Document:

Exhibit 4.2

 

THIS WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.

 

WARRANT TO
PURCHASE

 

SHARES OF COMMON
STOCK

 

OF

 

                                            -

 

Expires                 ,
2010

 

	
  No.

  	
   

  	
  Number of Shares:

  

Date of Issuance:                    ,
2005

 

FOR VALUE RECEIVED,
subject to the provisions hereinafter set forth, the undersigned, Apollo
Resources International, Inc., a Utah corporation (together with its
successors and assigns, the “Issuer”), hereby certifies that HC
Wainwright & Co., Inc.. or its registered assigns is entitled to
subscribe for and purchase, during the Term (as hereinafter defined), up to       
million  (                      )
shares (subject to adjustment as hereinafter provided) of the duly authorized,
validly issued, fully paid and non-assessable Common Stock of the Issuer, at an
exercise price per share equal to the Warrant Price then in effect, subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth.  Capitalized terms used in this
Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 9 hereof.

 

1.                                       Term.  The term of this Warrant shall commence on                ,
2005 and shall expire at 5:00 p.m., eastern time, on                 ,
2010 (such period being the “Term”).

 

2.                                       Method
of Exercise Payment; Issuance of New Warrant; Transfer and Exchange.

 

(a)                                  Time
of Exercise.  The purchase rights
represented by this Warrant may be exercised in whole or in part during the
Term.

 

(b)                                 Method
of Exercise.  The Holder hereof may
exercise this Warrant, in whole or in part, by the surrender of this Warrant
(with the exercise form attached hereto duly executed) at the principal office
of the Issuer, and by the payment to the Issuer of an amount of consideration

 

 

therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number
of shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder’s election (i) by certified or official
bank check or by wire transfer to an account designated by the Issuer, (ii) by
“cashless exercise” in accordance with the provisions of subsection (c) of
this Section 2, or (iii) by a combination of the foregoing methods of
payment selected by the Holder of this Warrant.

 

(c)                                  Cashless
Exercise.  Notwithstanding any
provisions herein to the contrary, if the Per Share Market Value of one share
of Common Stock is greater than the Warrant Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant by payment of cash, the
Holder may exercise this Warrant by a cashless exercise and shall receive the
number of shares of Common Stock equal to an amount (as determined below) by
surrender of this Warrant at the principal office of the Issuer together with
the properly endorsed Exercise Form in which event the Issuer shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:

 

	
  X = Y

  	
  (B-A)

  	
   

  
	
   

  	
  B

  	
   

  

 

	
  Where

  	
   

  	
   X =

  	
  the number of
  shares of Common Stock to be issued to the Holder.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   Y =

  	
  the number of shares of
  Common Stock purchasable upon exercise of all of the Warrant or, if only a
  portion of the Warrant is being exercised, the portion of the Warrant being
  exercised.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   A =

  	
  the Warrant Price.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   B =

  	
  the Per Share Market
  Value of one share of Common Stock.

  

 

(d)                                 Issuance
of Stock Certificates.  In the event
of exercise of this Warrant in accordance with and subject to the terms and
conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days
after such exercise or, at the request of the Holder (provided that a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is then in effect), issued and delivered to the Depository Trust
Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) within a reasonable time,
not exceeding three (3) Trading Days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the holder of the shares of
Warrant Stock so purchased as of the date of such exercise and (ii) unless
this Warrant has expired, a new Warrant representing the number of shares of
Warrant Stock, if any, with respect to which this Warrant shall not then have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer’s expense within such time.

 

(e)                                  Transferability
of Warrant.  Subject to Section 2(g) and
Section 2(h), this Warrant may be transferred by a Holder without the
consent of the Issuer.  If transferred
pursuant to this paragraph, this Warrant may be transferred on the books of the
Issuer by the Holder hereof in

 

2

 

person or by duly
authorized attorney, upon surrender of this Warrant at the principal office of
the Issuer, properly endorsed (by the Holder executing an assignment in the
form attached hereto) and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. 
This Warrant is exchangeable at the principal office of the Issuer for
Warrants for the purchase of the same aggregate number of shares of Warrant
Stock, each new Warrant to represent the right to purchase such number of
shares of Warrant Stock as the Holder hereof shall designate at the time of
such exchange.  All Warrants issued on
transfers or exchanges shall be dated the Original Issue Date and shall be
identical with this Warrant except as to the number of shares of Warrant Stock
issuable pursuant thereto.

 

(f)                                    Continuing
Rights of Holder.  The Issuer will,
at the time of or at any time after each exercise of this Warrant, upon the
request of the Holder hereof, acknowledge in writing the extent, if any, of its
continuing obligation to afford to such Holder all rights to which such Holder
shall continue to be entitled after such exercise in accordance with the terms
of this Warrant, provided that if any such Holder shall fail to make any
such request, the failure shall not affect the continuing obligation of the
Issuer to afford such rights to such Holder.

 

(g)                                 Compliance
with Securities Laws.

 

(i)                                     The Holder of this
Warrant, by acceptance hereof, acknowledges that this Warrant or the shares of
Warrant Stock to be issued upon exercise hereof are being acquired solely for
the Holder’s own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Warrant Stock to be issued upon exercise hereof
except pursuant to an effective registration statement, or an exemption from
registration, under the Securities Act and any applicable state securities
laws.

 

(ii)                                  Except as provided in
paragraph (iii) below, this Warrant and all certificates representing
shares of Warrant Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.

 

(iii)                               The Issuer agrees to
reissue certificates representing any of the Warrant Stock, without the legend
set forth above if at such time, prior to making any transfer of

 

3

 

any such securities, the
Holder shall give written notice to the Issuer describing the manner and terms
of such transfer and removal as the Issuer may reasonably request.  Such proposed transfer and removal will not
be effected until: (a) either (i) the Issuer has received an opinion
of counsel reasonably satisfactory to the Issuer, to the effect that the
registration of such securities under the Securities Act is not required in
connection with such proposed transfer, (ii) a registration statement
under the Securities Act covering such proposed disposition has been filed by
the Issuer with the Securities and Exchange Commission and has become effective
under the Securities Act, (iii) the Issuer has received other evidence
reasonably satisfactory to the Issuer that such registration and qualification
under the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Issuer with reasonable assurances that such security can be
sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the
Issuer, to the effect that registration or qualification under the securities
or “blue sky” laws of any state is not required in connection with such
proposed disposition, or (ii) compliance with applicable state securities
or “blue sky” laws has been effected or a valid exemption exists with respect
thereto.  The Issuer will respond to any
such notice from a holder within five (5) business days.  In the case of any proposed transfer under
this Section 2(g), the Issuer will use reasonable efforts to comply with
any such applicable state securities or “blue sky” laws, but shall in no event
be required, (x) to qualify to do business in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the
general service of process in any state where it is not then subject, or (z) to
comply with state securities or “blue sky” laws of any state for which
registration by coordination is unavailable to the Issuer.  The restrictions on transfer contained in
this Section 2(g) shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section of
this Warrant.  Whenever a certificate
representing the Warrant Stock is required to be issued to a the Holder without
a legend, in lieu of delivering physical certificates representing the Warrant
Stock, provided the Issuer’s transfer agent is participating in the DTC Fast
Automated Securities Transfer program, the Issuer shall use its reasonable best
efforts to cause its transfer agent to electronically transmit the Warrant
Stock to the Holder by crediting the account of the Holder’s Prime Broker with
DTC through its DWAC system (to the extent not inconsistent with any provisions
of this Warrant).

 

(h)                                 In
no event may the Holder exercise this Warrant in whole or in part unless the
Holder is an “accredited investor” as defined in Regulation D under the
Securities Act.

 

3.                                       Stock
Fully Paid; Reservation and Listing of Shares; Covenants.

 

(a)                                  Stock
Fully Paid.  The Issuer represents,
warrants, covenants and agrees that all shares of Warrant Stock which may be
issued upon the exercise of this Warrant or otherwise hereunder will, when
issued in accordance with the terms of this Warrant, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens
and charges created by or through the Issuer. 
The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of the issue upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

 

4

 

(b)                                 Reservation.  If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued, the Issuer
will in good faith use its reasonable best efforts as expeditiously as possible
at its expense to cause such shares to be duly registered or qualified.  If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act then
in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.  The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.

 

(c)                                  Covenants.  The Issuer shall not by any action including,
without limitation, amending the Articles of Incorporation or the by-laws of
the Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment.  Without limiting the generality of the foregoing,
the Issuer will (i) not permit the par value, if any, of its Common Stock
to exceed the then effective Warrant Price, (ii) not amend or modify any
provision of the Articles of Incorporation or by-laws of the Issuer in any
manner that would adversely affect the rights of the Holders of the Warrants in
their capacity as Holders of the Warrants, (iii) take all such action as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of
any liens, claims, encumbrances and restrictions (other than as provided
herein) upon the exercise of this Warrant, and (iv) use its reasonable
best efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be reasonably
necessary to enable the Issuer to perform its obligations under this Warrant.

 

(d)                                 Loss,
Theft, Destruction of Warrants.  Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and, in the case of any
such loss, theft or destruction, upon receipt of indemnity or security
satisfactory to the Issuer or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Issuer will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like tenor and representing the right to purchase the same number of shares of
Common Stock.

 

4.                                       Adjustment
of Warrant Price.  The price at which
such shares may be purchased upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth in this Section 4. The Issuer
shall give the Holder notice of any event described below which requires an
adjustment pursuant to this Section 4 in accordance with the notice
provisions set forth in Section 5.

 

5

 

(a)                                  Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.

 

(i)  In case
the Issuer after the Original Issue Date shall do any of the following (each, a
“Triggering Event”): (a) consolidate or merge with or into another
corporation where the holders of outstanding Voting Stock prior to such merger
or consolidation do not own over 50% of the outstanding Voting Stock of the
merged or consolidated entity immediately after such merger or consolidation,
or (b) sell all or substantially all of its properties or assets to any
other Person, or (c) change the Common Stock to the same or different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in Section 4(b) or
Section 4(c)), or (d) effect a capital reorganization (other than by
way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 4(b) or Section 4(c)),
then, and in the case of each such Triggering Event, proper provision shall be
made so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof
at any time after the consummation of such Triggering Event, to the extent this
Warrant is not exercised prior to such Triggering Event, to receive at the
Warrant Price in effect at the time immediately prior to the consummation of
such Triggering Event in lieu of the Common Stock issuable upon such exercise
of this Warrant prior to such Triggering Event, the securities, cash and
property to which such Holder would have been entitled upon the consummation of
such Triggering Event if such Holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for elsewhere in this Section 4.

 

(ii)                                  Notwithstanding
anything contained in this Warrant to the contrary, a Triggering Event shall
not be deemed to have occurred if, prior to the consummation thereof, each
Person (other than the Issuer) which may be required to deliver any securities,
cash or property upon the exercise of this Warrant as provided herein shall
assume, by written instrument delivered to, and reasonably satisfactory to, the
Holder of this Warrant, (A) the obligations of the Issuer under this
Warrant (and if the Issuer shall survive the consummation of such Triggering
Event, such assumption shall be in addition to, and shall not release the Issuer
from, any continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection (a),
such Holder shall be entitled to receive, and such Person shall have similarly
delivered to such Holder a written acknowledgement executed by the President or
Chief Financial Officer of the Company, stating that this Warrant shall
thereafter continue in full force and effect and the terms hereof (including,
without limitation, all of the provisions of this subsection (a)) shall be
applicable to the securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.

 

(b)                                 Stock
Dividends, Subdivisions and Combinations. 
If at any time the Issuer shall:

 

(i)                                     make
or issue or set a record date for the holders of its Common

 

6

 

Stock for the purpose of
entitling them to receive a dividend payable in, or other distribution of,
shares of Common Stock,

 

(ii)                                  subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or

 

(iii)                               combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,

 

then (1) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the occurrence of any such event shall
be adjusted to equal the number of shares of Common Stock which a record holder
of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant
Price then in effect shall be adjusted to equal (A) the Warrant Price then
in effect multiplied by the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such adjustment.

 

Notwithstanding the foregoing, if such record date shall have been
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Warrant Price shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividends or
distributions.

 

(c)                                  Certain
Other Distributions.  If at any time
the Issuer shall make or issue or set a record date for the determination of the
holders of its Common Stock for the purpose of entitling them to receive any
dividend or other distribution of:

 

(i)                                     cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer),

 

(ii)                                  any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock), or

 

(iii)                               any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or
Additional Shares of Common Stock),

 

then (1) the number
of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such adjustment multiplied by
a fraction (A) the numerator of which shall be the Per Share Market Value
of Common Stock at the date of taking such record and (B) the denominator
of which shall be such Per Share Market Value minus the amount allocable to one
share of Common Stock of any such cash so distributable and of the fair value
(as determined in good faith by the Board of Directors of the Issuer and
supported by an opinion

 

7

 

from an investment
banking firm of recognized national standing acceptable to (but not affiliated
with) the Holder) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and (2) the Warrant Price then in effect
shall be adjusted to equal (A) the Warrant Price then in effect multiplied
by the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such
adjustment.  A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of
Common Stock shall be changed into a larger or smaller number of shares of
Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4(b).

 

Notwithstanding the foregoing, if such record date shall have been
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Warrant Price shall be adjusted pursuant
to this Section 4(c) as of the time of actual payment of such
dividends or distributions.

 

(d)                                 Issuance
of Additional Shares of Common Stock.

 

(i)                                     In
the event the Issuer shall at any time following the Original Issue Date issue
any Additional Shares of Common Stock (otherwise than as provided in the
foregoing subsections (a) through (c) of this Section 4), at a
price per share less than the Warrant Price then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price determined by multiplying the Warrant Price then in effect by a
fraction:

 

(A)                              the
numerator of which shall be equal to the sum of (x) the number of shares of
Outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock plus (y) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase
at a price per share equal to the Warrant Price then in effect, and

 

(B)                                the
denominator of which shall be equal to the number of shares of Outstanding
Common Stock immediately after the issuance of such Additional Shares of Common
Stock.

 

(ii)                                  No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any Common Stock Equivalents, if any such adjustment shall previously
have been made upon the issuance of such Common Stock Equivalents (or upon the
issuance of any warrant or other rights therefor) pursuant to Section 4(e).

 

(e)                                  Issuance
of Common Stock Equivalents.  If at
any time the Issuer shall issue or

 

8

 

sell any Common Stock
Equivalents, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the aggregate price per share for which Common
Stock is issuable upon such conversion or exchange plus the consideration
received by the Issuer for issuance of such Common Stock Equivalent divided by
the number of shares of Common Stock issuable pursuant to such Common Stock
Equivalent shall be less than the Warrant Price in effect immediately prior to
the time of such issue or sale, then the number of shares of Common Stock for
which this Warrant is exercisable and the Warrant Price then in effect shall be
adjusted as provided in Section 4(d) on the basis that the maximum
number of Additional Shares of Common Stock necessary to effect the conversion
or exchange of all such Common Stock Equivalents shall be deemed to have been
issued and outstanding and the Issuer shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such Common Stock Equivalents.  No
further adjustment of the number of shares of Common Stock for which this
Warrant is exercisable and the Warrant Price then in effect shall be made under
this Section 4(e) upon the issuance of any Common Stock Equivalents
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights pursuant to this Section 4(e).  No further adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Common Stock Equivalents.

 

(f)                                    Superseding
Adjustment.  If, at any time after
any adjustment of the number of shares of Common Stock for which this Warrant
is exercisable and the Warrant Price then in effect shall have been made
pursuant to Section 4(e) as the result of any issuance of Common
Stock Equivalents, and (i) such Common Stock Equivalents, or the right of
conversion or exchange in such Common Stock Equivalents, shall expire, and all
or a portion of such or the right of conversion or exchange with respect to all
or a portion of such Common Stock Equivalents, as the case may be, shall not
have been exercised, or (ii) the consideration per share for which shares
of Common Stock are issuable pursuant to such Common Stock Equivalents shall be
increased, then such previous adjustment shall be rescinded and annulled and
the Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation.  Upon the occurrence of an
event set forth in this Section 4(f) above, there shall be a
recomputation made of the effect of such Common Stock Equivalents on the basis
of: (i) treating the number of Additional Shares of Common Stock
theretofore actually issued or issuable pursuant to the previous exercise of
Common Stock Equivalents or any such right of conversion or exchange, as having
been issued on the date or dates of any such exercise and for the consideration
actually received and receivable therefor, and (ii) treating any such
Common Stock Equivalents which then remain outstanding as having been granted
or issued immediately after the time of such increase of the consideration per
share for which Additional Shares of Common Stock are issuable under such
Common Stock Equivalents; whereupon a new adjustment of the number of shares of
Common Stock for which this Warrant is exercisable and the Warrant Price then
in effect shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.

 

(g)                                 Purchase
of Common Stock by the Issuer.  If
the Issuer at any time while this Warrant is outstanding shall, directly or
indirectly through a Subsidiary or otherwise, purchase, redeem or otherwise
acquire any shares of Common Stock at a price per share greater than the

 

9

 

Per Share Market Value,
then the Warrant Price upon each such purchase, redemption or acquisition shall
be adjusted to that price determined by multiplying such Warrant Price by a
fraction (i) the numerator of which shall be the number of shares of
Outstanding Common Stock immediately prior to such purchase, redemption or
acquisition minus the number of shares of Common Stock which the aggregate
consideration for the total number of such shares of Common Stock so purchased,
redeemed or acquired would purchase at the Per Share Market Value; and (ii) the
denominator of which shall be the number of shares of Outstanding Common Stock
immediately after such purchase, redemption or acquisition.  For the purposes of this subsection (h),
the date as of which the Per Share Market Price shall be computed shall be the
earlier of (x) the date on which the Issuer shall enter into a firm contract
for the purchase, redemption or acquisition of such Common Stock, or (y) the
date of actual purchase, redemption or acquisition of such Common Stock.  For the purposes of this subsection (h),
a purchase, redemption or acquisition of a Common Stock Equivalent shall be
deemed to be a purchase of the underlying Common Stock, and the computation
herein required shall be made on the basis of the full exercise, conversion or
exchange of such Common Stock Equivalent on the date as of which such computation
is required hereby to be made, whether or not such Common Stock Equivalent is
actually exercisable, convertible or exchangeable on such date.

 

(h)                                 Other
Provisions applicable to Adjustments under this Section.  The following provisions shall be applicable
to the making of adjustments of the number of shares of Common Stock for which
this Warrant is exercisable and the Warrant Price then in effect provided for
in this Section 4:

 

(i)                                     Computation
of Consideration.  To the extent that
any Additional Shares of Common Stock shall be issued for cash consideration,
the consideration received by the Issuer therefor shall be the amount of the
cash received by the Issuer therefor, or, if such Additional Shares of Common
Stock are offered by the Issuer for subscription, the subscription price, or,
if such Additional Shares of Common Stock are sold to underwriters or dealers
for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account any
compensation, discounts or expenses paid or incurred by the Issuer for and in
the underwriting of, or otherwise in connection with, the issuance thereof).  In connection with any merger or
consolidation in which the Issuer is the surviving corporation (other than any
consolidation or merger in which the previously outstanding shares of Common
Stock of the Issuer shall be changed to or exchanged for the stock or other securities
of another corporation), the amount of consideration therefore shall be, deemed
to be the fair value, as determined reasonably and in good faith by the Board,
of such portion of the assets and business of the nonsurviving corporation as
the Board may determine to be attributable to such Additional Shares of Common
Stock.  The consideration for any
Additional Shares of Common Stock issuable pursuant to any Convertible
Securities or warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Issuer for issuing such Convertible
Securities or warrants or other rights plus the additional consideration
payable to the Issuer upon exercise of such warrants or other rights.  In the event of any consolidation or merger
of the Issuer in which the Issuer is not the surviving corporation or in which
the previously outstanding shares of Common Stock of the Issuer shall be
changed into or exchanged for the stock or other securities of another
corporation, or in the event of any sale of all or substantially all of the
assets of the Issuer for stock or other securities of any corporation, the
Issuer shall be deemed to have issued a number of shares of its Common Stock
for stock or securities or other property of the

 

10

 

other corporation
computed on the basis of the actual exchange ratio on which the transaction was
predicated, and for a consideration equal to the fair market value on the date
of such transaction of all such stock or securities or other property of the
other corporation.  In the event any
consideration received by the Issuer for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board.  In the event Common Stock is issued with
other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section 4(h)(i) shall
be allocated among such securities and assets as determined in good faith by
the Board.

 

(ii)                                  When
Adjustments to Be Made.  The
adjustments required by this Section 4 shall be made whenever and as often
as any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except in the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than one percent (1%) of the shares of Common Stock for which
this Warrant is exercisable immediately prior to the making of such
adjustment.  Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment,
together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.

 

(iii)                               Fractional
Interests.  In computing adjustments
under this Section 4, fractional interests in Common Stock shall be taken
into account to the nearest one one-hundredth (1/100th) of a share.

 

(iv)                              When
Adjustment Not Required.  If the Issuer
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.

 

(i)                                     Form of
Warrant after Adjustments.  The form
of this Warrant need not be changed because of any adjustments in the Warrant
Price or the number and kind of Securities purchasable upon the exercise of
this Warrant.

 

(j)                                     Escrow
of Warrant Stock.  If after any
property becomes distributable pursuant to this Section 4 by reason of the
taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder
exercises this Warrant, any shares of Common Stock issuable upon exercise by
reason of such adjustment shall be deemed the last shares of Common Stock for
which this Warrant is exercised (notwithstanding any other provision to the
contrary herein) and such shares or other property shall be held in escrow for
the Holder by the Issuer to be issued to the Holder upon and to the extent that
the

 

11

 

event actually takes
place, upon payment of the current Warrant Price.  Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.

 

5.                                       Notice
of Adjustments.  Whenever the Warrant
Price or Warrant Share Number shall be adjusted pursuant to Section 4
hereof (for purposes of this Section 5, each an “adjustment”), the Issuer
shall cause its Chief Financial Officer to prepare and execute a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Board made any determination
hereunder), and the Warrant Price and Warrant Share Number after giving effect
to such adjustment, and shall cause copies of such certificate to be delivered
to the Holder of this Warrant promptly after each adjustment.  Any dispute between the Issuer and the Holder
of this Warrant with respect to the matters set forth in such certificate may
at the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the “big four” selected by the Holder, provided
that the Issuer shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of objection unless the Issuer identifies a valid conflict of interest for such
firm with any of the parties.  The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute.  Such opinion shall be final and
binding on the parties hereto.  The costs
and expenses of such accounting firm shall be paid equally by the Company and
the Holder.

 

6.                                       Fractional
Shares.  No fractional shares of
Warrant Stock will be issued in connection with any exercise hereof, but in
lieu of such fractional shares, the Issuer shall make a cash payment therefor
equal in amount to the product of the applicable fraction multiplied by the Per
Share Market Value then in effect.

 

7.                                       Ownership
Cap and Certain Exercise Restrictions. 
(a)  Notwithstanding anything to the contrary set forth in this
Warrant, at no time may a Holder of this Warrant exercise this Warrant if the
number of shares of Common Stock to be issued pursuant to such exercise would
exceed, when aggregated with all other shares of Common Stock owned by such
Holder at such time, the number of shares of Common Stock which would result in
such Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 4.9% of the then
issued and outstanding shares of Common Stock; provided, however,
that upon a holder of this Warrant providing the Issuer with sixty-one (61)
days notice (pursuant to Section 13 hereof) (the “Waiver Notice”) that
such Holder would like to waive this Section 7(a) with regard to any
or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7(a) will
be of no force or effect with regard to all or a portion of the Warrant
referenced in the Waiver Notice; provided, further, that this provision shall
be of no further force or effect during the sixty-one (61) days immediately
preceding the expiration of the term of this Warrant.

 

(b)                                 The
Holder may not exercise the Warrant hereunder to the extent such exercise would
result in the Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.9% of the then
issued

 

12

 

and outstanding shares of
Common Stock, including shares issuable upon exercise of the Warrant held by
the Holder after application of this Section; provided, however,
that upon a holder of this Warrant providing the Company with a Waiver Notice
that such holder would like to waive this Section 7(b) with regard to
any or all shares of Common Stock issuable upon exercise of this Warrant, this Section 7(b) shall
be of no force or effect with regard to those shares of Warrant Stock
referenced in the Waiver Notice; provided, further, that this
provision shall be of no further force or effect during the sixty-one (61) days
immediately preceding the expiration of the term of this Warrant.

 

8.                                       Registration
Rights.  If the Issuer shall determine to proceed with the preparation and
filing of a registration statement under the Securities Act in connection with
the proposed offer and sale of any of its securities by it or any of its
security holders (other than a registration statement on Form S-4, S-8 or
other limited purpose form), then the Issuer will give written notice of its
determination to the Holder.  Upon the
written request from the Holder, the Issuer will cause all shares of Common
Stock issuable upon the exercise of this Warrant to be included in such
registration statement, all to the extent requisite to permit the resale by the
Holder of such shares of Common Stock issuable upon the exercise of this
Warrant.

 

9.                                       Definitions.  For the purposes of this Warrant, the
following terms have the following meanings:

 

“Additional
Shares of Common Stock” means all shares of Common Stock issued by the
Issuer after the Original Issue Date, and all shares of Other Common, if any,
issued by the Issuer after the Original Issue Date, except: (i) securities
issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to a bona fide firm
underwritten public offering of the Issuer’s securities, (iii) securities
issued pursuant to the conversion or exercise of convertible or excercisable
securities issued or outstanding on or prior to the date hereof or issued
pursuant to the Purchase Agreement, (iv) the Warrant Stock, (v) securities
issued in connection with strategic alliances or other partnering arrangements
so long as such issuances are not for the purpose of raising capital, (vi) Common
Stock issued or options to purchase Common Stock granted or issued pursuant to
the Issuer’s stock option plans and employee stock purchase plans as they now
exist, (vii) any warrants issued to 1st SB Partners Ltd. for
consulting services, (viii) the payment of any principal and accrued
interest in shares of Common Stock pursuant to the convertible promissory notes
issued pursuant to the Purchase Agreement, and (ix) the issuance of up to
6,000,000 shares of Common Stock to the Issuer’s officers, directors and
employees so long as such shares of Common Stock are not offered, sold,
assigned, transferred or pledged, directly or indirectly, for a period of one (1) year
following the effective date of the registration statement providing for the
resale of the shares of Common Stock issuable upon exercise of this Warrant and
the convertible promissory notes issued pursuant to the Purchase Agreement.

 

“Articles of
Incorporation” means the Articles of Incorporation of the Issuer as in
effect on the Original Issue Date, and as hereafter from time to time amended,
modified, supplemented or restated in accordance with the terms hereof and
thereof and pursuant to applicable law.

 

“Board” shall
mean the Board of Directors of the Issuer.

 

13

 

“Capital Stock”
means and includes (i) any and all shares, interests, participations or
other equivalents of or interests in (however designated) corporate stock,
including, without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or
ownership interests in any Person of any other type.

 

“Common Stock”
means the Common Stock, par value $.001 per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.

 

“Common Stock
Equivalent” means any Convertible Security or warrant, option or other
right to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Security.

 

“Convertible
Securities” means evidences of Indebtedness, shares of Capital Stock or
other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common Stock.  The term “Convertible Security” means one of
the Convertible Securities.

 

“Governmental
Authority” means any governmental, regulatory or self-regulatory entity,
department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

 

“Holders”
mean the Persons who shall from time to time own any Warrant.  The term “Holder” means one of the Holders.

 

“Independent
Appraiser” means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the
Holder of any Warrant.

 

“Issuer”
means Apollo Resources International, Inc., a Utah corporation, and its
successors and assigns.

 

“Majority
Holders” means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the Warrants at the time
outstanding.

 

“Original Issue
Date” means                             ,
2005.

 

“OTC Bulletin Board”
means the over-the-counter electronic bulletin board.

 

“Other Common”
means any other Capital Stock of the Issuer of any class which shall be
authorized at any time after the date of this Warrant (other than Common Stock)

 

14

 

and which shall have the
right to participate in the distribution of earnings and assets of the Issuer without
limitation as to amount.

 

“Outstanding
Common Stock” means, at any given time, the aggregate amount of outstanding
shares of Common Stock, assuming full exercise, conversion or exchange (as
applicable) of all options, warrants and other Securities which are convertible
into or exercisable or exchangeable for, and any right to subscribe for, shares
of Common Stock that are outstanding at such time.

 

“Person”
means an individual, corporation, limited liability company, partnership, joint
stock company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.

 

“Per Share
Market Value” means on any particular date (a) the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (b) if the Common Stock is not then
reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the “Pink Sheet” quotes for the relevant
determination period, or (c) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by the
Board in good faith; provided, however, that the Majority
Holders, after receipt of the determination by the Board, shall have the right
to select, jointly with the Issuer, an Independent Appraiser, in which case,
the fair market value shall be the determination by such Independent Appraiser;
and provided, further that all determinations of the Per Share
Market Value shall be appropriately adjusted for any stock dividends, stock
splits or other similar transactions during such period.  The determination of fair market value shall
be based upon the fair market value of the Issuer determined on a going concern
basis as between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and binding on
all parties.  In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.

 

“Purchase
Agreement” means the Note and Warrant Purchase Agreement dated as of June     ,
2005, among the Issuer and the Purchasers.

 

“Purchasers”
means the purchasers of the convertible promissory notes and
the Warrants issued by the Issuer pursuant to the Purchase Agreement.

 

“Securities”
means any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any
Security.  “Security” means one of the
Securities.

 

“Securities Act”
means the Securities Act of 1933, as amended, or any similar federal statute
then in effect.

 

15

 

“Subsidiary”
means any corporation at least 50% of whose outstanding Voting Stock shall at
the time be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

 

“Term” has
the meaning specified in Section 1 hereof.

 

“Trading Day”
means (a) a day on which the Common Stock is traded on the OTC Bulletin
Board, or (b) if the Common Stock is not traded on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted
as set forth in (a) or (b) hereof, then Trading Day shall mean any
day except Saturday, Sunday and any day which shall be a legal holiday or a day
on which banking institutions in the State of New York are authorized or
required by law or other government action to close.

 

“Voting Stock”
means, as applied to the Capital Stock of any corporation, Capital Stock of any
class or classes (however designated) having ordinary voting power for the
election of a majority of the members of the Board of Directors (or other
governing body) of such corporation, other than Capital Stock having such power
only by reason of the happening of a contingency.

 

“Warrants”
means the Warrants issued and sold pursuant to this Warrant, and any other
warrants of like tenor issued in substitution or exchange for any thereof
pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof
or of any of such other Warrants.

 

“Warrant Price”
initially means U.S. $      [note: Apollo will
issue two warrants, to accommodate the different exercise prices tied to the
investor notes and the investor warrants], as such Warrant Price may be
adjusted from time to time as shall result from the adjustments specified in
this Warrant, including Section 4 hereto.

 

“Warrant Share
Number” means at any time the aggregate number of shares of Warrant Stock
which may at such time be purchased upon exercise of this Warrant, after giving
effect to all prior adjustments and increases to such number made or required
to be made under the terms hereof.

 

“Warrant Stock”
means Common Stock issuable upon exercise of any Warrant or Warrants or
otherwise issuable pursuant to any Warrant or Warrants.

 

10.                                 Other
Notices.  In case at any time:

 

(A)          the
Issuer shall make any distributions to the holders of Common Stock; or

 

(B)           the
Issuer shall authorize the granting to all holders of its Common Stock of
rights to subscribe for or purchase any shares of Capital Stock of any class or
other rights; or

 

16

 

(C)           there
shall be any reclassification of the Capital Stock of the Issuer; or

 

(D)          there
shall be any capital reorganization by the Issuer; or

 

(E)           there
shall be any (i) consolidation or merger involving the Issuer or (ii) sale,
transfer or other disposition of all or substantially all of the Issuer’s
property, assets or business (except a merger or other reorganization in which
the Issuer shall be the surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

 

(F)           there
shall be a voluntary or involuntary dissolution, liquidation or winding-up of
the Issuer or any partial liquidation of the Issuer or distribution to holders
of Common Stock;

 

then, in each of such
cases, the Issuer shall give written notice to the Holder of the date on which (i) the
books of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place.  Such notice also shall specify the date as of
which the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
certificates for Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be.  Such notice shall be given at least twenty
(20) days prior to the record date or effective date for the event specified in
such notice.

 

11.                                 Amendment
and Waiver.  Any term, covenant,
agreement or condition in this Warrant may be amended, or compliance therewith
may be waived (either generally or in a particular instance and either
retroactively or prospectively), by a written instrument or written instruments
executed by the Issuer and the Majority Holders; provided, however,
that no such amendment or waiver shall reduce the Warrant Share Number,
increase the Warrant Price, shorten the period during which this Warrant may be
exercised or modify any provision of this Section 11 without the consent
of the Holder of this Warrant.

 

12.                                 Governing
Law.  THIS WARRANT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

 

13.                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earlier of (i) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m.,
eastern time, on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or

 

17

 

communication is
delivered via facsimile at the facsimile telephone number specified for notice
later than 5:00 p.m., eastern time, on any date and earlier than 11:59 p.m.,
eastern time, on such date, or (iii) actual receipt by the party to whom
such notice is required to be given.  The
addresses for such communications shall be with respect to the Holder of this
Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at
its last known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:

 

Apollo Resources
International, Inc.

3001 Knox Street, Suite 403

Dallas, Texas  75205

Attention: Chief
Executive Officer

Tel. No.: (214) 389-9800

Fax No.:  (214) 389-9806

 

Copies of notices to the
Issuer shall be sent to Scheef & Stone, LLP, 5956 Sherry Lane, Suite 1400,
Dallas, Texas  75225, Attention: Roger A.
Crabb, Tel. No.: (214) 706-4224, Fax No.: (214) 706-4242.  Copies of notices to the Holder shall be sent
to John R. Clarke, President, HC Wainwright & Co., Inc., 250 Park
Avenue, 5th floor, NY, NY 10177. 
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to
the other party hereto.

 

14.                                 Warrant
Agent.  The Issuer may, by written
notice to each Holder of this Warrant, appoint an agent for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of
Section 2 hereof or replacing this Warrant pursuant to subsection (d) of
Section 3 hereof, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.

 

15.                                 Remedies.  The Issuer stipulates that the remedies at
law of the Holder of this Warrant in the event of any default or threatened
default by the Issuer in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.

 

16.                                 Successors
and Assigns.  This Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Issuer, the Holder hereof and (to the extent
provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall
be enforceable by any such Holder or Holder of Warrant Stock.

 

17.                                 Modification
and Severability.  If, in any action
before any court or agency legally empowered to enforce any provision contained
herein, any provision hereof is found to be unenforceable, then such provision
shall be deemed modified to the extent necessary to make it enforceable by such
court or agency.  If any such provision
is not enforceable as set forth in the preceding sentence, the unenforceability
of such provision shall not affect the other provisions of this Warrant, but
this Warrant shall be construed as if such unenforceable provision had never
been contained herein.

 

18

 

18.                                 Headings.  The headings of the Sections of this Warrant
are for convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.

 

 

IN WITNESS WHEREOF, the
Issuer has executed this Warrant as of the day and year first above written.

 

 

	
   

  	
  ISSUER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

19

 

EXERCISE FORM

 

[ISSUER]

 

The undersigned                            ,
pursuant to the provisions of the within Warrant, hereby elects to purchase             shares
of Common Stock of                                               covered
by the within Warrant.

 

	
  Dated:

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

Number of shares of Common Stock beneficially owned or deemed
beneficially owned by the Holder on the date of Exercise:

 

ASSIGNMENT

 

FOR VALUE RECEIVED,                                        hereby
sells, assigns and transfers unto                                       the
within Warrant and all rights evidenced thereby and does irrevocably constitute
and appoint                            ,
attorney, to transfer the said Warrant on the books of the within named
corporation.

 

	
  Dated:

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

PARTIAL ASSIGNMENT

 

FOR VALUE RECEIVED,                          hereby
sells, assigns and transfers unto                              the
right to purchase                                 shares
of Warrant Stock evidenced by the within Warrant together with all rights
therein, and does irrevocably constitute and appoint                                    ,
attorney, to transfer that part of the said Warrant on the books of the within
named corporation.

 

	
  Dated:

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

FOR USE BY THE
ISSUER ONLY:

This Warrant No. W-     
canceled (or transferred or exchanged) this        day
of                      ,
        , shares of Common Stock issued
therefor in the name of                     ,
Warrant No. W-         issued
for       shares of Common Stock in the name of                          .

 

20Exhibit 4.3

 

THIS WARRANT AND THE SHARES OF
COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES
UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED.

 

WARRANT TO
PURCHASE

 

SHARES OF COMMON
STOCK

 

OF

 

                                         -

 

Expires                 ,
2010

 

	
  No.

  	
   

  	
  Number of Shares:

  

Date of Issuance:                       ,
2005

 

FOR VALUE RECEIVED,
subject to the provisions hereinafter set forth, the undersigned, Apollo
Resources International, Inc., a Utah corporation (together with its
successors and assigns, the “Issuer”), hereby certifies that 1st
SB Partners Ltd. or its registered assigns is entitled to subscribe for and
purchase, during the Term (as hereinafter defined), up to        million
(                       )
shares (subject to adjustment as hereinafter provided) of the duly authorized,
validly issued, fully paid and non-assessable Common Stock of the Issuer, at an
exercise price per share equal to the Warrant Price then in effect, subject,
however, to the provisions and upon the terms and conditions hereinafter set
forth.  Capitalized terms used in this
Warrant and not otherwise defined herein shall have the respective meanings
specified in Section 9 hereof.

 

1.                                       Term.  The term of this Warrant shall commence on                 ,
2005 and shall expire at 5:00 p.m., eastern time, on                   ,
2008 (such period being the “Term”).

 

2.                                       Method
of Exercise Payment; Issuance of New Warrant; Transfer and Exchange.

 

(a)                                  Time
of Exercise.  The purchase rights
represented by this Warrant may be exercised in whole or in part during the
Term.

 

(b)                                 Method
of Exercise.  The Holder hereof may
exercise this Warrant, in whole or in part, by the surrender of this Warrant
(with the exercise form attached hereto duly executed) at

 

 

the principal office of
the Issuer, and by the payment to the Issuer of an amount of consideration
therefor equal to the Warrant Price in effect on the date of such exercise
multiplied by the number of shares of Warrant Stock with respect to which this
Warrant is then being exercised, payable at such Holder’s election (i) by
certified or official bank check or by wire transfer to an account designated
by the Issuer, (ii) by “cashless exercise” in accordance with the
provisions of subsection (c) of this Section 2, or (iii) by
a combination of the foregoing methods of payment selected by the Holder of
this Warrant.

 

(c)                                  Cashless
Exercise.  Notwithstanding any
provisions herein to the contrary, if the Per Share Market Value of one share
of Common Stock is greater than the Warrant Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant by payment of cash, the
Holder may exercise this Warrant by a cashless exercise and shall receive the
number of shares of Common Stock equal to an amount (as determined below) by
surrender of this Warrant at the principal office of the Issuer together with
the properly endorsed Exercise Form in which event the Issuer shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:

 

	
  X = Y

  	
  (B-A)

  	
   

  
	
   

  	
  B

  	
   

  

 

	
  Where

  	
   

  	
   X =

  	
  the number of
  shares of Common Stock to be issued to the Holder.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   Y =

  	
  the number of shares of
  Common Stock purchasable upon exercise of all of the Warrant or, if only a
  portion of the Warrant is being exercised, the portion of the Warrant being
  exercised.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   A =

  	
  the Warrant Price.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   B =

  	
  the Per Share Market
  Value of one share of Common Stock.

  

 

(d)                                 Issuance
of Stock Certificates.  In the event
of exercise of this Warrant in accordance with and subject to the terms and
conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days
after such exercise or, at the request of the Holder (provided that a
registration statement under the Securities Act providing for the resale of the
Warrant Stock is then in effect), issued and delivered to the Depository Trust
Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) within a reasonable time,
not exceeding three (3) Trading Days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the holder of the shares of
Warrant Stock so purchased as of the date of such exercise and (ii) unless
this Warrant has expired, a new Warrant representing the number of shares of
Warrant Stock, if any, with respect to which this Warrant shall not then have
been exercised (less any amount thereof which shall have been canceled in
payment or partial payment of the Warrant Price as hereinabove provided) shall
also be issued to the Holder hereof at the Issuer’s expense within such time.

 

(e)                                  Transferability
of Warrant.  Subject to Section 2(g) and
Section 2(h), this Warrant may be transferred by a Holder without the
consent of the Issuer.  If transferred
pursuant to this

 

2

 

paragraph, this Warrant
may be transferred on the books of the Issuer by the Holder hereof in person or
by duly authorized attorney, upon surrender of this Warrant at the principal
office of the Issuer, properly endorsed (by the Holder executing an assignment
in the form attached hereto) and upon payment of any necessary transfer tax or
other governmental charge imposed upon such transfer.  This Warrant is exchangeable at the principal
office of the Issuer for Warrants for the purchase of the same aggregate number
of shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange.  All Warrants
issued on transfers or exchanges shall be dated the Original Issue Date and
shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant thereto.

 

(f)                                    Continuing
Rights of Holder.  The Issuer will,
at the time of or at any time after each exercise of this Warrant, upon the
request of the Holder hereof, acknowledge in writing the extent, if any, of its
continuing obligation to afford to such Holder all rights to which such Holder
shall continue to be entitled after such exercise in accordance with the terms
of this Warrant, provided that if any such Holder shall fail to make any
such request, the failure shall not affect the continuing obligation of the
Issuer to afford such rights to such Holder.

 

(g)                                 Compliance
with Securities Laws.

 

(i)                                     The Holder of this
Warrant, by acceptance hereof, acknowledges that this Warrant or the shares of
Warrant Stock to be issued upon exercise hereof are being acquired solely for the
Holder’s own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Warrant Stock to be issued upon exercise hereof
except pursuant to an effective registration statement, or an exemption from
registration, under the Securities Act and any applicable state securities
laws.

 

(ii)                                  Except as provided in
paragraph (iii) below, this Warrant and all certificates representing
shares of Warrant Stock issued upon exercise hereof shall be stamped or
imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY
STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.

 

3

 

(iii)                               The Issuer agrees to
reissue certificates representing any of the Warrant Stock, without the legend
set forth above if at such time, prior to making any transfer of any such
securities, the Holder shall give written notice to the Issuer describing the
manner and terms of such transfer and removal as the Issuer may reasonably
request.  Such proposed transfer and
removal will not be effected until: (a) either (i) the Issuer has
received an opinion of counsel reasonably satisfactory to the Issuer, to the
effect that the registration of such securities under the Securities Act is not
required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act, (iii) the Issuer has received other
evidence reasonably satisfactory to the Issuer that such registration and
qualification under the Securities Act and state securities laws are not
required, or (iv) the Holder provides the Issuer with reasonable
assurances that such security can be sold pursuant to Rule 144 under the
Securities Act; and (b) either (i) the Issuer has received an opinion
of counsel reasonably satisfactory to the Issuer, to the effect that registration
or qualification under the securities or “blue sky” laws of any state is not
required in connection with such proposed disposition, or (ii) compliance
with applicable state securities or “blue sky” laws has been effected or a
valid exemption exists with respect thereto. 
The Issuer will respond to any such notice from a holder within five (5) business
days.  In the case of any proposed
transfer under this Section 2(g), the Issuer will use reasonable efforts
to comply with any such applicable state securities or “blue sky” laws, but
shall in no event be required, (x) to qualify to do business in any state where
it is not then qualified, (y) to take any action that would subject it to tax
or to the general service of process in any state where it is not then subject,
or (z) to comply with state securities or “blue sky” laws of any state for
which registration by coordination is unavailable to the Issuer.  The restrictions on transfer contained in
this Section 2(g) shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section of
this Warrant.  Whenever a certificate
representing the Warrant Stock is required to be issued to a the Holder without
a legend, in lieu of delivering physical certificates representing the Warrant
Stock, provided the Issuer’s transfer agent is participating in the DTC Fast
Automated Securities Transfer program, the Issuer shall use its reasonable best
efforts to cause its transfer agent to electronically transmit the Warrant
Stock to the Holder by crediting the account of the Holder’s Prime Broker with
DTC through its DWAC system (to the extent not inconsistent with any provisions
of this Warrant).

 

(h)                                 In
no event may the Holder exercise this Warrant in whole or in part unless the
Holder is an “accredited investor” as defined in Regulation D under the
Securities Act.

 

4

 

3.                                       Stock
Fully Paid; Reservation and Listing of Shares; Covenants.

 

(a)                                  Stock
Fully Paid.  The Issuer represents,
warrants, covenants and agrees that all shares of Warrant Stock which may be
issued upon the exercise of this Warrant or otherwise hereunder will, when
issued in accordance with the terms of this Warrant, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens
and charges created by or through the Issuer. 
The Issuer further covenants and agrees that during the period within
which this Warrant may be exercised, the Issuer will at all times have
authorized and reserved for the purpose of the issue upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

 

(b)                                 Reservation.  If any shares of Common Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any governmental authority
under any federal or state law before such shares may be so issued, the Issuer
will in good faith use its reasonable best efforts as expeditiously as possible
at its expense to cause such shares to be duly registered or qualified.  If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder (provided that such Warrant Stock has been
registered pursuant to a registration statement under the Securities Act then
in effect), and, to the extent permissible under the applicable securities
exchange rules, all unissued shares of Warrant Stock which are at any time
issuable hereunder, so long as any shares of Common Stock shall be so listed.  The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class shall
be listed on such securities exchange or market by the Issuer.

 

(c)                                  Covenants.  The Issuer shall not by any action including,
without limitation, amending the Articles of Incorporation or the by-laws of
the Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment.  Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Articles of Incorporation or by-laws of the Issuer
in any manner that would adversely affect the rights of the Holders of the
Warrants in their capacity as Holders of the Warrants, (iii) take all such
action as may be reasonably necessary in order that the Issuer may validly and
legally issue fully paid and nonassessable shares of Common Stock, free and
clear of any liens, claims, encumbrances and restrictions (other than as
provided herein) upon the exercise of this Warrant, and (iv) use its
reasonable best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.

 

(d)                                 Loss,
Theft, Destruction of Warrants.  Upon
receipt of evidence satisfactory to the Issuer of the ownership of and the
loss, theft, destruction or mutilation of any Warrant and, in the

 

5

 

case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to the
Issuer or, in the case of any such mutilation, upon surrender and cancellation
of such Warrant, the Issuer will make and deliver, in lieu of such lost,
stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and
representing the right to purchase the same number of shares of Common Stock.

 

4.                                       Adjustment
of Warrant Price.  The price at which
such shares may be purchased upon exercise of this Warrant shall be subject to
adjustment from time to time as set forth in this Section 4. The Issuer
shall give the Holder notice of any event described below which requires an
adjustment pursuant to this Section 4 in accordance with the notice
provisions set forth in Section 5.

 

(a)                                  Recapitalization,
Reorganization, Reclassification, Consolidation, Merger or Sale.

 

(i)  In case
the Issuer after the Original Issue Date shall do any of the following (each, a
“Triggering Event”): (a) consolidate or merge with or into another
corporation where the holders of outstanding Voting Stock prior to such merger
or consolidation do not own over 50% of the outstanding Voting Stock of the
merged or consolidated entity immediately after such merger or consolidation,
or (b) sell all or substantially all of its properties or assets to any
other Person, or (c) change the Common Stock to the same or different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends or distributions provided for in Section 4(b) or
Section 4(c)), or (d) effect a capital reorganization (other than by
way of a stock split or combination of shares or stock dividends or
distributions provided for in Section 4(b) or Section 4(c)),
then, and in the case of each such Triggering Event, proper provision shall be
made so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant shall be entitled upon the exercise hereof
at any time after the consummation of such Triggering Event, to the extent this
Warrant is not exercised prior to such Triggering Event, to receive at the
Warrant Price in effect at the time immediately prior to the consummation of
such Triggering Event in lieu of the Common Stock issuable upon such exercise
of this Warrant prior to such Triggering Event, the securities, cash and
property to which such Holder would have been entitled upon the consummation of
such Triggering Event if such Holder had exercised the rights represented by
this Warrant immediately prior thereto, subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for elsewhere in this Section 4.

 

(ii)                                  Notwithstanding
anything contained in this Warrant to the contrary, a Triggering Event shall
not be deemed to have occurred if, prior to the consummation thereof, each
Person (other than the Issuer) which may be required to deliver any securities,
cash or property upon the exercise of this Warrant as provided herein shall
assume, by written instrument delivered to, and reasonably satisfactory to, the
Holder of this Warrant, (A) the obligations of the Issuer under this
Warrant (and if the Issuer shall survive the consummation of such Triggering
Event, such assumption shall be in addition to, and shall not release the Issuer
from, any continuing obligations of the Issuer under this Warrant) and (B) the
obligation to deliver to such Holder such shares of securities, cash or
property as, in accordance with the foregoing provisions of this subsection (a),

 

6

 

such Holder shall be
entitled to receive, and such Person shall have similarly delivered to such
Holder a written acknowledgement executed by the President or Chief Financial
Officer of the Company, stating that this Warrant shall thereafter continue in
full force and effect and the terms hereof (including, without limitation, all
of the provisions of this subsection (a)) shall be applicable to the
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.

 

(b)                                 Stock
Dividends, Subdivisions and Combinations. 
If at any time the Issuer shall:

 

(i)                                     make
or issue or set a record date for the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, shares of Common Stock,

 

(ii)                                  subdivide
its outstanding shares of Common Stock into a larger number of shares of Common
Stock, or

 

(iii)                               combine
its outstanding shares of Common Stock into a smaller number of shares of
Common Stock,

 

then (1) the number of shares of Common Stock for which this
Warrant is exercisable immediately after the occurrence of any such event shall
be adjusted to equal the number of shares of Common Stock which a record holder
of the same number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (2) the Warrant
Price then in effect shall be adjusted to equal (A) the Warrant Price then
in effect multiplied by the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such adjustment.

 

Notwithstanding the foregoing, if such record date shall have been
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Warrant Price shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividends or
distributions.

 

(c)                                  Certain
Other Distributions.  If at any time
the Issuer shall make or issue or set a record date for the determination of
the holders of its Common Stock for the purpose of entitling them to receive
any dividend or other distribution of:

 

(i)                                     cash
(other than a cash dividend payable out of earnings or earned surplus legally
available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Issuer),

 

(ii)                                  any
evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock), or

 

(iii)                               any
warrants or other rights to subscribe for or purchase any

 

7

 

evidences of its
indebtedness, any shares of stock of any class or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or
Additional Shares of Common Stock),

 

then (1) the number
of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such adjustment multiplied by
a fraction (A) the numerator of which shall be the Per Share Market Value
of Common Stock at the date of taking such record and (B) the denominator
of which shall be such Per Share Market Value minus the amount allocable to one
share of Common Stock of any such cash so distributable and of the fair value
(as determined in good faith by the Board of Directors of the Issuer and
supported by an opinion from an investment banking firm of recognized national
standing acceptable to (but not affiliated with) the Holder) of any and all
such evidences of indebtedness, shares of stock, other securities or property
or warrants or other subscription or purchase rights so distributable, and (2) the
Warrant Price then in effect shall be adjusted to equal (A) the Warrant
Price then in effect multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment divided
by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. 
A reclassification of the Common Stock (other than a change in par
value, or from par value to no par value or from no par value to par value)
into shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Issuer to the holders of its Common Stock of such
shares of such other class of stock within the meaning of this Section 4(c) and,
if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case may be,
of the outstanding shares of Common Stock within the meaning of Section 4(b).

 

Notwithstanding the foregoing, if such record date shall have been
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Warrant Price shall be adjusted pursuant
to this Section 4(c) as of the time of actual payment of such
dividends or distributions.

 

(d)                                 Issuance
of Additional Shares of Common Stock.

 

(i)                                     In
the event the Issuer shall at any time following the Original Issue Date issue
any Additional Shares of Common Stock (otherwise than as provided in the
foregoing subsections (a) through (c) of this Section 4), at a
price per share less than the Warrant Price then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price determined by multiplying the Warrant Price then in effect by a
fraction:

 

(A)                              the
numerator of which shall be equal to the sum of (x) the number of shares of
Outstanding Common Stock immediately prior to the issuance of such Additional
Shares of Common Stock plus (y) the number of shares of Common Stock
(rounded to the nearest whole share) which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase
at a price per share equal to the Warrant Price then in effect, and

 

8

 

(B)                                the
denominator of which shall be equal to the number of shares of Outstanding
Common Stock immediately after the issuance of such Additional Shares of Common
Stock.

 

(ii)                                  No
adjustment of the number of shares of Common Stock for which this Warrant shall
be exercisable shall be made under paragraph (i) of Section 4(d) upon
the issuance of any Additional Shares of Common Stock which are issued pursuant
to the exercise of any Common Stock Equivalents, if any such adjustment shall
previously have been made upon the issuance of such Common Stock Equivalents
(or upon the issuance of any warrant or other rights therefor) pursuant to Section 4(e).

 

(e)                                  Issuance
of Common Stock Equivalents.  If at
any time the Issuer shall issue or sell any Common Stock Equivalents, whether
or not the rights to exchange or convert thereunder are immediately
exercisable, and the aggregate price per share for which Common Stock is
issuable upon such conversion or exchange plus the consideration received by
the Issuer for issuance of such Common Stock Equivalent divided by the number
of shares of Common Stock issuable pursuant to such Common Stock Equivalent
shall be less than the Warrant Price in effect immediately prior to the time of
such issue or sale, then the number of shares of Common Stock for which this
Warrant is exercisable and the Warrant Price then in effect shall be adjusted
as provided in Section 4(d) on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or
exchange of all such Common Stock Equivalents shall be deemed to have been
issued and outstanding and the Issuer shall have received all of the
consideration payable therefor, if any, as of the date of actual issuance of
such Common Stock Equivalents.  No
further adjustment of the number of shares of Common Stock for which this
Warrant is exercisable and the Warrant Price then in effect shall be made under
this Section 4(e) upon the issuance of any Common Stock Equivalents
which are issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously have been
made upon the issuance of such warrants or other rights pursuant to this Section 4(e).  No further adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Warrant
Price then in effect shall be made upon the actual issue of such Common Stock
upon conversion or exchange of such Common Stock Equivalents.

 

(f)                                    Superseding
Adjustment.  If, at any time after
any adjustment of the number of shares of Common Stock for which this Warrant
is exercisable and the Warrant Price then in effect shall have been made
pursuant to Section 4(e) as the result of any issuance of Common
Stock Equivalents, and (i) such Common Stock Equivalents, or the right of
conversion or exchange in such Common Stock Equivalents, shall expire, and all
or a portion of such or the right of conversion or exchange with respect to all
or a portion of such Common Stock Equivalents, as the case may be, shall not
have been exercised, or (ii) the consideration per share for which shares
of Common Stock are issuable pursuant to such Common Stock Equivalents shall be
increased, then such previous adjustment shall be rescinded and annulled and
the Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation.  Upon the occurrence of an
event set forth in this Section 4(f) above, there shall be a
recomputation made of the effect of such Common Stock Equivalents on the basis
of: (i) treating the number of Additional Shares of Common Stock
theretofore actually issued or issuable pursuant to the previous exercise of

 

9

 

Common Stock Equivalents
or any such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually received and
receivable therefor, and (ii) treating any such Common Stock Equivalents
which then remain outstanding as having been granted or issued immediately
after the time of such increase of the consideration per share for which
Additional Shares of Common Stock are issuable under such Common Stock
Equivalents; whereupon a new adjustment of the number of shares of Common Stock
for which this Warrant is exercisable and the Warrant Price then in effect
shall be made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.

 

(g)                                 Purchase
of Common Stock by the Issuer.  If
the Issuer at any time while this Warrant is outstanding shall, directly or
indirectly through a Subsidiary or otherwise, purchase, redeem or otherwise
acquire any shares of Common Stock at a price per share greater than the Per
Share Market Value, then the Warrant Price upon each such purchase, redemption
or acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number
of shares of Outstanding Common Stock immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of
Outstanding Common Stock immediately after such purchase, redemption or
acquisition.  For the purposes of this
subsection (h), the date as of which the Per Share Market Price shall be
computed shall be the earlier of (x) the date on which the Issuer shall enter
into a firm contract for the purchase, redemption or acquisition of such Common
Stock, or (y) the date of actual purchase, redemption or acquisition of such
Common Stock.  For the purposes of this
subsection (h), a purchase, redemption or acquisition of a Common Stock
Equivalent shall be deemed to be a purchase of the underlying Common Stock, and
the computation herein required shall be made on the basis of the full
exercise, conversion or exchange of such Common Stock Equivalent on the date as
of which such computation is required hereby to be made, whether or not such
Common Stock Equivalent is actually exercisable, convertible or exchangeable on
such date.

 

(h)                                 Other
Provisions applicable to Adjustments under this Section.  The following provisions shall be applicable
to the making of adjustments of the number of shares of Common Stock for which
this Warrant is exercisable and the Warrant Price then in effect provided for
in this Section 4:

 

(i)                                     Computation
of Consideration.  To the extent that
any Additional Shares of Common Stock shall be issued for cash consideration,
the consideration received by the Issuer therefor shall be the amount of the
cash received by the Issuer therefor, or, if such Additional Shares of Common
Stock are offered by the Issuer for subscription, the subscription price, or,
if such Additional Shares of Common Stock are sold to underwriters or dealers
for public offering without a subscription offering, the initial public
offering price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends and without taking into account any
compensation, discounts or expenses paid or incurred by the Issuer for and in
the underwriting of, or otherwise in connection with, the issuance thereof).  In connection with any merger or
consolidation in which the Issuer is the surviving corporation (other than any
consolidation or merger in which the previously outstanding shares of Common
Stock of the Issuer shall be changed to or exchanged for the stock or other
securities of another corporation), the amount of consideration therefore shall
be, deemed to be the fair value, as determined

 

10

 

reasonably and in good
faith by the Board, of such portion of the assets and business of the
nonsurviving corporation as the Board may determine to be attributable to such
Additional Shares of Common Stock.  The
consideration for any Additional Shares of Common Stock issuable pursuant to
any Convertible Securities or warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the Issuer for issuing
such Convertible Securities or warrants or other rights plus the additional
consideration payable to the Issuer upon exercise of such warrants or other
rights.  In the event of any
consolidation or merger of the Issuer in which the Issuer is not the surviving
corporation or in which the previously outstanding shares of Common Stock of
the Issuer shall be changed into or exchanged for the stock or other securities
of another corporation, or in the event of any sale of all or substantially all
of the assets of the Issuer for stock or other securities of any corporation,
the Issuer shall be deemed to have issued a number of shares of its Common
Stock for stock or securities or other property of the other corporation
computed on the basis of the actual exchange ratio on which the transaction was
predicated, and for a consideration equal to the fair market value on the date
of such transaction of all such stock or securities or other property of the
other corporation.  In the event any
consideration received by the Issuer for any securities consists of property
other than cash, the fair market value thereof at the time of issuance or as
otherwise applicable shall be as determined in good faith by the Board.  In the event Common Stock is issued with
other shares or securities or other assets of the Issuer for consideration
which covers both, the consideration computed as provided in this Section 4(h)(i) shall
be allocated among such securities and assets as determined in good faith by
the Board.

 

(ii)                                  When
Adjustments to Be Made.  The
adjustments required by this Section 4 shall be made whenever and as often
as any specified event requiring an adjustment shall occur, except that any
adjustment of the number of shares of Common Stock for which this Warrant is
exercisable that would otherwise be required may be postponed (except in the
case of a subdivision or combination of shares of the Common Stock, as provided
for in Section 4(b)) up to, but not beyond the date of exercise if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than one percent (1%) of the shares of Common Stock for which
this Warrant is exercisable immediately prior to the making of such
adjustment.  Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment,
together with other adjustments required by this Section 4 and not
previously made, would result in a minimum adjustment or on the date of
exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.

 

(iii)                               Fractional
Interests.  In computing adjustments
under this Section 4, fractional interests in Common Stock shall be taken
into account to the nearest one one-hundredth (1/100th) of a share.

 

(iv)                              When
Adjustment Not Required.  If the
Issuer shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or distribution or subscription or
purchase rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.

 

11

 

(i)                                     Form of
Warrant after Adjustments.  The form
of this Warrant need not be changed because of any adjustments in the Warrant
Price or the number and kind of Securities purchasable upon the exercise of
this Warrant.

 

(j)                                     Escrow
of Warrant Stock.  If after any
property becomes distributable pursuant to this Section 4 by reason of the
taking of any record of the holders of Common Stock, but prior to the
occurrence of the event for which such record is taken, and the Holder
exercises this Warrant, any shares of Common Stock issuable upon exercise by
reason of such adjustment shall be deemed the last shares of Common Stock for
which this Warrant is exercised (notwithstanding any other provision to the
contrary herein) and such shares or other property shall be held in escrow for
the Holder by the Issuer to be issued to the Holder upon and to the extent that
the event actually takes place, upon payment of the current Warrant Price.  Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or
is rescinded, then such escrowed shares shall be cancelled by the Issuer and
escrowed property returned.

 

5.                                       Notice
of Adjustments.  Whenever the Warrant
Price or Warrant Share Number shall be adjusted pursuant to Section 4
hereof (for purposes of this Section 5, each an “adjustment”), the Issuer
shall cause its Chief Financial Officer to prepare and execute a certificate
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
(including a description of the basis on which the Board made any determination
hereunder), and the Warrant Price and Warrant Share Number after giving effect
to such adjustment, and shall cause copies of such certificate to be delivered
to the Holder of this Warrant promptly after each adjustment.  Any dispute between the Issuer and the Holder
of this Warrant with respect to the matters set forth in such certificate may
at the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the “big four” selected by the Holder, provided
that the Issuer shall have ten (10) days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right
of objection unless the Issuer identifies a valid conflict of interest for such
firm with any of the parties.  The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute.  Such opinion shall be final and
binding on the parties hereto.  The costs
and expenses of such accounting firm shall be paid equally by the Company and
the Holder.

 

6.                                       Fractional
Shares.  No fractional shares of
Warrant Stock will be issued in connection with any exercise hereof, but in
lieu of such fractional shares, the Issuer shall make a cash payment therefor
equal in amount to the product of the applicable fraction multiplied by the Per
Share Market Value then in effect.

 

7.                                       Ownership
Cap and Certain Exercise Restrictions. 
(a)  Notwithstanding anything to the contrary set forth in this
Warrant, at no time may a Holder of this Warrant exercise this Warrant if the
number of shares of Common Stock to be issued pursuant to such exercise would
exceed, when aggregated with all other shares of Common Stock owned by such
Holder at such time, the number of shares of Common Stock which would result in
such Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules

 

12

 

thereunder) in excess of
4.9% of the then issued and outstanding shares of Common Stock; provided,
however, that upon a holder of this Warrant providing the Issuer with
sixty-one (61) days notice (pursuant to Section 13 hereof) (the “Waiver
Notice”) that such Holder would like to waive this Section 7(a) with
regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this Section 7(a) will be of no force or effect with regard
to all or a portion of the Warrant referenced in the Waiver Notice; provided,
further, that this provision shall be of no further force or effect during the
sixty-one (61) days immediately preceding the expiration of the term of this
Warrant.

 

(b)                                 The
Holder may not exercise the Warrant hereunder to the extent such exercise would
result in the Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.9% of the then issued
and outstanding shares of Common Stock, including shares issuable upon exercise
of the Warrant held by the Holder after application of this Section; provided,
however, that upon a holder of this Warrant providing the Company with a
Waiver Notice that such holder would like to waive this Section 7(b) with
regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this Section 7(b) shall be of no force or effect with regard
to those shares of Warrant Stock referenced in the Waiver Notice; provided,
further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Warrant.

 

8.                                       Registration
Rights.  If the Issuer shall determine to proceed with the preparation and
filing of a registration statement under the Securities Act in connection with
the proposed offer and sale of any of its securities by it or any of its
security holders (other than a registration statement on Form S-4, S-8 or
other limited purpose form), then the Issuer will give written notice of its
determination to the Holder.  Upon the
written request from the Holder, the Issuer will cause all shares of Common
Stock issuable upon the exercise of this Warrant to be included in such registration
statement, all to the extent requisite to permit the resale by the Holder of
such shares of Common Stock issuable upon the exercise of this Warrant.

 

9.                                       Definitions.  For the purposes of this Warrant, the
following terms have the following meanings:

 

“Additional
Shares of Common Stock” means all shares of Common Stock issued by the
Issuer after the Original Issue Date, and all shares of Other Common, if any,
issued by the Issuer after the Original Issue Date, except: (i) securities
issued (other than for cash) in connection with a merger, acquisition, or
consolidation, (ii) securities issued pursuant to a bona fide firm
underwritten public offering of the Issuer’s securities, (iii) securities
issued pursuant to the conversion or exercise of convertible or excercisable
securities issued or outstanding on or prior to the date hereof or issued
pursuant to the Purchase Agreement, (iv) the Warrant Stock, (v) securities
issued in connection with strategic alliances or other partnering arrangements
so long as such issuances are not for the purpose of raising capital, (vi) Common
Stock issued or options to purchase Common Stock granted or issued pursuant to
the Issuer’s stock option plans and employee stock purchase plans as they now
exist, (vii) any warrants issued to the placement agent and its designees
for the transactions contemplated by the Purchase Agreement, (viii) the
payment of any principal and accrued interest in shares of Common Stock
pursuant to the convertible promissory notes issued pursuant to the Purchase
Agreement, and (ix) the

 

13

 

issuance of up to
6,000,000 shares of Common Stock to the Issuer’s officers, directors and
employees so long as such shares of Common Stock are not offered, sold,
assigned, transferred or pledged, directly or indirectly, for a period of one (1) year
following the effective date of the registration statement providing for the
resale of the shares of Common Stock issuable upon exercise of this Warrant and
the convertible promissory notes issued pursuant to the Purchase Agreement.

 

“Articles of
Incorporation” means the Articles of Incorporation of the Issuer as in
effect on the Original Issue Date, and as hereafter from time to time amended,
modified, supplemented or restated in accordance with the terms hereof and
thereof and pursuant to applicable law.

 

“Board”
shall mean the Board of Directors of the Issuer.

 

“Capital Stock”
means and includes (i) any and all shares, interests, participations or
other equivalents of or interests in (however designated) corporate stock,
including, without limitation, shares of preferred or preference stock, (ii) all
partnership interests (whether general or limited) in any Person which is a
partnership, (iii) all membership interests or limited liability company
interests in any limited liability company, and (iv) all equity or
ownership interests in any Person of any other type.

 

“Common Stock”
means the Common Stock, par value $.001 per share, of the Issuer and any other
Capital Stock into which such stock may hereafter be changed.

 

“Common Stock
Equivalent” means any Convertible Security or warrant, option or other
right to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Security.

 

“Convertible
Securities” means evidences of Indebtedness, shares of Capital Stock or
other Securities which are or may be at any time convertible into or
exchangeable for Additional Shares of Common Stock.  The term “Convertible Security” means one of
the Convertible Securities.

 

“Governmental
Authority” means any governmental, regulatory or self-regulatory entity,
department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

 

“Holders”
mean the Persons who shall from time to time own any Warrant.  The term “Holder” means one of the Holders.

 

“Independent
Appraiser” means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the
Holder of any Warrant.

 

14

 

“Issuer”
means Apollo Resources International, Inc., a Utah corporation, and its
successors and assigns.

 

“Majority
Holders” means at any time the Holders of Warrants exercisable for a
majority of the shares of Warrant Stock issuable under the Warrants at the time
outstanding.

 

“Original Issue
Date” means                           ,
2005.

 

“OTC Bulletin Board”
means the over-the-counter electronic bulletin board.

 

“Other Common”
means any other Capital Stock of the Issuer of any class which shall be
authorized at any time after the date of this Warrant (other than Common Stock)
and which shall have the right to participate in the distribution of earnings
and assets of the Issuer without limitation as to amount.

 

“Outstanding
Common Stock” means, at any given time, the aggregate amount of outstanding
shares of Common Stock, assuming full exercise, conversion or exchange (as
applicable) of all options, warrants and other Securities which are convertible
into or exercisable or exchangeable for, and any right to subscribe for, shares
of Common Stock that are outstanding at such time.

 

“Person”
means an individual, corporation, limited liability company, partnership, joint
stock company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.

 

“Per Share
Market Value” means on any particular date (a) the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (b) if the Common Stock is not then
reported by the OTC Bulletin Board or the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the “Pink Sheet” quotes for the relevant
determination period, or (c) if the Common Stock is not then publicly
traded the fair market value of a share of Common Stock as determined by the
Board in good faith; provided, however, that the Majority
Holders, after receipt of the determination by the Board, shall have the right
to select, jointly with the Issuer, an Independent Appraiser, in which case,
the fair market value shall be the determination by such Independent Appraiser;
and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period. 
The determination of fair market value shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties.  In determining the fair market value of any shares
of Common Stock, no consideration shall be given to any restrictions on
transfer of the Common Stock imposed by agreement or by federal or state
securities laws, or to the existence or absence of, or any limitations on,
voting rights.

 

15

 

“Purchase
Agreement” means the Note and Warrant Purchase Agreement dated as of June    ,
2005, among the Issuer and the Purchasers.

 

“Purchasers”
means the purchasers of the convertible promissory notes and
the Warrants issued by the Issuer pursuant to the Purchase Agreement.

 

“Securities”
means any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any
Security.  “Security” means one of the
Securities.

 

“Securities Act”
means the Securities Act of 1933, as amended, or any similar federal statute
then in effect.

 

“Subsidiary”
means any corporation at least 50% of whose outstanding Voting Stock shall at
the time be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries, or by the Issuer and one or more of its Subsidiaries.

 

“Term” has
the meaning specified in Section 1 hereof.

 

“Trading Day”
means (a) a day on which the Common Stock is traded on the OTC Bulletin
Board, or (b) if the Common Stock is not traded on the OTC Bulletin Board,
a day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted
as set forth in (a) or (b) hereof, then Trading Day shall mean any
day except Saturday, Sunday and any day which shall be a legal holiday or a day
on which banking institutions in the State of New York are authorized or
required by law or other government action to close.

 

“Voting Stock”
means, as applied to the Capital Stock of any corporation, Capital Stock of any
class or classes (however designated) having ordinary voting power for the
election of a majority of the members of the Board of Directors (or other
governing body) of such corporation, other than Capital Stock having such power
only by reason of the happening of a contingency.

 

“Warrants”
means the Warrants issued and sold pursuant to this Warrant, and any other
warrants of like tenor issued in substitution or exchange for any thereof
pursuant to the provisions of Section 2(c), 2(d) or 2(e) hereof
or of any of such other Warrants.

 

“Warrant Price”
initially means U.S. $       [note:
Apollo will issue two warrants, to accommodate the different exercise prices
tied to the investor notes and the investor warrants], as such Warrant
Price may be adjusted from time to time as shall result from the adjustments
specified in this Warrant, including Section 4 hereto.

 

“Warrant Share
Number” means at any time the aggregate number of shares of Warrant Stock
which may at such time be purchased upon exercise of this Warrant, after

 

16

 

giving effect to all
prior adjustments and increases to such number made or required to be made
under the terms hereof.

 

“Warrant Stock”
means Common Stock issuable upon exercise of any Warrant or Warrants or
otherwise issuable pursuant to any Warrant or Warrants.

 

10.                                 Other
Notices.  In case at any time:

 

	
  (A)

  	
  the Issuer shall make
  any distributions to the holders of Common Stock; or

  
	
   

  	
   

  
	
  (B)

  	
  the Issuer shall
  authorize the granting to all holders of its Common Stock of rights to
  subscribe for or purchase any shares of Capital Stock of any class or other
  rights; or

  
	
   

  	
   

  
	
  (C)

  	
  there shall be any
  reclassification of the Capital Stock of the Issuer; or

  
	
   

  	
   

  
	
  (D)

  	
  there shall be any
  capital reorganization by the Issuer; or

  
	
   

  	
   

  
	
  (E)

  	
  there shall be any (i) consolidation
  or merger involving the Issuer or (ii) sale, transfer or other
  disposition of all or substantially all of the Issuer’s property, assets or
  business (except a merger or other reorganization in which the Issuer shall
  be the surviving corporation and its shares of Capital Stock shall continue
  to be outstanding and unchanged and except a consolidation, merger, sale,
  transfer or other disposition involving a wholly-owned Subsidiary); or

  
	
   

  	
   

  
	
  (F)

  	
  there shall be a
  voluntary or involuntary dissolution, liquidation or winding-up of the Issuer
  or any partial liquidation of the Issuer or distribution to holders of Common
  Stock;

  

 

then, in each of such
cases, the Issuer shall give written notice to the Holder of the date on which (i) the
books of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place.  Such notice also shall specify the date as of
which the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
certificates for Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be.  Such notice shall be given at least twenty
(20) days prior to the record date or effective date for the event specified in
such notice.

 

11.                                 Amendment
and Waiver.  Any term, covenant,
agreement or condition in this Warrant may be amended, or compliance therewith
may be waived (either generally or in a particular instance and either
retroactively or prospectively), by a written instrument or written

 

17

 

instruments executed by
the Issuer and the Majority Holders; provided, however, that no
such amendment or waiver shall reduce the Warrant Share Number, increase the
Warrant Price, shorten the period during which this Warrant may be exercised or
modify any provision of this Section 11 without the consent of the Holder
of this Warrant.

 

12.                                 Governing
Law.  THIS WARRANT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.

 

13.                                 Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earlier of (i) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m.,
eastern time, on a Trading Day, (ii) the Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m.,
eastern time, on any date and earlier than 11:59 p.m., eastern time, on
such date, or (iii) actual receipt by the party to whom such notice is
required to be given.  The addresses for
such communications shall be with respect to the Holder of this Warrant or of
Warrant Stock issued pursuant hereto, addressed to such Holder at its last
known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:

 

Apollo Resources
International, Inc.

3001 Knox Street, Suite 403

Dallas, Texas  75205

Attention: Chief
Executive Officer

Tel. No.: (214) 389-9800

Fax No.:  (214) 389-9806

 

Copies of notices to the
Issuer shall be sent to Scheef & Stone, LLP, 5956 Sherry Lane, Suite 1400,
Dallas, Texas  75225, Attention: Roger A.
Crabb, Tel. No.: (214) 706-4224, Fax No.: (214) 706-4242.  Copies of notices to the Holder shall be sent
to Sarah R. Speno, Pres. & Attorney 1st SB Partners Ltd.,
1775 York Avenue 24th floor, NY, NY 10128. 
Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to
the other party hereto.

 

14.                                 Warrant
Agent.  The Issuer may, by written
notice to each Holder of this Warrant, appoint an agent for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to subsection (b) of
Section 2 hereof, exchanging this Warrant pursuant to subsection (d) of
Section 2 hereof or replacing this Warrant pursuant to subsection (d) of
Section 3 hereof, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.

 

15.                                 Remedies.  The Issuer stipulates that the remedies at
law of the Holder of this Warrant in the event of any default or threatened
default by the Issuer in the performance of or compliance with any of the terms
of this Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the

 

18

 

specific performance of
any agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise.

 

16.                                 Successors
and Assigns.  This Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Issuer, the Holder hereof and (to the extent
provided herein) the Holders of Warrant Stock issued pursuant hereto, and shall
be enforceable by any such Holder or Holder of Warrant Stock.

 

17.                                 Modification
and Severability.  If, in any action
before any court or agency legally empowered to enforce any provision contained
herein, any provision hereof is found to be unenforceable, then such provision
shall be deemed modified to the extent necessary to make it enforceable by such
court or agency.  If any such provision
is not enforceable as set forth in the preceding sentence, the unenforceability
of such provision shall not affect the other provisions of this Warrant, but
this Warrant shall be construed as if such unenforceable provision had never
been contained herein.

 

18.                                 Headings.  The headings of the Sections of this Warrant
are for convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.

 

 

IN WITNESS WHEREOF, the
Issuer has executed this Warrant as of the day and year first above written.

 

 

	
   

  	
  ISSUER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

19

 

 

EXERCISE FORM

 

[ISSUER]

 

The undersigned
                           ,
pursuant to the provisions of the within Warrant, hereby elects to purchase
            shares
of Common Stock of
                                              covered
by the within Warrant.

 

	
  Dated:

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

Number of shares of Common Stock beneficially owned or deemed
beneficially owned by the Holder on the date of Exercise:

 

ASSIGNMENT

 

FOR VALUE RECEIVED,
                                       hereby
sells, assigns and transfers unto
                                      the
within Warrant and all rights evidenced thereby and does irrevocably constitute
and appoint
                           ,
attorney, to transfer the said Warrant on the books of the within named
corporation.

 

	
  Dated:

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

PARTIAL ASSIGNMENT

 

FOR VALUE RECEIVED,
                         hereby
sells, assigns and transfers unto                              the
right to purchase
                                shares
of Warrant Stock evidenced by the within Warrant together with all rights
therein, and does irrevocably constitute and appoint
                                   ,
attorney, to transfer that part of the said Warrant on the books of the within
named corporation.

 

	
  Dated:

  	
   

  	
   

  	
  Signature

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

FOR USE BY THE
ISSUER ONLY:

This Warrant No. W-     
canceled (or transferred or exchanged) this
       day of
                     ,
        , shares of Common Stock issued
therefor in the name of
                    ,
Warrant No. W-         issued
for       shares of Common Stock in the name of
                         .

 

20

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