  to  change,  modify  or  discharge  any  provision of this
Agreement  or  to  constitute  a  waiver  of  any Event of Default.  The Secured
Parties  shall  not  have  any liability for any error, omission or delay of any
kind  occurring  in  the  handling  or  liquidation of the Collateral or for any
damages  resulting  therefrom, other than as a result of its gross negligence or
willful  misconduct.

     18.     SUPPLEMENTAL  DOCUMENTATION.  At  the Secured Parties' request, the
Grantor  shall  execute and deliver to the Secured Parties, at any time or times
hereafter,  all documents, instruments and other written matter that the Secured
Parties  may  request  to  perfect  and  maintain perfected the Secured Parties'
security  interest  in  the  Collateral, in form and substance acceptable to the
Secured  Parties, and pay all charges, expenses and fees the Secured Parties may
reasonably  incur  in  filing  any  of  such  documents,  and all taxes relating
thereto.  Grantor  agrees  that  a  carbon,  photographic,photostatic,  or other
reproduction  of  this  Agreement  or  a  financing statement is sufficient as a
financing  statement  and  may  be  filed  by  the Secured Parties in any filing
office.

     19.     WAIVERS.  In  addition  to  the  other  waivers  contained  herein,
Grantor hereby expressly waives, to the extent permitted by law: presentment for
payment, demand, protest, notice of demand, notice of protest, notice of default
or  dishonor,  notice  of  payments  and  nonpayments  and all other notices and
consents to any action taken by the Secured Parties unless expressly required by
this  Agreement.

     20.     TRADE  NAMES.  Grantor  represents  that  it  has no trade names or
styles.

     21.     NOTICE.  Any  notice  shall  be  conclusively  deemed  to have been
received  by  any party hereto and be effective on the day on which delivered to
such party (against  receipt therefor) at the address set forth below or such
other address as  such  party  shall  specify  to  the  other  parties

<PAGE>

     in  writing  (or,  in  the  case of telephonic notice or notice by telecopy
(where the receipt of such message is verified by return) expressly provided for
hereunder,  when  received at such telephone or telecopy number as may from time
to  time be specified in written notice to the other parties hereto or otherwise
received),  or  if  sent  prepaid by certified or registered mail return receipt
requested  on  the  third Business Day after the day on which mailed, or if sent
prepaid by a national overnight courier service, on the first Business Day after
the  day  on which delivered to such service against receipt therefor, addressed
to  such  party  at  said  address:

     (a)     if  to  Grantor:

Merlin  Software  Technologies,  Inc.
Suite  420-6450  Roberts  Street
Burnaby,  British  Columbia,  Canada  V5G4E1
Attention:  Robert  Heller
Telephone:  (604)  320-7227
Telefacsimile:  (604)  320-7277

             with  a  copy  to:

Clark,  Wilson
HSBC  Building,  800-885  West  Georgia  Street
Vancouver,  British  Columbia,  Canada  VGC3H1
Attention:  Virgil  Z.  Hlus,  Esq.
Telephone:  (604)  687-5700
Telefacsimile:  (604)  687-6314

     (b)     if  to  the  Secured  Parties:

Narragansett  Asset  Management,  LLC
375  Park  Avenue
New  York,  New  York  10152
Attn:  Managing  Director
Fax:  (212)  521-5027
Phone:  (212)  521-5029

             with  a  copy  to:

Kane  Kessler,  P.C.
1350  Avenue  of  the  Americas
New  York,  New  York  10019
Attention:  Robert  L.  Lawrence,  Esq.
Telephone:  (212)  541-6222
Telefacsimile:  (212)  245-3009

or  to  such other address as each party may designate for itself by like notice
given  in  accordance  with  this  Section  21.

22.     DEFINITIONS.  All  terms  used  herein  and  not  defined  in  Purchase
Agreement  shall  be  defined  in  accordance  with  the appropriate definitions
appearing  in  the  Uniform  Commercial

<PAGE>

     Code as in effect in New York, and such definitions are hereby incorporated
herein  by  reference  and  made  a  part  hereof.

     23.     ENTIRE  AGREEMENT.  This  Agreement,  together  with  the  Purchase
Agreement  and  other  Related  Documents,  constitutes and expresses the entire
understanding  between  the  parties  hereto  with respect to the subject matter
hereof,  and  supersedes  all  prior agreements and understandings, inducements,
commitments or conditions, express or implied, oral or written, except as herein
contained.  The  express  terms  hereof  control  and  supersede  any  course of
performance  or  usage  of  the trade inconsistent with any of the terms hereof.
Neither  this  Agreement  nor  any  portion  or provision hereof may be changed,
altered,  modified,  supplemented,  discharged, canceled, terminated, or amended
orally  or  in  any  manner other than by an agreement, in writing signed by the
parties  hereto.

     24.     LEASE ASSIGNMENT AND LANDLORD WAIVER.  If at any time Grantor moves
a  significant portion of its Inventory from any location identified in Schedule
1 hereto to a leased or rented building, warehouse or other facility of whatever
description not identified in Schedule 1 (each a "New Leased Facility"), Grantor
hereby  agrees  that  it  will  execute  and  deliver to the Secured Parties, an
assignment  of the Grantor's interest in the lease with respect to each such New
Leased Facility to the extent that such landlord has any, as applicable, in form
and  substance  satisfactory to the Secured Parties.  The Grantor further agrees
that  at  such time, and as applicable, it will deliver or cause to be delivered
to  the Secured Parties, a landlord's waiver executed by the owner, or any other
Person  serving as landlord, of such New Leased Facility, to the extent that any
such landlord has any contractual, statutory or other rights to obtain a lien or
security  interest, or other right in any Inventory which may take priority over
the  lien  or  security  interest  of the Secured Parties, in form and substance
reasonably  satisfactory  to  the  Secured  Parties.

     25.     SEVERABILITY.  The  provisions of this Agreement are independent of
and  separable  from each other. If any provision hereof shall for any reason be
held  invalid  or  unenforceable,  such invalidity or unenforceability shall not
affect  the  validity  or enforceability of any other provision hereof, but this
Agreement  shall  be construed as if such invalid or unenforceable provision had
never  been  contained  herein.

     26.     SUCCESSORS  AND  ASSIGNS.  This Agreement shall be binding upon the
successors  and  assigns  of  the Grantor, and the rights, remedies, powers, and
privileges  of  the  Secured Parties hereunder shall inure to the benefit of the
successors  and  assigns of the Secured Parties; provided, however, that Grantor
shall  not  make  any assignment hereof without the prior written consent of the
Secured  Parties.

     27.     COUNTERPARTS.  This  Agreement  may  be  executed  in any number of
counterparts  and  all  the  counterparts  taken  together  shall  be  deemed to
constitute  one  and  the  same  instrument.

     28.     TERMINATION; RELEASE. Upon the indefeasible payment  in full of all
Obligations,  this  Agreement and all obligations of the Grantor hereunder shall
terminate  without

<PAGE>

     delivery  of any instrument or performance of any act by any party, and the
Collateral  shall  automatically  be  released  from  the  Liens created by this
Agreement  and  all  rights  to  such  Collateral  shall automatically revert to
Grantor.  Notwithstanding  the  immediately  preceding  sentence,  upon  such
termination  of this Agreement, the Secured Parties shall reassign and redeliver
such  Collateral then held by or for the Secured Parties and execute and deliver
to  the  Grantor  such  documents  as  the  Grantor  shall reasonably request to
evidence  such  termination.

     29.     GOVERNING  LAW.

     (A)     This  agreement  shall  be governed by, and construed in accordance
with,  the  laws of the state of Nevada applicable to contracts executed, and to
be  fully  performed,  in  such  state.

     (B)     Each  party  hereby  expressly  and irrevocably agrees and consents
that any suit, action or proceeding arising out of or relating to this agreement
and  the  transactions  contemplated  herein  may  be instituted in any state or
federal  court  sitting  in  the  county  of New York, state of New York, United
States  of  America  and,  by the execution and delivery of this agreement, each
party  expressly  waives  any objection that it may have now or hereafter to the
laying  of  the  venue  or  to  the  jurisdiction  of  any  such suit, action or
proceeding,  and  irrevocably  submits  generally  and  unconditionally  to  the
jurisdiction  of  any  such  court  in  any  such  suit,  action  or proceeding.

     (C)     Each  party  agrees that service of process may be made by personal
service  of  a  copy  of the summons and complaint or other legal process in any
such  suit,  action  or  proceeding, or by registered or certified mail (postage
prepaid)  to  the address of such party provided by section 21 hereof, or by any
other  method of service provided for under the applicable laws in effect in the
state  of  new  york.

     (D)     Nothing  contained  in subsections (b) or (c) hereof shall preclude
any  party  from  bringing  any  suit,  action  or  proceeding arising out of or
relating  to  this  agreement  or  the other loan documents in the courts of any
place  where any party or any of such party's property or assets may be found or
located.  To  the  extent  permitted  by  the  applicable  laws  of  any  such
jurisdiction,  each  party hereby irrevocably submits to the jurisdiction of any
such  court  and  expressly  waives,  in  respect  of  any  such suit, action or
proceeding,  the  jurisdiction  of  any  other  court  or  courts  which  now or
hereafter,  by  reason  of  its present or future domicile, or otherwise, may be
available  to  it.

     (E)     In  any  action  or  proceeding to enforce or defend any  rights or
remedies  under  or  related  to  this  agreement  or any amendment, instrument,
document  or  agreement  delivered  or  that  may  in the future be delivered in
connection with the foregoing, each party hereby agrees, to the extent permitted
by applicable law,  that  any  such  action  or  proceeding  shall  be

<PAGE>

     tried before a court and not before a jury and each party hereby waives, to
the extent permitted by applicable law, any objection that it may have that each
action  or  proceeding  has  been  brought  in  an  inconvenient  forum.

         IN  WITNESS  WHEREOF,  the  parties  have duly executed this Subsidiary
Security  Agreement  on  the  day  and  year  first  written  above.

     MERLIN  SOFTWARE  TECHNOLOGIES,  INC.

     By:  /s/  Robert  Heller
          -------------------
      Name:   Robert  Heller
      Title:  President

PROVINCE  OF  BRITISH  COLUMBIA     )
                                    )ss.
CANADA                              )

     Before me, the undersigned, a Notary Public in and for the county aforesaid
on  this 21st day of August, 2000, personally appeared Robert Heller to me known
personally,  and  who,  being  by me duly sworn, deposes and says that he is the
Presdient  of  Merlin Software Technologies, Inc., and that foregoing instrument
was signed on behalf of said corporation by authority of its Board of Directors,
and  said Robert Heller acknowledged said instrument to be the free act and deed
of  said  corporation.

/s/  Virgil  Z.  Hlus
---------------------
Notary  Public
My  commission  expires:  N/A
Virgil  Z.  Hlus
Barrister  &  Solicitor
800  -  885  West  Georgia  Street,
Vancouver,  B.C.  V6C  3H1
Telephone:  (604)  687-5700

     SIGNATURE  PAGE  1  OF  2

<PAGE>

SECURED  PARTIES:

NARRAGANSETT  I,  L.P.

By:  /s/  Joseph  L.  Dowling
     ------------------------
     Name:  Joseph  L.  Dowling
     Title: Managing  Member

NARRAGANSETT  OFFSHORE  LTD.
by  its  Investment  Manager,
Leo  Holding,  L.L.C.

By:  /s/  Joseph  L.  Dowlin
     -----------------------
      Name:  Joseph  L.  Dowling
      Title: Managing  Member

PEQUOT  SCOUT  FUND,  L.P.
by  its  Investment  Advisor,
Pequot  Capital  Management,  Inc.

By:  /s/  David  J.  Malat
     ---------------------
     Name:  David  J.  Malat
     Title: Chief  Accounting  Officer

SDS  MERCHANT  FUND,  L.P.
by  its  Managing  Member,
SDS  Capital  Partners,  L.L.C.

By:  /s/  Steven  Derby
     ------------------
     Name:  Steven  Derby
     Title: Managing  Member

     SIGNATURE  PAGE  2  OF  2

<PAGE>

     SCHEDULE  1

Canadian  Office:          Suite  420-6450  Roberts  Street
     Burnaby,  British  Columbia  Canada  V5G  4E1

<PAGE>

     SCHEDULE  2
     HOLDERS

Narragansett  I,  L.P.

Narragansett  Offshore  Ltd.

Pequot  Scout  Fund,  L.P.

SDS  Merchant  Fund,  L.P.

<PAGE>

                                    EXHIBIT A

                      SUBSIDIARY  ASSIGNMENT  OF  COLLATERAL

     This  ASSIGNMENT  is  made by Merlin Software Technologies, Inc., as of the
________________  2000,  as  follows:

     1.     ASSIGNMENT:  For  good  and valuable consideration, receipt of which
is  hereby  acknowledged,  the undersigned, Merlin  Software  Technologies, Inc.
("Assignor"),  does  hereby  assign  to  Narragansett  I  and L.P., Narragansett
Offshore  Ltd.,  Pequot  Scout  Fund,  L.P.  and  SDS  Merchant Fund, L.P., (the
"Assignees")  and  its  successors  and  assigns  forever, for security purposes
pursuant  to  that  certain  Subsidiary  Security Agreement between Assignor and
Assignees  dated  as of August 18, 2000 ("Subsidiary Security Agreement") all of
Assignor's right, title and interest in and to the Collateral (as defined in the
Subsidiary  Security  Agreement).

     2.     WARRANTIES.  Assignor  represents and warrants to the Assignees that
(i)  Assignor  owns  all  rights in and to the Collateral; (ii) Assignor has not
assigned,  licensed or in any other manner encumbered, diminished or impaired or
disposed  of  any  rights  in respect of the Collateral which it acquired at any
time;  (iii)  Assignor  has  the right to enter into and perform this Agreement;
(iv)  all  sums  due  and  payable  to  date  by Assignor in connection with the
Collateral  have been paid; and (v) there are no liens on the Collateral imposed
by  third  parties which would conflict with or interfere with Assignor's rights
thereto  or  Assignees'  rights  hereunder.

     3.     PERFECTION.  Concurrently  with  the  execution and delivery of this
Assignment,  Assignor  will  deliver  to Assignees the following documents (each
satisfactory  in  form  and  substance  to  the  Assignees):

     (a)     UCC-1  filing certificates from all appropriate jurisdictions (each
satisfactory  in  form and substance to the Assignees) confirming and perfecting
Assignor's  right,  title  and  interest  in  and  to  the  Collateral;  and

     (b)     executed  UCC  Assignments  for  filing  by  the  Assignees  in all
appropriate  jurisdictions  for  purposes  of  perfecting  the security interest
granted  to  the  Assignees  hereunder.

     4.     NO PERFORMANCE REQUIRED BY ASSIGNEE: The Assignees do  not and shall
not  at  any  time have any obligation in respect of the Collateral by reason or
arising  out  of this Assignment or any document or action relating thereto, nor
shall  the  Assignees  be  required  or  obligated  in any manner to perform any
obligation of Assignor or to present or file any claim, or take any other action
to  collect  or  enforce the payment of any amounts in respect of the Collateral
which  may  have been assigned to the Assignees or to which the Assignees are or
may  be  entitled  to  hereunder.

<PAGE>

     5.     FURTHER  ASSURANCES:  Assignor  hereby  agrees,  promptly  upon
Assignees'  request,  to execute such further documents and other instruments as
shall  be  required  by  the  Assignees  from  time  to  time.

     MERLIN  SOFTWARE  TECHNOLOGIES,  INC.

     By:  /s/  Robert  Heller
          -------------------
     Name:  Robert  Heller
     Title:  President

PROVINCE  OF  BRITISH  COLUMBIA     )
                                    )ss.
CANADA                              )

     Before me, the undersigned, a Notary Public in and for the county aforesaid
on  this 21st day of August, 2000, personally appeared Robert Heller to me known
personally,  and  who,  being  by me duly sworn, deposes and says that he is the
President  of  Merlin Software Technologies, Inc., and that foregoing instrument
was signed on behalf of said corporation by authority of its Board of Directors,
and  said Robert Heller acknowledged said instrument to be the free act and deed
of  said  corporation.

/s/  Virgil  Z.  Hlus
---------------------
Notary  Public
My  commission  expires:  N/A
Virgil  Z.  Hlus
Barrister  &  Solicitor
800  -  885  West  Georgia  Street,
Vancouver,  B.C.  V6C  3H1
Telephone:  (604)  687-5700

<PAGE>

                                   EXHIBIT "B"

                             NOTICE  OF  ASSIGNMENT
                                       AND
                             IRREVOCABLE  AUTHORITY

From:

To:

Date:     _____________________

Ladies  and  Gentlemen:

     Reference is hereby made to those certain payment obligations between us as
set  forth  in  Schedule  1 attached hereto, (the "Obligations") relating, among
other  things,  to  the  __________________________________.

     We  have  assigned  the  benefit  and  proceeds  of  said  Obligations  to
Narragansett  I,  L.P., Narragansett Offshore Ltd.,  Pequot Scout Fund, L.P. and
SDS  Merchant  Fund,  L.P.  (the "Secured Parties") and this will constitute our
irrevocable  authority  and instruction to you to pay to the Secured Parties all
monies  from  time to time owing or to become due from you to us with respect to
the  Obligations.

     The  monies  are  to  be  sent  by  telegraphic  transfer  to:

     This  authority  and instruction is coupled with an interest and may not be
revoked  or altered without the prior consent in writing of the Secured Parties.

     Please  sign  the  acknowledgment and confirmation as enclosed herewith and
return it as soon as possible to the Secured Parties at the address indicated on
such acknowledgment, including your confirmation of the amounts to become due in
accordance  with  said  Obligations:

By:_____________________________
   Name:
   Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]