Exhibit
10.3


NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.  ANY TRANSFEREE OF THIS WARRANT SHOULD
CAREFULLY REVIEW THE TERMS OF THIS WARRANT, INCLUDING SECTION 7(d) HEREOF.


APOLLO RESOURCES INTERNATIONAL, INC.


WARRANT TO PURCHASE COMMON
STOCK


Warrant No.: 01

Number of Shares of Common Stock:  16,447,369

Date of Issuance: July 26, 2006 (“Issuance
Date”)


Apollo Resources International, Inc., a Utah
corporation (the “Company”),
hereby certifies that, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, CASTLERIGG MASTER INVESTMENTS LTD., the
registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as
defined below) then in effect, upon surrender of this Warrant to Purchase
Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or times on or after the date hereof, but
not after 11:59 p.m., New York time, on the Expiration Date (as defined below),
Sixteen Million, Four Hundred and Forty Seven Thousand, Three Hundred and Sixty
Nine (16,447,369) fully paid nonassessable shares of Common Stock (as defined
below) (the “Warrant Shares”).  Except as otherwise defined herein,
capitalized terms in this Warrant shall have the meanings set forth in Section
15.  This Warrant is one of the Warrants
to purchase Common Stock (the “SPA Warrants”)
issued pursuant to Section 1 of that certain Securities Purchase Agreement,
dated as of July 25, 2006 (the “Subscription
Date”), by and among the Company and the investors (the “Buyers”) referred to therein (the “Securities Purchase Agreement”).









 



1.     EXERCISE OF WARRANT.


(a).  Mechanics
of Exercise.  Subject to the terms
and conditions hereof (including, without limitation, the limitations set forth
in Section 1(f)), this Warrant may be exercised by the Holder on any day on or
after the date hereof, in whole or in part, by (i) delivery of a written
notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this
Warrant (accompanied by the attached Warrant Shares Exercise Log) to the
Company (with a copy to its legal counsel) and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash or by wire transfer of
immediately available funds or (B) by notifying the Company that this Warrant
is being exercised pursuant to a Cashless Exercise (as defined in Section
1(d)).  The Holder shall not be required
to deliver the original Warrant in order to effect an exercise hereunder.  Execution and delivery of the Exercise Notice
with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant
evidencing the right to purchase the remaining number of Warrant Shares.  On or before the first (1st) Business Day following the date on
which the Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the “Exercise
Delivery Documents”), the Company shall transmit by facsimile an
acknowledgment of confirmation of receipt of the Exercise Delivery Documents to
the Holder and the Company’s transfer agent (the “Transfer
Agent”).  For purposes hereof,
any Exercise Delivery Documents delivered on or after 5:00 p.m., New York City
time shall be deemed to have been delivered on the next Business Day.  On or before the third (3rd) Business Day following the date on
which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) if legends are
not required to be placed on certificates of Common Stock pursuant to the
Securities Purchase Agreement, provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder,
credit such aggregate number of Warrant Shares to which the Holder is entitled
pursuant to such exercise to the Holder’s or its designee’s balance account
with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and dispatch by overnight courier to the address as
specified in the Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the number of
shares of Common Stock to which the Holder is entitled pursuant to such
exercise which certificates shall not bear any restrictive legends unless
required pursuant to Section 2(g) of the Securities Purchase Agreement.  Upon delivery of the Exercise Delivery
Documents, the Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which this Warrant
has been exercised, irrespective of the date such Warrant Shares are credited
to the Holder’s DTC account or the date of delivery of the certificates
evidencing such Warrant Shares as the case may be.  If this Warrant is submitted in connection
with any exercise pursuant to this Section 1(a) and the number of Warrant
Shares represented by this Warrant submitted for exercise is greater than the
number of Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three Business Days
after any exercise and at its own expense, issue subject to such prior exercise
a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to
which this Warrant is exercised. No fractional shares



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of Common Stock are to be issued upon the exercise of this Warrant, but
rather the number of shares of Common Stock to be issued shall be rounded up to
the nearest whole number.  The Company
shall pay any and all taxes which may be payable with respect to the issuance
and delivery of Warrant Shares upon exercise of this Warrant


(b)   Exercise
Price.  For purposes of this Warrant,
“Exercise Price”
means $0.38, subject to adjustment as provided herein.


(c)   Company’s
Failure to Timely Deliver Securities. 
If within three (3) Trading Days after the Company’s receipt of the
facsimile copy of a Exercise Notice the Company shall fail to issue and deliver
a certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise hereunder, and if on or after such Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the
Company (a “Buy-In”), then
the Company shall, within three (3) Trading Days after the Holder’s request and
in the Holder’s discretion, either (i) pay cash to the Holder in an amount
equal to the Holder’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate (and to issue such Warrant Shares) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates or if legends are not required to be placed on certificates of
Common Stock pursuant to the Securities Purchase Agreement, provided that the
Transfer Agent is participating in DTC Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of
Warrant Shares to which the Holder is entitled pursuant to such exercise to the
Holder’s or its designee’s balance account with DTC through its Deposit
Withdrawal Agent Commission system and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Bid Price on the date
of exercise.


(d)   Cashless
Exercise.  Notwithstanding anything contained
herein to the contrary, if a Registration Statement (as defined in the
Registration Rights Agreement) covering the Warrant Shares that are the subject
of the Exercise Notice (the “Unavailable Warrant Shares”)
is not available for the resale of such Unavailable Warrant Shares at any time
during which such Registration Statement is required in accordance with the
Registration Rights Agreement, the Holder may, in its sole discretion during
such time, exercise this Warrant in whole or in part and, in lieu of making the
cash payment otherwise contemplated to be made to the Company upon such
exercise in payment of the Aggregate Exercise Price, elect instead to receive
upon such exercise the “Net Number” of shares of Common Stock determined according
to the following formula (a “Cashless Exercise”):


                                              Net Number = (A
x B) - (A x C)



 3
 






 



                                         B


                                              For
purposes of the foregoing formula:


A= the total
number of shares with respect to which this Warrant is then being exercised.


B= the Closing
Sale Price of the shares of Common Stock (as reported by Bloomberg) on the date
immediately preceding the date of the Exercise Notice.


C= the Exercise
Price then in effect for the applicable Warrant Shares at the time of such
exercise.


(e)   Disputes.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall promptly issue to the Holder the number of
Warrant Shares that are not disputed and resolve such dispute in accordance
with Section 12.


(f)    Limitations
on Exercises. 


(1)        Beneficial Ownership.  The Company shall not effect the exercise of
this Warrant, and the Holder shall not have the right to exercise this Warrant,
to the extent that after giving effect to such exercise, such Person (together
with such Person’s affiliates) would beneficially own in excess of 4.99% of the
shares of Common Stock outstanding immediately after giving effect to such
exercise.  For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) exercise of the remaining, unexercised
portion of this Warrant beneficially owned by such Person and its affiliates
and (ii) exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company beneficially owned by such Person and its
affiliates (including, without limitation, any convertible notes or convertible
preferred stock or warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein. 
Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended.  For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the Company’s
most recent Form 10-KSB, Form 10-QSB, Current Report on Form 8-K or other
public filing with the Securities and Exchange Commission, as the case may be,
(2) a more recent public announcement by the Company or (3) any other notice by
the Company or the Transfer Agent setting forth the



 4
 






 



number of
shares of Common Stock outstanding.  For
any reason at any time, upon the written request of the Holder, the Company
shall within one Business Day confirm in writing to the Holder the number of
shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of securities of
the Company, including the SPA Warrants, by the Holder and its affiliates since
the date as of which such number of outstanding shares of Common Stock was
reported.  By written notice to the
Company, the Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such
notice; provided that (i) any such increase will not be effective until the
sixty-first (61st)
day after such notice is delivered to the Company, and (ii) any such increase
or decrease will apply only to the Holder and not to any other holder of SPA
Warrants.


(2)           Market Regulation.  The Company shall not be obligated to issue
any shares of Common Stock upon exercise of this Warrant, and the Holder of
this Warrant shall not have the right to receive upon exercise of this Warrant
any shares of Common Stock, if the issuance of such shares of Common Stock
would exceed that number of shares of Common Stock which the Company may issue
upon exercise, redemption or conversion, as applicable, of the SPA Warrants or
otherwise without breaching the Company’s obligations under the rules or
regulations of the applicable Eligible Market (the number of shares which may
be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply
in the event that the Company (A) obtains the approval of its stockholders as
required by the applicable rules of the applicable Eligible Market for
issuances of shares of Common Stock in excess of such amount or (B) obtains a
written opinion from outside counsel to the Company that such approval is not
required, which opinion shall be reasonably satisfactory to the Required
Holders.  Unless and until such approval
or written opinion is obtained, no Buyer shall be issued in the aggregate, upon
exercise or conversion, as applicable, of any SPA Warrants, shares of Common
Stock in an amount greater than the product of the Exchange Cap multiplied by a
fraction, the numerator of which is the total number of shares of Common Stock
underlying the SPA Warrants issued to such Buyer pursuant to the Securities
Purchase Agreement on the Issuance Date and the denominator of which is the
aggregate number of shares of Common Stock underlying the SPA Warrants issued
to the Buyers pursuant to the Securities Purchase Agreement on the Issuance
Date (with respect to each Buyer, the “Exchange Cap Allocation”).  In the event that any Buyer shall sell or
otherwise transfer any of such Buyer’s SPA Warrants, the transferee shall be
allocated a pro rata portion of such Buyer’s Exchange Cap Allocation, and the
restrictions of the prior sentence shall apply to such transferee with respect
to the portion of the Exchange Cap Allocation allocated to such
transferee.  In the event that any holder
of SPA Warrants shall exercise all



 5
 






 



of such holder’s
SPA Warrants into a number of shares of Common Stock which, in the aggregate,
is less than such holder’s Exchange Cap Allocation, then the difference between
such holder’s Exchange Cap Allocation and the number of shares of Common Stock
actually issued to such holder shall be allocated to the respective Exchange
Cap Allocations of the remaining holders of SPA Warrants on a pro rata basis in
proportion to the shares of Common Stock underlying the SPA Warrants then held
by each such holder.


(g)   Insufficient
Authorized Shares.  If at any time
while any of the Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon exercise of the Warrants at
least a number of shares of Common Stock equal to 130% of the number of shares
of Common Stock as shall from time to time be necessary to effect the exercise
of all of the Warrants then outstanding 
(the “Required Reserve Amount”) (an “Authorized Share Failure”), then the Company shall
immediately take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the Warrants then outstanding.  Without limiting the generality of the
foregoing sentence, as soon as practicable after the date of the occurrence of
an Authorized Share Failure, but in no event later than ninety (90) days after
the occurrence of such Authorized Share Failure, the Company shall hold a
meeting of its stockholders for the approval of an increase in the number of
authorized shares of Common Stock.  In
connection with such meeting, the Company shall provide each stockholder with a
proxy statement and shall use its best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause its
board of directors to recommend to the stockholders that they approve such
proposal.


2.     ADJUSTMENT OF EXERCISE PRICE AND NUMBER
OF WARRANT SHARES.  The Exercise
Price and the number of Warrant Shares shall be adjusted from time to time as
follows:


(a)   Adjustment
upon Issuance of shares of Common Stock. 
If and whenever on or after the Subscription Date the Company issues or
sells, or in accordance with this Section 2 is deemed to have issued or sold,
any shares of Common Stock (including the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company, but excluding shares
of Common Stock deemed to have been issued by the Company in connection with
any Excluded Securities for a consideration per share (the “New Issuance Price”) less than a price equal to the Exercise
Price in effect immediately prior to such issue or sale or deemed issuance or
sale (the “Applicable Price” and the
foregoing a “Dilutive Issuance”), then
immediately after such Dilutive Issuance, the Exercise Price then in effect shall
be reduced to an amount equal to the New Issuance Price.  Upon each such adjustment of the Exercise
Price hereunder, the number of Warrant Shares shall be adjusted to the number
of shares of Common Stock determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment.  For purposes of determining
the adjusted Exercise Price under this Section 2(a), the following shall be
applicable:



 6
 






 



 


(i)   Issuance of Options.  If the Company in any manner grants any
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion, exercise or
exchange of any Convertible Securities issuable upon exercise of any such
Option is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the granting or sale of such Option for such price per share.  For purposes of this Section 2(a)(i), the “lowest
price per share for which one share of Common Stock is issuable upon exercise
of any such Options or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of such Option” shall be equal to the sum of
the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion, exercise or
exchange of any Convertible Security issuable upon exercise of such
Option.  No further adjustment of the
Exercise Price or number of Warrant Shares shall be made upon the actual
issuance of such shares of Common Stock or of such Convertible Securities upon
the exercise of such Options or upon the actual issuance of such shares of
Common Stock upon conversion, exercise or exchange of such Convertible
Securities.


(ii)  Issuance of Convertible Securities.  If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share
of Common Stock is issuable upon the conversion, exercise or exchange thereof
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section
2(a)(ii), the “lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange” shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale of
the Convertible Security and upon conversion, exercise or exchange of such
Convertible Security.  No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise Price or
number of Warrant Shares shall be made by reason of such issue or sale.


(iii) Change in Option Price or Rate of
Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any,



 7
 






 



payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases
at any time, the Exercise Price and the number of Warrant Shares in effect at
the time of such increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease.  No adjustment pursuant to this Section 2(a)
shall be made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.


(iv) Calculation of Consideration Received.  In case any Option is issued in connection
with the issue or sale of other securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be deemed to have been issued
the difference of (x) the aggregate fair market value of such Options and other
securities issued or sold in such integrated transaction, less (y) the fair
market value of the securities other than such Option, issued or sold in such
transaction and the other securities issued or sold in such integrated
transaction will be deemed to have been issued or sold for the balance of the
consideration received by the Company. 
If any Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the consideration received
therefor will be deemed to be the gross amount raised by the Company; provided,
however, that such gross amount is not greater than 110% of the net amount
received by the Company therefor.  If any
shares of Common Stock, Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of such consideration received
by the Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Closing Sale Price of such security on the
date of receipt.  If any shares of Common
Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be deemed to be the
fair value of such portion of the net assets and business of the non-surviving
entity as is



 8
 






 



attributable
to such shares of Common Stock, Options or Convertible Securities, as the case
may be.  The fair value of any
consideration other than cash or securities will be determined jointly by the
Company and the Required Holders.  If
such parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the “Valuation Event”), the fair value of such consideration will
be determined within five (5) Business Days after the tenth day following the
Valuation Event by an independent, reputable appraiser jointly selected by the
Company and the Required Holders.  The
determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be
borne by the Company.


(v)  Record Date.  If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.


(b)   Adjustment
upon Subdivision or Combination of Common Stock.  If the Company at any time on or after the
Subscription Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision will be proportionately reduced and the
number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the
Subscription Date  combines (by
combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any adjustment
under this Section 2(b) shall become effective at the close of business on the
date the subdivision or combination becomes effective.


(c)   Other
Events.  If any event occurs of the
type contemplated by the provisions of this Section 2 but not expressly
provided for by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company’s Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares so as to
protect the rights of the Holder; provided that no such adjustment pursuant to
this Section 2(c) will increase the Exercise Price or decrease the number of
Warrant Shares as otherwise determined pursuant to this Section 2.


3.     RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to



 9
 






 



holders of shares of
Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the
issuance of this Warrant, then, in each such case:


(a)   any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by multiplying
such Exercise Price by a fraction of which (i) the numerator shall be the
Closing Bid Price of the shares of Common Stock on the trading day immediately
preceding such record date minus the value of the Distribution (as determined
in good faith by the Company’s Board of Directors) applicable to one share of
shares of Common Stock, and (ii) the denominator shall be the Closing Bid Price
of the shares of Common Stock on the trading day immediately preceding such
record date; and


(b)   the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a); provided
that in the event that the Distribution is of shares of Common Stock (or common
stock) (“Other Shares of Common
Stock”) of a company whose common shares are traded on a national
securities exchange or a national automated quotation system, then the Holder
may elect to receive a warrant to purchase Other Shares of Common Stock in lieu
of an increase in the number of Warrant Shares, the terms of which shall be
identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Stock that
would have been payable to the Holder pursuant to the Distribution had the
Holder exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this
paragraph (b).


4.     PURCHASE RIGHTS; FUNDAMENTAL
TRANSACTIONS.


(a)   Purchase
Rights.  In addition to any
adjustments pursuant to Section 2 above, if at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the record holders of
any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.


 



 10














 


(b)   Fundamental
Transactions.  The Company shall not enter into or
be party to a Fundamental Transaction unless (i)  the Successor Entity
assumes in writing all of the obligations of the Company under this Warrant and
the other Transaction Documents in accordance with the provisions of this
Section (4)(b) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Warrants in
exchange for such Warrants a
security of the Successor
Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value
for the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and reasonably
satisfactory to the Required Holders and
(ii) the Successor Entity (including its Parent Entity) is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market.  Upon the occurrence of any
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Warrant referring to the “Company” shall refer instead
to the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Warrant with
the same effect as if such Successor Entity had been named as the Company
herein.  Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) issuable
upon the exercise of the Warrant
prior to such Fundamental Transaction, such shares of the publicly traded common stock (or
its equivalent) of the Successor Entity (including its Parent Entity) which the
Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Warrant been converted immediately prior to such
Fundamental Transaction, as adjusted in accordance with the provisions of this
Warrant.  In addition to and not in
substitution for any other rights hereunder, prior to the consummation of any
Fundamental Transaction pursuant to which holders of shares of Common Stock are
entitled to receive securities or other assets with respect to or in exchange
for shares of Common Stock (a “Corporate
Event”), the Company shall make appropriate provision to insure that
the Holder will thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the shares of the Common Stock (or
other securities, cash, assets or other property) issuable upon the exercise of
the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or
any other property whatsoever (including warrants or other purchase or
subscription rights) which the Holder would have been entitled to receive upon
the happening of such Fundamental Transaction had the Warrant been exercised
immediately prior to such Fundamental Transaction.  The provisions of this Section shall
apply similarly and equally to successive Fundamental Transactions and
Corporate Events and shall be applied without regard to any limitations on the
exercise of this Warrant.


(c)   Notwithstanding
the foregoing and the provisions of Section 4(b) above, in the event of a
Change of Control, if the Holder has not exercised the Warrant in full prior to
the consummation of the Change of Control, then the Holder shall have
the right to



 11
 






 



require
such Successor Entity to purchase this Warrant from the Holder by paying
to the Holder, simultaneously with the consummation of the Change of Control
and in lieu of the warrant referred to in Section 4(b) cash in the amount equal
to the value of the remaining unexercised portion of this Warrant on the date
of such consummation, which value shall be determined by use of the
Black-Scholes Option Pricing Model reflecting (i) a risk-free interest rate
corresponding to the U.S. Treasury rate for a period equal to the remaining
term of this Warrant as of such date of request and (ii) an expected volatility
equal to the 100 day volatility obtained from the HVT function on Bloomberg;
provided that if such function yields a volatility (x) less than 50%, the
expected volatility shall be equal to 50% and (y) greater than 80%, the
expected volatility shall be equal to 80%.


5.     NONCIRCUMVENTION.  The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder.  Without
limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect,
(ii) shall take all such actions as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, 130% of the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).


6.     WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. 
Except as otherwise specifically provided herein, the Holder, solely in
such Person’s capacity as a holder of this Warrant, shall not be entitled to
vote or receive dividends or be deemed the holder of share capital of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in such Person’s capacity as the
Holder of this Warrant, any of the rights of a shareholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of
the Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition,
nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a shareholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 6, the Company
shall provide the Holder with copies of the same notices and other information
given to the shareholders of the Company generally, contemporaneously with the
giving thereof to the shareholders.



 12
 






 



7.     REISSUANCE
OF WARRANTS.


(a)   Transfer
of Warrant.  If this Warrant is to be
transferred, the Holder shall surrender this Warrant to the Company, whereupon
the Company will subject to the satisfaction of the transfer provisions of the
Securities Purchase Agreement forthwith issue and deliver upon the order of the
Holder a new Warrant (in accordance with Section 7(d)), registered in the name
of the registered transferee or assignee, representing the right to purchase
the number of Warrant Shares being transferred by the Holder and, if less then
the total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.


(b)   Lost,
Stolen or Mutilated Warrant.  Upon
receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of any indemnification undertaking by the Holder to
the Company in customary form and, in the case of mutilation, upon surrender
and cancellation of this Warrant, the Company shall execute and deliver to the
Holder a new Warrant (in accordance with Section 7(d)) representing the right
to purchase the Warrant Shares then underlying this Warrant.


(c)   Exchangeable
for Multiple Warrants.  This Warrant
is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Warrant or Warrants (in accordance with
Section 7(d)) representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new Warrant will
represent the right to purchase such portion of such Warrant Shares as is
designated by the Holder at the time of such surrender; provided, however, that
no Warrants for fractional shares of Common Stock shall be given.


(d)   Issuance
of New Warrants.  Whenever the
Company is required to issue a new Warrant pursuant to the terms of this
Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii)
shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a
new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of
Common Stock underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such
new Warrant which is the same as the Issuance Date, and (iv) shall have the
same rights and conditions as this Warrant.


8.     NOTICES.  Whenever notice is required to be given under
this Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason
therefore.  Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon any adjustment of the Exercise Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen days prior to the date on which the Company closes its books



 13
 






 



or takes a record (A)
with respect to any dividend or distribution upon the shares of Common Stock,
(B) with respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
to holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or
in conjunction with such notice being provided to the Holder.


9.     AMENDMENT AND WAIVER.  No term of this Warrant may be amended,
modified or waived unless pursuant to a writing signed by the Company and the
Required Holders; provided that no such action may increase the exercise price
of any SPA Warrants or decrease the number of shares or class of stock
obtainable upon exercise of any SPA Warrants without the written consent of the
Holder.  No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
SPA Warrants then outstanding.


10.   GOVERNING LAW.  This Warrant shall be governed by and
construed and enforced in accor­dance with, and all questions concerning the
construction, validity, interpretation and performance of this Warrant shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.


11.   CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against
any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.


12.   DISPUTE RESOLUTION.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within two Business Days of receipt of
the Exercise Notice giving rise to such dispute, as the case may be, to the
Holder.  If the Holder and the Company
are unable to agree upon such determination or calculation of the Exercise
Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment
bank selected by the Company and approved by the Holder  or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations.  Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.


13.   REMEDIES, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF.  The remedies
provided in this Warrant shall be cumulative and in addition to all other
remedies available under this Warrant and the other Transaction Documents, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein



 14
 






 



shall limit the right of
the Holder right to pursue actual damages for any failure by the Company to
comply with the terms of this Warrant. 
The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder and that the remedy at law for any
such breach may be inadequate.  The
Company therefore agrees that, in the event of any such breach or threatened
breach, the holder of this Warrant shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.


14.   TRANSFER.  This Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company, except as may otherwise be required by
Section 2(f) of the Securities Purchase Agreement.


15.   CERTAIN DEFINITIONS.  For purposes of this Warrant, the following
terms shall have the following meanings:


(a)   “Approved Stock Plan” means any employee benefit plan
which has been approved by the Board of Directors of the Company, pursuant to
which the Company’s securities may be issued to any employee, consultant,
officer or director for services provided to the Company.


(b)   “Bloomberg” means Bloomberg Financial Markets.


(c)   “Business Day” means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.


(d)   “Change of Control” means any Fundamental Transaction other
than (i) any
reorganization, recapitalization or reclassification of the Common Stock or
business combination in which the Company is the publicly traded surviving
entity in which the holders of the Company’s voting power immediately prior to
such reorganization, recapitalization or reclassification or business
combination continue after such reorganization, recapitalization or
reclassification or business combination to hold publicly traded securities
and, directly or indirectly, the voting power of the surviving entity or
entities necessary to elect a majority of the members of the board of directors
(or their equivalent if other than a corporation) of such entity or entities
(except where Apollo Resources International or its affiliates becomes
the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 70% or greater of the aggregate Voting Stock of the
Company),
or (ii) pursuant to a migratory merger effected solely for the purpose of
changing the jurisdiction of incorporation of the Company.


(e)   “Closing Bid Price” and “Closing Sale Price”
means, for any security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the Principal Market,
as reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the
closing trade price, as the case may be, then the last bid price or last trade
price, respectively, of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on the principal
securities



 15
 






 



exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the
bid prices, or the ask prices, respectively, of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.).  If the
Closing Bid Price or the Closing Sale Price cannot be calculated for a security
on a particular date on any of the foregoing bases, the Closing Bid Price or
the Closing Sale Price, as the case may be, of such security on such date shall
be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be
resolved pursuant to Section 12.  All
such determinations to be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.


(f)    “Common Shares” means the Common Shares
issued pursuant to the Securities Purchase Agreement.


(g)   “Common Stock” means (i) the Company’s shares of Common
Stock, par value $0.001 per share, and (ii) any share capital into which
such Common Stock shall have been changed or any share capital resulting from a
reclassification of such Common Stock.


(h)   “Convertible Securities” means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.


(i)    “Eligible Market” means the Principal Market, the American
Stock Exchange, The New York Stock Exchange, Inc., the Nasdaq National Market.


(j)    “Excluded
Securities”
means any Common Stock issued or issuable: (i) in connection with any Approved
Stock Plan; (ii) upon exercise of the Warrants; (iii) pursuant to a bona fide
firm commitment underwritten public offering with a nationally recognized
underwriter which generates gross proceeds to the Company in excess of
$50,000,000 (other than an “at-the-market offering” as defined in Rule
415(a)(4) under the 1933 Act and “equity lines”); (iv) in connection with any
acquisition by the Company, whether through an acquisition of stock or a merger
of any business, assets or technologies the primary purpose of which is not to
raise equity capital; (v) in connection with any other strategic transaction or
alliance the primary purpose of which is not to raise equity capital; and (vii)
upon conversion or exercise of any Options or Convertible Securities which are
outstanding on the day immediately preceding the Subscription Date, provided
that the conversion or exercise price of such Options or Convertible Securities
is not amended, modified or changed on or after the Subscription Date.


(k)   “Expiration Date” means the date sixty months after the
Issuance Date or, if such date falls on a day other than a Business Day or on
which trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.



 16
 






 



(l)    “Fundamental
Transaction” means that the Company shall, directly or indirectly,
in one or more related transactions, (i) consolidate or merge with or into
(whether or not the Company is the surviving corporation) another Person or
Persons, or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person,
or (iii) allow another Person to make a purchase, tender or exchange offer that
is accepted by the holders of more than 50% of the outstanding shares of Voting
Stock (not including any shares of Voting Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or
party to, such purchase, tender or exchange offer), or (iv) consummate a stock
purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
the 50% of the outstanding shares of Voting Stock (not including any shares of
Voting Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Common Stock or (vi) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 50% of the aggregate Voting Stock
of the Company.


(m)  “Options” means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.


(n)   “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or
listed on an Eligible Market,
or, if there is more than one such Person or Parent Entity, the Person or
Parent Entity with the largest public market capitalization as of the date of
consummation of the Fundamental Transaction.


(o)   “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.


(p)   “Principal Market” means OTC Bulletin Board.


(q)   “Registration Rights Agreement” means that certain
registration rights agreement by and among the Company and the Buyers.


(r)    “Required Holders” means the holders of the SPA Warrants
representing at least a majority of shares of Common Stock underlying the SPA
Warrants then outstanding.


(s)   “Successor Entity” means the Person (or, if so elected by the Required Holders, the Parent
Entity) formed by, resulting from or surviving any Fundamental Transaction or
the Person (or, if so elected by the Required Holders, the Parent Entity) with
which such Fundamental Transaction shall have been entered into.


[Signature
Page Follows]


 



 17














 


 


IN WITNESS WHEREOF, the Company has caused
this Warrant to Purchase Common Stock to be duly executed as of the Issuance
Date set out above.


	
   

  	
   

  	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  



 















 


EXHIBIT A


EXERCISE NOTICE


TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS

WARRANT TO PURCHASE COMMON STOCK


APOLLO
RESOURCES INTERNATIONAL, INC.


The undersigned holder hereby exercises the right to
purchase                   
of the shares of Common Stock (“Warrant
Shares”) of Apollo
Resources International, Inc., a Utah corporation (the “Company”),
evidenced by the attached Warrant to Purchase Common Stock (the “Warrant”). 
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.


1.    Form of
Exercise Price.  The Holder intends that
payment of the Exercise Price shall be made as:


	
  

  	
   

  	
                              a
  “Cash Exercise” with respect to                                       
  Warrant Shares;

  
	
   

  	
   

  	
                              and/or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                              a
  “Cashless Exercise” with respect to                                  
  Warrant Shares.

  



 


2.    Payment
of Exercise Price.  In the event that the
holder has elected a Cash Exercise with respect to some or all of the Warrant
Shares to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $           
to the Company in accordance with the terms of the Warrant.


3.    Delivery
of Warrant Shares.  The Company shall
deliver to the holder                
Warrant Shares in accordance with the terms of the Warrant.


4.    By its
delivery of this Exercise Notice, the undersigned represents and warrants to
the Company that in giving effect to the exercise evidenced hereby the Holder
will not beneficially own in excess of the number of shares of Common Stock
(determined in accordance with Section 13(d) of the Securities Exchange Act of
1934) permitted to be owned under Section 1(f)(1) of this Warrant to which this
notice relates.


Date:                ,
    


	
   

  	
   

  	
   

  	
   

  
	
  Name of Registered Holder

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  



 















 


ACKNOWLEDGMENT


The
Company hereby acknowledges this Exercise Notice and, if applicable, hereby
directs Colonial Stock Transfer to
issue the above indicated number of shares of Common Stock in accordance with
the Transfer Agent Instructions dated July   , 2006 from the
Company and acknowledged and agreed to by Colonial Stock Transfer.


	
   

  	
   

  	
  APOLLO RESOURCES INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
     

  	
   

  	
  By:

  	
   

  	
   

  
	
     

  	
   

  	
  Name:

  	
   

  	
   

  
	
     

  	
   

  	
  Title:

  	
   

  	
   

  



 















 


Warrant Shares Exercise Log


	
   Date

  	
   

  	
  Number of Warrant

  Shares Available

  to be Exercised

  	
   

  	
  Number of Warrant

  Shares Exercised

  	
   

  	
  Number of Warrant

  Shares Remaining

  to be Exercised