Filed by sedaredgar.com - Fox Petroleum, Inc. - Exhibit 10.38






SECURITY AGREEMENT

     THIS SECURITY AGREEMENT
(the “Agreement”), is entered into and made effective as of June 24,
2008, by and between Fox Petroleum, Inc. a Nevada corporation, with
headquarters located at 64 Knightsbridge, London, SW1X7JF (the
“Company”), and Trafalgar Capital Specialized Investment Fund,
Luxembourg (the “Secured Party”). Capitalized words which are
otherwise undefined in this Agreement shall have the same definition as in the
Securities Purchase Agreement entered into by the parties hereto on the date
hereof.

     WHEREAS, the Company shall
issue and sell to the Secured Party, as provided in the Securities Purchase
Agreement dated the date hereof, and the Secured Party shall purchase up to Two
Million Five Hundred Thousand U.S. Dollars (US$2,500,000) of secured convertible
redeemable debentures (the “Debentures”) 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 Debentures, the Registration Rights Agreement and the
Escrow Agreement (collectively referred to as the “Transaction
Documents”), the Company hereby grants to the Secured Party a first priority
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 premises 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 to the Secured Party 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 the Securities Purchase
Agreement and the 




Debenture 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. Grant of Security Interest.

     1. 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
in the property described in “Exhibit A” hereto, whether now existing or
hereafter from time to time acquired (collectively, the “Pledged
Property.”).

     (a) 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:

          (i) All of the Company’s interest
in the Genesco-Edwards Fields leases (Kansas) shall be immediately assigned to
the Secured Party; and

          (ii) 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 

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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

          (iii) 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 

          (iv) 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 Debenture as described herein

     (c) Each of the following events,
subject to the lapse of applicable cure periods, shall constitute a default
under this Agreement (each an “Event of Default”):

          (i) any default, whether in whole
or in part, shall occur in the payment to the Secured Party of principal,
interest or other item comprising the Obligations as and when due or with
respect to any other debt or obligation of the Company to a party other than the
Secured Party;

          (ii) any default, whether in
whole or in part, shall occur in the due observance or performance of any
obligations or other covenants, terms or provisions to be performed under this
Agreement or the Transaction Documents; 

          (iii) the Company shall: (1) make
a general assignment for the benefit of its creditors; (2) apply for or consent
to the appointment of a receiver, trustee, assignee, custodian, sequestrator,
liquidator or similar official for itself or any of its assets and properties;
(3) commence a voluntary case for relief as a debtor under the United States
Bankruptcy Code; (4) file with or otherwise submit to any governmental authority
any petition, answer or other document seeking: (A) reorganization, (B) an
arrangement with creditors or (C) to take advantage of any other present or
future applicable law respecting bankruptcy, reorganization, insolvency,
readjustment of debts, relief of debtors, dissolution or liquidation; (5) file
or otherwise submit any answer or other document admitting or failing to contest
the material allegations of a petition or other document filed or otherwise
submitted against it in any of the proceedings set forth in this Section
2.2(c)(iii) under any such applicable law, or (6) be adjudicated a bankrupt or
insolvent by a court of competent jurisdiction; or

          (iv) any case, proceeding or
other action shall be commenced against the Company for the purpose of
effecting, or an order, judgment or decree shall be entered by any court of
competent jurisdiction approving (in whole or in part) anything specified in
Section 2.2(c)(iii) hereof, or any receiver, trustee, assignee, custodian,
sequestrator, liquidator or other official shall be appointed with respect to
the Company, or shall be appointed to take or shall otherwise acquire possession
or control of all or a substantial part of the assets and 

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properties of the Company, and any of the foregoing shall
continue unstayed and in effect for any period of thirty (30) days.

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 or Pledged Property to make
payments directly to the Secured Party.

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 and for
the Permitted Liens. For purposes hereof, “Permitted Liens” shall mean (i) liens
for taxes or other governmental charges which are not yet delinquent or are
being contested in good faith by appropriate proceedings, (ii) liens for
carriers, contractors, warehousemen, mechanics, 

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materialmen, laborers, employees, suppliers or other similar
persons arising by operation of law and incurred in the ordinary course of
business for sums not yet delinquent or being contested in good faith, (iii)
liens relating to deposits made in the ordinary course of business in connection
with workers’ compensation, unemployment insurance and other types of social
security or to secure the performance of leases, trade contracts or other
similar agreements; and (iv) in the case of real property, any matters,
restrictions, covenants, conditions, limitations, rights, rights of way,
encumbrances, encroachments, reservations, easements, agreements and other
matters of record, such state of facts of which an accurate survey or inspection
of the property would reveal and do not materially interfere with the use or
value of the property.

ARTICLE 5.
DEFAULT; REMEDIES; SUBSTITUTE
COLLATERAL

Section 5.1. Default and Remedies.

     (a) If an Event of Default
described in Section 2.2(c)(i) or (ii) 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. If an Event of Default
described in Sections 2.2(c)(iii) or (iv) occurs and is continuing for the
period set forth therein, then the Obligations shall automatically become
immediately due and payable without declaration or other act on the part of the
Secured Party.

     (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 Collateral, (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 as provided
herein.

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:

     (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.

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     (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.

     (d) 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.

     (e) 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), shall be entitled and empowered, by intervention in
such proceeding or otherwise:

     (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


6




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, whether individually or in the aggregate, upon
(a) the Company’s assets, business, operations, properties or condition,
financial or otherwise or results of operations of the Company, taken as a
whole, excluding any change, event, circumstance or effect that is caused by
changes in general economic conditions or changes generally affecting the
industry in which the Company operates (provided that such changes do not affect
the Company in a materially disproportionate manner); or (b) the Company’s
ability to make payment as and when due of all or any part of the Obligations;
or (c) the Pledged Property.

Section 6.2 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:

     (b) 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 

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any material portion of its assets and properties, received
respecting any of the indebtedness of the Company in excess of $25,000 (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 $25,000,
including any received from any person acting on behalf of the Secured Party or
beneficiary thereof, except for supplier requests in the normal course of
business for payment of past due accounts payable invoices so long as such past
due amounts do not exceed in the aggregate $50,000 at any time; and 

     (c) 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; or (iii) any part of the
Pledged Property.

Section 6.2. Maintenance of Books and Records;
Inspection.

     The Company shall maintain its
books, accounts and records in accordance with United States 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, during business hours and upon reasonable notice to visit and inspect
any of its properties (including but not limited to the Pledged Property),
corporate books and financial records, and to discuss its accounts, affairs and
finances with any employee, officer or director thereof.

Section 6.3. 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 6.4. 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.

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Section 6.5. 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.

Section 6.6. 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 (other
than those being contested by the Company in good faith), 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 6.7. 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 6.8. 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 6.9. 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 or the Transaction Documents, promptly upon the occurrence
thereof.

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Section 6.10. 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.

 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.

     Other than in the ordinary course
of business consistent with past practice or as otherwise permitted herein,
without the prior written consent of the Secured Party, 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,
including commitments, contingencies and credit availabilities, or apply for or
offer or agree to do any of the foregoing.

Section 7.2. Liens and Encumbrances.

     Except for Permitted Liens and
for transfers in the ordinary course of business, and except for such
assignment, transfer, pledge, mortgage, security interest or other lien or
encumbrance as is outstanding on the date of this Agreement, 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 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.

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Section 7.3. Certificate of Incorporation, By-Laws, Mergers,
Consolidations, Acquisitions and Sales, Sales of Capital Stock,
Incurrence of Debt.

     Other than in the ordinary course
of business, without the prior express written consent of the Secured Party, the
Company shall not: (a) Amend its Articles of Incorporation or ByLaws; (b) issue
or sell its common stock without consideration or for a consideration per share
less than the bid price of the common stock determined immediately prior to its
issuance, (c) issue or sell shares of Common Stock or Preferred Stock without
consideration or for a consideration per share less than the bid price of the
Common Stock determined immediately prior to its issuance provided that upon
such sale with Secured Party’s consent, the Fixed Conversion Price in the
Debentures shall be reset to an amount equal to eighty-five percent of such
sales price (the “Reset Price”) if such Reset Price would be lower than the then
current Fixed Conversion Price, (d) issue or sell any warrant, option, right,
contract, call, or other security instrument granting the holder thereof, the
right to acquire Common Stock without consideration or for a consideration less
than such Common Stock’s bid price value determined immediately prior to it’s
issuance, (e) incur any additional debt or permit any subsidiary of the Company
to incur any additional debt without the Secured Party’s prior written consent,
(f) be a party to any merger, consolidation or corporate reorganization, (g)
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, (e) sell, transfer, convey, grant a security interest in (except for
Permitted Liens) or lease all or any substantial part of its assets, nor (h)
create any new subsidiaries nor convey any of its assets to any subsidiary.

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. 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),
without the prior written consent of the Secured Party.

Section 7.6. Guaranties; Loans.

     Other than in the ordinary course
of business, and except for such guarantees or liabilities as are outstanding on
the date of this Agreement, 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 

11




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. Debt.

     Other than in the ordinary course
of business, and except for such indebtedness as is outstanding on the date of
this Agreement, without the prior written approval of Secured Party, the Company
shall not create, incur, assume or suffer to exist any additional indebtedness
of any description whatsoever in an aggregate amount in excess of $50,000
(excluding any indebtedness of the Company to the Secured Party, indebtedness
otherwise permitted by the terms of this Agreement, 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 7.8. Conduct of Business.

     The Company will continue to
engage in a business of the general type as conducted by it on the date of this
Agreement.

Section 7.9. Places of Business.

     The location of the Company’s
chief place of business is at the address set forth in Section 8.1 hereof. 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. 

     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: 	Trafalgar Capital Specialized
      Investment Fund 
	  	8-10 Rue Mathias Hardt 
	  	BP 3023 
	 	L-1030 Luxembourg 
	  	Attention: Andrew Garai, Chairman of
      the Board of 
	  	Trafalgar Capital Sarl, General
      Partner 
	  	Facsimile: 	011-44-207-405-0161 and 
	  	  	001-786-323-1651 


12





	With a copy to: 	James G. Dodrill II, P.A. 
	  	5800 Hamilton Way 
	  	Boca Raton, FL 33496 
	  	Attention: 	James Dodrill, Esq. 
	  	Telephone: 	(561) 862-0529 
	  	Facsimile: 	(561) 892-7787 
	  	  	  
	  	  	  
	And if to the Company: 	Fox Petroleum, Inc. 
	 	64 Knightsbridge  	 
	  	London, SW1X7JF 
	  	Attention: 	Mr. Richard Joseph Moore, CEO and 
	  	Director 	  
	  	Telephone: 	011-44-207-590-9630 
	  	Facsimile: 	011-44-207-590-9601 
	  	  	  
	  	  	  
	With a copy to: 	As above 	  
	  	  	  
	  	  	  
	  	  	  
	  	Attention: Alex Craven - Director  
	  	Telephone: as above 
	  	Facsimile: as above


     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 (whether by
payment of cash, redemption or conversion); 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. Upon
payment in full of all Obligations, the Secured Party shall execute and deliver
to the Company all instruments and other documents as may be necessary or proper
to release the lien on and security interest in the Pledged Property which has
been granted hereunder.

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 Florida without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Florida and expressly consent to the
jurisdiction and venue of the Florida State Court sitting in Broward County,
Florida or the United States District Court for the Southern District of
Florida, 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 

14




ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT
AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS TRANSACTION. 

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.

Section 8.10 Further Assurances.

     The Company shall do and perform,
or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the Secured Party may reasonably request in order to carry out the
intent and accomplish the purposes of Furthermore, the Company agrees to execute
such other documents as are reasonably required by the Secured Party. It shall
be deemed a default of this Agreement if the Company fails to sign any such
agreement within one business day of the date of request by Secured Party.

[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:
      
		FOX PETROLEUM,
      INC.
		 	  
		By:	/s/
    Richard Joseph Moore
		Name:	Mr. Richard Joseph Moore 
		Title:	CEO and Director 
		 	  
		 	  
		SECURED PARTY:
      
	 	TRAFALGAR
      CAPITAL SPECIALIZED
		INVESTMENT FUND, LUXEMBOURG
      
		By:
    	Trafalgar Capital Sarl 
	 	Its:	General Partner 
	  	 	  
	 	By:	/s/ Andrew Garai
	 	Name:	Andrew Garai 
		Title: 	Chairman of the Board


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, all  of the Company’s and its current or future acquired subsidiaries’ assets,  including specifically the following Pledged Property of the Company and its  current or future acquired subsidiaries:

                (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, including specifically an assignment of the  receivables from ABB (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; and

                (h)        all  equity interests, securities or other instruments in other companies, including,  without limitation, any subsidiaries, investments or other entities (whether or  not controlled); and

                (i)         an  assignment of all of the Company’s interest in the Genesco-Edwards Fields  leases (Kansas),  which shall be held in escrow and which shall be immediately assigned to the  Secured Party upon the occurrence of an Event of Default.

A-1