Document:

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                                                                     EXHIBIT 4.8

                            GRANT PRIDECO CANADA LTD.

                                 as Corporation

                                       and

                         DEUTSCHE BANK AG, CANADA BRANCH

                                    as Agent

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                              AMENDED AND RESTATED
                               SECURITY AGREEMENT

                               DECEMBER 19, 2002

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                                TABLE OF CONTENTS

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<S>                                                                                                              <C>
                                                     ARTICLE 1
                                                     SECURITY

Section 1.1      Terms Incorporated by Reference..................................................................2
Section 1.2      Grant of Security................................................................................3
Section 1.3      Obligations Secured..............................................................................4
Section 1.4      Further Security.................................................................................5
Section 1.5      Attachment.......................................................................................5
Section 1.6      Scope of Security Interest.......................................................................6
Section 1.7      Care and Custody of Collateral...................................................................6
Section 1.8      Corporation Remains Liable.......................................................................7
Section 1.9      Dealings in the Ordinary Course..................................................................7
Section 1.10      Negative Pledge.................................................................................7
Section 1.11      Continuing Security.............................................................................7
Section 1.12      Notification of Account Debtors.................................................................8
Section 1.13      No Release......................................................................................8

                                                     ARTICLE 2
                                     REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.1      Representations and Warranties...................................................................8
Section 2.2      Additional Covenants.............................................................................9
Section 2.3      Special Covenants With Respect to Equipment and Inventory.......................................10
Section 2.4      Special Covenants with respect to Receivables...................................................11

                                                     ARTICLE 3
                                                    ENFORCEMENT

Section 3.1      Enforcement......................................................................................12
Section 3.2      Remedies.........................................................................................12
Section 3.3      Additional Rights................................................................................13
Section 3.4      Receiver's Powers................................................................................14
Section 3.5      Appointment of Attorney..........................................................................14
Section 3.6      Dealing with the Collateral......................................................................15
Section 3.7      Standards of Sale................................................................................15
Section 3.8      Dealings by Third Parties........................................................................16

                                                     ARTICLE 4
                                                      GENERAL

Section 4.1      Discharge........................................................................................16
Section 4.2      Loan Agreement Governs...........................................................................17
Section 4.3      Amendments, etc. ................................................................................17
</Table>

                                      (i)
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<Table>
<S>                                                                                                             <C>
Section 4.4      Waivers.........................................................................................17
Section 4.5      No Merger.......................................................................................17
Section 4.6      Further Assurances..............................................................................18
Section 4.7      Supplemental Security...........................................................................18
Section 4.8      Notices.........................................................................................18
Section 4.9      Successors and Assigns..........................................................................18
Section 4.10     Gender and Number...............................................................................18
Section 4.11     Headings, etc. .................................................................................18
Section 4.12     Severability....................................................................................19
Section 4.13     Governing Law...................................................................................19
</Table>

                                      (ii)
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                     AMENDED AND RESTATED SECURITY AGREEMENT

         Amended and Restated Security Agreement (this "AMENDED AND RESTATED
SECURITY AGREEMENT") dated December 19, 2002 made by Grant Prideco Canada Ltd.
(the "CORPORATION") to and in favour of Deutsche Bank AG, Canada Branch, as
Canadian agent (the "AGENT") for the Canadian Lenders referred to below.

         RECITALS:

         (a)      Pursuant to the Existing Credit Arrangements (as that term is
                  defined in the Loan Agreement hereinafter defined and referred
                  to), the Cdn. Lenders (as that term is defined in the Existing
                  Credit Arrangements) agreed to make certain credit facilities
                  available to the Corporation;

         (b)      The Corporation entered into a security agreement dated April
                  14, 2000 (the "EXISTING TRANSAMERICA SECURITY AGREEMENT") in
                  favour of Transamerica Commercial Finance Corporation, Canada
                  ("TRANSAMERICA") as security for the payment and performance
                  of the Corporation's obligations to the Cdn. Lenders and
                  Transamerica under the Existing Credit Arrangements and the
                  other loan documents entered into in connection with the
                  Existing Credit Arrangements;

         (c)      The Canadian Lenders (as that term is defined in the Loan
                  Agreement hereinafter defined and referred to) have purchased
                  and assumed all of the rights and obligations of the Cdn.
                  Lenders relating to the Canadian loan commitments and
                  outstanding Cdn. Loans (as that term is defined in the Loan
                  Agreement hereinafter defined and referred to) under the
                  Existing Credit Arrangements (collectively, the "EXISTING
                  TRANSAMERICA LOANS") including the rights and obligations of
                  the Cdn. Lenders under the Existing Transamerica Security
                  Agreement;

         (d)      The Canadian Lenders and the Corporation have amended and
                  restated terms and conditions of the Existing Transamerica
                  Loans upon and subject to the terms and conditions contained
                  in a credit agreement among Grant Prideco, LP, XL Systems,
                  L.P., Texas Arai, Inc., Tube-Alloy Corporation, Star Operating
                  Company, Reed-Hycalog Operating, L.P. and the Corporation, as
                  Borrowers (as that term is defined in the Loan Agreement
                  hereinafter defined and referred to), with Grant Prideco, LP
                  acting in its capacity as US Funds Administrator (as that term
                  is defined in the Loan Agreement hereinafter defined and
                  referred to) for the Borrowers, and Grant Prideco Canada Ltd.
                  acting in its capacity as Canadian Funds Administrator (as
                  that

<PAGE>
                                      -2-

                  term is defined in the Loan Agreement hereinafter defined and
                  referred to) for the Borrowers, with Grant Prideco, Inc., as a
                  guarantor, each of the Lenders from time to time party hereto
                  (as that term is defined in the Loan Agreement hereinafter
                  defined and referred to), Deutsche Bank Trust Company
                  Americas, acting in its capacity as contractual representative
                  for the US Lenders (US Lenders, as that term is defined in the
                  Loan Agreement hereinafter defined and referred to and
                  Deutsche Bank Trust Company Americas, acting in its capacity
                  as contractual representative for the US Lenders, referred to
                  as the "US AGENT") and the Agent, acting in its capacity as
                  contractual representative of the Canadian Lenders
                  Transamerica Business Capital Corporation, as Document Agent
                  (as that term is defined in the Loan Agreement hereinafter
                  defined and referred to), JP Morgan Chase Bank, as
                  Co-Syndication Agent (as that term is defined in the Loan
                  Agreement hereinafter defined and referred to) and Merrill
                  Lynch Capital, as Co-Syndication Agent (as that term is
                  defined in the Loan Agreement hereinafter defined and referred
                  to) (such credit agreement as it may at any time or from time
                  to time be amended, supplemented, restated or replaced, the
                  "LOAN AGREEMENT");

         (e)      The Agent is to hold for its own benefit and is to act as
                  agent to hold for itself and for the rateable benefit of the
                  Canadian Lenders any and all security for the payment and
                  performance of the obligations of the Corporation under the
                  Loan Agreement and the other Credit Documents (as such term is
                  defined in the Loan Agreement); and

         (f)      The Corporation and the Agent have agreed to amend and restate
                  the terms and conditions of the Existing Transamerica Security
                  Agreement subject to the terms and conditions contained in
                  this Amended and Restated Security Agreement to provide for
                  security to and in favour of the Agent for the payment and
                  performance of the Corporation's obligations to the Canadian
                  Lenders and the Agent under the Loan Agreement and other
                  Credit Documents in respect of the Canadian Revolving Loans
                  (as that term is defined in the Loan Agreement).

         In consideration of the foregoing and other good and valuable
consideration (the receipt and adequacy of which are acknowledged), the
Corporation agrees that the Existing Transamerica Security Agreement is amended
and restated in its entirety as follows:

                                    ARTICLE 1
                                    SECURITY

SECTION 1.1 TERMS INCORPORATED BY REFERENCE

         Terms defined in the Personal Property Security Act (Alberta) (as
amended from time to time, the "PPSA") and used in this Amended and Restated
Security Agreement

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                                      -3-

shall have the same meanings attributed to such terms in the PPSA. For all
purposes of this Amended and Restated Security Agreement, capitalized terms
defined in the Loan Agreement and used in this Amended and Restated Security
Agreement and not otherwise defined in this Amended and Restated Security
Agreement shall herein have the meanings provided to those terms in the Loan
Agreement.

SECTION 1.2 GRANT OF SECURITY

         Subject to Section 1.6, the Corporation grants to the Agent, for its
own benefit and as agent and for the rateable benefit of the Canadian Lenders, a
security interest in all the Corporation's right, title and interest in and to
any and all of the Corporation's:

         (a)      accounts due or accruing due and all agreements, books,
                  accounts, invoices, letters, documents and papers recording,
                  evidencing or relating thereto including without limiting the
                  foregoing all contract rights, promissory notes, chattel
                  paper, tax refunds, rights to receive tax refunds, rights of
                  indemnification, contribution and subrogation, causes of
                  action, choses in action, judgments, claims against third
                  parties of every kind or nature, drafts, acceptances, letters
                  of credit, rights to receive payments under letters of credit,
                  book accounts, accounts maintained by the Corporation with any
                  financial institutions (including, without limitation, the
                  Canadian Collateral Account (as defined in the Blocked Account
                  Agreement dated December 19, 2002) and all money, balances,
                  credits, deposits or other financial assets therein or
                  represented thereby, all credits and reserves and all other
                  forms of obligations whatsoever owing to the Corporation, and
                  all instruments, books, ledgers, files, computer tapes,
                  programs, discs and software, trade secrets, computer service
                  contracts and records with respect to any of the foregoing,
                  together with all right, title, security and guarantees with
                  respect to any such receivables, including any right of
                  stoppage in transit, wherever located, whether now or
                  hereafter acquired and all claims, causes of action or other
                  rights to enforce or sue for performance (collectively, the
                  "RECEIVABLES");

         (b)      inventory, including without limiting the foregoing all
                  present and future goods intended for sale, lease or other
                  disposition including, without limitation, all raw materials,
                  work in process, finished goods and other retail inventory,
                  goods in the possession of outside processors or other third
                  parties, consigned goods (to the extent of the consignee's
                  interest therein), materials and supplies of any kind, nature
                  or description which are or might be used in connection with
                  the manufacture, packing, shipping, advertising, selling or
                  finishing of any such goods, all documents of title or
                  documents representing the same and all records, files and
                  writings with respect thereto, wherever located, whether now
                  or hereafter acquired (collectively, the "INVENTORY");

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                                      -4-

         (c)      machinery, equipment, furniture, fixtures and leasehold
                  improvements, including, without limitation, conveyors, tools,
                  materials, storage and handling equipment, hydraulic presses,
                  cutting equipment, computer equipment and hardware (including,
                  without limitation, central processing units, terminals,
                  drives, memory units, printers, keyboards, screens,
                  peripherals and input or output devices), molds, dies, stamps,
                  and other equipment of every kind and nature and wherever
                  situated now or hereafter owned by the Corporation or in which
                  the Corporation may have any interest as lessee or otherwise
                  (to the extent of such interest), together with all additions
                  and accessions thereto, all replacements and all accessories
                  and parts therefor, all manuals, blueprints, know-how,
                  warranties and records in connection therewith and all rights
                  against suppliers, warrantors, manufacturers, and sellers or
                  others in connection therewith (other than equipment that is
                  subject to a lease which prohibits, or creates a default or
                  right of termination upon, the assignment of or the granting
                  of a security interest in or other Lien on the Corporation's
                  rights thereunder) (collectively, the "EQUIPMENT");

         (d)      substitutions and replacements of and increases, additions
                  and, where applicable, accessions to the property described in
                  Section 1.2(a), (b) and (c) above; and

         (e)      proceeds in any form derived directly or indirectly from any
                  dealing with all or any part of the property described in
                  Section 1.2(a), (b), (c) and (d) above or the proceeds of such
                  proceeds

(collectively, the "COLLATERAL").

SECTION 1.3 OBLIGATIONS SECURED

         (a)      The security interest granted hereby (the "SECURITY INTEREST")
                  secures the payment and performance of all debts, liabilities
                  and obligations at any time or from time to time due or
                  accruing due and owing by or otherwise payable by the
                  Corporation to the Agent or the Canadian Lenders under or
                  pursuant to the Loan Agreement and any other agreements
                  executed by the Corporation in connection therewith, including
                  this Amended and Restated Security Agreement and the Credit
                  Documents to which the Corporation is a party, with respect to
                  the Canadian Revolving Loans and including all charges and
                  fees of the Canadian Lenders and the Agent, whether present or
                  future, direct or indirect, absolute or contingent, matured or
                  unmatured, however or wherever incurred, and in any currency,
                  and whether incurred by the Corporation alone or with another
                  or others and whether as principal or surety (collectively,
                  and together with the expenses, costs and charges set out in
                  Section 1.3(b), herein the

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                                      -5-

                  "OBLIGATIONS"). For greater certainty, Obligations shall not
                  include any debts, liabilities or obligations payable by the
                  Corporation with respect to the Canadian Term Loans.

         (b)      All expenses, costs and charges incurred by or on behalf of
                  the Agent and the Canadian Lenders in connection with this
                  Amended and Restated Security Agreement, the Security Interest
                  or the Collateral, including all legal fees, court costs,
                  receiver's or agent's remuneration and other expenses of
                  taking possession of, repairing, protecting, insuring,
                  preparing for disposition, realizing, collecting, selling,
                  transferring, delivering or obtaining payment of the
                  Collateral or other lawful exercises of the powers conferred
                  by the Loan Agreement, and of taking, defending or
                  participating in any action or proceeding in connection with
                  any of the foregoing matters or otherwise in connection with
                  the Canadian Lenders' or the Agent's interest in any
                  Collateral shall be added to and form a part of the
                  Obligations.

SECTION 1.4 FURTHER SECURITY

         The Corporation also grants to the Agent, for its own benefit and as
agent for the rateable benefit of the Canadian Lenders, as further security for
all of the Obligations, a security interest in all of its right, title and
interest in and to all property of the Corporation in the possession of or
deposited with or in the custody of the Agent or any Affiliate of the Agent or
any representative, agent or correspondent of the Agent. For purposes of this
Amended and Restated Security Agreement, any property in which the Agent or any
such Affiliate has any security or title retention interest shall be deemed to
be in the custody of the Agent or of such Affiliate.

SECTION 1.5 ATTACHMENT

         (a)      The Corporation acknowledges that (i) value has been given,
                  (ii) it has rights in the Collateral (other than
                  after-acquired Collateral), (iii) it has not agreed to
                  postpone the time of attachment of the Security Interest, and
                  (iv)it has received a duplicate original copy of this Amended
                  and Restated Security Agreement. The Security Interest is
                  intended to, and shall, attach to the existing Collateral when
                  the Corporation signs this Amended and Restated Security
                  Agreement, and to all Collateral subsequently acquired by the
                  Corporation immediately upon the Corporation acquiring rights
                  in such Collateral.

         (b)      If the Corporation acquires Collateral consisting of chattel
                  paper, instruments, securities or negotiable documents of
                  title (collectively, "NEGOTIABLE COLLATERAL"), the Corporation
                  will, upon the Security Interest becoming enforceable and at
                  the request of the Agent, deliver to the Agent the Negotiable
                  Collateral and the Corporation shall, at the request of the

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                                      -6-

                  Agent: (i) cause the transfer of the Negotiable Collateral to
                  the Agent to be registered wherever, in the opinion of the
                  Agent, such registration may be required or advisable, (ii)
                  duly endorse the same for transfer in blank or as the Agent
                  may direct, and (iii) immediately deliver to the Agent any and
                  all consents or other documents which may be necessary to
                  effect the transfer of the Negotiable Collateral to the Agent
                  or any third party.

         (c)      The Corporation will execute and deliver, at its own expense,
                  from time to time, amendments to this Amended and Restated
                  Security Agreement or additional security agreements as may be
                  required by the Agent.

SECTION 1.6       SCOPE OF SECURITY INTEREST

         The Security Interest shall not:

         (a)      extend or apply to the last day of the term of any lease,
                  sublease or any agreement therefore applicable to all
                  Collateral now held or hereafter acquired by the Corporation,
                  but upon enforcement of the Security Interest, the Corporation
                  shall thereafter stand possessed of such last day and shall
                  hold it in trust for the Agent to assign the same to any
                  person acquiring such term in the course of the enforcement of
                  the Security Interest; or

         (b)      extend to, and the Collateral shall not include any agreement,
                  right, franchise, licence or permit (the "CONTRACTUAL RIGHTS")
                  to which the Corporation is a party or of which the
                  Corporation has the benefit, to the extent that the creation
                  of the Security Interest herein would constitute a breach of
                  the terms of, or permit any person to terminate, the
                  Contractual Rights, but the Corporation shall hold its
                  interest therein in trust for the Agent to assign the same to
                  any person acquiring all or any portion of the Collateral in
                  the course of enforcement of the Security Interest.

SECTION 1.7 CARE AND CUSTODY OF COLLATERAL

         (a)      The Agent shall have no obligation to keep Collateral in its
                  possession identifiable.

         (b)      The Agent may, after the Security Interest shall have become
                  enforceable, (i) notify any person obligated on an account or
                  on chattel paper or any obligor on an instrument to make
                  payments to the Agent whether or not the Corporation was
                  previously making collections on such accounts, chattel paper
                  or instruments, and (ii) assume control of any proceeds
                  arising from the Collateral.

<PAGE>
                                      -7-

SECTION 1.8 CORPORATION REMAINS LIABLE

         Notwithstanding the provisions of this Amended and Restated Security
Agreement: (i) the Corporation shall remain liable to perform all of its duties
and obligations in regard to the Collateral (including, without limitation, all
of its duties and obligations arising under any leases, licenses, permits,
reservations, contracts, agreements, instruments, contractual rights and
governmental orders, authorizations, licenses and permits, if any, now or
hereafter pertaining thereto) to the same extent as if this Amended and Restated
Security Agreement had not been executed; (ii) the exercise by or on behalf of
the Agent of any of its rights and remedies under or in regard to this Amended
and Restated Security Agreement shall not release the Corporation from such
duties and obligations; and (iii) the Agent nor the Canadian Lenders shall have
no liability for such duties and obligations by reason of the execution and
delivery of this Amended and Restated Security Agreement.

SECTION 1.9 DEALINGS IN THE ORDINARY COURSE

         Subject to Section 1.10 hereof and until the Security Interest becomes
enforceable, the Corporation may dispose of or deal with the Collateral in the
ordinary course of business and for the purpose of carrying on the same, so that
purchasers thereof or parties dealing with the Corporation take title thereto
free and clear of the Security Interest, provided that such action is not in
breach of any covenant in this Amended and Restated Security Agreement or any
covenant of the Corporation in the Loan Agreement or any of the other Credit
Documents to which the Corporation is a party. In the event of any such
disposition, and provided that such disposition is not made in contravention of
any provision in the Loan Agreement or any of the other Credit Documents to
which the Corporation is a party, the Agent will, at the written request of the
Corporation, release the Security Interest in the Collateral which has been
disposed of pursuant to such disposition.

SECTION 1.10 NEGATIVE PLEDGE

         The Corporation shall not, without the prior written consent of the
Agent, or as otherwise permitted by the Loan Agreement, create, issue, incur,
assume, have outstanding or permit to exist, any mortgage, charge, pledge, lien,
assignment by way of security, security interest or other encumbrance on any
part of the Collateral, other than Permitted Liens.

SECTION 1.11 CONTINUING SECURITY

         This Amended and Restated Security Agreement shall be a continuing
obligation, shall cover and secure any ultimate balance of the Obligations owing
to the Agent or the Canadian Lenders, and shall be operative and binding
notwithstanding that at any time or times the Obligations may be zero, or that
any payments from time to time may be made to the Agent or the Canadian Lenders,
or any settlements of

<PAGE>
                                      -8-

account effected, or any other thing whatsoever done, suffered or permitted, or
any other action short of complete and irrevocable payment of all the
Obligations and any other amounts payable hereunder.

SECTION 1.12 NOTIFICATION OF ACCOUNT DEBTORS

         Upon the occurrence and during the continuance of an Event of Default,
the Agent may give notice to any person obligated to the Corporation or other
person liable to the Corporation in respect of a Receivable or intangible to
make all further payments to the Lender, and, upon notice to the Corporation
thereof, any payment or other proceeds of Collateral received by the Corporation
from account debtors or from any other person liable to the Corporation after
any such notice is given by the Agent shall be held by the Corporation in trust
for the Agent and paid over to the Agent on request.

SECTION 1.13 NO RELEASE

         The loss, injury or destruction of the Collateral shall not operate in
any manner to release or discharge the Corporation from any of its liabilities
to the Agent.

                                    ARTICLE 2
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

SECTION 2.1 REPRESENTATIONS AND WARRANTIES

         The Corporation hereby represents and warrants to the Agent and the
Canadian Lenders that:

(1)      the Corporation has good title to, or a valid leasehold interest in, or
         a valid contractual agreement to use, all of the Collateral owned by
         the Corporation free and clear of any Lien, except for a Permitted
         Lien. Except as expressly permitted by the Loan Agreement and such as
         may have been filed in favor of Agent or the Canadian Lenders relating
         to this Amended and Restated Security Agreement, no effective financing
         statement or other instrument similar in effect under the law of any
         jurisdiction covering all or any part of the Collateral is on file in
         any filing, registry or recording office;

(2)      all certificates or instruments (excluding cheques and drafts)
         evidencing, comprising or representing the Collateral have been
         delivered to the Agent duly endorsed or accompanied by duly executed
         instruments of transfer or assignment in blank. Notwithstanding,
         anything to the contrary in the preceding sentence, (i) the Corporation
         is not obligated to deliver to the Agent negotiable instruments of
         title unless an Event of Default has occurred and is continuing and the
         Agent requests delivery of such items and (ii) the Corporation is not
         obligated to deliver to the Agent Letters of Credit unless requested by
         the Agent.

<PAGE>
                                      -9-

         If requested by the Agent, the Corporation will cause all Letters of
         Credit to be delivered to the Agent. If the Corporation is required to
         deliver Letters of Credit to the Agent, then the Corporation will
         notify the Agent from time to time of its desire to make a draw on a
         Letter of Credit and its request for return of the Letter of Credit for
         such purposes. The Agent shall, promptly after receipt of any such
         request, return the requested Letter of Credit to the Corporation. The
         Corporation shall within five (5) business days after receipt of such
         Letter of Credit either, present such Letter of Credit to the issuing
         bank for draw thereon or return the Letter of Credit to the Agent. If
         the Letter of Credit is partially (rather than fully) drawn, the
         Corporation shall return the Letter of Credit to the Agent within three
         (3) business days after submitting the Letter of Credit for such
         partial draw (or if the Letter of Credit is retained by the issuing
         bank, then within three (3) business days after the Letter of Credit is
         returned to the Corporation by the issuing bank);

(3)      the Security Interest in the Collateral granted to the Agent for its
         own benefit and as agent and for the rateable benefit of the Canadian
         Lenders hereunder creates a valid security interest in the Collateral,
         securing the payment of Obligations as provided in Section 1.3 hereof.
         Upon the filing of financing change statements naming the Corporation
         as "debtor", naming the Agent as "secured party" and describing the
         Collateral pursuant to the PPSA and the Personal Property Security Act
         (Newfoundland) and the filing of a financing statement naming the
         Corporation as "debtor" and the Agent as "secured party" pursuant to
         the Personal Property Security Act (Nova Scotia), the Security Interest
         in the Collateral granted hereunder will constitute a perfected
         security interest in all Collateral now owned and hereafter acquired by
         the Corporation enforceable against the Corporation prior to all other
         Liens (except for Permitted Liens), and all other documents and
         instruments for all filings, registrations and recordings and other
         actions necessary or desirable to perfect and protect such Security
         Interest will have been duly made or taken.

SECTION 2.2 ADDITIONAL COVENANTS

         The Corporation covenants with the Agent that the Corporation shall:

(1)      ensure that the representations and warranties set forth in Section 2.1
         shall be true and correct at all times;

(2)      not permit the Collateral to be affixed to real or personal property so
         as to become a fixture or accession without the prior written consent
         of the Agent, except where the Collateral is affixed to real or
         personal property which is a Permitted Lien or which is also subject to
         a security interest in favour of the Agent and which is not subject to
         a security interest in favour of any other person, except for a
         Permitted Lien;

<PAGE>
                                      -10-

(3)      not change its name or, in addition to and without limiting the
         provisions of the Loan Agreement, shall not amalgamate with any other
         corporation, continue to, reorganize or reincorporate itself under any
         other jurisdiction other than the Province of Alberta without (i) first
         giving fifteen (15) days notice to the Agent of its intention to do so
         and providing such other information in connection therewith as the
         Agent may request including, without limitation, the new name and the
         names of all amalgamating corporations and the date when such new name
         or amalgamation is to become effective; and (ii) taking all action
         satisfactory to the Agent with respect to the new name or jurisdiction
         to maintain the Security Interest of the Agent in the Collateral
         intended to be granted and perfected hereby at all times fully
         perfected and in full force and effect;

(4)      pay to the Agent forthwith upon demand all reasonable costs, charges
         and expenses (including, without limiting the generality of the
         foregoing, all legal, receiver's and accounting fees and expenses)
         incurred by or on behalf of the Agent or the Canadian Lenders in
         connection with the preparation, execution and perfection of this
         Amended and Restated Security Agreement and the carrying out of any of
         the provisions of this Amended and Restated Security Agreement
         including, without limiting the generality of the foregoing, protecting
         and preserving the Security Interest and enforcing by legal process or
         otherwise the remedies provided herein; and all such costs and expenses
         shall be added to and form part of the Obligations secured hereunder;

(5)      if the Agent gives value to enable the Corporation to acquire rights in
         or for the use of any Collateral, use such value for such purposes; and

(6)      except as expressly permitted by the Loan Agreement, pay promptly when
         due all property and other taxes, assessments and governmental charges
         or levies imposed upon, and all claims (including claims for labor,
         services, materials and supplies) against, the Collateral, except to
         the extent the validity thereof is being contested in good faith;
         provided that the Corporation shall in any event pay such taxes,
         assessments, charges, levies or claims not later than five (5) days
         prior to the date of any proposed sale under any judgment, writ or
         warrant of attachment entered or filed against the Corporation or any
         of the Collateral as a result of the failure to make such payment.

SECTION 2.3 SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.

         The Corporation shall:

         (a)      keep correct and accurate records of Inventory owned by the
                  Corporation itemizing and describing the kind, type and
                  quality of such Inventory, such Corporation's cost therefor
                  and (where applicable) the current list prices for such
                  Inventory;

<PAGE>
                                      -11-

         (b)      if any Inventory is in possession or control of any of the
                  Corporation's agents or processors, upon the occurrence and
                  continuation of an Event of Default, instruct such agent or
                  processor to hold all such Inventory for the account of the
                  Agent and subject to the instructions of the Agent;

         (c)      the Corporation shall, at its own expense, maintain insurance
                  with respect to the Equipment and INVENTORY in accordance with
                  the terms of the Loan Agreement;

         (d)      upon (i) the occurrence and during the continuation of any
                  Event of Default or (ii) the actual or constructive loss of
                  any Equipment or Inventory, all insurance payments in respect
                  of such Equipment or Inventory shall be paid to and applied by
                  the Agent against the Obligations as specified in the Loan
                  Agreement.

SECTION 2.4 SPECIAL COVENANTS WITH RESPECT TO RECEIVABLES

         (a)      The Corporation shall, for not less than three (3) years from
                  the date on which each Receivable of the Corporation arose,
                  maintain (i) records of such Receivable in such detail, form
                  and scope as is consistent with good business practice, and
                  (ii) all documentation relating thereto as is consistent with
                  good business practice.

         (b)      Except as otherwise provided in this Section 2.1(b), the
                  Corporation shall continue to collect, at its own expense, all
                  amounts due or to become due to the Corporation or in any way
                  relate to the Receivables. In connection with such
                  collections, the Corporation may take (and, upon the
                  occurrence and during the continuance of an Event of Default
                  at the Agent's direction, shall take) such action as the
                  Corporation or the Agent may deem necessary or advisable to
                  enforce collection of amounts due or to become due under the
                  Receivables; provided, however, that the Agent shall have the
                  right at any time, upon the occurrence and during the
                  continuance of an Event of Default and upon written notice to
                  the Corporation of its intention to do so, to notify the
                  account debtors or obligors under any Receivables of the
                  assignment of such Receivables to the Agent and to direct such
                  account debtors or obligors to make payment of all amounts due
                  or to become due to the Corporation thereunder directly to the
                  Agent, to notify each Person maintaining a lockbox, blocked
                  account or similar arrangement to which account debtors or
                  obligors under any Receivables have been directed to make
                  payment to remit all amounts representing collections on
                  cheques and other payment items from time to time sent to or
                  deposited in such lockbox, blocked account or other
                  arrangement directly to the Agent and, upon such notification
                  and at the expense of the Corporation, to enforce collection
                  of

<PAGE>
                                      -12-

                  any such Receivables and to adjust, settle or compromise the
                  amount or payment thereof, in the same manner and to the same
                  extent as the Corporation might have done. After receipt by
                  the Corporation of the notice from the Agent referred to in
                  the proviso to the preceding sentence and during the
                  continuation of an Event of Default, (i) all amounts and
                  proceeds (including cheques and other instruments) received by
                  the Corporation in respect of the Receivables shall be
                  received in trust for the benefit of the Agent hereunder,
                  shall be segregated from other funds of the Corporation and
                  shall be forthwith paid over or delivered to the Agent in the
                  same form as so received (with any necessary endorsement) to
                  be held as cash Collateral and applied against the Obligations
                  as provided by the Loan Agreement, and (ii) the Corporation
                  shall not adjust, settle or compromise the amount or payment
                  of any Receivable, or release wholly or partly any account
                  debtor or obligor thereof, or allow any credit or discount
                  thereon.

                                    ARTICLE 3
                                   ENFORCEMENT

SECTION 3.1 ENFORCEMENT

         The Security Interest shall be and become enforceable against the
Corporation upon the occurrence and during the continuance of an Event of
Default.

SECTION 3.2 REMEDIES

         (a)      Whenever the Security Interest has become enforceable, the
                  Agent may realize upon the Collateral and enforce its rights
                  by:

                  (i)      entry onto any premises where Collateral consisting
                           of tangible personal property may be located;

                  (ii)     entry into possession of the Collateral by any method
                           permitted by law;

                  (iii)    sale or lease of all or any part of the Collateral;

                  (iv)     collection of any proceeds arising in respect of the
                           Collateral;

                  (v)      collection, realization or sale of, or other dealing
                           with, the Receivables;

                  (vi)     appointment by instrument in writing of a receiver or
                           agent of all or any part of the Collateral and
                           removal or replacement from time to time of any
                           receiver or agent;

<PAGE>
                                      -13-

                  (vii)    institution of proceedings in any court of competent
                           jurisdiction for the appointment of a receiver of all
                           or any part of the Collateral;

                  (viii)   institution of proceedings in any court of competent
                           jurisdiction for sale or foreclosure of all or any
                           part of the Collateral;

                  (ix)     filing of proofs of claim and other documents to
                           establish claims to the Collateral in any proceeding
                           relating to the Corporation; and

                  (x)      any other remedy or proceeding authorized or
                           permitted under the PPSA or otherwise by law or
                           equity.

         (b)      Such remedies may be exercised from time to time separately or
                  in combination and are in addition to, and not in substitution
                  for, any other rights of the Agent and the Canadian Lenders
                  however created. The Agent or the Canadian Lenders shall not
                  be bound to exercise any right or remedy, and the exercise of
                  any rights and remedies shall be without prejudice to the
                  rights of the Agent and the Canadian Lenders in respect of the
                  Obligations including the right to claim for any deficiency.

SECTION 3.3 ADDITIONAL RIGHTS

         In addition to the remedies set forth in Section 3.2, the Agent may,
whenever the Security Interest has become enforceable:

         (a)      require the Corporation, by notice in writing, at the
                  Corporation's expense, to assemble the Collateral at a place
                  or places designated by notice in writing and the Corporation
                  agrees to so assemble the Collateral;

         (b)      require the Corporation, by notice in writing, to disclose to
                  the Agent the location or locations of the Collateral and the
                  Corporation agrees to make such disclosure when so required;

         (c)      repair, process, modify, complete or otherwise deal with the
                  Collateral and prepare for the disposition of the Collateral,
                  whether on the premises of the Corporation or otherwise;

         (d)      enter upon, occupy and use all or any of the premises,
                  buildings, and other property of or used by the Corporation
                  for such time as the Agent sees fit, free of charge, to
                  exercise any of the Agent's rights or remedies under or in
                  relation to this Amended and Restated Security Agreement, and
                  the Agent and the Canadian Lenders shall not be liable to the
                  Corporation for any act, omission or negligence in so doing or
                  for any rent, charges, depreciation or damages incurred in
                  connection with or resulting from such action;

<PAGE>
                                      -14-

         (e)      borrow for the purpose of the maintenance, preservation or
                  protection of the Collateral and grant a security interest in
                  the Collateral, whether or not in priority to the Security
                  Interest, to secure repayment; and

         (f)      commence, continue or defend any judicial or administrative
                  proceedings for the purpose of protecting, seizing,
                  collecting, realizing or obtaining possession or payment of
                  the Collateral, and give good and valid receipts and
                  discharges in respect of the Collateral and compromise or give
                  time for the payment or performance of all or any part of the
                  accounts or any other obligation of any third party to the
                  Corporation.

SECTION 3.4 RECEIVER'S POWERS.

         (a)      Any receiver appointed by the Agent shall be vested with the
                  rights and remedies which could have been exercised by the
                  Agent in respect of the Corporation or the Collateral. The
                  identity of the receiver, its replacement and its remuneration
                  shall be within the sole and unfettered discretion of the
                  Agent. Any receiver appointed by a court shall have all powers
                  and discretions as are granted in the instrument of
                  appointment and any supplemental instruments.

         (b)      Any receiver appointed by the Agent shall act as agent for the
                  Agent for the purposes of taking possession of the Collateral,
                  but otherwise and for all other purposes (except as provided
                  below), as agent for the Corporation. The receiver may sell,
                  lease, or otherwise dispose of Collateral as agent for the
                  Corporation or as agent for the Agent as the Agent may
                  determine in its discretion. The Corporation agrees to ratify
                  and confirm all actions of the receiver acting as agent for
                  the Corporation, and to release and indemnify the receiver in
                  respect of all such actions.

         (c)      The Agent, in appointing or refraining from appointing any
                  receiver, shall not incur liability to the receiver, the
                  Corporation or otherwise and shall not be responsible for any
                  misconduct or negligence of the receiver.

SECTION 3.5 APPOINTMENT OF ATTORNEY

         The Corporation irrevocably appoints the Agent (and any of its
officers) as attorney of the Corporation (with full power of substitution) to
(a) sign the Corporation's name on any documents, instruments and other items
described in the Loan Agreement; (b) request at any time from parties indebted
to the Corporation verification of information concerning such indebtedness
including the amount owing thereon (provided that any verification prior to an
the occurrence of an Event of Default shall not contain the Agent's name); and
(c) upon the occurrence and during the continuance of an Event of Default: (i)
convey any item of the Collateral to any purchaser thereof; and (ii) make any
payment or take any act necessary or desirable to

<PAGE>
                                      -15-

protect or preserve any Collateral. The Agent's authority hereunder shall
include, without limitation, the authority to execute and give receipt for any
certificate of ownership or any document, to transfer title to any item of the
Collateral and to take any other actions arising from or incident to the powers
granted to the Agent under this Amended and Restated Security Agreement. This
power of attorney is coupled with an interest and is irrevocable.

SECTION 3.6 DEALING WITH THE COLLATERAL

         (a)      The Agent and the Canadian Lenders shall not be obliged to
                  exhaust their recourse against the Corporation or any other
                  person or against any other security it may hold in respect of
                  the Obligations before realizing upon or otherwise dealing
                  with the Collateral in such manner as the Agent may consider
                  desirable.

         (b)      The Agent and the Canadian Lenders may grant extensions or
                  other indulgences, take and give up securities, accept
                  compositions, grant releases and discharges and otherwise deal
                  with the Corporation, the Collateral and with other persons,
                  sureties or securities as it may see fit without prejudice to
                  the Obligations, the liability of the Corporation or the
                  rights of the Agent in respect of the Collateral.

         (c)      Except as otherwise provided by law or this Amended and
                  Restated Security Agreement, the Agent and the Canadian
                  Lenders shall not be: (i) liable or accountable for any
                  failure to collect, realize or obtain payment in respect of
                  the Collateral; (ii) bound to institute proceedings for the
                  purpose of collecting, enforcing, realizing or obtaining
                  payment of the Collateral or for the purpose of preserving any
                  rights of any persons in respect of the Collateral; (iii)
                  responsible for any loss occasioned by any sale or other
                  dealing with the Collateral or by the retention of or failure
                  to sell or otherwise deal with the Collateral; or (iv) bound
                  to protect the Collateral from depreciating in value or
                  becoming worthless.

SECTION 3.7 STANDARDS OF SALE

         The Corporation acknowledges that, upon the Security Interest becoming
enforceable and without prejudice to the ability of the Agent to dispose of the
Collateral in any manner which is commercially reasonable:

         (a)      the Collateral may be disposed of in whole or in part;

         (b)      the Collateral may be disposed of by public auction, public
                  tender and/or private contract, with or without advertising
                  and without any other formality;

<PAGE>
                                      -16-

         (c)      any assignee of the Collateral or any part thereof may be a
                  customer of the Agent or a Canadian Lender;

         (d)      a disposition of the Collateral or any part thereof may be on
                  such terms and conditions as to credit or otherwise as the
                  Agent, in its sole discretion, may deem advantageous; and

         (e)      the Agent may establish an upset or reserve bid or price in
                  respect of the Collateral or any part thereof.

SECTION 3.8 DEALINGS BY THIRD PARTIES

         (a)      No person dealing with the Agent, any of the Canadian Lenders
                  or an agent or receiver shall be required to determine (i)
                  whether the Security Interest has become enforceable, (ii)
                  whether the powers which such person is purporting to exercise
                  have become exercisable, (iii) whether any money remains due
                  to the Agent or the Canadian Lenders by the Corporation, (iv)
                  the necessity or expediency of the stipulations and conditions
                  subject to which any sale or lease is made, (v) the propriety
                  or regularity of any sale or other dealing by the Agent or any
                  Canadian Lender with the Collateral, or (vi) how any money
                  paid to the Agent or the Canadian Lenders has been applied.

         (b)      At any time on or after such time as the Security Interest
                  becomes enforceable, any purchaser of all or any part of the
                  Collateral from the Agent or a receiver or agent shall hold
                  the Collateral absolutely, free from any claim or right of
                  whatever kind, including any equity of redemption, of the
                  Corporation, which it specifically waives (to the fullest
                  extent permitted by law) as against any such purchaser
                  together with all rights of redemption, stay or appraisal
                  which the Corporation has or may have under any rule of law or
                  statute now existing or hereafter adopted.

                                    ARTICLE 4
                                     GENERAL

SECTION 4.1 DISCHARGE

         The Security Interest shall be discharged upon, but only upon, (i) full
payment and performance of the Obligations, and (ii) the Agent and the Canadian
Lenders having no obligations under the Loan Documents or otherwise. Upon
discharge of the Security Interest and at the request and expense of the
Corporation, the Agent shall execute and deliver to the Corporation such
releases and discharges as the Corporation may reasonably require.

<PAGE>
                                      -17-

SECTION 4.2 LOAN AGREEMENT GOVERNS

         Notwithstanding anything to the contrary contained herein, this Amended
and Restated Security Agreement is issued subject always to the covenants,
conditions, limitations and other provisions contained in the Loan Agreement. In
the event of any conflict, discrepancy or ambiguity in or between any of the
provisions of this Amended and Restated Security Agreement and any of the
provisions of the Loan Agreement, including, without limitation, in the amount
payable thereunder, the principal amount for which this Amended and Restated
Security Agreement is expressed to be security, the interest payable on such
principal amount, the time at which demand may be made, the covenants therein
and the remedies available to the Agent or the Canadian Lenders, the provisions
of the Loan Agreement shall prevail and the provisions of this Amended and
Restated Security Agreement shall be deemed to be rendered inoperative by the
Loan Agreement, to the extent necessary to eliminate such conflict, discrepancy,
difference or ambiguity.

SECTION 4.3 AMENDMENTS, ETC.

         No amendment or waiver of any provision of this Amended and Restated
Security Agreement, nor consent to any departure by the Corporation from such
provisions, is effective unless in writing and, in the case of an amendment,
signed by the Corporation and the Agent or, in the case of a waiver or consent,
approved by the Agent. Any amendment, waiver or consent is effective only in the
specific instance and for the specific purpose for which it was given.

SECTION 4.4 WAIVERS

         No failure on the part of the Agent or any of the Canadian Lenders to
exercise, and no delay in exercising, any right under this Amended and Restated
Security Agreement shall operate as a waiver of such right; nor shall any single
or partial exercise of any right under this Amended and Restated Security
Agreement preclude any other or further exercise of such right or the exercise
of any other right.

SECTION 4.5 NO MERGER

         This Amended and Restated Security Agreement shall not operate by way
of merger of any of the Obligations and no judgment recovered by the Agent or
any of the Canadian Lenders shall operate by way of merger of, or in any way
affect, the Security Interest, which is in addition to, and not in substitution
for, any other security now or hereafter held by the Agent for itself and the
rateable benefit of the Canadian Lenders in respect of the Obligations.

<PAGE>
                                      -18-

SECTION 4.6 FURTHER ASSURANCES

         The Corporation shall from time to time, whether before or after the
Security Interest shall have become enforceable, do all acts and things and
execute and deliver all transfers, assignments and instruments as the Agent may
reasonably require for (i) protecting the Collateral, (ii) perfecting the
Security Interest, and (iii) exercising all powers, authorities and discretions
conferred upon the Agent, provided that notwithstanding the foregoing, the
Corporation is not required to assist the Agent in exercising any rights
available to the Agent which are dependent upon the occurrence of an Event of
Default until the Security Interest has become enforceable. The Corporation
shall, from time to time after the Security Interest has become enforceable, do
all acts and things and execute and deliver all transfers, assignments and
instruments as the Agent may require for facilitating the sale or other
disposition of the Collateral in connection with its realization.

SECTION 4.7 SUPPLEMENTAL SECURITY

         This Amended and Restated Security Agreement is in addition and without
prejudice to and supplemental all other security now held or which may hereafter
be held by the Agent or the Canadian Lenders as security for the Obligations.

SECTION 4.8 NOTICES

         Any notices, directions or other communications provided for in this
Amended and Restated Security Agreement shall be in writing and given in
accordance with the provisions of the Loan Agreement.

SECTION 4.9 SUCCESSORS AND ASSIGNS

         This Amended and Restated Security Agreement shall be binding upon the
Corporation, its successors and assigns, and shall enure to the benefit of the
Agent and its successors and permitted assigns. The rights of the Agent
hereunder shall be assignable in accordance with the provisions of the Loan
Agreement.

SECTION 4.10 GENDER AND NUMBER

         Any reference in this Amended and Restated Security Agreement to gender
shall include all genders and words importing the singular number only shall
include the plural and vice versa.

SECTION 4.11 HEADINGS, ETC.

         The division of this Amended and Restated Security Agreement into
Articles and Sections and the insertion of headings are for convenient reference
only and are not to affect its interpretation.

<PAGE>
                                      -19-

SECTION 4.12 SEVERABILITY

         If any provision of this Amended and Restated Security Agreement shall
be deemed by any court of competent jurisdiction to be invalid or void, the
remaining provisions shall remain in full force and effect.

SECTION 4.13 GOVERNING LAW

         This Amended and Restated Security Agreement shall be governed by and
interpreted and enforced in accordance with the laws of the Province of Alberta
and the laws of Canada applicable therein.

<PAGE>
                                      -20-

         IN WITNESS WHEREOF the Corporation has executed this Amended and
Restated Security Agreement.

                                       GRANT PRIDECO CANADA LTD.

                                       By:
                                          --------------------------------------
                                          Authorized Signing Officer

                                       By:
                                          --------------------------------------
                                          Authorized Signing Officer<PAGE>
                                                                     EXHIBIT 4.9

                            GRANT PRIDECO CANADA LTD.

                                 as Corporation

                                       and

                         DEUTSCHE BANK AG, CANADA BRANCH

                                    as Agent

--------------------------------------------------------------------------------

                               SECURITY AGREEMENT

                                DECEMBER 19, 2002

--------------------------------------------------------------------------------

<PAGE>

                                TABLE OF CONTENTS

<Table>
<S>                   <C>                                                                                   <C>
                                                   ARTICLE 1
                                                    SECURITY

Section 1.1           Terms Incorporated by Reference........................................................2
Section 1.2           Grant of Security......................................................................2
Section 1.3           Obligations Secured....................................................................4
Section 1.4           Further Security.......................................................................5
Section 1.5           Attachment.............................................................................5
Section 1.6           Scope of Security Interest.............................................................5
Section 1.7           Care and Custody of Collateral.........................................................6
Section 1.8           Corporation Remains Liable.............................................................6
Section 1.9           Dealings in the Ordinary Course........................................................6
Section 1.10          Negative Pledge........................................................................7
Section 1.11          Continuing Security....................................................................7
Section 1.12          Notification of Account Debtors........................................................7
Section 1.13          No Release.............................................................................7

                                                   ARTICLE 2
                                   REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.1           Representations and Warranties.........................................................8
Section 2.2           Additional Covenants...................................................................9
Section 2.3           Special Covenants With Respect to Equipment and Inventory.............................11
Section 2.4           Special Covenants with respect to Receivables.........................................12
Section 2.5           Special Covenants with Respect to the Intellectual Property...........................13

                                                   ARTICLE 3
                                                  ENFORCEMENT

Section 3.1           Enforcement...........................................................................16
Section 3.2           Remedies..............................................................................16
Section 3.3           Additional Rights.....................................................................17
Section 3.4           Receiver's Powers.....................................................................18
Section 3.5           Appointment of Attorney...............................................................19
Section 3.6           Dealing with the Collateral...........................................................19
Section 3.7           Standards of Sale.....................................................................20
Section 3.8           Dealings by Third Parties.............................................................20

                                                   ARTICLE 4
                                                    GENERAL

Section 4.1           Discharge.............................................................................21
Section 4.2           Loan Agreement Governs................................................................21
Section 4.3           Amendments, etc.......................................................................21
Section 4.4           Waivers...............................................................................22
</Table>

                                      (i)

<PAGE>

<Table>
<S>                   <C>                                                                                   <C>

Section 4.5           No Merger.............................................................................22
Section 4.6           Further Assurances....................................................................22
Section 4.7           Supplemental Security.................................................................22
Section 4.8           Notices...............................................................................22
Section 4.9           Successors and Assigns................................................................22
Section 4.10          Gender and Number.....................................................................23
Section 4.11          Headings, etc.........................................................................23
Section 4.12          Severability..........................................................................23
Section 4.13          Governing Law.........................................................................23
</Table>

                                      (ii)

<PAGE>

                               SECURITY AGREEMENT

         Security Agreement (this "SECURITY AGREEMENT") dated December 19, 2002
made by Grant Prideco Canada Ltd. (the "CORPORATION") to and in favour of
Deutsche Bank AG, Canada Branch, as Canadian agent (the "AGENT") for the
Canadian Lenders referred to below.

         RECITALS:

         (a)      The Canadian Lenders (as that term is defined in the Loan
                  Agreement hereinafter defined and referred to) as may from
                  time to time be parties to the Loan Agreement have agreed to
                  make credit facilities including, without limitation, the
                  Canadian Term Loans (as that term is defined in the Loan
                  Agreement) available to the Corporation on the terms and
                  conditions contained in a credit agreement among Grant
                  Prideco, LP, XL Systems, L.P., Texas Arai, Inc., Tube-Alloy
                  Corporation, Star Operating Company, Reed-Hycalog Operating,
                  L.P. and the Corporation, as Borrowers (as that term is
                  defined in the Loan Agreement hereinafter defined and referred
                  to) with Grant Prideco, LP acting in its capacity as US Funds
                  Administrator (as that term is defined in the Loan Agreement
                  hereinafter defined and referred to) for the Borrowers, and
                  the Corporation acting in its capacity as Canadian Funds
                  Administrator (as that term is defined in the Loan Agreement
                  hereinafter defined and referred to) for the Borrowers, with
                  Grant Prideco, Inc., as a guarantor, each of the Lenders from
                  time to time party hereto (as that term is defined in the Loan
                  Agreement hereinafter defined and referred to), Deutsche Bank
                  Trust Company Americas, acting in its capacity as contractual
                  representative for the US Lenders (US Lenders, as that term is
                  defined in the Loan Agreement hereinafter defined and referred
                  to and Deutsche Bank Trust Company Americas, acting in its
                  capacity as contractual representative for the US Lenders,
                  referred to as the "US AGENT") and the Agent, acting in its
                  capacity as contractual representative of the Canadian
                  Lenders, Transamerica Business Capital Corporation, as
                  Document Agent (as that term is defined in the Loan Agreement
                  hereinafter defined and referred to), JP Morgan Chase Bank, as
                  Co-Syndication Agent (as that term is defined in the Loan
                  Agreement hereinafter defined and referred to) and Merrill
                  Lynch Capital, as Co-Syndication Agent (as that term is
                  defined in the Loan Agreement hereinafter defined and referred
                  to) (such credit agreement as it may at any time or from time
                  to time be amended, supplemented, restated or replaced, the
                  "LOAN AGREEMENT");

         (b)      The Agent is to hold for its own benefit and is to act as
                  agent to hold for itself and for the rateable benefit of the
                  Canadian Lenders any and

<PAGE>

                                      -2-

                  all security for the payment and performance of the
                  obligations of the Corporation under the Loan Agreement and
                  the other Credit Documents (as such term is defined in the
                  Loan Agreement); and

         (c)      The Corporation has agreed to execute and deliver this
                  Security Agreement to and in favour of the Agent as security
                  for the payment and performance of the Corporation's
                  obligations to the Canadian Lenders and the Agent under the
                  Loan Agreement and other Credit Documents in respect of the
                  Canadian Term Loans.

         In consideration of the foregoing and other good and valuable
consideration (the receipt and adequacy of which are acknowledged), the
Corporation agrees as follows:

                                   ARTICLE 1
                                    SECURITY

SECTION 1.1 TERMS INCORPORATED BY REFERENCE

         Terms defined in the Personal Property Security Act (Alberta) (as
amended from time to time, the "PPSA") and used in this Security Agreement shall
have the same meanings attributed to such terms in the PPSA. For all purposes of
this Security Agreement, capitalized terms defined in the Loan Agreement and
used in this Security Agreement and not otherwise defined in this Security
Agreement shall herein have the meanings provided to those terms in the Loan
Agreement.

SECTION 1.2 GRANT OF SECURITY

         As general and continuing security for the payment and performance of
the Obligations (as defined herein), the Corporation hereby grants to the Agent,
for its own benefit and as agent and for the rateable benefit of the Canadian
Lenders, a security interest in all of the present and after acquired personal
property of the Corporation and all of the present and future undertaking,
assets and property of the Corporation (collectively, the "COLLATERAL"), and as
further general and continuing security for the payment and performance of the
Obligations, the Corporation hereby assigns the Collateral to the Agent for its
own benefit and as agent and for the rateable benefit of the Canadian Lenders
and mortgages and charges the Collateral to the Agent, for its own benefit and
as agent and for the rateable benefit of the Canadian Lenders (collectively, the
"SECURITY INTEREST"). Without limiting the generality of the foregoing, the
Collateral shall include all right, title and interest that the Corporation now
has, may be possessed of, entitled to, or acquire, by way of amalgamation or
otherwise, now or hereafter or may hereafter have in all property of the
following kinds:

<PAGE>

                                      -3-

(1)      ACCOUNTS RECEIVABLE: all present and after-acquired debts, demands,
         accounts, claims and choses in action which are now, or which may
         hereafter become, due, owing or accruing due to the Corporation
         (collectively, the "RECEIVABLES");

(2)      INVENTORY: all present and after-acquired inventory of whatever kind
         and wherever situated including, without limiting the generality of the
         foregoing, all goods held for sale, lease or resale, goods furnished or
         to be furnished to third parties under contracts of lease, consignment
         or service, goods that are work in progress or raw materials used or
         consumed in the business of the Corporation (collectively, the
         "INVENTORY");

(3)      EQUIPMENT: all present and after-acquired equipment, machinery,
         fixtures, furniture, plants, vehicles and other tangible personal
         property which is not Inventory (collectively, the "EQUIPMENT");

(4)      CHATTEL PAPER: all chattel paper;

(5)      DOCUMENTS OF TITLE: all warehouse receipts, bills of lading and other
         documents of title, whether negotiable or not;

(6)      SECURITIES AND INSTRUMENTS: all shares, stock, warrants, bonds,
         debentures, debenture stock and other securities and all instruments
         other than those excluded by Section 7.19 of the Loan Agreement
         (collectively, the "SECURITIES");

(7)      INTANGIBLES: all present and after-acquired intangibles not described
         in Section 1.2(1) including, without limiting the generality of the
         foregoing, all other industrial property, security interests, goodwill,
         choses in action and other contractual benefits and all trademarks,
         trademark registrations and pending trademark applications, patents,
         pending patent applications, copyrights and copyright registrations and
         other intellectual property (such trademarks, trademark registrations
         and pending trademark applications, patents, pending patent
         applications, copyrights and copyright registrations and all other
         intellectual property collectively, the "INTELLECTUAL PROPERTY");

(8)      MONEY: all coins or bills or other medium of exchange adopted for use
         as part of the currency of Canada or of any foreign government;

(9)      BOOKS, RECORDS, ETC.: all books, papers, accounts, invoices, letters,
         files, charts, plans, drawings, specifications, manuals, documents and
         other records in any form recording, evidencing or relating to any of
         the property described in Sections 1.2(1) to (8) inclusive, and all
         contracts, securities, instruments, licences and other rights and
         benefits in respect thereof;

<PAGE>

                                      -4-

(10)     SUBSTITUTIONS. ETC.: all replacements of, substitutions for and
         increases, additions and accessions to any of the property described in
         Sections 1.2(1) to (9) inclusive; and

(11)     PROCEEDS: all proceeds of the property described in Sections 1.2(1) to
         (10) inclusive including, without limiting the generality of the
         foregoing, all personal property in any form, or fixtures derived
         directly or indirectly from any dealing with such property or that
         indemnifies or compensates for the loss of or damage to such property,
         inclusive of the proceeds of such proceeds.

SECTION 1.3 OBLIGATIONS SECURED

         (a)      The Security Interest granted hereby secures the payment and
                  performance of all debts, liabilities and obligations at any
                  time or from time to time due or accruing due and owing by or
                  otherwise payable by the Corporation to the Agent or the
                  Canadian Lenders under or pursuant to the Loan Agreement and
                  any other agreements executed by the Corporation in connection
                  therewith, including this Security Agreement and the Credit
                  Documents to which the Corporation is a party, with respect to
                  the Canadian Term Loans and including all charges and fees of
                  the Canadian Lenders and the Agent, whether present or future,
                  direct or indirect, absolute or contingent, matured or
                  unmatured, however or wherever incurred, and in any currency,
                  and whether incurred by the Corporation alone or with another
                  or others and whether as principal or surety (collectively,
                  and together with the expenses, costs and charges set out in
                  1.3(b), herein the "OBLIGATIONS"). For greater certainty,
                  Obligations shall not include any debts, liabilities or
                  obligations payable by the Corporation with respect to the
                  Canadian Revolving Loans.

         (b)      All expenses, costs and charges incurred by or on behalf of
                  the Agent and the Canadian Lenders in connection with this
                  Security Agreement, the Security Interest or the Collateral,
                  including all legal fees, court costs, receiver's or agent's
                  remuneration and other expenses of taking possession of,
                  repairing, protecting, insuring, preparing for disposition,
                  realizing, collecting, selling, transferring, delivering or
                  obtaining payment of the Collateral or other lawful exercises
                  of the powers conferred by the Loan Agreement, and of taking,
                  defending or participating in any action or proceeding in
                  connection with any of the foregoing matters or otherwise in
                  connection with the Canadian Lenders' or the Agent's interest
                  in any Collateral shall be added to and form a part of the
                  Obligations.

<PAGE>

                                      -5-

SECTION 1.4 FURTHER SECURITY

         The Corporation also grants to the Agent, for its own benefit and as
agent for the rateable benefit of the Canadian Lenders, as further security for
all of the Obligations, a security interest in all of its right, title and
interest in and to all property of the Corporation in the possession of or
deposited with or in the custody of the Agent or any Affiliate of the Agent or
any representative, agent or correspondent of the Agent. For purposes of this
Security Agreement, any property in which the Agent or any such Affiliate has
any security or title retention interest shall be deemed to be in the custody of
the Agent or of such Affiliate.

SECTION 1.5 ATTACHMENT

         (a)      The Corporation acknowledges that (i) value has been given,
                  (ii) it has rights in the Collateral (other than
                  after-acquired Collateral),(iii) it has not agreed to postpone
                  the time of attachment of the Security Interest, and (iv) it
                  has received a duplicate original copy of this Security
                  Agreement. The Security Interest is intended to, and shall,
                  attach to the existing Collateral when the Corporation signs
                  this Security Agreement, and to all Collateral subsequently
                  acquired by the Corporation immediately upon the Corporation
                  acquiring rights in such Collateral.

         (b)      If the Corporation acquires Collateral consisting of chattel
                  paper, instruments, securities or negotiable documents of
                  title (collectively, "NEGOTIABLE COLLATERAL"), the Corporation
                  will, upon the Security Interest becoming enforceable and at
                  the request of the Agent, deliver to the Agent the Negotiable
                  Collateral and the Corporation shall, at the request of the
                  Agent: (i) cause the transfer of the Negotiable Collateral to
                  the Agent to be registered wherever, in the opinion of the
                  Agent, such registration may be required or advisable, (ii)
                  duly endorse the same for transfer in blank or as the Agent
                  may direct, and (iii) immediately deliver to the Agent any and
                  all consents or other documents which may be necessary to
                  effect the transfer of the Negotiable Collateral to the Agent
                  or any third party.

         (c)      The Corporation will execute and deliver, at its own expense,
                  from time to time, amendments to this Security Agreement or
                  additional security agreements as may be required by the
                  Agent.

SECTION 1.6 SCOPE OF SECURITY INTEREST

         The Security Interest shall not:

         (a)      extend or apply to the last day of the term of any lease,
                  sublease or any agreement therefore applicable to all
                  Collateral now held or hereafter

<PAGE>

                                      -6-

                  acquired by the Corporation, but upon enforcement of the
                  Security Interest, the Corporation shall thereafter stand
                  possessed of such last day and shall hold it in trust for the
                  Agent to assign the same to any person acquiring such term in
                  the course of the enforcement of the Security Interest; or

         (b)      extend to, and the Collateral shall not include any agreement,
                  right, franchise, licence or permit (the "CONTRACTUAL RIGHTS")
                  to which the Corporation is a party or of which the
                  Corporation has the benefit, to the extent that the creation
                  of the Security Interest herein would constitute a breach of
                  the terms of, or permit any person to terminate, the
                  Contractual Rights, but the Corporation shall hold its
                  interest therein in trust for the Agent to assign the same to
                  any person acquiring all or any portion of the Collateral in
                  the course of enforcement of the Security Interest.

SECTION 1.7 CARE AND CUSTODY OF COLLATERAL

         (a)      The Agent shall have no obligation to keep Collateral in its
                  possession identifiable.

         (b)      The Agent may, after the Security Interest shall have become
                  enforceable, (i) notify any person obligated on an account or
                  on chattel paper or any obligor on an instrument to make
                  payments to the Agent whether or not the Corporation was
                  previously making collections on such accounts, chattel paper
                  or instruments, and (ii) assume control of any proceeds
                  arising from the Collateral.

SECTION 1.8 CORPORATION REMAINS LIABLE

         Notwithstanding the provisions of this Security Agreement: (i) the
Corporation shall remain liable to perform all of its duties and obligations in
regard to the Collateral (including, without limitation, all of its duties and
obligations arising under any leases, licenses, permits, reservations,
contracts, agreements, instruments, contractual rights and governmental orders,
authorizations, licenses and permits, if any, now or hereafter pertaining
thereto) to the same extent as if this Security Agreement had not been executed;
(ii) the exercise by or on behalf of the Agent of any of its rights and remedies
under or in regard to this Security Agreement shall not release the Corporation
from such duties and obligations; and (iii) the Agent nor the Canadian Lenders
shall have no liability for such duties and obligations by reason of the
execution and delivery of this Security Agreement.

SECTION 1.9 DEALINGS IN THE ORDINARY COURSE

         Subject to Section 1.10 hereof and until the Security Interest becomes
enforceable, the Corporation may dispose of or deal with the Collateral in the

<PAGE>

                                      -7-

ordinary course of business and for the purpose of carrying on the same, so that
purchasers thereof or parties dealing with the Corporation take title thereto
free and clear of the Security Interest, provided that such action is not in
breach of any covenant in this Security Agreement or any covenant of the
Corporation in the Loan Agreement or any of the other Credit Documents to which
the Corporation is a party. In the event of any such disposition, and provided
that such disposition is not made in contravention of any provision in the Loan
Agreement or any of the other Credit Documents to which the Corporation is a
party, the Agent will, at the written request of the Corporation, release the
Security Interest in the Collateral which has been disposed of pursuant to such
disposition.

SECTION 1.10 NEGATIVE PLEDGE

         The Corporation shall not, without the prior written consent of the
Agent, or as otherwise permitted by the Loan Agreement, create, issue, incur,
assume, have outstanding or permit to exist, any mortgage, charge, pledge, lien,
assignment by way of security, security interest or other encumbrance on any
part of the Collateral, other than Permitted Liens.

SECTION 1.11 CONTINUING SECURITY

         This Security Agreement shall be a continuing obligation, shall cover
and secure any ultimate balance of the Obligations owing to the Agent or the
Canadian Lenders, and shall be operative and binding notwithstanding that at any
time or times the Obligations may be zero, or that any payments from time to
time may be made to the Agent or the Canadian Lenders, or any settlements of
account effected, or any other thing whatsoever done, suffered or permitted, or
any other action short of complete and irrevocable payment of all the
Obligations and any other amounts payable hereunder.

SECTION 1.12 NOTIFICATION OF ACCOUNT DEBTORS

         Upon the occurrence and during the continuance of an Event of Default,
the Agent may give notice to any person obligated to the Corporation or other
person liable to the Corporation in respect of a Receivable or intangible to
make all further payments to the Lender, and, upon notice to the Corporation
thereof, any payment or other proceeds of Collateral received by the Corporation
from account debtors or from any other person liable to the Corporation after
any such notice is given by the Agent shall be held by the Corporation in trust
for the Agent and paid over to the Agent on request.

SECTION 1.13 NO RELEASE

         The loss, injury or destruction of the Collateral shall not operate in
any manner to release or discharge the Corporation from any of its liabilities
to the Agent.

<PAGE>

                                      -8-

                                   ARTICLE 2
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

SECTION 2.1 REPRESENTATIONS AND WARRANTIES

         The Corporation hereby represents and warrants to the Agent and the
Canadian Lenders that:

(1)      the Corporation has good title to, or a valid leasehold interest in, or
         a valid contractual agreement to use, all of the Collateral owned by
         the Corporation free and clear of any Lien, except for a Permitted
         Lien. Except as expressly permitted by the Loan Agreement and such as
         may have been filed in favour of Agent or the Canadian Lenders relating
         to this Security Agreement, no effective financing statement or other
         instrument similar in effect under the law of any jurisdiction covering
         all or any part of the Collateral is on file in any filing, registry or
         recording office;

(2)      all certificates or instruments (excluding cheques and drafts)
         evidencing, comprising or representing the Collateral have been
         delivered to the Agent duly endorsed or accompanied by duly executed
         instruments of transfer or assignment in blank. Notwithstanding,
         anything to the contrary in the preceding sentence, (a) the Corporation
         is not obligated to deliver to the Agent negotiable instruments of
         title unless an Event of Default has occurred and is continuing and the
         Agent requests delivery of such items, and (b) the Corporation is not
         obligated to deliver to the Agent Letters of Credit unless requested by
         the Agent. If requested by the Agent, the Corporation will cause all
         Letters of Credit to be delivered to the Agent. If the Corporation is
         required to deliver Letters of Credit to the Agent, then the
         Corporation will notify the Agent from time to time of its desire to
         make a draw on a Letter of Credit and its request for return of the
         Letter of Credit for such purposes. The Agent shall, promptly after
         receipt of any such request, return the requested Letter of Credit to
         the Corporation. The Corporation shall within five (5) business days
         after receipt of such Letter of Credit either, present such Letter of
         Credit to the issuing bank for draw thereon or return the Letter of
         Credit to the Agent. If the Letter of Credit is partially (rather than
         fully) drawn, the Corporation shall return the Letter of Credit to the
         Agent within three (3) business days after submitting the Letter of
         Credit for such partial draw (or if the Letter of Credit is retained by
         the issuing bank, then within three (3) business days after the Letter
         of Credit is returned to the Corporation by the issuing bank);

<PAGE>

                                      -9-

(3)      with respect to the Intellectual Property:

         (a)      A true and complete list of all trademark registrations and
                  trademark applications owned by the Corporation, in whole or
                  in part, is set forth in Schedule 2.1(3)(a);

         (b)      A true and complete list of all patents owned by the
                  Corporation, in whole or in part, is set forth in Schedule
                  2.1(3)(b);

         (c)      A true and complete list of all copyrights and copyright
                  registrations and applications for copyright registrations
                  owned by the Corporation, in whole or in part, is set forth in
                  Schedule 2.1(3)(c);

         (d)      The Corporation is not aware of any pending or threatened
                  claim by any third party that any of the Intellectual Property
                  owned, held or used by the Corporation is invalid or
                  unenforceable; and

         (e)      No effective security interest or other Lien covering all or
                  any part of the Intellectual Property is on file in the
                  Canadian Intellectual Property Office.

(4)      the Security Interest in the Collateral granted to the Agent for its
         own benefit and as agent and for the rateable benefit of the Canadian
         Lenders hereunder creates a valid security interest in the Collateral,
         securing the payment of Obligations as provided in Section 1.3 hereof.
         Upon the filing of financing statements naming the Corporation as
         "debtor", naming the Agent as "secured party" and describing the
         Collateral pursuant to the PPSA and the Personal Property Security Act
         (Newfoundland) and the filing of a financing statement naming the
         Corporation as "debtor" and the Agent as "secured party" pursuant to
         the Personal Property Security Act (Nova Scotia), the Security Interest
         in the Collateral granted hereunder will constitute a perfected
         security interest in all Collateral now owned and hereafter acquired by
         the Corporation enforceable against the Corporation prior to all other
         Liens (except for Permitted Liens), and all other documents and
         instruments for all filings, registrations and recordings and other
         actions necessary or desirable to perfect and protect such Security
         Interest will have been duly made or taken.

SECTION 2.2 ADDITIONAL COVENANTS

         The Corporation covenants with the Agent that the Corporation shall:

(1)      ensure that the representations and warranties set forth in Section 2.1
         shall be true and correct at all times;

<PAGE>

                                      -10-

(2)      not permit the Collateral to be affixed to real or personal property so
         as to become a fixture or accession without the prior written consent
         of the Agent, except where the Collateral is affixed to real or
         personal property which is a Permitted Lien or which is also subject to
         a security interest in favour of the Agent and which is not subject to
         a security interest in favour of any other person, except for a
         Permitted Lien;

(3)      not change its name or, in addition to and without limiting the
         provisions of the Loan Agreement, shall not amalgamate with any other
         corporation, continue to, reorganize or reincorporate itself under any
         other jurisdiction other than the Province of Alberta without (i) first
         giving fifteen (15) days notice to the Agent of its intention to do so
         and providing such other information in connection therewith as the
         Agent may request including, without limitation, the new name and the
         names of all amalgamating corporations and the date when such new name
         or amalgamation is to become effective; and (ii) taking all action
         satisfactory to the Agent with respect to the new name or jurisdiction
         to maintain the Security Interest of the Agent in the Collateral
         intended to be granted and perfected hereby at all times fully
         perfected and in full force and effect;

(4)      pay to the Agent forthwith upon demand all reasonable costs, charges
         and expenses (including, without limiting the generality of the
         foregoing, all legal, receiver's and accounting fees and expenses)
         incurred by or on behalf of the Agent or the Canadian Lenders in
         connection with the preparation, execution and perfection of this
         Security Agreement and the carrying out of any of the provisions of
         this Security Agreement including, without limiting the generality of
         the foregoing, protecting and preserving the Security Interest and
         enforcing by legal process or otherwise the remedies provided herein;
         and all such costs and expenses shall be added to and form part of the
         Obligations secured hereunder;

(5)      if the Agent gives value to enable the Corporation to acquire rights in
         or for the use of any Collateral, use such value for such purposes; and

(6)      except as expressly permitted by the Loan Agreement, pay promptly when
         due all property and other taxes, assessments and governmental charges
         or levies imposed upon, and all claims (including claims for labour,
         services, materials and supplies) against, the Collateral, except to
         the extent the validity thereof is being contested in good faith;
         provided that the Corporation shall in any event pay such taxes,
         assessments, charges, levies or claims not later than five (5) days
         prior to the date of any proposed sale under any judgment, writ or
         warrant of attachment entered or filed against the Corporation or any
         of the Collateral as a result of the failure to make such payment.

<PAGE>

                                      -11-

(7)      if the Corporation shall hereafter obtain rights to any new
         Intellectual Property or become entitled to the benefit of (a) any
         patent application or patent or any reissue, division, continuation,
         renewal, extension or continuation-in-part of any patent or any
         improvement of any patent or (b) any copyright registration,
         application for copyright registration or renewals or extension of any
         copyright, then in any such case, the provisions of this Security
         Agreement shall automatically apply thereto. The Corporation shall
         notify the Agent in writing, on the quarterly basis prescribed in
         Section 7.1(b) of the Loan Agreement, of any of the foregoing rights
         acquired by the Corporation after the date hereof and of (a) any
         trademark registrations issued or application for a trademark
         registration or application for a patent made, and (b) any copyright
         registrations issued or applications for copyright registration made,
         in any such case, after the date hereof. Promptly within thirty (30)
         days after the filing of an application for any (i) trademark
         registration; (ii) patent; and (iii) copyright registration, the
         Corporation shall execute and deliver to the Agent and record in all
         places where a security interest is recorded a Confirmation of Security
         Interest in Intellectual Property (a "CONFIRMATION"); provided, if, in
         the reasonable judgment of the Corporation, after due inquiry, filing
         such Confirmation would result in the grant of a trademark registration
         or copyright registration in the name of the Agent, the Corporation
         shall give written notice to the Agent as soon as reasonably
         practicable and the filing shall instead be undertaken as soon as
         practicable but in no case later than immediately following the grant
         of the applicable trademark registration or copyright registration, as
         the case may be. Upon delivery to the Agent of a Confirmation,
         Schedules 2.1(3)(a), 2.1(3)(b) and 2.1(3)(c) hereto shall be deemed
         modified to include reference to any right, title or interest in any
         existing Intellectual Property or any Intellectual Property included in
         such Confirmation. The Corporation hereby authorizes the Agent to
         modify this Security Agreement without the signature or consent of the
         Corporation by attaching Schedules 2.1(3)(a), 2.1(3)(b) and 2.1(3)(c)
         as applicable, that have been modified to include such Intellectual
         Property or to delete any reference to any right, title or interest in
         any Intellectual Property in which the Corporation no longer has or
         claims any right, title or interest; provided, the failure of the
         Corporation to execute a Confirmation with respect to any additional
         Intellectual Property pledged pursuant to this Security Agreement shall
         not impair the security interest of the Agent therein or otherwise
         adversely affect the rights and remedies of the Agent hereunder with
         respect thereto.

SECTION 2.3 SPECIAL COVENANTS WITH RESPECT TO EQUIPMENT AND INVENTORY.

         The Corporation shall:

<PAGE>

                                      -12-

(a)      keep correct and accurate records of Inventory owned by the Corporation
         itemizing and describing the kind, type and quality of such Inventory,
         such Corporation's cost therefor and (where applicable) the current
         list prices for such Inventory;

(b)      if any Inventory is in possession or control of any of the
         Corporation's agents or processors, upon the occurrence and
         continuation of an Event of Default, instruct such agent or processor
         to hold all such Inventory for the account of the Agent and subject to
         the instructions of the Agent;

(c)      maintain insurance with respect to the Equipment and Inventory in
         accordance with the terms of the Loan Agreement; and

(d)      upon (i) the occurrence and during the continuation of any Event of
         Default or (ii) the actual or constructive loss of any Equipment or
         Inventory, all insurance payments in respect of such Equipment or
         Inventory shall be paid to and applied against the Obligations by the
         Agent as specified in the Loan Agreement.

SECTION 2.4 SPECIAL COVENANTS WITH RESPECT TO RECEIVABLES

(a)      The Corporation shall, for not less than three (3) years from the date
         on which each Receivable of the Corporation arose, maintain (i) records
         of such Receivable in such detail, form and scope as is consistent with
         good business practice, and (ii) all documentation relating thereto as
         is consistent with good business practice.

(b)      Except as otherwise provided in this Section 2.4(b), the Corporation
         shall continue to collect, at its own expense, all amounts due or to
         become due to the Corporation or in any way relate to the Receivables.
         In connection with such collections, the Corporation may take (and,
         upon the occurrence and during the continuance of an Event of Default
         at the Agent's direction, shall take) such action as the Corporation or
         the Agent may deem necessary or advisable to enforce collection of
         amounts due or to become due under the Receivables; provided, however,
         that the Agent shall have the right at any time, upon the occurrence
         and during the continuance of an Event of Default and upon written
         notice to the Corporation of its intention to do so, to notify the
         account debtors or obligors under any Receivables of the assignment of
         such Receivables to the Agent and to direct such account debtors or
         obligors to make payment of all amounts due or to become due to the
         Corporation thereunder directly to the Agent, to notify each Person
         maintaining a lockbox, blocked account or similar arrangement to which
         account debtors or obligors under any Receivables have been

<PAGE>

                                      -13-

         directed to make payment to remit all amounts representing collections
         on cheques and other payment items from time to time sent to or
         deposited in such lockbox, blocked account or other arrangement
         directly to the Agent and, upon such notification and at the expense of
         the Corporation, to enforce collection of any such Receivables and to
         adjust, settle or compromise the amount or payment thereof, in the same
         manner and to the same extent as the Corporation might have done. After
         receipt by the Corporation of the notice from the Agent referred to in
         the proviso to the preceding sentence and during the continuation of an
         Event of Default, (i) all amounts and proceeds (including cheques and
         other instruments) received by the Corporation in respect of the
         Receivables shall be received in trust for the benefit of the Agent
         hereunder, shall be segregated from other funds of the Corporation and
         shall be forthwith paid over or delivered to the Agent in the same form
         as so received (with any necessary endorsement) to be held as cash
         Collateral and applied against the Obligations as provided by the Loan
         Agreement, and (ii) the Corporation shall not adjust, settle or
         compromise the amount or payment of any Receivable, or release wholly
         or partly any account debtor or obligor thereof, or allow any credit or
         discount thereon.

SECTION 2.5 SPECIAL COVENANTS WITH RESPECT TO THE INTELLECTUAL PROPERTY

(1)      The Corporation shall:

         (a)      diligently keep reasonable records respecting the Intellectual
                  Property and at all times keep at least one complete set of
                  its records concerning such Collateral at its chief executive
                  office or principal place of business;

         (b)      take any and all reasonable steps to protect the secrecy of
                  all trade secrets relating to the products and services sold
                  or delivered under or in connection with the Intellectual
                  Property, including, without limitation, where appropriate
                  entering into confidentiality agreements with employees and
                  labelling and restricting access to secret information and
                  documents;

         (c)      use proper statutory notice in connection with its use of any
                  of the Intellectual Property;

         (d)      use a commercially appropriate standard of quality (which may
                  be consistent with the Corporation's past practices) in the
                  manufacture, sale and delivery of products and services sold
                  or delivered under or in connection with its trademarks; and

<PAGE>

                                      -14-

         (e)      furnish the Agent from time to time at the Agent's reasonable
                  request statements and schedules further identifying and
                  describing any Intellectual Property and such other reports in
                  connection with such Collateral, all in reasonable detail.

(2)      Except as otherwise provided in this Section 2.5, the Corporation shall
         continue to collect, at its own expense, all amounts due or to become
         due to the Corporation in respect of the Intellectual Property or any
         portion thereof. In connection with such collections, the Corporation
         may take (and, after the occurrence and during the continuance of any
         Event of Default at the Agent's reasonable direction, shall take) such
         action as the Corporation or the Agent may deem reasonably necessary or
         advisable to enforce collections of such amounts; provided, the Agent
         shall have the right at any time, upon the occurrence and during the
         continuation of an Event of Default and upon written notice to the
         Corporation of its security interest created hereby to direct such
         obligors to make payment of all such amounts directly to the Agent,
         and, upon such notification and at the expense of the Corporation, to
         enforce collection of any such amounts and to adjust, settle or
         compromise the amount or payment thereof, in the same manner and to the
         same extent as the Corporation might have done. After receipt by the
         Corporation of the notice from the Agent referred to in the proviso to
         the preceding sentence and during the continuation of any Event of
         Default, (a) all amounts and proceeds (including cheques and other
         instruments) received by the Corporation in respect of amounts due to
         the Corporation in respect of its Intellectual Property or any portion
         thereof shall be received in trust for the benefit of the Agent
         hereunder, shall be segregated from other funds of the Corporation and
         shall be forthwith paid over or delivered to the Agent in the same form
         as so received (with any necessary endorsement) to be held as cash
         Collateral and applied against the Obligations as provided by the Loan
         Agreement, and (b) the Corporation shall not adjust, settle or
         compromise the amount or payment of any such amount or release wholly
         or partly any obligor with respect thereto or allow any credit or
         discount thereon.

(3)      The Corporation shall have the duty diligently to prosecute, file
         and/or make, unless and until the Corporation, in its commercially
         reasonably judgment, decides otherwise, (a) any application relating to
         any of the Intellectual Property owned, held or used by the Corporation
         and identified on Schedules 2.1(3)(a), 2.1(3)(b) or 2.1(3)(c), as
         applicable, that is pending as of the date of this Security Agreement,
         (b) any copyright registration on any existing or future unregistered
         but copyrightable works (except for works of nominal commercial value
         or with respect to which the Corporation has determined in the exercise
         of its commercially reasonable judgment that it shall not seek
         registration), (c) application on any future patentable but

<PAGE>

                                      -15-

         unpatented innovation or invention comprising Intellectual Property,
         and (d) any trademark opposition and cancellation proceedings, renew
         trademark registrations and copyright registrations and do any and all
         acts which are necessary or desirable to preserve and maintain all
         rights in its Intellectual Property. Any expenses incurred in
         connection therewith shall be borne solely the Corporation. Subject to
         the foregoing, the Corporation shall give the Agent prior written
         notice of any abandonment of any Intellectual Property or any pending
         patent application or any patent.

(4)      Except as provided herein, the Corporation shall have the right to
         commence and prosecute in its own name, as real party in interest, for
         its own benefit and at its own expense, such suits, proceedings or
         other actions for infringement, unfair competition, dilution,
         misappropriation or other damage, or re-examination or reissue
         proceedings as are necessary to protect the Intellectual Property. The
         Agent shall provide, at the Corporation's expense, all reasonable and
         necessary cooperation in connection with any such suit, proceeding or
         action including, without limitation, joining as a necessary party. The
         Corporation shall promptly, following its becoming aware thereof,
         notify the Agent of the institution of, or of any adverse determination
         in, any proceeding (whether in the Canadian Intellectual Property
         Office or any federal, provincial, local or foreign court) or regarding
         the Corporation's ownership, right to use, or interest in any
         Intellectual Property material to the conduct of the Corporation's
         business. The Corporation shall provide to the Agent any information
         with respect thereto reasonably requested by the Agent.

(5)      In addition to, and not by way of limitation of, the granting of a
         security interest in the Collateral pursuant hereto, the Corporation,
         effective upon the occurrence and during the continuation of an Event
         of Default, hereby assigns, transfers and conveys to the Agent the
         nonexclusive right and license to use all trademarks, tradenames,
         copyrights, patents or technical processes (including, without
         limitation, the Intellectual Property) owned or used by the Corporation
         that relate to the Collateral and any other collateral granted by the
         Corporation as security for the Obligations, together with any goodwill
         associated therewith, all to the extent necessary to enable the Agent
         to realize on the Collateral in accordance with this Security Agreement
         and to enable any transferee or assignee of the Collateral to enjoy the
         benefits of the Collateral. This right shall inure to the benefit of
         all successors, assigns and transferees of the Agent or the Canadian
         Lenders and their successors, assigns and transferees, whether by
         voluntary conveyance, operation of law, assignment, transfer,
         foreclosure, deed in lieu of foreclosure or otherwise. Such right and
         license shall be granted free of charge, without requirement that any
         monetary payment whatsoever be made to the Corporation. In

<PAGE>

                                      -16-

         addition, the Corporation hereby grants to the Agent and its employees,
         representatives and agents the right to visit the Corporation's and any
         of its Affiliate's or subcontractor's plants, facilities and other
         places of business that are utilized in connection with the
         manufacture, production, inspection, storage or sale of products and
         services sold or delivered under any of the Intellectual Property (or
         which were so utilized during the prior six month period), and to
         inspect the quality control and all other records relating thereto upon
         reasonable advance written notice to the Corporation and during normal
         business hours at reasonable dates and times and as often as may be
         reasonably requested. The Corporation may license its Intellectual
         Property to any Person as it may deem necessary to the successful
         conduct of its business. Nothing contained herein shall prohibit or
         limit the licensing of Intellectual Property to any Person as the
         Corporation may deem appropriate in the conduct of its business. If and
         to the extent that the Corporation licenses the Intellectual Property,
         the Agent shall promptly enter into a non-disturbance agreement or
         other similar arrangement, at the Corporation's request and expense,
         with the Corporation and any licensee of any Intellectual Property
         permitted hereunder in form and substance reasonably satisfactory to
         the Agent pursuant to which (a) the Agent shall agree not to disturb or
         interfere with such licensee's rights under its license agreement with
         the Corporation so long as such licensee is not in default thereunder,
         and (b) such licensee shall acknowledge and agree that the Intellectual
         Property licensed to it is subject to the Security Interest created in
         favour of the Agent and the other terms of this Security Agreement
         subject to clause (a).

(6)      Notwithstanding anything in the foregoing, the Corporation will not be
         subject to Subsections 2.5(1)(a) through 2.5(1)(d), 2.5(2) and 2.5(3)
         with respect to Intellectual Property that is obsolete.

                                   ARTICLE 3
                                   ENFORCEMENT

SECTION 3.1 ENFORCEMENT

         The Security Interest shall be and become enforceable against the
Corporation upon the occurrence and during the continuance of an Event of
Default.

SECTION 3.2 REMEDIES

         (a)      Whenever the Security Interest has become enforceable, the
                  Agent may realize upon the Collateral and enforce its rights
                  by:

                  (i)      entry onto any premises where Collateral consisting
                           of tangible personal property may be located;

<PAGE>

                                      -17-

                  (ii)     entry into possession of the Collateral by any method
                           permitted by law;

                  (iii)    sale or lease of all or any part of the Collateral;

                  (iv)     collection of any proceeds arising in respect of the
                           Collateral;

                  (v)      collection, realization or sale of, or other dealing
                           with, the Receivables;

                  (vi)     appointment by instrument in writing of a receiver or
                           agent of all or any part of the Collateral and
                           removal or replacement from time to time of any
                           receiver or agent;

                  (vii)    institution of proceedings in any court of competent
                           jurisdiction for the appointment of a receiver of all
                           or any part of the Collateral;

                  (viii)   institution of proceedings in any court of competent
                           jurisdiction for sale or foreclosure of all or any
                           part of the Collateral;

                  (ix)     filing of proofs of claim and other documents to
                           establish claims to the Collateral in any proceeding
                           relating to the Corporation; and

                  (x)      any other remedy or proceeding authorized or
                           permitted under the PPSA or otherwise by law or
                           equity.

         (b)      Such remedies may be exercised from time to time separately or
                  in combination and are in addition to, and not in substitution
                  for, any other rights of the Agent and the Canadian Lenders
                  however created. The Agent or the Canadian Lenders shall not
                  be bound to exercise any right or remedy, and the exercise of
                  any rights and remedies shall be without prejudice to the
                  rights of the Agent and the Canadian Lenders in respect of the
                  Obligations including the right to claim for any deficiency.

SECTION 3.3 ADDITIONAL RIGHTS

         In addition to the remedies set forth in Section 3.2, the Agent may,
whenever the Security Interest has become enforceable:

         (a)      require the Corporation, by notice in writing, at the
                  Corporation's expense, to assemble the Collateral at a place
                  or places designated by notice in writing and the Corporation
                  agrees to so assemble the Collateral;

<PAGE>

                                      -18-

         (b)      require the Corporation, by notice in writing, to disclose to
                  the Agent the location or locations of the Collateral and the
                  Corporation agrees to make such disclosure when so required;

         (c)      repair, process, modify, complete or otherwise deal with the
                  Collateral and prepare for the disposition of the Collateral,
                  whether on the premises of the Corporation or otherwise;

         (d)      enter upon, occupy and use all or any of the premises,
                  buildings, and other property of or used by the Corporation
                  for such time as the Agent sees fit, free of charge, to
                  exercise any of the Agent's rights or remedies under or in
                  relation to this Security Agreement, and the Agent and the
                  Canadian Lenders shall not be liable to the Corporation for
                  any act, omission or negligence in so doing or for any rent,
                  charges, depreciation or damages incurred in connection with
                  or resulting from such action;

         (e)      borrow for the purpose of the maintenance, preservation or
                  protection of the Collateral and grant a security interest in
                  the Collateral, whether or not in priority to the Security
                  Interest, to secure repayment; and

         (f)      commence, continue or defend any judicial or administrative
                  proceedings for the purpose of protecting, seizing,
                  collecting, realizing or obtaining possession or payment of
                  the Collateral, and give good and valid receipts and
                  discharges in respect of the Collateral and compromise or give
                  time for the payment or performance of all or any part of the
                  accounts or any other obligation of any third party to the
                  Corporation.

SECTION 3.4 RECEIVER'S POWERS.

         (a)      Any receiver appointed by the Agent shall be vested with the
                  rights and remedies which could have been exercised by the
                  Agent in respect of the Corporation or the Collateral. The
                  identity of the receiver, its replacement and its remuneration
                  shall be within the sole and unfettered discretion of the
                  Agent. Any receiver appointed by a court shall have all powers
                  and discretions as are granted in the instrument of
                  appointment and any supplemental instruments.

         (b)      Any receiver appointed by the Agent shall act as agent for the
                  Agent for the purposes of taking possession of the Collateral,
                  but otherwise and for all other purposes (except as provided
                  below), as agent for the Corporation. The receiver may sell,
                  lease, or otherwise dispose of Collateral as agent for the
                  Corporation or as agent for the Agent as the Agent may
                  determine in its discretion. The Corporation agrees to

<PAGE>

                                      -19-

                  ratify and confirm all actions of the receiver acting as agent
                  for the Corporation, and to release and indemnify the receiver
                  in respect of all such actions.

         (c)      The Agent, in appointing or refraining from appointing any
                  receiver, shall not incur liability to the receiver, the
                  Corporation or otherwise and shall not be responsible for any
                  misconduct or negligence of the receiver.

SECTION 3.5 APPOINTMENT OF ATTORNEY

         The Corporation irrevocably appoints the Agent (and any of its
officers) as attorney of the Corporation (with full power of substitution) to
(a) sign the Corporation's name on any documents, instruments and other items
described in the Loan Agreement; (b) request at any time from parties indebted
to the Corporation verification of information concerning such indebtedness
including the amount owing thereon (provided that any verification prior to an
the occurrence of an Event of Default shall not contain the Agent's name); and
(c) upon the occurrence and during the continuance of an Event of Default: (i)
convey any item of the Collateral to any purchaser thereof; and (ii) make any
payment or take any act necessary or desirable to protect or preserve any
Collateral. The Agent's authority hereunder shall include, without limitation,
the authority to execute and give receipt for any certificate of ownership or
any document, to transfer title to any item of the Collateral and to take any
other actions arising from or incident to the powers granted to the Agent under
this Security Agreement. This power of attorney is coupled with an interest and
is irrevocable.

SECTION 3.6 DEALING WITH THE COLLATERAL

         (a)      The Agent and the Canadian Lenders shall not be obliged to
                  exhaust their recourse against the Corporation or any other
                  person or against any other security it may hold in respect of
                  the Obligations before realizing upon or otherwise dealing
                  with the Collateral in such manner as the Agent may consider
                  desirable.

         (b)      The Agent and the Canadian Lenders may grant extensions or
                  other indulgences, take and give up securities, accept
                  compositions, grant releases and discharges and otherwise deal
                  with the Corporation, the Collateral and with other persons,
                  sureties or securities as it may see fit without prejudice to
                  the Obligations, the liability of the Corporation or the
                  rights of the Agent in respect of the Collateral.

         (c)      Except as otherwise provided by law or this Security
                  Agreement, the Agent and the Canadian Lenders shall not be:
                  (i) liable or accountable for any failure to collect, realize
                  or obtain payment in respect of the

<PAGE>

                                      -20-

                  Collateral; (ii) bound to institute proceedings for the
                  purpose of collecting, enforcing, realizing or obtaining
                  payment of the Collateral or for the purpose of preserving any
                  rights of any persons in respect of the Collateral; (iii)
                  responsible for any loss occasioned by any sale or other
                  dealing with the Collateral or by the retention of or failure
                  to sell or otherwise deal with the Collateral; or (iv) bound
                  to protect the Collateral from depreciating in value or
                  becoming worthless.

SECTION 3.7 STANDARDS OF SALE

         The Corporation acknowledges that, upon the Security Interest becoming
enforceable and without prejudice to the ability of the Agent to dispose of the
Collateral in any manner which is commercially reasonable:

         (a)      the Collateral may be disposed of in whole or in part;

         (b)      the Collateral may be disposed of by public auction, public
                  tender and/or private contract, with or without advertising
                  and without any other formality;

         (c)      any assignee of the Collateral or any part thereof may be a
                  customer of the Agent or a Canadian Lender;

         (d)      a disposition of the Collateral or any part thereof may be on
                  such terms and conditions as to credit or otherwise as the
                  Agent, in its sole discretion, may deem advantageous; and

         (e)      the Agent may establish an upset or reserve bid or price in
                  respect of the Collateral or any part thereof.

SECTION 3.8 DEALINGS BY THIRD PARTIES

         (a)      No person dealing with the Agent, any of the Canadian Lenders
                  or an agent or receiver shall be required to determine (i)
                  whether the Security Interest has become enforceable, (ii)
                  whether the powers which such person is purporting to exercise
                  have become exercisable, whether any money remains due to the
                  Agent or the Canadian Lenders by the Corporation, (iii) the
                  necessity or expediency of the stipulations and conditions
                  subject to which any sale or lease is made, (iv) the propriety
                  or regularity of any sale or other dealing by the Agent or any
                  Canadian Lender with the Collateral, or (v) how any money paid
                  to the Agent or the Canadian Lenders has been applied.

         (b)      At any time on or after such time as the Security Interest
                  becomes enforceable, any purchaser of all or any part of the
                  Collateral from the Agent or a receiver or agent shall hold
                  the Collateral absolutely, free

<PAGE>

                                      -21-

                  from any claim or right of whatever kind, including any equity
                  of redemption, of the Corporation, which it specifically
                  waives (to the fullest extent permitted by law) as against any
                  such purchaser together with all rights of redemption, stay or
                  appraisal which the Corporation has or may have under any rule
                  of law or statute now existing or hereafter adopted.

                                   ARTICLE 4
                                     GENERAL

SECTION 4.1 DISCHARGE

         The Security Interest shall be discharged upon, but only upon, (a) full
payment and performance of the Obligations, and (b) the Agent and the Canadian
Lenders having no obligations under the Loan Documents or otherwise. Upon
discharge of the Security Interest and at the request and expense of the
Corporation, the Agent shall execute and deliver to the Corporation such
releases and discharges as the Corporation may reasonably require.

SECTION 4.2 LOAN AGREEMENT GOVERNS

         Notwithstanding anything to the contrary contained herein, this
Security Agreement is issued subject always to the covenants, conditions,
limitations and other provisions contained in the Loan Agreement. In the event
of any conflict, discrepancy or ambiguity in or between any of the provisions of
this Security Agreement and any of the provisions of the Loan Agreement,
including, without limitation, in the amount payable thereunder, the principal
amount for which this Security Agreement is expressed to be security, the
interest payable on such principal amount, the time at which demand may be made,
the covenants therein and the remedies available to the Agent or the Canadian
Lenders, the provisions of the Loan Agreement shall prevail and the provisions
of this Security Agreement shall be deemed to be rendered inoperative by the
Loan Agreement, to the extent necessary to eliminate such conflict, discrepancy,
difference or ambiguity.

SECTION 4.3 AMENDMENTS, ETC.

         No amendment or waiver of any provision of this Security Agreement, nor
consent to any departure by the Corporation from such provisions, is effective
unless in writing and, in the case of an amendment, signed by the Corporation
and the Agent or, in the case of a waiver or consent, approved by the Agent. Any
amendment, waiver or consent is effective only in the specific instance and for
the specific purpose for which it was given.

<PAGE>

                                      -22-

SECTION 4.4 WAIVERS

         No failure on the part of the Agent or any of the Canadian Lenders to
exercise, and no delay in exercising, any right under this Security Agreement
shall operate as a waiver of such right; nor shall any single or partial
exercise of any right under this Security Agreement preclude any other or
further exercise of such right or the exercise of any other right.

SECTION 4.5 NO MERGER

         This Security Agreement shall not operate by way of merger of any of
the Obligations and no judgment recovered by the Agent or any of the Canadian
Lenders shall operate by way of merger of, or in any way affect, the Security
Interest, which is in addition to, and not in substitution for, any other
security now or hereafter held by the Agent for itself and the rateable benefit
of the Canadian Lenders in respect of the Obligations.

SECTION 4.6 FURTHER ASSURANCES

         The Corporation shall from time to time, whether before or after the
Security Interest shall have become enforceable, do all acts and things and
execute and deliver all transfers, assignments and instruments as the Agent may
reasonably require for (i) protecting the Collateral, (ii) perfecting the
Security Interest, and (iii) exercising all powers, authorities and discretions
conferred upon the Agent, provided that notwithstanding the foregoing, the
Corporation is not required to assist the Agent in exercising any rights
available to the Agent which are dependent upon the occurrence of an Event of
Default until the Security Interest has become enforceable. The Corporation
shall, from time to time after the Security Interest has become enforceable, do
all acts and things and execute and deliver all transfers, assignments and
instruments as the Agent may require for facilitating the sale or other
disposition of the Collateral in connection with its realization.

SECTION 4.7 SUPPLEMENTAL SECURITY

         This Security Agreement is in addition and without prejudice to and
supplemental all other security now held or which may hereafter be held by the
Agent or the Canadian Lenders as security for the Obligations.

SECTION 4.8 NOTICES

         Any notices, directions or other communications provided for in this
Security Agreement shall be in writing and given in accordance with the
provisions of the Loan Agreement.

SECTION 4.9 SUCCESSORS AND ASSIGNS

         This Security Agreement shall be binding upon the Corporation, its
successors and assigns, and shall enure to the benefit of the Agent and its
successors

<PAGE>

                                      -23-

and permitted assigns. The rights of the Agent hereunder shall be assignable in
accordance with the provisions of the Loan Agreement.

SECTION 4.10 GENDER AND NUMBER

         Any reference in this Security Agreement to gender shall include all
genders and words importing the singular number only shall include the plural
and vice versa.

SECTION 4.11 HEADINGS, ETC.

         The division of this Security Agreement into Articles and Sections and
the insertion of headings are for convenient reference only and are not to
affect its interpretation.

SECTION 4.12 SEVERABILITY

         If any provision of this Security Agreement shall be deemed by any
court of competent jurisdiction to be invalid or void, the remaining provisions
shall remain in full force and effect.

SECTION 4.13 GOVERNING LAW

         This Security Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Province of Alberta and the laws of
Canada applicable therein.

<PAGE>

                                      -24-

         IN WITNESS WHEREOF the Corporation has executed this Security
Agreement.

                                      GRANT PRIDECO CANADA LTD.

                                      By:
                                          -------------------------------------
                                          Authorized Signing Officer

                                      By:
                                          -------------------------------------
                                          Authorized Signing Officer

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