Unassociated Document


    
      

    

    Exhibit
      4.6 

     

    SECURITY
      AGREEMENT

     

    THIS
      SECURITY AGREEMENT
      (the
“Agreement”), is
      entered into and made effective as of January 5, 2006, by and between
IGNIS
      PETROLEUM GROUP, INC., a
      Nevada
      corporation (the “Company”),
      and
      the BUYER(S)
      listed
      on Schedule I attached to the Securities Purchase Agreement dated the date
      hereof (the
      “Secured
      Party”).

     

    WHEREAS,
      the
      Company shall issue and sell to the Secured Party, as provided in the Securities
      Purchase Agreement of even date herewith between the Company and the Secured
      Party (the “Securities
      Purchase Agreement”),
      and
      the Secured Party shall purchase up to Five Million Dollars ($5,000,000) of
      secured convertible debentures (the “Convertible
      Debentures”),
      which
      shall be convertible into shares of the Company’s common stock, par value $0.001
      (the “Common
      Stock”)
      (as
      converted, the “Conversion
      Shares”)
      in the
      respective amounts set forth opposite each Buyer(s) name on Schedule I attached
      to the Securities Purchase Agreement;

     

    WHEREAS,
      to
      induce
      the Secured Party to enter into the transaction contemplated by the Securities
      Purchase Agreement, the Convertible Debentures, the Investor Registration Rights
      Agreement of even date herewith between the Company and the Secured Party (the
      “Investor
      Registration Rights Agreement”),
      the
      Pledge and Escrow Agreement of even date herewith among the Company, the Secured
      Party and David Gonzalez, Esq. (the “Pledge
      Agreement”),
      the
      Escrow Agreement of even date herewith among the Company, the Secured Party,
      and
      David Gonzalez, Esq. (the “Escrow
      Agreement”),
      and
      the Irrevocable Transfer Agent Instructions among the Company, the Secured
      Party, Transfer Agent, and David Gonzalez, Esq. (the “Transfer
      Agent Instructions”)
      (collectively referred to as the “Transaction
      Documents”),
      the
      Company hereby grants to the Secured Party a security interest in and to the
      pledged property identified on Exhibit
      A
      hereto
      (collectively referred to as the “Pledged
      Property”)
      until
      the satisfaction of the Obligations, as defined herein below.

     

    NOW,
      THEREFORE, in
      consideration of the promises and the mutual covenants herein contained, and
      for
      other good and valuable consideration, the adequacy and receipt of which are
      hereby acknowledged, the parties hereto hereby agree as follows:

     

    ARTICLE
      1.

     

    DEFINITIONS
      AND INTERPRETATIONS

     

    
      	 	
              Section
                1.1.

            	
              Recitals.

            


    

     

    The
      above
      recitals are true and correct and are incorporated herein, in their entirety,
      by
      this reference.

     

    
      	 	
              Section
                1.2.

            	
              Interpretations.

            


    

     

    Nothing
      herein expressed or implied is intended or shall be construed to confer upon
      any
      person other than the Secured Party any right, remedy or claim under or by
      reason hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                1.3.

            	
              Obligations
                Secured.

            


    

     

    The
      obligations secured hereby are any and all obligations of the Company now
      existing or hereinafter incurred to the Secured Party, whether oral or written
      and whether arising before, on or after the date hereof including, without
      limitation, those obligations of the Company to the Secured Party under this
      Agreement, the Transaction Documents, and any other amounts now or hereafter
      owed to the Secured Party by the Company thereunder or hereunder (collectively,
      the “Obligations”).

     

    ARTICLE
      2.

     

    PLEDGED
      PROPERTY, ADMINISTRATION OF COLLATERAL

    AND
      TERMINATION OF SECURITY INTEREST

     

    
      	 	
              Section
                2.1.

            	
              Pledged
                Property.

            


    

     

    (a)   Company
      hereby pledges to the Secured Party, and creates in the Secured Party for its
      benefit, a security interest for such time until the Obligations are paid in
      full, in and to all of the property of the Company as set forth in Exhibit
      “A”
      attached
      hereto and the products thereof and the proceeds of all such items
      (collectively, the “Pledged
      Property”):

     

    (b)   Simultaneously
      with the execution and delivery of this Agreement, the Company shall make,
      execute, acknowledge, file, record and deliver to the Secured Party any
      documents reasonably requested by the Secured Party to perfect its security
      interest in the Pledged Property. Simultaneously with the execution and delivery
      of this Agreement, the Company shall make, execute, acknowledge and deliver
      to
      the Secured Party such documents and instruments, including, without limitation,
      financing statements, certificates, affidavits and forms as may, in the Secured
      Party’s reasonable judgment, be necessary to effectuate, complete or perfect, or
      to continue and preserve, the security interest of the Secured Party in the
      Pledged Property, and the Secured Party shall hold such documents and
      instruments as secured party, subject to the terms and conditions contained
      herein.

     

    
      	 	
              Section
                2.2.

            	
              Rights;
                Interests; Etc.

            


    

     

    (a)   So
      long
      as no Event of Default (as hereinafter defined) shall have occurred and be
      continuing:

     

    (i)   the
      Company shall be entitled to exercise any and all rights pertaining to the
      Pledged Property or any part thereof for any purpose not inconsistent with
      the
      terms hereof; and

     

    (ii)   
        the
      Company shall be entitled to receive and retain any and all payments paid or
      made in respect of the Pledged Property.

     

    (b)   Upon
      the
      occurrence and during the continuance of an Event of Default:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    (i)   All
      rights of the Company to exercise the rights which it would otherwise be
      entitled to exercise pursuant to Section 2.2(a)(i) hereof and to receive
      payments which it would otherwise be authorized to receive and retain pursuant
      to Section 2.2(a)(ii) hereof shall be suspended, and all such rights shall
      thereupon become vested in the Secured Party who shall thereupon have the sole
      right to exercise such rights and to receive and hold as Pledged Property such
      payments; provided,
      however,
      that if
      the Secured Party shall become entitled and shall elect to exercise its right
      to
      realize on the Pledged Property pursuant to Article 5 hereof, then all cash
      sums
      received by the Secured Party, or held by Company for the benefit of the Secured
      Party and paid over pursuant to Section 2.2(b)(ii) hereof, shall be applied
      against any outstanding Obligations; and

     

    (ii)  
         All
      interest, dividends, income and other payments and distributions which are
      received by the Company contrary to the provisions of Section 2.2(b)(i) hereof
      shall be received in trust for the benefit of the Secured Party, shall be
      segregated from other property of the Company and shall be forthwith paid over
      to the Secured Party; or 

     

    (iii)  
        The
      Secured Party in its sole discretion shall be authorized to sell
      any
      or all of the Pledged Property at public or private sale in order to recoup
      all
      of the outstanding principal plus accrued interest owed pursuant to the
      Convertible Debenture as described herein

     

    (c)   An
      “Event
      of Default”
shall
      be deemed to have occurred under this Agreement upon an Event of Default under
      the Convertible Debentures.

     

    Section
      2.3.   Termination
      of Security Interest.
      Notwithstanding anything to the contrary contained herein, upon full payment
      of
      all Obligations due to the Secured Party under the Convertible Debentures,
      by
      repayment or conversion in accordance with the terms of the Convertible
      Debentures, this Agreement and Secured Party’s security interest and rights in
      and to the Pledged Property shall terminate and Secured Party shall cooperate
      with the Company to effectuate the release of any liens created hereby.
      Notwithstanding the foregoing, the Company shall not formally terminate the
      Secured Party’s security interest with obtaining the Secured Party’s consent.


     

    ARTICLE
      3.

     

    ATTORNEY-IN-FACT;
      PERFORMANCE

     

    
      	 	
              Section
                3.1.

            	
              Secured
                Party Appointed Attorney-In-Fact.

            


    

     

    Upon
      the
      occurrence of an Event of Default, the Company hereby appoints the Secured
      Party
      as its attorney-in-fact, with full authority in the place and stead of the
      Company and in the name of the Company or otherwise, from time to time in the
      Secured Party’s discretion to take any action and to execute any instrument
      which the Secured Party may reasonably deem necessary to accomplish the purposes
      of this Agreement, including, without limitation, to receive and collect all
      instruments made payable to the Company representing any payments in respect
      of
      the Pledged Property or any part thereof and to give full discharge for the
      same. The Secured Party may demand, collect, receipt for, settle, compromise,
      adjust, sue for, foreclose, or realize on the Pledged Property as and when
      the
      Secured Party may determine. To facilitate collection, the Secured Party may
      notify account debtors and obligors on any Pledged Property to make payments
      directly to the Secured Party.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                3.2.

            	
              Secured
                Party May Perform.

            


    

     

    If
      the
      Company fails to perform any agreement contained herein, the Secured Party,
      at
      its option, may itself perform, or cause performance of, such agreement, and
      the
      expenses of the Secured Party incurred in connection therewith shall be included
      in the Obligations secured hereby and payable by the Company under Section
      8.3.

     

    ARTICLE
      4.

     

    REPRESENTATIONS
      AND WARRANTIES

     

    
      	 	
              Section
                4.1.

            	
              Authorization;
                Enforceability.

            


    

     

    Each
      of
      the parties hereto represents and warrants that it has taken all action
      necessary to authorize the execution, delivery and performance of this Agreement
      and the transactions contemplated hereby; and upon execution and delivery,
      this
      Agreement shall constitute a valid and binding obligation of the respective
      party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
      and similar laws affecting creditors’ rights or by the principles governing the
      availability of equitable remedies.

     

    
      	 	
              Section
                4.2.

            	
              Ownership
                of Pledged Property.

            


    

     

    The
      Company warrants and represents that it is the legal and beneficial owner of
      the
      Pledged Property free and clear of any lien, security interest, option or other
      charge or encumbrance except for the security interest created by this
      Agreement.

     

    ARTICLE
      5.

     

    DEFAULT;
      REMEDIES; SUBSTITUTE COLLATERAL

     

    
      	 	
              Section
                5.1.

            	
              Default
                and Remedies.

            


    

     

    (a)   If
      an
      Event of Default occurs, then in each such case the Secured Party may declare
      the Obligations to be due and payable immediately, by a notice in writing to
      the
      Company, and upon any such declaration, the Obligations shall become immediately
      due and payable. 

     

    (b)   Upon
      the
      occurrence of an Event of Default, the Secured Party shall: (i) be entitled
      to
      receive all distributions with respect to the Pledged Property, (ii) to cause
      the Pledged Property to be transferred into the name of the Secured Party or
      its
      nominee, (iii) to dispose of the Pledged Property, and (iv) to realize upon
      any
      and all rights in the Pledged Property then held by the Secured
      Party.

     

    
      	 	
              Section
                5.2.

            	
              Method
                of Realizing Upon the Pledged Property: Other Remedies.

            


    

     

    Upon
      the
      occurrence of an Event of Default, in addition to any rights and remedies
      available at law or in equity, the following provisions shall govern the Secured
      Party’s right to realize upon the Pledged Property:

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    


    (a)   Any
      item
      of the Pledged Property may be sold for cash or other value in any number of
      lots at brokers board, public auction or private sale and may be sold without
      demand, advertisement or notice (except that the Secured Party shall give the
      Company ten (10) days’ prior written notice of the time and place or of the time
      after which a private sale may be made (the “Sale
      Notice”)),
      which notice period is hereby agreed to be commercially reasonable. At any
      sale
      or sales of the Pledged Property, the Company may bid for and purchase the
      whole
      or any part of the Pledged Property and, upon compliance with the terms of
      such
      sale, may hold, exploit and dispose of the same without further accountability
      to the Secured Party. The Company will execute and deliver, or cause to be
      executed and delivered, such instruments, documents, assignments, waivers,
      certificates, and affidavits and supply or cause to be supplied such further
      information and take such further action as the Secured Party reasonably shall
      require in connection with any such sale.

     

    (b)   Any
      cash
      being held by the Secured Party as Pledged Property and all cash proceeds
      received by the Secured Party in respect of, sale of, collection from, or other
      realization upon all or any part of the Pledged Property shall be applied as
      follows:

     

    (i)   to
      the
      payment of all amounts due the Secured Party for the expenses reimbursable
      to it
      hereunder or owed to it pursuant to Section 8.3 hereof;

     

    (ii)   
        to
      the
      payment of the Obligations then due and unpaid.

     

    (iii)  
        the
      balance, if any, to the person or persons entitled thereto, including, without
      limitation, the Company.

     

    (c)   In
      addition to all of the rights and remedies which the Secured Party may have
      pursuant to this Agreement, the Secured Party shall have all of the rights
      and
      remedies provided by law, including, without limitation, those under the Uniform
      Commercial Code.

     

    (i)   If
      the
      Company fails to pay such amounts due upon the occurrence of an Event of Default
      which is continuing, then the Secured Party may institute a judicial proceeding
      for the collection of the sums so due and unpaid, may prosecute such proceeding
      to judgment or final decree and may enforce the same against the Company and
      collect the monies adjudged or decreed to be payable in the manner provided
      by
      law out of the property of Company, wherever situated.

     

    (ii)     The
      Company agrees that it shall be liable for any reasonable fees, expenses and
      costs incurred by the Secured Party in connection with enforcement, collection
      and preservation of the Transaction Documents, including, without limitation,
      reasonable legal fees and expenses, and such amounts shall be deemed included
      as
      Obligations secured hereby and payable as set forth in Section 8.3
      hereof.

     

    
      	 	
              Section
                5.3.

            	
              Proofs
                of Claim.

            


    

     

    In
      case
      of the pendency of any receivership, insolvency, liquidation, bankruptcy,
      reorganization, arrangement, adjustment, composition or other judicial
      proceeding relating to the Company or the property of the Company or of such
      other obligor or its creditors, the Secured Party (irrespective of whether
      the
      Obligations shall then be due and payable as therein expressed or by declaration
      or otherwise and irrespective of whether the Secured Party shall have made
      any
      demand on the Company for the payment of the Obligations), subject to the rights
      of Previous Security Holders, shall be entitled and empowered, by intervention
      in such proceeding or otherwise:

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


    (i)   to
      file
      and prove a claim for the whole amount of the Obligations and to file such
      other
      papers or documents as may be necessary or advisable in order to have the claims
      of the Secured Party (including any claim for the reasonable legal fees and
      expenses and other expenses paid or incurred by the Secured Party permitted
      hereunder and of the Secured Party allowed in such judicial proceeding),
      and

     

    (ii)   
        to
      collect and receive any monies or other property payable or deliverable on
      any
      such claims and to distribute the same; and any custodian, receiver, assignee,
      trustee, liquidator, sequestrator or other similar official in any such judicial
      proceeding is hereby authorized by the Secured Party to make such payments
      to
      the Secured Party and, in the event that the Secured Party shall consent to
      the
      making of such payments directed to the Secured Party, to pay to the Secured
      Party any amounts for expenses due it hereunder.

     

    
      	 	
              Section
                5.4.

            	
              Duties
                Regarding Pledged Property.

            


    

     

    The
      Secured Party shall have no duty as to the collection or protection of the
      Pledged Property or any income thereon or as to the preservation of any rights
      pertaining thereto, beyond the safe custody and reasonable care of any of the
      Pledged Property actually in the Secured Party’s possession.

     

    ARTICLE
      6.

     

    AFFIRMATIVE
      COVENANTS

     

    The
      Company covenants and agrees that, from the date hereof and until the
      Obligations have been fully paid and satisfied, unless the Secured Party shall
      consent otherwise in writing (as provided in Section 8.4 hereof):

     

    
      	 	
              Section
                6.1.

            	
              Existence,
                Properties, Etc.

            


    

     

    (a)   The
      Company shall do, or cause to be done, all things, or proceed with due diligence
      with any actions or courses of action, that may be reasonably necessary (i)
      to
      maintain Company’s due organization, valid existence and good standing under the
      laws of its state of incorporation, and (ii) to preserve and keep in full force
      and effect all qualifications, licenses and registrations in those jurisdictions
      in which the failure to do so could have a Material Adverse Effect (as defined
      below); and (b) the Company shall not do, or cause to be done, any act impairing
      the Company’s corporate power or authority (i) to carry on the Company’s
      business as now conducted, and (ii) to execute or deliver this Agreement or
      any
      other document delivered in connection herewith, including, without limitation,
      any UCC-1 Financing Statements required by the Secured Party to which it is
      or
      will be a party, or perform any of its obligations hereunder or thereunder.
      For
      purpose of this Agreement, the term “Material
      Adverse Effect”
shall
      mean any material and adverse affect as determined by Secured Party in its
      sole
      discretion, whether individually or in the aggregate, upon (a) the Company’s
      assets, business, operations, properties or condition, financial or otherwise;
      (b) the Company’s to make payment as and when due of all or any part of the
      Obligations; or (c) the Pledged Property.

     

    
      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

    

    


    
      	 	
              Section
                6.2.

            	
              Financial
                Statements and Reports.

            


    

     

    The
      Company shall furnish to the Secured Party within a reasonable time such
      financial data as the Secured Party may reasonably request, including, without
      limitation, the following:

     

    (a)   The
      balance sheet of the Company as of the close of each fiscal year, the statement
      of earnings and retained earnings of the Company as of the close of such fiscal
      year, and statement of cash flows for the Company for such fiscal year, all
      in
      reasonable detail, prepared in accordance with generally accepted accounting
      principles consistently applied, certified by the chief executive and chief
      financial officers of the Company as being true and correct and accompanied
      by a
      certificate of the chief executive and chief financial officers of the Company,
      stating that the Company has kept, observed, performed and fulfilled each
      covenant, term and condition of this Agreement during such fiscal year and
      that
      no Event of Default hereunder has occurred and is continuing, or if an Event
      of
      Default has occurred and is continuing, specifying the nature of same, the
      period of existence of same and the action the Company proposes to take in
      connection therewith;

     

    (b)   A
      balance
      sheet of the Company as of the close of each month, and statement of earnings
      and retained earnings of the Company as of the close of such month, all in
      reasonable detail, and prepared substantially in accordance with generally
      accepted accounting principles consistently applied, certified by the chief
      executive and chief financial officers of the Company as being true and correct;
      and

     

    (c)   Copies
      of
      all accountants' reports and accompanying financial reports submitted to the
      Company by independent accountants in connection with each annual examination
      of
      the Company.

     

    
      	 	
              Section
                6.3.

            	
              Accounts
                and Reports.

            


    

     

    The
      Company shall maintain a standard system of accounting in accordance with
      generally accepted accounting principles consistently applied and provide,
      at
      its sole expense, to the Secured Party the following:

     

    (a)   as
      soon
      as available, a copy of any notice or other communication alleging any
      nonpayment or other material breach or default, or any foreclosure or other
      action respecting any material portion of its assets and properties, received
      respecting any of the indebtedness of the Company in excess of $50,000 (other
      than the Obligations), or any demand or other request for payment under any
      guaranty, assumption, purchase agreement or similar agreement or arrangement
      respecting the indebtedness or obligations of others in excess of $50,000,
      including any received from any person acting on behalf of the Secured Party
      or
      beneficiary thereof; and

     

    (b)   within
      fifteen (15) days after the making of each submission or filing, a copy of
      any
      report, financial statement, notice or other document, whether periodic or
      otherwise, submitted to the shareholders of the Company, or submitted to or
      filed by the Company with any governmental authority involving or affecting
      (i)
      the Company that could have a Material Adverse Effect; (ii) the Obligations;
      (iii) any part of the Pledged Property; or (iv) any of the transactions
      contemplated in this Agreement or the Loan Instruments.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                6.4.

            	
              Maintenance
                of Books and Records; Inspection.

            


    

     

    The
      Company shall maintain its books, accounts and records in accordance with
      generally accepted accounting principles consistently applied, and permit the
      Secured Party, its officers and employees and any professionals designated
      by
      the Secured Party in writing, at any time to visit and inspect any of its
      properties (including but not limited to the collateral security described
      in
      the Transaction Documents and/or the Loan Instruments), corporate books and
      financial records, and to discuss its accounts, affairs and finances with any
      employee, officer or director thereof.

     

    
      	 	
              Section
                6.5.

            	
              Maintenance
                and Insurance.

            


    

     

    (a)   The
      Company shall maintain or cause to be maintained, at its own expense, all of
      its
      assets and properties in good working order and condition, making all necessary
      repairs thereto and renewals and replacements thereof.

     

    (b)   The
      Company shall maintain or cause to be maintained, at its own expense, insurance
      in form, substance and amounts (including deductibles), which the Company deems
      reasonably necessary to the Company’s business, (i) adequate to insure all
      assets and properties of the Company, which assets and properties are of a
      character usually insured by persons engaged in the same or similar business
      against loss or damage resulting from fire or other risks included in an
      extended coverage policy; (ii) against public liability and other tort claims
      that may be incurred by the Company; (iii) as may be required by the Transaction
      Documents and/or applicable law and (iv) as may be reasonably requested by
      Secured Party, all with adequate, financially sound and reputable
      insurers.

     

    
      	 	
              Section
                6.6.

            	
              Contracts
                and Other Collateral.

            


    

     

    The
      Company shall perform all of its obligations under or with respect to each
      instrument, receivable, contract and other intangible included in the Pledged
      Property to which the Company is now or hereafter will be party on a timely
      basis and in the manner therein required, including, without limitation, this
      Agreement.

     

    
      	 	
              Section
                6.7.

            	
              Defense
                of Collateral, Etc.

            


    

     

    The
      Company shall defend and enforce its right, title and interest in and to any
      part of: (a) the Pledged Property; and (b) if not included within the Pledged
      Property, those assets and properties whose loss could have a Material Adverse
      Effect, the Company shall defend the Secured Party’s right, title and interest
      in and to each and every part of the Pledged Property, each against all manner
      of claims and demands on a timely basis to the full extent permitted by
      applicable law.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                6.8.

            	
              Payment
                of Debts, Taxes, Etc.

            


    

     

    The
      Company shall pay, or cause to be paid, all of its indebtedness and other
      liabilities and perform, or cause to be performed, all of its obligations in
      accordance with the respective terms thereof, and pay and discharge, or cause
      to
      be paid or discharged, all taxes, assessments and other governmental charges
      and
      levies imposed upon it, upon any of its assets and properties on or before
      the
      last day on which the same may be paid without penalty, as well as pay all
      other
      lawful claims (whether for services, labor, materials, supplies or otherwise)
      as
      and when due

     

    
      	 	
              Section
                6.9.

            	
              Taxes
                and Assessments; Tax Indemnity.

            


    

     

    The
      Company shall (a) file all tax returns and appropriate schedules thereto that
      are required to be filed under applicable law, prior to the date of delinquency,
      (b) pay and discharge all taxes, assessments and governmental charges or levies
      imposed upon the Company, upon its income and profits or upon any properties
      belonging to it, prior to the date on which penalties attach thereto, and (c)
      pay all taxes, assessments and governmental charges or levies that, if unpaid,
      might become a lien or charge upon any of its properties; provided,
      however,
      that
      the Company in good faith may contest any such tax, assessment, governmental
      charge or levy described in the foregoing clauses (b) and (c) so long as
      appropriate reserves are maintained with respect thereto. 

     

    
      	 	
              Section
                6.10.

            	
              Compliance
                with Law and Other Agreements.
                

            


    

     

    The
      Company shall maintain its business operations and property owned or used in
      connection therewith in compliance with (a) all applicable federal, state and
      local laws, regulations and ordinances governing such business operations and
      the use and ownership of such property, and (b) all agreements, licenses,
      franchises, indentures and mortgages to which the Company is a party or by
      which
      the Company or any of its properties is bound. Without limiting the foregoing,
      the Company shall pay all of its indebtedness promptly in accordance with the
      terms thereof.

     

    
      	 	
              Section
                6.11.

            	
              Notice
                of Default.
                

            


    

     

    The
      Company shall give written notice to the Secured Party of the occurrence of
      any
      default or Event of Default under this Agreement, the Transaction Documents
      or
      any other Loan Instrument or any other agreement of Company for the payment
      of
      money, promptly upon the occurrence thereof.

     

    
      	 	
              Section
                6.12.

            	
              Notice
                of Litigation.

            


    

     

    The
      Company shall give notice, in writing, to the Secured Party of (a) any actions,
      suits or proceedings wherein the amount at issue is in excess of $50,000,
      instituted by any persons against the Company, or affecting any of the assets
      of
      the Company, and (b) any dispute, not resolved within fifteen (15) days of
      the
      commencement thereof, between the Company on the one hand and any governmental
      or regulatory body on the other hand, which might reasonably be expected to
      have
      a Material Adverse Effect on the business operations or financial condition
      of
      the Company.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    


    ARTICLE
      7.

     

    NEGATIVE
      COVENANTS

     

    The
      Company covenants and agrees that, from the date hereof until the Obligations
      have been fully paid and satisfied, the Company shall not, unless the Secured
      Party shall consent otherwise in writing:

     

    
      	 	
              Section
                7.1.

            	
              Indebtedness.

            


    

     

    The
      Company shall not directly or indirectly permit, create, incur, assume, permit
      to exist, increase, renew or extend on or after the date hereof any indebtedness
      on its part in aggregate amount in excess of $50,000, including commitments,
      contingencies and credit availabilities, or apply for or offer or agree to
      do
      any of the foregoing (excluding any indebtedness of the Company to the Secured
      Party, trade accounts payable and accrued expenses incurred in the ordinary
      course of business and the endorsement of negotiable instruments payable to
      the
      Company, respectively for deposit or collection in the ordinary course of
      business).

     

    
      	 	
              Section
                7.2.

            	
              Liens
                and Encumbrances.

            


    

     

    Except
      for Permitted Liens (as defined in the Securities Purchase Agreement) or with
      the written consent of the Secured Party which consent shall not be unreasonably
      withheld or delayed, the Company shall not directly or indirectly make, create,
      incur, assume or permit to exist any assignment, transfer, pledge, mortgage,
      security interest or other lien or encumbrance of any nature in, to or against
      any part of the Pledged Property or of the Company’s capital stock, or offer or
      agree to do so, or own or acquire or agree to acquire any asset or property
      of
      any character subject to any of the foregoing encumbrances (including any
      conditional sale contract or other title retention agreement), or assign, pledge
      or in any way transfer or encumber its right to receive any income or other
      distribution or proceeds from any part of the Pledged Property or the Company’s
      capital stock; or enter into any sale-leaseback financing respecting any part
      of
      the Pledged Property as lessee, or cause or assist the inception or continuation
      of any of the foregoing.

     

    
      	 	
              Section
                7.3.

            	
              Articles
                of Incorporation, By-Laws, Mergers, Consolidations, Acquisitions
                and
                Sales.

            


    

     

    Without
      the prior express written consent of the Secured Party which consent shall
      not
      be unreasonably withheld or delayed, the Company shall not: (a) Amend its
      Articles of Incorporation or By-Laws; (b) issue or sell its stock, stock
      options, bonds, notes or other corporate securities or obligations (except
      as
      otherwise permitted in Section 4(k) of the Securities Purchase Agreement);
      (c)
      be a party to any merger, consolidation or corporate reorganization, (d)
      purchase or otherwise acquire all or substantially all of the assets or stock
      of, or any partnership or joint venture interest in, any other person, firm
      or
      entity, unless the Company provides the Secured Party a security interest in
      such assets or stock or acknowledges that this Agreement creates a security
      interest in such future acquired assets or stock, (d) sell, transfer, convey,
      grant a security interest in or lease all or any substantial part of its assets,
      nor (e) create any subsidiaries nor convey any of its assets to any subsidiary
      unless such entity provides the Secured Party with a first priority security
      interest in the assets of such entity.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                7.4.

            	
              Management,
                Ownership.

            


    

     

    The
      Company shall not materially change its ownership, executive staff or management
      without the prior written consent of the Secured Party which consent shall
      not
      be unreasonably withheld or delayed. The ownership, executive staff and
      management of the Company are material factors in the Secured Party's
      willingness to institute and maintain a lending relationship with the
      Company.

     

    
      	 	
              Section
                7.5.

            	
              Dividends,
                Etc.

            


    

     

    The
      Company shall not declare or pay any dividend of any kind, in cash or in
      property, on any class of its capital stock, nor purchase, redeem, retire or
      otherwise acquire for value any shares of such stock, nor make any distribution
      of any kind in respect thereof, nor make any return of capital to shareholders,
      nor make any payments in respect of any pension, profit sharing, retirement,
      stock option, stock bonus, incentive compensation or similar plan (except as
      required or permitted hereunder or under the Securities Purchase Agreement),
      without the prior written consent of the Secured Party.

     

    
      	 	
              Section
                7.6.

            	
              Guaranties;
                Loans.

            


    

     

    The
      Company shall not guarantee nor be liable in any manner, whether directly or
      indirectly, or become contingently liable after the date of this Agreement
      in
      connection with the obligations or indebtedness of any person or persons, except
      for (i) the indebtedness currently secured by the liens identified on the
      Pledged Property identified on Exhibit A hereto and (ii) the endorsement of
      negotiable instruments payable to the Company for deposit or collection in
      the
      ordinary course of business. The Company shall not make any loan, advance or
      extension of credit to any person other than in the normal course of its
      business.

     

    
      	 	
              Section
                7.7.

            	
              Conduct
                of Business.

            


    

     

    The
      Company will continue to engage, in an efficient and economical manner, in
      a
      business of the same general type as conducted by it on the date of this
      Agreement.

     

    
      	 	
              Section
                7.8.

            	
              Places
                of Business.

            


    

     

    The
      location of the Company’s chief place of business is 100 Crescent Court -
      7th
      Floor,
      Dallas, TX 75201. The Company shall not change the location of its chief place
      of business, chief executive office or any place of business disclosed to the
      Secured Party or move any of the Pledged Property from its current location
      without thirty (30) days' prior written notice to the Secured Party in each
      instance. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    


    ARTICLE
      8.

     

    MISCELLANEOUS

     

    
      	 	
              Section
                8.1.

            	
              Notices.

            


    

     

    All
      notices or other communications required or permitted to be given pursuant
      to
      this Agreement shall be in writing and shall be considered as duly given on:
      (a)
      the date of delivery, if delivered in person, by nationally recognized overnight
      delivery service or (b) five (5) days after mailing if mailed from within the
      continental United States by certified mail, return receipt requested to the
      party entitled to receive the same:

     

    
      	
              If
                to the Secured Party:

            	
              Cornell
                Capital Partners, LP

            
	 	
              101
                Hudson Street-Suite 3700 

            
	 	
              Jersey
                City, New Jersey 07302 

            
	 	
              Attention:

            	
              Mark
                Angelo

            
	 	 	
              Portfolio
                Manager

            
	 	
              Telephone:

            	
              (201)
                986-8300

            
	 	
              Facsimile:

            	
              (201)
                985-8266

            
	 	 	 
	
              With
                a copy to:

            	
              David
                Gonzalez, Esq.

            
	 	
              101
                Hudson Street, Suite 3700

            
	 	
              Jersey
                City, NJ 07302

            
	 	
              Telephone:

            	
              (201)
                985-8300

            
	 	
              Facsimile:

            	
              (201)
                985-8266

            


    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    


    
      	
              And
                if to the Company:

            	
              Ignis
                Petroleum Group, Inc.

            
	 	
              100
                Crescent Court - 7th
                Floor

            
	 	
              Dallas,
                TX 75201

            
	 	
              Attention:

            	
              Michael
                Piazza

            
	 	
              Telephone:

            	
              (214)
                459-8188

            
	 	
              Facsimile:

            	
              (214)
                459-3101

            
	 	 	 
	
              With
                a copy to:

            	
              Sichenzia
                Ross Friedman Ference LLP

            
	 	
              1065
                Avenue of the Americas - 21st
                Floor

            
	 	
              New
                York, NY 10018

            
	 	
              Attention:

            	
              Gregory
                Sichenzia, Esq.

            
	 	
              Telephone:

            	
              (212)
                930-9700

            
	 	
              Facsimile:

            	
              (212)
                930-9725

            
	 	 	 
	 	
              and

            	 
	 	 	 
	 	
              Cantey
                & Hanger, LLP

            
	 	
              801
                Cherry Street, Suite 2100

            
	 	
              Fort
                Worth, Texas 76102

            
	 	
              Attention:

            	
              Douglas
                W. Clayton, Esq.

            
	 	
              Telephone:

            	
              (817)
                877-2890

            
	 	
              Facsimile:

            	
              (817)
                877-2807

            


    

    


    Any
      party
      may change its address by giving notice to the other party stating its new
      address. Commencing on the tenth (10th)
      day
      after the giving of such notice, such newly designated address shall be such
      party’s address for the purpose of all notices or other communications required
      or permitted to be given pursuant to this Agreement.

     

    
      	 	
              Section
                8.2.

            	
              Severability.

            


    

     

    If
      any
      provision of this Agreement shall be held invalid or unenforceable, such
      invalidity or unenforceability shall attach only to such provision and shall
      not
      in any manner affect or render invalid or unenforceable any other severable
      provision of this Agreement, and this Agreement shall be carried out as if
      any
      such invalid or unenforceable provision were not contained herein.

     

    
      	 	
              Section
                8.3.

            	
              Expenses.

            


    

     

    In
      the
      event of an Event of Default, the Company will pay to the Secured Party the
      amount of any and all reasonable expenses, including the reasonable fees and
      expenses of its counsel, which the Secured Party may incur in connection with:
      (i) the custody or preservation of, or the sale, collection from, or other
      realization upon, any of the Pledged Property; (ii) the exercise or enforcement
      of any of the rights of the Secured Party hereunder or (iii) the failure by
      the
      Company to perform or observe any of the provisions hereof.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                8.4.

            	
              Waivers,
                Amendments, Etc.

            


    

     

    The
      Secured Party’s delay or failure at any time or times hereafter to require
      strict performance by Company of any undertakings, agreements or covenants
      shall
      not waiver, affect, or diminish any right of the Secured Party under this
      Agreement to demand strict compliance and performance herewith. Any waiver
      by
      the Secured Party of any Event of Default shall not waive or affect any other
      Event of Default, whether such Event of Default is prior or subsequent thereto
      and whether of the same or a different type. None of the undertakings,
      agreements and covenants of the Company contained in this Agreement, and no
      Event of Default, shall be deemed to have been waived by the Secured Party,
      nor
      may this Agreement be amended, changed or modified, unless such waiver,
      amendment, change or modification is evidenced by an instrument in writing
      specifying such waiver, amendment, change or modification and signed by the
      Secured Party.

     

    
      	 	
              Section
                8.5.

            	
              Continuing
                Security Interest.

            


    

     

    This
      Agreement shall create a continuing security interest in the Pledged Property
      and shall: (i) remain in full force and effect until payment in full of the
      Obligations; and (ii) be binding upon the Company and its successors and heirs
      and (iii) inure to the benefit of the Secured Party and its successors and
      assigns. Upon the payment or satisfaction in full of the Obligations, the
      Company shall be entitled to the return, at its expense, of such of the Pledged
      Property as shall not have been sold in accordance with Section 5.2 hereof
      or
      otherwise applied pursuant to the terms hereof.

     

    
      	 	
              Section
                8.6.

            	
              Independent
                Representation.

            


    

     

    Each
      party hereto acknowledges and agrees that it has received or has had the
      opportunity to receive independent legal counsel of its own choice and that
      it
      has been sufficiently apprised of its rights and responsibilities with regard
      to
      the substance of this Agreement.

     

    
      	 	
              Section
                8.7.

            	
              Applicable
                Law: Jurisdiction.

            


    

     

    This
      Agreement shall be governed by and interpreted in accordance with the laws
      of
      the State of New Jersey without regard to the principles of conflict of laws.
      The parties further agree that any action between them shall be heard in Hudson
      County, New Jersey, and expressly consent to the jurisdiction and venue of
      the
      Superior Court of New Jersey, sitting in Hudson County and the United States
      District Court for the District of New Jersey sitting in Newark, New Jersey
      for
      the adjudication of any civil action asserted pursuant to this
      Paragraph.

     

    
      	 	
              Section
                8.8.

            	
              Waiver
                of Jury Trial.

            


    

     

    AS
      A
      FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
      MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES
      ANY
      RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
      AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION.


     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    
      	 	
              Section
                8.9.

            	
              Entire
                Agreement.

            


    

     

    This
      Agreement constitutes the entire agreement among the parties and supersedes
      any
      prior agreement or understanding among them with respect to the subject matter
      hereof.

     

    


    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    


    IN
      WITNESS WHEREOF, the
      parties hereto have executed this Security Agreement as of the date first above
      written.

     

    


    
      	 	
              COMPANY:

            
	 	
              IGNIS
                PETROLEUM GROUP, INC.

            
	 	 	 	 
	 	
              By:

            	
              /s/
                MICHAEL PIAZZA

            
	 	
              Name:

            	
               Michael
                Piazza

            
	 	
              Title:

            	
               President
                & CEO

            
	 	 	 	 
	 	 	 	 
	 	
              SECURED
                PARTY:

            
	 	
              CORNELL
                CAPITAL PARTNERS, LP

            
	 	 	 	 
	 	
              By:

            	
               Yorkville
                Advisors, LLC

            
	 	
              Its:

            	
               General
                Partner

            
	 	 	 	 
	 	
              By:

            	
              /s/
                MARK ANGELO

            
	 	
              Name:

            	
               Mark
                Angelo

            
	 	
              Title:

            	
               Portfolio
                Manager

            


    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

    DEFINITION
      OF PLEDGED PROPERTY

     

    For
      the
      purpose of securing prompt and complete payment and performance by the Company
      of all of the Obligations, the Company unconditionally and irrevocably hereby
      grants to the Secured Party a continuing security interest in and to, and lien
      upon, the following Pledged Property of the Company:

     

    (a)   all
      goods
      of the Company, including, without limitation, machinery, equipment, furniture,
      furnishings, fixtures, signs, lights, tools, parts, supplies and motor vehicles
      of every kind and description, now or hereafter owned by the Company or in
      which
      the Company may have or may hereafter acquire any interest, and all
      replacements, additions, accessions, substitutions and proceeds thereof, arising
      from the sale or disposition thereof, and where applicable, the proceeds of
      insurance and of any tort claims involving any of the foregoing;

     

    (b)   all
      inventory of the Company, including, but not limited to, all goods, wares,
      merchandise, parts, supplies, finished products, other tangible personal
      property, including such inventory as is temporarily out of Company’s custody or
      possession and including any returns upon any accounts or other proceeds,
      including insurance proceeds, resulting from the sale or disposition of any
      of
      the foregoing;

     

    (c)   all
      contract rights and general intangibles of the Company, including, without
      limitation, goodwill, trademarks, trade styles, trade names, leasehold
      interests, partnership or joint venture interests, patents and patent
      applications, copyrights, deposit accounts whether now owned or hereafter
      created;

     

    (d)   all
      documents, warehouse receipts, instruments and chattel paper of the Company
      whether now owned or hereafter created;

     

    (e)   all
      accounts and other receivables, instruments or other forms of obligations and
      rights to payment of the Company (herein collectively referred to as
“Accounts”),
      together with the proceeds thereof, all goods represented by such Accounts
      and
      all such goods that may be returned by the Company’s customers, and all proceeds
      of any insurance thereon, and all guarantees, securities and liens which the
      Company may hold for the payment of any such Accounts including, without
      limitation, all rights of stoppage in transit, replevin and reclamation and
      as
      an unpaid vendor and/or lienor, all of which the Company represents and warrants
      will be bona fide and existing obligations of its respective customers, arising
      out of the sale of goods by the Company in the ordinary course of
      business;

     

    (f) 
         to
      the
      extent assignable, all of the Company’s rights under all present and future
      authorizations, permits, licenses and franchises issued or granted in connection
      with the operations of any of its facilities;

     

    (g)    
        all
      products and proceeds (including, without limitation, insurance proceeds) from
      the above-described Pledged Property.

     

     

    A-1