Document:

Exhibit 4.1

 

 

WARRANT
AGREEMENT

 

THIS WARRANT
AGREEMENT (this “Agreement”) is made and entered into as of 
           ,
between BETA
OIL & GAS, INC., a Nevada corporation (the “Company”) and 
              ,
an individual (“Holder”).

 

R  E  C  I  T  A  L  S

 

WHEREAS, the
Company proposes to issue to Holder
          warrants (the
“Warrants”), each such Warrant entitling the holder thereof to purchase one
share of Common Stock, $0.001 par value, of the Company (the “Shares” or the
“Common Stock”); and

 

WHEREAS, the
Warrants which are the subject of this Agreement will be issued by the Company
to Holder as part of consideration payable to Holder in connection with
services rendered by the Holder to the Company as Chief Financial Officer of
the Company.

 

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereto agree as follows:

 

A  G  R  E  E  M  E  N
T

 

1.             Warrant Certificates.  The warrant certificates to be delivered
pursuant to this Agreement (the “Warrant Certificates”) shall be in the form
set forth in Exhibit A, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Warrant Agreement.

 

2.             Vesting.  The warrants shall vest as follows: (a)
       warrants shall be immediately vested upon
the execution of this Agreement; (b)        
warrants shall vest upon the date which is Holder’s one year anniversary of
employment with the Company; (c)
         warrants shall vest upon
the date which is Holder’s two year anniversary of employment with the Company;
and (d)        warrants shall vest upon the date
which is Holder’s three year anniversary of employment with the Company.  If Holder shall cease his employment with
the Company, for any reason, Holder shall be entitled only to those warrants
which vested as of the date of termination of employment.  All nonvested warrants shall be forfeited.

 

3.             Right to Exercise Warrants.  Subject to the provisions of paragraph 2
above, each Warrant may be exercised from the date of this Agreement until
11:59 P.M. (Los Angeles time) on the date that is five years after the date of
this Agreement (the “Expiration Date”). 
Each Warrant not exercised on or before the Expiration Date shall expire.

 

Each Warrant shall
entitle its holder to purchase from the Company one share of Common Stock at an
exercise price of $      per share, subject to
adjustment as set forth below (“Exercise Price”).

 

 

The Company shall
not be required to issue fractional shares of capital stock upon the exercise
of this Warrant or to deliver Warrant Certificates which evidence fractional
shares of capital stock.  In the event
that a fraction of an Exercisable Share would, except for the provisions of
this paragraph 2, be issuable upon the exercise of this Warrant, the Company
shall pay to the Holder exercising the Warrant an amount in cash equal to such
fraction multiplied by the current market value of the Exercise Share.  For purposes of this paragraph 2, the
current market value shall be determined as follows:

 

(a)           if the Exercise
Shares are traded in the over-the-counter market and not on any national
securities exchange and not in the NASDAQ Reporting System, the average of the
mean between the last bid and asked prices per share, as reported by the
National Quotation Bureau, Inc., or an equivalent generally accepted reporting
service, for the last business day prior to the date on which this Warrant is
exercised, or, if not so reported, the average of the closing bid and asked
prices for an Exercise Share as furnished to the Company by any member of the
National Association of Securities Dealers, Inc., selected by the Company for
that purpose.

 

(b)           if the Exercise
Shares are listed or traded on a national securities exchange or in the NASDAQ
Reporting System, the closing price on the principal national securities
exchange on which they are so listed or traded or in the NASDAQ Reporting
System, as the case may be, on the last business day prior to the date of the
exercise of this Warrant.  The closing
price referred to in this Clause (b) shall be the last reported sales price or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices, in either case on the national
securities exchange on which the Exercise Shares are then listed on in the
NASDAQ Reporting System; or

 

(c)           if
no such closing price or closing bid and asked prices are available, as
determined in any reasonable manner as may be prescribed by the Board of
Directors of the Company.

 

4.             Mutilated or
Missing Warrant Certificates.  In
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed prior to its expiration date, the Company shall issue and deliver, in
exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and in substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent right or interest.

 

5.             Reservation of
Shares.  The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Shares or its authorized and issued
Shares held in its treasury for the purpose of enabling it to satisfy its
obligation to issue Shares upon exercise of Warrants, the full number of Shares
deliverable upon the exercise of all outstanding Warrants.

 

The Company covenants that all Shares which may be issued upon exercise
of Warrants will be validly issued, fully paid and nonassessable outstanding
Shares of the Company.

 

6.             Rights of
Holder.   The Holder shall not, by
virtue of anything contained in this Warrant Agreement or otherwise, prior to
exercise of this Warrant, be entitled to any right whatsoever, either in law or
equity, of a stockholder of the Company, including without limitation, the
right to receive 

 

 

dividends or to vote or to consent or to receive notice as a
shareholder in respect of the meetings of shareholders or the election of
directors of the Company of any other matter.

 

7.             Investment
Intent.  Holder represents and
warrants to the Company that Holder is acquiring the Warrants for investment
and with no present intention of distributing or reselling any of the Warrants.

 

8.             Certificates to
Bear Language.  The Warrants  and the certificate or certificates
therefore shall bear the following legend by which each holder shall be bound:

 

“THE
WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK (OR
OTHER SECURITIES) ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.”

 

The Shares and the certificate or certificates evidencing any such
Shares shall bear the following legend:

 

“THE
SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. 
THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.”

 

Certificates for Warrants without such legend shall be issued if such
warrants or shares are sold pursuant to an effective registration statement
under the Securities Act of 1933 (the “Act”) or if the Company has received an
opinion from counsel reasonably satisfactory to counsel for the Company, that
such legend is no longer required under the Act.

 

9.             Registration
Rights.  The Company is obligated to
register the shares of Common Stock underlying the Warrants in any subsequent
registration statement filed by the Company with the Securities and Exchange
Commission, so that holders of such Common Stock shall be entitled to sell the
same simultaneously with and upon the terms and conditions as the securities
sold for the account of the Company are being sold pursuant to any such
registration statement, subject to such lock-up provisions as may be proposed
by the underwriter of said registration statement and agreed to by the
investors (the “Piggyback Registration Right”).  In such registration, the Company shall pay all its expenses and
filing fees and shall make a reasonable number of copies of the registration
statement and any prospectus 

 

 

available to holders.  The
Company will not pay any selling commissions or similar expenses incurred by
Seller or of any counsel or other representative of a seller.

 

10.           Adjustment of
Number of Shares and Class of Capital Stock Purchasable.  The Number of Shares and Class of Capital
Stock purchasable under this Warrant Agreement are subject to adjustment from
time to time as set forth in this Section.

 

(a)           Adjustment for
Change in Capital Stock.  If the
Company:

 

(i)            pays a dividend or
makes a distribution on its Common Stock, in each case, in shares of its Common
Stock;

 

(ii)           subdivides its
outstanding shares of Common Stock into a greater number of shares;

 

(iii)          combines its
outstanding shares of Common Stock into a smaller number of shares;

 

(iv)          makes a distribution
on its Common Stock in shares of its capital stock other than Common Stock; or

 

(v)           issues by
reclassification of its shares of Common Stock any shares of its capital stock;

 

then the number
and classes of shares purchasable upon exercise of each Warrant in effect
immediately prior to such action shall be adjusted so that the holder of any
Warrant thereafter exercised may receive the number and classes of shares of
capital stock of the Company which such holder would have owned immediately
following such action if such holder had exercised the Warrant immediately
prior to such action.

 

For a dividend or distribution the adjustment shall become effective
immediately after the record date for the dividend or distribution.  For a subdivision, combination or
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.

 

If after an adjustment the holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Board of Directors of the Company shall in good faith determine the allocation
of the adjusted Exercise Price between or among the classes of capital
stock.  After such allocation, that
portion of the Exercise Price applicable to each share of each such class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Agreement.  Notwithstanding the allocation of the Exercise Price between or
among shares of capital stock as provided by this Section 9, a Warrant may only
be exercised in full by payment of the entire Exercise Price currently in
effect.

 

 

(b)           Consolidation,
Merger or Sale of the Company.  If
the Company is a party to a consolidation, merger or transfer of assets which
reclassifies or changes its outstanding Common Stock, the successor corporation
(or corporation controlling the successor corporation or the Company, as the
case may be) shall by operation of law assume the Company’s obligations under
this Warrant Agreement.  Upon
consummation of such transaction the Warrants shall auto­matically become
exercisable for the kind and amount of securities, cash or other assets which
the holder of a Warrant would have owned immediately after the consolidation,
merger or transfer if the holder had exercised the Warrant immediately before
the effective date of such transaction. 
As a condition to the consummation of such transaction, the Company
shall arrange for the person or entity obligated to issue securities or deliver
cash or other assets upon exercise of the Warrant to, concurrently with the
consummation of such transaction, assume the Company’s obligations hereunder by
executing an instrument so providing and further providing for adjustments
which shall be as nearly equivalent as may be practical to the adjustments
provided for in this Section 9.

 

11.           Successors.  All the covenants and provisions of this Agreement
by or for the benefit of the Company or Holder shall bind and inure to the
benefit of their respective successor and assigns hereunder.

 

12.           Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all proposes be deemed
to be an original, and such counterparts shall together constitute by one and
the same instrument.

 

13.           Notices.   All notices or other communications under
this Warrant shall be in writing and shall be deemed to have been given if
delivered by hand or mailed by certified mail, postage prepaid, return receipt
requested, addressed as follows:  if to
the Company: Beta Oil & Gas, Inc., 901 Dove Street, Suite  Suite 230, Newport Beach, California, 92660,
Attention: Chief Executive Officer, and to the Holder: at the address of the
Holder appearing on the books of the Company or the Company’s transfer agent,
if any.

 

Either the Company or the Holder may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Paragraph 12.

 

14.           Supplements and
Amendments.   The Company may from
time to time supplement or amend this Warrant Agreement without the approval of
any Holders of Warrants in order to cure any ambiguity or to be correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provision, or to make any other provisions in
regard to matters or questions herein arising hereunder which the Company may
deem necessary or desirable and which shall not materially adversely affect the
interest of the Holder.

 

15.           Severability.   If for any reason any provision, paragraph
or term of this Warrant Agreement is held to be invalid or unenforceable, all
other valid provisions herein shall remain in full force and effect and all
terms, provisions and paragraphs of this Warrant shall be deemed to be
severable.

 

 

16.           Governing Law and
Venue.   This Warrant shall be
deemed to be a contract made under the laws of the State of California and for
all purposes shall be governed and construed in accordance with the laws of
said State.  Any proceeding arising
under this Warrant Agreement shall be instituted in Orange County, State of
California.

 

                17.           Headings.   Paragraphs and subparagraph headings, used
herein are included herein for convenience of reference only and shall not
affect the construction of this Warrant Agreement nor constitute a part of this
Warrant Agreement for any other purpose.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the date and year first above written.

 

	
   “COMPANY”

  	
   

  	
  “HOLDER”

  
	
   

  	
   

  	
   

  
	
  BETA OIL & GAS,
  INC.

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
  By:

  
	
  ITS: President

  	
   

  	
   

  
				

 

 

EXHIBIT
A

 

	
  NUMBER    

  	
   

  	
  WARRANT

  
	
   

  	
   

  	
  Warrant to Purchase

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shares

  
	
   

  	
  BETA OIL & GAS, INC.

  	
  see reverse for

  
	
   

  	
  COMMON STOCK
  PURCHASE WARRANT

  	
  certain
  definitions

  
	
  will be void if
  not exercised prior to 11:59 P.M. Pacific Time on
            , 200

  

 

This Certifies that for value
received,

 

the registered holder or assigns
(“Holder”),

 

is entitled to
purchase from Beta Oil & Gas, Inc., a Nevada corporation (the “Company”) at
any time after 9:00 A.M. Eastern Time on
              at the purchase price per share of
$         (the “Warrant Price”), the
number of shares of Common Stock of the Company set forth above (the
“Shares”).  The number of shares
purchasable upon exercise of each warrant evidenced hereby and the Warrant
Price per Share shall be subject to adjustment from time to time as set forth
in the Warrant Agreement referred to below. 
The Warrants expire on
            .  Holders will not have any rights or
privileges of shareholders of the Company prior to exercise of the
Warrants.  Holders of the Warrants
evidenced hereby and the shares of Common Stock issuable upon exercise hereof
have certain rights with respect to registration with the Securities and
Exchange Commission of the Warrants and Common Stock issuable upon exercise
hereof.  These registration rights are
set forth in that certain Warrant Agreement of even date herewith pursuant to
which this Warrant Certificate has been issued. Further, the Warrant Agreement
includes certain vesting provisions which may affect the Holder’s right to
exercise the Warrants.  The Warrant
evidenced hereby may be exercised in whole or in part by presentation of this
Warrant certificate with the Purchase Form on the reverse side hereof fully
executed (with a signature guarantee as provided on the reverse side hereof)
and simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company. 
Payment of such price shall be made at the option of the holder in cash
or by certified check or bank draft. The Warrants evidenced hereby are part of
a duly authorized issue of Common Stock Purchase Warrants with rights to
purchase an aggregate of up to        
shares of Common Stock of the Company. 
Upon any partial exercise  of the
Warrant evidenced hereby, there shall be countersigned and issued to the Holder
a new Warrant Certificate in respect of the Shares as to which the Warrants
evidenced hereby shall not have been exercised.  This Warrant Certificate may be exchanged at the office of the
Company by surrender of this Warrant Certificate properly endorsed with a
signature guarantee either separately or in combination with one or more other
Warrants for one or more new Warrants to purchase the same aggregate number of
Shares as evidenced by the Warrant or Warrants exchanged.  No fractional Shares will be issued upon the
exercise of rights to purchase hereunder, but the Company shall pay the cash
value of any fraction upon the exercise of one or more Warrants.  The Holder hereof may be treated by the
Company and all other persons dealing with this Warrant Certificate as the
absolute owner hereof for all purposes and as the person entitled to exercise
the rights represented hereby, any notice to the contrary notwithstanding, and
until such transfer is on such books, the Company may treat the Holder as the
owner for all purposes.

	
  Dated:
            , 1998

  	
   

  	
  BETA OIL & GAS, INC.

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  

SEE
LEGEND ON REVERSE

 

 

THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF CERTAIN STATES, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
ANY APPLICABLE STATE LAWS, (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE
ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE
REASONABLY SATISFACTORY TO COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND APPLICABLE STATE LAW IS AVAILABLE.

 

 

ELECTION
TO PURCHASE

 

The undersigned hereby elects irrevocably to exercise the within
Warrant and to purchase
                        
shares of Common Stock of Beta Oil & Gas, Inc. and hereby makes payment
of 
$          (at the rate of
$         per share) in payment of the
Exercise Price pursuant hereto.  Please
issue the shares as to which this Warrant is exercised in accordance with the
instructions given below.

 

The undersigned represents and warrants that the exercise of the within
Warrant was solicited by the member firm of the National Association of
Securities Dealers, Inc. (“NASD”) listed below.  If not solicited by an NASD member, please write “unsolicited” in
the space below.

 

	
   

  
	
  (Insert Name of
  NASD Member or “Unsolicited”)

  

 

 

Dated:
                ,
19      

 

	
  Signature:

  	
   

  

 

 

 

 

INSTRUCTIONS
FOR REGISTRATION OF SHARES

 

	
  Name (print) 

  	
   

  
	
   

  	
   

  
	
  Address (print) 

  	
   

  
				

 

 

 

ASSIGNMENT

 

FOR VALUE RECEIVED,
                                                     
does hereby sell, assign and transfer unto 
                                                                                      ,
the right to purchase
                 shares
of Common Stock of Beta Oil & Gas, Inc., evidenced by the within Warrant,
and does hereby irrevocably constitute and appoint
                                                              
attorney to transfer such right on the books of Beta Oil & Gas, Inc., with
full power of substitution on the premises.

 

Dated:
                  ,
19        

 

	
  Signature:

  	
   

  

 

 

Notice: 
The signature of Election to Purchase or Assignment must correspond with
the name as written upon the face of the within Warrant in every particular
without alteration or enlargement or any change whatsoever.  The signature(s) must by guaranteed by an
eligible guarantor institution (Banks, Stockbrokers, Savings and Loan
Associations and Credit Unions with membership in an approved signature
guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15.

	
   

  
	
  Signature
  GuaranteeExhibit
4.2

 

SELECTED
DEALER WARRANT AGREEMENT

 

THIS
SELECTED DEALER WARRANT AGREEMENT (the “Agreement”), dated as of July 30, 1999
is made and entered into by and between BETA OIL & GAS, INC., a Nevada
corporation (the “Company”), and BROOKSTREET SECURITIES (“Warrantholder”).

 

Concurrently
herewith, the Company is consummating the sale, in a public offering (the
“Offering”) of up to 1,650,000 of shares (the “Public Offering Shares”) of the
Company’s Common Stock, par value $.001 per share (the “Common Stock or the
“Shares”).  The Offering has been
registered under the Securities Act of 1933, as amended (the “Act”) and has
been underwritten by Brookstreet Securities Corporation pursuant to an
Underwriting Agreement dated as of July 1, 1999 (the “Underwriting Agreement”)
between the Company and Brookstreet Securities Corporation.  The Underwriting Agreement provides that, on
consummation of the sale of any of Public Offering Shares, the Company shall
sell and issue to broker / dealers participating in the offering, including the
Underwriter (“Selected Dealers”) warrants (the “Warrants”) entitling the
Selected Dealers to purchase, on the terms and conditions hereinafter set
forth, a number of shares of Company Common Stock (hereinafter referred to as
the “Warrant Shares”) equal to ten percent (10%) of the number of Public
Offering Shares sold in the Offering.

 

In
consideration of the foregoing and in satisfaction of the Company’s obligations
contained in the Underwriting Agreement and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
with respect thereto, the Company and the Warrantholder, for value received,
hereby agree as follows:

 

Section 1.                                          Sale and Issuance of Warrants; Transferability and Form of Warrants.

 

1.1                                 Sale and Issuance of the Warrants.  The
Company agrees that it shall issue and sell, and the Warrantholder agrees to
purchase, on this date, a number of Warrants equal to ten percent (10%) of the
number of Shares sold by the Warrantholder in the Offering, for a purchase
price of $.001 per warrant.  Each
Warrant will entitle the Warrantholder to purchase one share of the Company’s
Common Stock (as hereinafter further defined in Subsection 8.1(h)    
hereof), at the Warrant Price (as defined in Section 7 hereof).  Accordingly, the number of Warrants to be
sold and issued on the date hereof by the Company to the Warrantholder, and the
number of Warrant Shares that may be purchased hereafter on exercise thereof
(before giving effect to any adjustments required by Section 8 hereof), shall
be 39,586. The Warrants being sold and issued on the date hereof shall be
evidenced by a Warrant Certificate substantially in the form of Exhibit A
hereto (the “Warrant Certificate”).  If
additional Shares of Common Stock are sold hereafter in the Offering, the
Company shall sell and issue to the Selected Dealers, on the terms and
conditions set forth herein, a number of additional Warrants equal to ten
percent (10%) of such additional Shares that are sold by the Selected Dealers
(the “Additional Warrants”).  The
Additional Warrants, if any, shall be sold and issued on the Interim Closing
Date(s) and Final (as defined in the Underwriting Agreement and shall be
evidenced by a separate Warrant Certificate substantially in the form of Exhibit
A hereto.

 

1.2                                 Registration.  The Warrants shall be numbered
and shall be registered on the books of the Company when issued.

 

1.3                                 Transfer.  The Warrants shall be transferable in whole or in
part only on the books of the Company maintained at its principal office in
Newport Beach, California, or wherever its principal office may then be
located, upon delivery thereof duly endorsed by the Warrantholder or by
its  duly authorized attorney or representative,
accompanied by proper evidence of succession, assignment or authority to
transfer.  Upon any registration of
transfer, the Company shall execute and deliver new Warrants to the person or
persons entitled thereto.

 

1.4                                 Limitations on Transfer of the Warrants.  Subject
to the provisions of Section 11, the Warrants shall not be sold, transferred,
assigned or hypothecated by the Warrantholder, until July 30, 2000, except that
the Warrants may be transferred, in whole or in part, to (i) one or more
persons, each of whom on the date of transfer is an officer or partner of the
transferring Warrantholder; (ii) any other underwriting firm or member of the
selling group which participated in the Public Offering (or the officers or
partners of any such firm); (iii) a successor to the transferring Warrantholder
in merger or consolidation; (iv) a purchaser of all or substantially all of the
transferring Warrantholder’s

 

1

 

assets;
or (v) any person receiving the Warrants from one or more of the persons listed
in this subsection 1.4 at such person’s or persons’ death pursuant to a will or
trust or the laws of intestate succession. 
The Warrants may be divided or combined, upon request to the Company by
the Warrantholder, into a certificate or certificates representing the right to
purchase the same aggregate number of Warrant Shares.  Unless the context indicates otherwise, the term “Warrantholder”
shall include any transferee or transferees of the Warrants pursuant to this
subsection 1.3, and the term “Warrants” shall include any and all warrants
outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange, substitution or
transfer pursuant to this Agreement.

 

1.5                                 Form of Warrants. 
The text of the Warrants
and of the form of election to purchase Warrant Shares shall be substantially
as set forth in Exhibit A attached hereto. 
The number of Warrant Shares issuable upon exercise of the Warrants is
subject to adjustment upon the occurrence of certain events, all as hereinafter
provided.  The Warrants shall be
executed on behalf of the Company by its President or by a Vice President.  A Warrant bearing the signature of an
individual who was at the time of signature the proper officer of the Company
shall bind the Company, notwithstanding that such individual shall have ceased
to hold such office prior to the delivery of such Warrant or did not hold such
office on the date of this Agreement. 
The Warrants shall be dated as of the date of  the initial escrow closing as defined in the Underwriting
Agreement and Final Prospectus..

 

Section 2.                                          Exchange of Warrant Certificate.  Any Warrant certificate may be exchanged for
another certificate or certificates entitling the Warrantholder to purchase a
like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitled such Warrantholder to purchase.  Any Warrantholder desiring to exchange a
Warrant certificate shall make such request in writing delivered to the
Company, and shall surrender, properly endorsed, with signatures guaranteed,
the certificate evidencing the Warrant to be so exchanged.  Thereupon, the Company shall execute and
deliver to the person or persons entitled thereto a new Warrant certificate as
so requested.

 

Section 3.                                          Term of Warrants; Exercise of Warrants.

 

(a)                                  Subject to the terms of this Agreement, each
Warrantholder shall have the right, at any time during the period commencing at
9:00 a.m., Pacific Time, on July 30, 2000 and ending at 5:00 p.m., Pacific
Time, on July 30,  2004 (the “Termination Date”), to purchase from the
Company up to the number of fully paid and nonassessable Shares to which the
Warrantholder may at the time be entitled to purchase pursuant to this
Agreement, upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrants to be exercised, together with the purchase
form on the reverse thereof duly filled in and signed, with signatures
guaranteed, and upon payment to the Company of the Warrant Price (as defined in
and determined in accordance with the provisions of this section 3 and sections
7 and 8 hereof), for the number of Warrant Shares in respect of which such
Warrants are then exercised, but in no event for less than 100 Warrant Shares (unless
less than an aggregate of 100 Warrant Shares are then purchasable under all
outstanding Warrants held by a Warrantholder).

 

(b)                                 Payment of the aggregate Warrant Price shall be
made in cash, or by check, or any combination thereof.  Upon such surrender of the Warrants and
payment of such Warrant Price as aforesaid, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of
the Warrantholder, and in such name or names as the Warrantholder may designate,
a certificate or certificates for the number of full Warrant Shares so
purchased upon the exercise of the Warrant, together with cash, as provided in
Section 9 hereof, in respect of any fractional Warrant Shares otherwise
issuable upon such surrender.  Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such securities as of the date of surrender of the Warrants and
payment of the Warrant Price, as aforesaid, notwithstanding that the
certificate or certificates representing such securities shall not actually
have been delivered or that the stock transfer books of the Company shall then
be closed.  The Warrants shall be
exercisable, at the election of each Warrantholder, either in full or from time
to time in part and, in the event that a certificate evidencing the Warrants is
exercised in respect of less than all of the Warrant Shares specified therein
at any time prior to the Termination Date, a new certificate evidencing the
remaining portion of the Warrants shall be issued by the Company to such
Warrantholder.

 

Section 4.                                          Payment of Taxes.  The Company will pay all  documentary stamp taxes, if any, attributable to the initial
issuance of the Warrants or the securities comprising the Warrant Shares;
provided, however, the Company shall not be required to pay any tax which may
be payable in respect of any secondary transfer of the Warrants or the
securities comprising the Warrant Shares.

 

2

 

Section 5.                                          Mutilated or Missing Warrants.  In case the certificate or certificates evidencing
the Warrants shall be mutilated, lost, stolen or destroyed, the Company shall,
at the request of the Warrantholder, issue and deliver in exchange and
substitution for and upon cancellation of the mutilated certificate or
certificates, or in lieu of and substitution for the certificate or
certificates lost, stolen or destroyed, a new Warrant certificate or certificates
of like tenor and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction of such Warrant and payment of the reasonable out-of-pocket
expenses incurred by the Company in issuing a replacement Warrant Certificate.

 

Section 6.                                          Reservation of Warrant Shares.  There has been reserved, out of its authorized
Capital Stock, such number of shares of Common Stock as shall be subject to
purchase under the Warrants, and the Company shall at all times keep reserved,
for so long as any of the Warrants remain outstanding, such shares of Common
Stock that from time to time are, and such additional Warrant Shares or other
securities that, pursuant to Section 8 hereof, become issuable on exercise of
the Warrants.

 

Section 7.                                          Warrant Price.  The price per Share at which Warrant Shares shall
be purchasable upon the exercise of the Warrants shall be $7.50, subject to any
adjustments thereto required pursuant to Section 8 hereof (and as so adjusted,
the “Warrant Price”).

 

Section 8.                                          Adjustment of Number of Warrant Shares.  The number and kind of securities purchasable upon
the exercise of the Warrants and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events, as follows:

 

8.1                                 Adjustments. 
The number of Warrant
Shares purchasable upon the exercise of the Warrants shall be subject to
adjustment as follows:

 

(a)                                  In case the Company shall (i) pay a dividend in
Common Stock or make a distribution in Common Stock, (ii) subdivide its
outstanding Common Stock, (iii) combine its outstanding Common Stock into a
smaller number of shares of Common Stock, or (iv) issue by reclassification of
its Common Stock other securities of the Company, the number of Warrant Shares
purchasable upon exercise of the Warrants immediately prior thereto shall be
adjusted so that the Warrantholder shall be entitled to receive the kind and
number of Warrant Shares or other securities of the Company which it would have
owned or would have been entitled to receive immediately after the happening of
any of the events described above, had the Warrants been exercised immediately
prior to the happening of such event or any record date with respect thereto.  Any adjustment made pursuant to this
subsection 8.1(a) shall become effective immediately after the effective date
of such event, retroactive to the record date, if any, for such event.

 

(cb)                           In case the Company shall distribute to all or
substantially all holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions out of earnings) or rights,
options, warrants or convertible securities containing the right to subscribe
for or purchase Common Stock (excluding those referred to in subsection 8.1(ba)
above), then in each case the number of Warrant Shares thereafter purchasable
upon the exercise of the Warrants shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the then Current Market Price on the
date of such distribution, and of which the denominator shall be such Current
Market Price on such date minus the then fair value (determined as provided in
subsection (d) below) of the portion of the assets or evidences of indebtedness
so distributed or of such subscription rights, options, warrants or convertible
securities applicable to one share. 
Such adjustment shall be made whenever any such distribution is made and
shall become effective on the date of distribution.

 

(dc)                           For the purposes of the adjustments covered by
subsections 8.1(ba) or (cb) hereof, the Common Stock which the
holders of any Common Stock Rights shall be entitled to subscribe for or
purchase, whether by exercise, exchange or conversion or otherwise, shall be
deemed issued and outstanding as of the date of such sale or issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such Common Stock Rights, plus the
consideration or premiums stated in such Common Stock Rights to be paid for the
Common Stock covered thereby.  In case
the Company shall sell or issue Below Market Shares, or Common Stock Rights
containing the right to subscribe for or purchase Common Stock, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then, in determining the “price per share” of Common

 

3

 

Stock
and the “consideration received by the Company” for purposes of the first
sentence of this subsection 8.1(d), the Company’s Board of Directors shall
determine the fair value of said property, and such determination, if
reasonable and based upon the Board of Directors’ good faith business judgment,
shall be binding upon the Warrantholder. 
In determining the “price per share” of Common Stock, any underwriting
discounts or commissions shall not be deducted from the consideration received
by the Company for or in connection with any sales of Below Market Shares or
Common Stock Rights.

 

(ed)                           No adjustment in the number of Warrant Shares
purchasable pursuant to the Warrants shall be required unless such adjustment
would require an increase or decrease of at least one percent in the number of
Warrant Shares then purchasable upon the exercise of the Warrants or, if the
Warrants are not then exercisable, the number of Warrant Shares purchasable
upon the exercise of the Warrants on the first date thereafter that the
Warrants become exercisable; provided, however, that any adjustments which by
reason of this subsection  8.1(e) are
not required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.

 

(fe)                              Whenever the number of Warrant Shares purchasable
upon the exercise of the Warrant is adjusted, as herein provided, the Warrant
Price payable upon exercise of the Warrant shall be adjusted by multiplying
such Warrant Price immediately prior to such adjustment by a fraction, of which
(i) the numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and (ii) the
denominator shall be the number of Warrant Shares so purchasable immediately
thereafter.

 

(gf)                             Whenever the number of Warrant Shares purchasable
upon the exercise of the Warrants is adjusted as herein provided, the Company
shall cause to be promptly mailed to the Warrantholder by first class mail,
postage prepaid, notice of such adjustment and a certificate of the chief
financial officer of the Company setting forth the number of Warrant Shares
purchasable upon the exercise of the Warrants and the Warrant Price after such
adjustment, a brief statement of the transaction or transactions that required
such adjustment and the computation by which such adjustment was made.

 

(hg)                          For the purpose of this subsection 8.1, the term
“Common Stock” shall mean (i) the class of stock designated as the Common Stock
of the Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no  par value, or from no par value to par
value.  In the event that at any time,
as a result of an adjustment made pursuant to this Section 8, the Warrantholder
shall become entitled to purchase any securities of the Company other than
Common Stock, (x) if the Warrantholder’ right to purchase is on any other basis
than that available to all holders of the Company’s Common Stock, the Company
shall obtain an opinion of an independent investment banking firm valuing such
other securities, and (y) thereafter the number of such other securities so
purchasable upon exercise of the Warrants shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Warrant Shares contained in this Section 8.

 

(ih)                              Upon the expiration of any Common Stock Rights, if
such shall not have been exercised prior thereto (the “Expired Rights”), the
number of Warrant Shares purchasable upon exercise of the Warrants then
outstanding, and the Warrant Price thereof, shall, upon such expiration, be
readjusted to the number of Warrant Shares that would have been issuable on
exercise of such outstanding Warrants, and the Warrant Price at which the
Warrant Shares would have been purchasable, if the Expired Rights had never
been issued; provided, however, that no such readjustment shall
have the effect of decreasing the number of Warrant Shares purchasable upon
exercise of the Warrants by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such Expired
Rights.

 

8.2                                 No Adjustment for Dividends.  Except
as provided in subsection 8.1, no adjustment in respect of any dividends or
distributions out of earnings shall be made during the term of the Warrants or
upon the exercise of the Warrants.

 

8.3                                 Preservation of Purchase Rights upon
Reclassification, Consolidation, etc.  In case of any consolidation of the Company with
or merger of the Company into another corporation or in case of any sale or
conveyance to another corporation of the property, assets or business of the
Company as an entirety or substantially as an entirety (a “Business Combination
Transaction”), the Company or such successor or purchasing corporation, as the
case may be, shall execute with the Warrantholder an agreement that the
Warrantholder shall have the right thereafter,

 

4

 

exercisable
at any time or from time to time during the remaining term of the Warrant, upon
payment of the Warrant Price in effect immediately prior to the consummation of
such Business Combination Transaction (as the same may be adjusted thereafter
pursuant to the adjustment provisions referenced below in this section 8.3), to
purchase the kind and number or amount of shares and other securities and
property which the Warrantholder would have owned or have been entitled to
receive immediately after the happening of such consolidation, merger, sale or
conveyance had the Warrants been exercised immediately prior to such Business
Combination Transaction.  In the event
of a Business Combination Transaction that is implemented by means of a merger
described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in
which the Company is the surviving corporation, the right to purchase Warrant
Shares under the Warrants shall terminate on the date of such merger and thereupon
the Warrants shall become null and void, but only if the controlling
corporation shall agree to substitute for the Warrants its warrants (the
“Controlling Corporation Warrants”), which entitle each Warrantholder to
purchase upon the exercise thereof, the kind and amount of shares and other
securities and property which the Warrantholder would have owned or been
entitled to receive had the Warrants been exercised immediately prior to such
merger.  Any such agreements referred to
in this subsection 8.3 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 8
hereof. The provisions of this subsection 8.3 shall similarly apply to
successive Business Combination Transactions. 
The Company will not merge or consolidate with or into any
other corporation or sell all or substantially all of its property to another
corporation, unless the provisions of this section 8.3 are complied with.

 

8.4                                 Par Value of Warrant Shares of Common Stock.  Before
taking any action which would cause an adjustment effectively reducing the
portion of the Warrant Price allocable to each Share below the then par value
(if any) per share of the Common Stock issuable upon exercise of the Warrants,
the Company will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Common Stock upon exercise of the Warrants.

 

8.5                                 Independent Public Accountants.  The
Company may retain a firm of independent public accountants of recognized
national standing (which may be any such firm regularly employed by the
Company) to make any computation required under this Section 8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 8.

 

8.6                                 Statement on Warrant Certificates.  Irrespective
of any adjustments in the number of Shares or other securities issuable upon
exercise of Warrants, Warrant certificates theretofore or thereafter issued may
continue to express the same number of securities as are stated in the similar
Warrant certificates initially issuable pursuant to this Agreement.  However, the Company may, at any time in its
sole discretion (which shall be conclusive), make any change in the form of
Warrant certificate that it may deem appropriate and that does not affect the
substance thereof; and any Warrant certificate thereafter issued, whether upon
registration of transfer of, or in exchange or substitution for, an outstanding
Warrant certificate, may be in the form so changed.

 

Section 9.                                          Fractional Interests; Current Market Price.  The Company shall not be required to issue
fractional Warrant Shares on the exercise of any of the Warrants.  If any fraction of a Warrant Share would,
except for the provisions of this Section 9, be issuable on the exercise of the
Warrants (or any specified portion thereof being exercised), the Company shall
pay to the Warrantholder, in lieu of the issuance of such fractional Warrant
Share, an amount in cash equal to the then Current Market Price multiplied by
such fraction.  For purposes of this
Agreement, the term “Current Market Price” shall mean (i) if the Common Stock
is traded in the over-the-counter market and not in the NASDAQ National Market
System nor on any national securities exchange, the average of the per share
closing bid prices of the Common Stock on the 30 consecutive trading days
immediately preceding the date in question, as reported by NASDAQ or an equivalent
generally accepted reporting service, or (ii) if the Common Stock is traded in
the NASDAQ National Market System or on a national securities exchange, the
average for the 30 consecutive trading days immediately preceding the date in
question of the daily per share closing prices of the Common Stock in the
NASDAQ National Market System or on the principal stock exchange on which it is
listed, as the case may be.  For
purposes of clause (i) above, if trading in the Common Stock is not reported by
NASDAQ, the bid price referred to in said clause shall be the lowest bid price
as reported in the “pink sheets” published by National Quotation Bureau,
Incorporated.  The closing price
referred to in clause (ii) above shall be the last reported sale price or, in
case no such reported sale takes place on such day, the average of the last
reported closing bid and asked prices, in either case in the NASDAQ National
Market System or on the national securities exchange on which the Common Stock
is then listed.

 

Section 10.                                   No Rights as Shareholder; Notices to Warrantholder.  Nothing contained in this Agreement or in the

 

5

 

Warrants
shall be construed as conferring upon the Warrantholder or its transferees any
rights as a shareholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a shareholder in respect of any
meeting of shareholders for the election of directors of the Company or any
other matter, unless and until the Warrantholder or such transferee (as the
case may be) exercises the Warrants, in whole or in part, and pays the Warrant
Price thereof to the Company. 
Notwithstanding the foregoing, however, if at any time prior to the
earlier of the expiration of the Warrants and or their exercise in full, any
one or more of the following events shall occur:

 

(a)                                  any action which would require an adjustment
pursuant to Section 8.1; or

 

(b)                                 a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety or substantially as an entirety)
shall be proposed;

 

then,
the Company shall give notice in writing of such event to the Warrantholder, in
the manner provided in Section 14 hereof, at least 20 days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights or other rights or for the determination of
shareholders entitled to vote on such proposed dissolution, liquidation or
winding up.  Such notice shall specify
such record date or the date of closing of the transfer books, as the case may
be.

 

Section 11.                                   Restrictions on Transfer; Registration Rights.

 

11.1                           Transfer Restrictions.  The Warrantholder
agrees that prior to making any disposition of the Warrants or the Warrant
Shares, other than to persons or entities identified in clauses (i) through
(v), inclusive, of Section 1.4, the Warrantholder shall give written notice to
the Company describing briefly the manner in which any such proposed
disposition is to be made; and no such disposition shall be made if the Company
has notified the Warrantholder that in the opinion of counsel reasonably satisfactory
to the Warrantholder a registration statement or other notification or
post-effective amendment thereto (hereinafter collectively a “Registration
Statement”) under the Act is required with respect to such disposition and no
such Registration Statement has been filed by the Company with, and declared
effective, if necessary, by, the Securities and Exchange Commission (the
“Commission”).

 

11.2                           Registration Rights.

 

(a)                                  The Company shall be obligated to the owners of
the Warrants and the Warrant Shares to register the Warrant Shares in its a
Registration Statement for the offering. 
The Company also agrees that, until all Warrant Shares have been sold,
the Company shall keep the Registration Statement effective pursuant to which
such securities are now and have been registered.

 

(b)                                 All fees, disbursements and out-of-pocket expenses
(other than Warrantholder’ brokerage fees and commissions and reasonable legal
fees of counsel to the Warrantholder, if any) in connection with the filing of
any Registration Statement under section 11(a) and in complying with applicable
securities and Blue blue Sky sky laws shall be borne by the
Company.  The Company at its expense
will supply any Warrantholder and any holder of Warrant Shares with copies of
such Registration Statement and the prospectus included therein and other
related documents, and any opinions and no-action letters in such quantities as
may be reasonably requested by the Warrantholder or holder of Warrant Shares.

 

Section 12.  Indemnification.

 

12.1                           Indemnification of Warrantholder.  The
Company agrees to indemnify and hold harmless each Warrantholder and any holder
of such Warrant Shares and each person, if any, who controls the Warrantholder
or any holder of such Warrant Shares within the meaning of the Act, against any
losses, claims, damages or liabilities, joint or several (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys’ fees), to which such Warrantholder
or any holder of such Warrant Shares or such controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any such Registration Statement, or any related preliminary prospectus, final
prospectus, or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a

 

6

 

material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
preliminary prospectus, final prospectus or amendment or supplement thereto in
reliance upon, and in conformity with, written information furnished to the
Company by such Warrantholder or the holder of such Warrant Shares specifically
for inclusion therein .  This indemnity
will be in addition to any liability which the Company may otherwise have.

 

12.1                           Indemnification of the Company.  The
Warrantholder and the holders of the Warrant Shares agree that they will
indemnify and hold harmless the Company, each other person referred to in
subparts (1), (2) and (3) of Section 11(a) of the Act in respect of the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Act, against any losses, claims, damages or liabilities
(which shall, for all purposes of this Agreement, include but not be limited
to, all costs of defense and investigation and all attorneys’ fees) to which
the Company or any such director, officer or controlling person may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such Registration Statement, or any related preliminary prospectus, final
prospectus or amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in such
Registration Statement, preliminary prospectus, final prospectus or amendment
or supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by the Warrantholder or such holder of
Warrant Shares specifically for inclusion therein.  This indemnity agreement will be in addition to any liability
which the Warrantholder or such holder of Warrant Shares may otherwise have.

 

12.3                           Indemnification Procedures.  Promptly
after receipt by an indemnified party under this Section 12 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 12,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party.  In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, reasonably assume the defense thereof, subject to the
provisions herein stated, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 12 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion.  The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided, however,
that if the indemnified party is a Warrantholder or a holder of Warrant Shares
or a person who controls a Warrantholder or a holder of Warrant Shares within
the meaning of the Act, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has
been specifically authorized in writing by the indemnifying party or (ii) the
named parties to any such action, including any impleaded parties, include both
a Warrantholder or a holder of Warrant Shares or such controlling person and
the indemnifying party and a Warrantholder or a holder of Warrant Shares or
such controlling person shall have been advised by such counsel that there may
be one or more legal defenses available to a Warrantholder or a holder of
Warrant Shares or controlling person which are not available to or in conflict
with any legal defenses which may be available to the indemnifying party (in
which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of a Warrantholder or a holder of Warrant
Shares or such controlling person, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys for
the Warrantholder, the holders of the Warrant Shares and controlling persons,
which firm shall be designated in writing by a majority in interest of such
holders and controlling persons based upon the value of the securities included
in the Registration Statement).  No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified and the indemnifying parties, which shall not be
unreasonably withheld in light of all factors of

 

7

 

importance
to such parties.

 

Section 13.  Contribution.  In order to provide for just and
equitable contribution under the Act in any case in which (i) a Warrantholder
or any holder of the Warrant Shares or controlling person makes a claim for
indemnification pursuant to Section 12 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 12 hereof
provide for indemnification in such case or (ii) contribution under the Act may
be required on the part of any Warrantholder or any holder of the Warrant
Shares or controlling person, then the Company and any Warrantholder or any
such holder of the Warrant Shares or controlling person shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys’ fees), in either
such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations.  The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or a Warrantholder or
holder of Warrant Shares or controlling person on the other and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.  The
Company and such holders of such securities and such controlling persons agree
that it would not be just and equitable if contribution pursuant to this
Section 13 were determined by pro rata allocation or by any other method which
does not take account of the equitable considerations referred to in this
Section 13.  The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
13 shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim.  No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.

 

Section 14.                                   Notices.  Any notice pursuant to this
Agreement by the Company or by a Warrantholder or a holder of Warrant Shares
shall be in writing and shall be deemed to have been duly given on the date of
delivery or refusal indicated on the return receipt if delivered or mailed by
certified mail, return receipt requested:

 

14.1                           Warrantholder Address.  If to
the Warrantholder or a holder of Warrant Shares, at the address set forth in
the Selected Dealer Agreement or any more recent notice of address change
delivered to the Company.

 

14.2                           Company Address.  If to the Company addressed to
it at 901 Dove Street, Suite 230, Newport Beach, California 92660, Attention:
President.

 

Each
party may from time to time change the address to which notices to it are to be
delivered or mailed hereunder by notice in accordance herewith to the other
party.

 

Section 15.                                   Survival of Representations and Warranties.  All statements contained in any schedule, exhibit,
certificate or other instrument delivered by or on behalf of the parties
hereto, or in connection with the transactions contemplated by this Agreement,
shall be deemed to be representations and warranties hereunder.  Notwithstanding any investigations made by
or on behalf of the parties to this Agreement, all representations, warranties
and agreements made by the parties to this Agreement or pursuant hereto shall
survive.

 

Section 16.                                   Miscellaneous.

 

16.1                           Applicable Law.  This
Agreement shall be deemed to be a contract made under the laws of the State of
California and for all purposes shall be construed in accordance with the laws
of said State.

 

16.2                           Successors.  All
the covenants and provisions of this Agreement by or for the benefit of the
Company, the Warrantholder, or the holders of Warrant Shares shall bind and
inure to the benefit of their respective successors and assigns hereunder.  Notwithstanding the foregoing, however,
nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrantholder and the holders of
Warrant Shares, and their respective permitted transferees (other than
transferees who acquire any Warrant Shares that are free of restrictions on
transfer under this Agreement and under the Act), any legal or equitable right,
remedy or claim under this Agreement.

 

8

 

This
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrantholder and the holders of Warrant Shares and such permitted transferees
(other than transferees who acquire any Warrant Shares that are free of
restrictions on transfer under this Agreement and under the Act).

 

16.3                           Amendments.  This Agreement may be amended only by a
written instrument executed by duly authorized representatives of the Company
and the Warrantholder.

 

16.4                           Severability.  In the event any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision, but only to the extent necessary to cure the infirmity
that caused such provision to be held illegal, unenforceable or void.

 

16.5                           Interpretation.  This Agreement is the result of arms’-length
negotiations between the parties hereto and no provision hereof, because of any
ambiguity found to be contained in any of the provisions hereof, shall be
construed against a party by reason of the fact that such party or its legal
counsel was the draftsman of those provisions. 
Unless otherwise indicated elsewhere in this Agreement, (i) the term
“or” shall not be exclusive, (ii) the term “including” shall mean
“including, but not limited to,” and (iii) unless the context indicates
otherwise the terms “herein,” “hereof,” “hereto,” “hereunder” and other terms
similar to such terms shall refer to this Agreement as a whole and not merely
to the specific section, subsection, paragraph or clause where such terms may
appear.

 

16.6                           Headings.  The captions or headings of
the sections and subsections of this Agreement are for convenience of reference
only and shall be disregarded in interpreting, construing or applying any of
the provisions of this Agreement.

 

                                                16.7                           Counterparts.  This Agreement may be executed
in separate counterparts, each of which shall be an original of and all of
which together shall constitute one and the same instrument.

 

 

IN WITNESS
WHEREOF, the parties have caused this Agreement to be duly executed, all as of
the day and year first above written.

 

	
   

  	
  BETA OIL & GAS,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve Antry

  	
   

  
	
   

  	
   

  	
  Name:  Steve Antry

  
	
   

  	
   

  	
  Title:

  	
  Chairman and President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BROKER / DEALER:

  
	
   

  	
  BROOKSTREET SECURITIES

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stan Brooks

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

9

 

Exhibit
A

 

Warrant
Certificate
No.           

 

SELECTED
DEALERS WARRANTS TO PURCHASE
                    
SHARES OF COMMON STOCK

 

VOID
AFTER 5:00 P.M.,

PACIFIC TIME, ON
                ,
2004

 

BETA OIL
& GAS, INC.

 

INCORPORATED
UNDER THE LAWS

OF THE STATE OF NEVADA

 

This certifies that, for value received,
                                                                          
the registered holder hereof or assigns (the “Warrantholder”), is entitled to
purchase from BETA OIL & GAS, INC. (the “Company”), at any time during the
period commencing at 9:00 a.m., Pacific Time, on
                  
    , 2000, and before 5:00 p.m., Pacific Time, on
              
    , 2004 at the purchase price per share of $7.50
(the “Warrant Price”), the number of Shares of Common Stock of the Company set forth
above (the “Warrant Shares”).  The
number of Warrant Shares issuable upon exercise of each Warrant evidenced
hereby and the Warrant Price shall be subject to adjustment from time to time
as set forth in the Selected Dealers Warrant Agreement referred to below.

 

The Warrants evidenced hereby represent the right
to purchase an aggregate of up to                     
(          ) Shares, subject
to certain adjustments, and are issued under and in accordance with a Selected
Dealer Warrant Agreement, dated as of
                
    , 1999 (the “Selected Dealer Warrant Agreement”),
between the Company and the Warrantholder and are subject to the terms and
provisions contained in the Selected Dealers Warrant Agreement, to all of which
the Warrantholder by acceptance hereof consents.

 

The Warrants evidenced hereby may be exercised in
whole or in part by presentation of this Warrant Certificate with the Purchase
Form attached hereto duly executed (with a signature guarantee as provided
thereon) and simultaneous payment of the Warrant Price at the principal office
of the Company.  Payment of such price
shall be made at the option of the Warrantholder in cash, or by check, or any
combination thereof.

 

Upon any partial exercise of the Warrants
evidenced hereby, there shall be signed and issued to the Warrantholder a new
Warrant Certificate in respect of the Warrant Shares as to which the Warrants
evidenced hereby shall not have been exercised.  These Warrants may be exchanged at the office of the Company by
surrender of this Warrant Certificate properly endorsed for one or more new
Warrants of the same aggregate number of Warrant Shares as evidenced by the
Warrant or Warrants exchanged.  No
fractional Shares of Common Stock will be issued upon the exercise of rights to
purchase hereunder, but the Company shall pay the cash value of any fraction
upon the exercise of one or more Warrants. 
These Warrants are transferable at the office of the Company in the
manner and subject to the limitations set forth in the Selected Dealers Warrant
Agreement.

 

This Warrant Certificate does not entitle any
Warrantholder to any of the rights of a stockholder of the Company unless and
until the Warrantholder exercises its rights to purchase Warrant Shares
hereunder.

 

	
   

  	
  BETA OIL & GAS,
  INC.

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
  , 1999

  	
  By:

  	
   

  	
   

  
								

 

 

BETA OIL
& GAS, INC.

PURCHASE
FORM

BETA OIL & GAS, INC.

9O1 Dove Street, Suite 230

Newport Beach, California  92660

 

The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder,
                        
Warrant Shares of Common Stock (the “Warrant Shares”) provided for therein, and
requests that certificates for the Warrant Shares be issued in the name of:

 

	
   

  
	
  (Please Print or
  Type Name)

  
	
   

  
	
  (Address,
  including zip code)

  
	
   

  
	
  (Social Security
  No. or Tax I.D. No.)

  

 

and,
if said number of Warrant Shares shall not be all the Warrant Shares
purchasable hereunder, that a new Warrant Certificate for the balance of the
Warrant Shares purchasable under the within Warrant Certificate be registered
in the name of the undersigned Warrantholder or his Assignee as below indicated
and delivered to the address stated below.

 

	
  Name
  of Warrantholder

  	
   

  	
   

  
	
  or
  Assignee:

  	
   

  
	
  (Please Print)

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
   

  	
  Dated:

  	
   

  
											

 

Note:  The above signature must
correspond with the name as written upon the face of this Warrant Certificate
in every particular, without alteration or enlargement or any change whatever,
unless these Warrants have been assigned.

 

	
  Signature:

  	
   

  	
   

  	
   

  

 

(Signature must be guaranteed by a bank or trust company having an
office or correspondent in the United States or by a member firm of a
registered securities exchange or the National Association of Securities
Dealers, Inc.)

 

ASSIGNMENT

(To be signed only upon assignment of Warrants)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto the assignee named below all of the rights of the undersigned represented
by the attached Warrant with respect to the number of Warrant Shares covered by
the Warrant set forth below:

 

(Name
and Address of Assignee Must Be Printed or Typewritten)

 

	
  Name of Assignee

  	
   

  	
  Social Security No.

  or Tax I.D. No.

  	
   

  	
  Address

  	
   

  	
  No. of

  Warrant

  Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

and does hereby irrevocably constitute and appoint
                                                                  
Attorney to transfer said Warrants on the books of the Company, with full power
of substitution in the premises.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Signature of Registered Holder

  

 

Note:                   The signature
on this assignment must correspond with the name as it appears upon the face of
the within Warrant Certificate in every particular, without alteration or
enlargement or any change whatever.

 

	
  Signature Guaranteed:

  	
   

  	
   

  

 

(Signature must be guaranteed by a bank or trust company having an
office or correspondent in the United States or by a member firm of a
registered securities exchange or the National Association of Securities
Dealers, Inc.)

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