Document:

Exhibit
4.2

 

 

Execution Copy

 

CARRIAGE SERVICES, INC.

 

(a Delaware corporation)

 

7.875% Senior Notes due
2015

 

 

REGISTRATION RIGHTS
AGREEMENT

 

 

Dated:  January 27, 2005

 

 

 

CARRIAGE SERVICES, INC.

(a Delaware corporation)

 

$130,000,000

7.875% Senior Notes due 2015

 

REGISTRATION RIGHTS AGREEMENT

 

January 27, 2005

 

MERRILL LYNCH & CO.

Merrill Lynch, Pierce,
Fenner & Smith Incorporated

Banc of America Securities
LLC

c/o            Merrill Lynch & Co.

Merrill Lynch, Pierce,
Fenner & Smith Incorporated

4
World Financial Center

New
York, New York  10080

 

Dear Sirs:

 

Carriage Services, Inc., a Delaware corporation (the “Issuer”),
proposes to issue and sell to you (the “Initial Purchasers”), upon the terms
set forth in a purchase agreement dated January 20, 2005 (the “Purchase
Agreement”), $130,000,000 aggregate principal amount of its 7.875% Senior Notes
due 2015 (the “Initial Securities”).  The
Initial Securities will be issued pursuant to an Indenture, to be dated as of
the date hereof (the “Indenture”), among the Issuer, the guarantors party
thereto (the “Guarantors”), and Wells Fargo Bank, National Association, as
trustee (the “Trustee”).  The Issuer and
the Guarantors are collectively referred to herein as the “Company”.  To satisfy a condition to the obligations of
the Initial Purchasers under the Purchase Agreement, the Company agrees with
the Initial Purchasers, for the benefit of the Initial Purchasers and the
subsequent holders of the Securities (as defined below) (collectively the “Holders”),
as follows:

 

1.  Registered Exchange Offer.  Unless not permitted by applicable law (after
the Company has complied with the ultimate paragraph of this Section 1),
the Company shall prepare and, not later than 90 days (such 90th day being a “Filing
Deadline”) after the date on which the Initial Purchasers purchase the Initial
Securities pursuant to the Purchase Agreement (the “Closing Date”), file with
the Securities and Exchange Commission (the “Commission”) a registration
statement (the “Exchange Offer Registration Statement”) on an appropriate form
under the Securities Act of 1933, as amended (the “Securities Act”), with
respect to a proposed offer (the “Registered Exchange Offer”) to the Holders of
Transfer Restricted Securities (as defined in Section 6 hereof), who are
not prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange
for the Initial Securities, a like aggregate principal amount of debt
securities of the Issuer issued under the Indenture, identical in all material
respects to the Initial Securities and registered under the Securities Act (the
“Exchange Securities”).  The Company
shall (i) use its reasonable best efforts to cause such Exchange Offer
Registration Statement to become effective

 

 

under the Securities Act
within 180 days after the Closing Date (such 180th day being an “Effectiveness
Deadline”) and (ii) keep the Exchange Offer Registration Statement
effective for not less than 30 days (or longer, if required by applicable
law) after the date notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the “Exchange Offer Registration Period”).

 

If the Company commences the Registered Exchange
Offer, the Company (i) will be entitled to consummate the Registered
Exchange Offer 30 days after such commencement (provided that the Company
has accepted all the Initial Securities theretofore validly tendered in
accordance with the terms of the Registered Exchange Offer) and (ii) will
be required to consummate the Registered Exchange Offer on or prior to the 45th
day after the date on which the Exchange Offer Registration Statement is
declared effective (the “Consummation Deadline”).

 

As soon as practicable after the declaration of the
effectiveness of the Exchange Offer Registration Statement, the Company shall
commence the Registered Exchange Offer, it being the objective of such
Registered Exchange Offer to enable each Holder of Transfer Restricted
Securities electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the
meaning of the Securities Act, acquires the Exchange Securities in the ordinary
course of such Holder’s business and has no arrangements with any person to
participate in the distribution of the Exchange Securities and is not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Securities from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of the several
states of the United States.

 

The Company acknowledges that, pursuant to current
interpretations by the Commission’s staff of Section 5 of the Securities
Act, in the absence of an applicable exemption therefrom, (i) each Holder
which is a broker-dealer electing to exchange Initial Securities, acquired for
its own account as a result of market making activities or other trading activities,
for Exchange Securities (an “Exchanging Dealer”), is required to deliver a
prospectus containing the information set forth in (a) Annex A hereto on
the cover, (b) Annex B hereto in the “Exchange Offer Procedures” section and
the “Purpose of the Exchange Offer” section, and (c) Annex C hereto in the
“Plan of Distribution” section of such prospectus in connection with a
sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser
that elects to sell Securities (as defined below) acquired in exchange for
Initial Securities constituting any portion of an unsold allotment, is required
to deliver a prospectus containing the information required by Item 507 or
508 of Regulation S-K under the Securities Act, as applicable, in
connection with such sale.

 

The Company shall use its reasonable best efforts to
keep the Exchange Offer Registration Statement effective and to amend and
supplement the prospectus contained therein, in order to permit such prospectus
to be lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons must
comply with such requirements in order to resell the Exchange Securities;
provided, however, that (i) in the case where such prospectus and any
amendment or supplement thereto must be delivered by an Exchanging Dealer or an
Initial Purchaser, such period shall be the

 

 

lesser of 180 days
or the date on which all Exchanging Dealers and the Initial Purchasers have
sold all Exchange Securities held by them (unless such period is extended
pursuant to Section 3(j) below) and (ii) the Company shall make such
prospectus and any amendment or supplement thereto available to any broker-dealer
for use in connection with any resale of any Exchange Securities for a period
of not less than 180 days after the consummation of the Registered Exchange
Offer.

 

If, upon consummation of the Registered Exchange
Offer, any Initial Purchaser holds Initial Securities acquired by it as part of
its initial distribution, the Company, simultaneously with the delivery of the
Exchange Securities pursuant to the Registered Exchange Offer, shall issue and
deliver to such Initial Purchaser upon the written request of such Initial
Purchaser, in exchange (the “Private Exchange”) for the Initial Securities held
by such Initial Purchaser, a like principal amount of debt securities of the
Issuer issued under the Indenture and identical in all material respects to the
Initial Securities (the “Private Exchange Securities”).  The Initial Securities, the Exchange
Securities and the Private Exchange Securities are herein collectively called
the “Securities”.

 

In connection with the Registered Exchange Offer, the
Company shall:

 

(a)  mail
to each Holder a copy of the prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate letter of transmittal;

 

(b)  keep
the Registered Exchange Offer open for not less than 30 days (or longer,
if required by applicable law) after the date notice thereof is mailed to the
Holders;

 

(c)  utilize
the services of a depositary for the Registered Exchange Offer, which may be
the Trustee or an affiliate of the Trustee;

 

(d)  permit
Holders to withdraw tendered Securities at any time prior to the close of
business, New York time, on the last business day on which the Registered
Exchange Offer shall remain open; and

 

(e)  otherwise
comply with all applicable laws.

 

As soon as practicable after the close of the
Registered Exchange Offer or the Private Exchange, as the case may be, the
Company shall:

 

(x)  accept
for exchange all the Securities validly tendered and not withdrawn pursuant to
the Registered Exchange Offer and the Private Exchange; and

 

(y)  cause
the Trustee to deliver promptly to each Holder of the Initial Securities,
Exchange Securities or Private Exchange Securities, as the case may be, equal
in principal amount to the Initial Securities of such Holder so accepted for
exchange.

 

The Indenture will provide that the Exchange
Securities will not be subject to the transfer restrictions set forth in the
Indenture and that all the Securities will vote and consent together on all
matters as one class and that none of the Securities will have the right to
vote or consent as a class separate from one another on any matter.

 

 

Interest on each Exchange Security and Private
Exchange Security issued pursuant to the Registered Exchange Offer and in the
Private Exchange will accrue from the last interest payment date on which
interest was paid on the Initial Securities surrendered in exchange therefor
or, if no interest has been paid on the Initial Securities, from the date of
original issue of the Initial Securities.

 

Each Holder participating in the Registered Exchange
Offer shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder will have no arrangements or understanding with any person to
participate in the distribution of the Initial Securities or the Exchange
Securities within the meaning of the Securities Act, (iii) such Holder is not
an “affiliate,” as defined in Rule 405 of the Securities Act, of the
Company or if it is an affiliate, such Holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged
in, and does not intend to engage in, the distribution of the Exchange
Securities and (v) if such Holder is a broker-dealer, that it will receive
Exchange Securities for its own account in exchange for Initial Securities that
were acquired as a result of market-making activities or other trading
activities and that it will be required to acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities.

 

Notwithstanding any other provisions hereof, the
Company will ensure that (i) any Exchange Offer Registration Statement and
any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any
Exchange Offer Registration Statement, and any supplement to such prospectus,
does not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

 

If following the date hereof there has been announced
a change in Commission policy with respect to exchange offers that in the
reasonable opinion of counsel to the Company raises a substantial question as
to whether the Registered Exchange Offer is permitted by applicable federal
law, the Company will seek a no-action letter or other favorable decision from
the Commission allowing the Company to consummate the Registered Exchange
Offer.  The Company will pursue the
issuance of such a decision to the Commission staff level.  In connection with the foregoing, the Company
will take all such other actions as may be reasonably requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (i) participating in telephonic
conferences with the Commission and (ii) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that the Registered
Exchange Offer should be permitted.

 

4

 

2.  Shelf Registration.  If, (i) because of any change in law or
in applicable interpretations thereof by the staff of the Commission, the
Company is not permitted to effect a Registered Exchange Offer, as contemplated
by Section 1 hereof, (ii) the Registered Exchange Offer is not
consummated by the 210th day after the Closing Date (provided that if the
Registered Exchange Offer shall be consummated after such 210-day period, then
the obligations of the Company and the Guarantors under this clause (ii)
arising from the failure of the Registered Exchange Offer to be consummated
within such 210-day period shall cease), (iii) any Initial Purchaser so
requests within 90 days following consummation of the Registered Exchange Offer with respect to the Initial Securities (or
the Private Exchange Securities) not eligible to be exchanged for Exchange
Securities in the Registered Exchange Offer and held by it following
consummation of the Registered Exchange Offer or (iv) any Holder (other
than an Exchanging Dealer) is not eligible to participate in the Registered
Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer)
that participates in the Registered Exchange Offer, such Holder does not
receive freely tradeable Exchange Securities on the date of the exchange and
any such Holder so requests within 90 days following the consummation of the
Registered Exchange Offer, the Company shall take the following actions (the
date on which any of the conditions described in the foregoing clauses (i)
through (iv) occur, including in the case of clause (iii) or (iv) the
receipt of the required notice, being a “Trigger Date”):

 

(a)  The
Company shall promptly  (but in no event
more than 60 days after the Trigger Date (such 60th day being a “Shelf Filing
Deadline”)) file with the Commission and thereafter use its reasonable best
efforts to cause to be declared effective (x) in the case of clause
(i) above, no later than 210 days after the Closing Date and
(y) otherwise no later than 60 days after the Shelf Filing Deadline (such
210th day or 60th day being an “Effectiveness Deadline”) a registration
statement (the “Shelf Registration Statement” and, together with the Exchange
Offer Registration Statement, a “Registration Statement”) on an appropriate
form under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities by the Holders thereof from time to time in accordance
with the methods of distribution set forth in the Shelf Registration Statement
and Rule 415 under the Securities Act (hereinafter, the “Shelf Registration”); provided,
however, that no Holder (other than an Initial Purchaser) shall be entitled to
have the Securities held by it covered by such Shelf Registration Statement
unless such Holder agrees in writing to be bound by all the provisions of this
Agreement applicable to such Holder.

 

(b)  The
Company shall use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the prospectus included
therein to be lawfully delivered by the Holders of the relevant Securities, for
a period of two years (or for such longer period if extended pursuant to Section 3(j)
below) from the Closing Date or such shorter period that will terminate when
all the Securities covered by the Shelf Registration Statement (i) have
been sold pursuant thereto or (ii) are no longer subject to restrictions
on resale pursuant to Rule 144 under the Securities Act, or any successor
rule thereto.

 

(c)  Notwithstanding
any other provisions of this Agreement to the contrary, the Company shall cause
the Shelf Registration Statement and the related prospectus and any amendment
or supplement thereto, as of the effective date of the Shelf Registration

 

5

 

Statement,
amendment or supplement, (i) to comply in all material respects with the
applicable requirements of the Securities Act and the rules and regulations of
the Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.

 

3.  Registration Procedures.  In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:

 

(a)  The
Company shall (i) furnish to each Initial Purchaser, prior to the filing
thereof with the Commission, a copy of the Registration Statement and each
amendment thereof and each supplement, if any, to the prospectus included
therein and, in the event that an Initial Purchaser (with respect to any
portion of an unsold allotment from the original offering) is participating in
the Registered Exchange Offer or the Shelf Registration Statement, the Company
shall use its reasonable best efforts to reflect in each such document, when so
filed with the Commission, such comments as such Initial Purchaser reasonably
may propose; (ii) include the information set forth in Annex A hereto on the
cover, in Annex B hereto in the “Exchange Offer Procedures” section and
the “Purpose of the Exchange Offer” section and in Annex C hereto in the “Plan
of Distribution” section of the prospectus forming a part of the Exchange
Offer Registration Statement and include the information set forth in Annex D
hereto in the letter of transmittal delivered pursuant to the Registered
Exchange Offer; (iii) if requested by an Initial Purchaser, include the
information required by Item 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement; (iv) include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled “Plan of
Distribution,” which shall contain a summary statement of the positions taken
or policies made by the staff of the Commission with respect to the potential “underwriter”
status of any broker-dealer that is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
of Exchange Securities received by such broker-dealer in the Registered
Exchange Offer (a “Participating Broker-Dealer”), whether such positions or
policies have been publicly disseminated by the staff of the Commission or such
positions or policies, in the reasonable judgment of the Company based upon
advice of counsel (which may be in-house counsel), represent the prevailing
views of the staff of the Commission; and (v) in the case of a Shelf
Registration Statement, include the names of the Holders who propose to sell
Securities pursuant to the Shelf Registration Statement as selling
securityholders.

 

(b)  The Company shall give written notice to the
Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer
from whom the Company has received prior written notice that it will be a
Participating Broker-Dealer in the Registered Exchange Offer (which notice
pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been made):

 

6

 

(i) when the
Registration Statement or any amendment thereto has been filed with the Commission
and when the Registration Statement or any post-effective amendment thereto has
become effective;

 

(ii) of any
request by the Commission for amendments or supplements to the Registration
Statement or the prospectus included therein or for additional information;

 

(iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose;

 

(iv) of the
receipt by the Company or its legal counsel of any notification with respect to
the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and

 

(v) of the
happening of any event that requires the Company to make changes in the
Registration Statement or the prospectus in order that the Registration
Statement or the prospectus does not contain an untrue statement of a material
fact nor omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the prospectus, in
light of the circumstances under which they were made) not misleading.

 

provided, however, that, in the case of a
Registered Exchange Offer, the Company shall not be required to give notice of
(i) and (ii) above to the Holders of the Securities.

 

(c)  The Company shall make every reasonable
effort to obtain the withdrawal at the earliest possible time, of any order
suspending the effectiveness of the Registration Statement.

 

(d)  If and to the extent requested in writing by
any such Holder, the Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge, at
least one copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if the
Holder so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).

 

(e)  The Company shall deliver to each Exchanging
Dealer and each Initial Purchaser, and to any other Holder who so requests,
without charge, at least one copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements and
schedules, and, if any Initial Purchaser or any such Holder requests, all
exhibits thereto (including those incorporated by reference).

 

(f)  The Company shall, during the Shelf
Registration Period, deliver to each Holder of Securities included within the
coverage of the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto

 

7

 

as such person
may reasonably request.  The Company
consents, subject to the provisions of this Agreement, to the use of the
prospectus or any amendment or supplement thereto by each of the selling
Holders of the Securities in connection with the offering and sale of the
Securities covered by the prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.

 

(g)  The Company shall deliver to each Initial
Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus included
in the Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. 
The Company consents, subject to the provisions of this Agreement, to
the use of the prospectus or any amendment or supplement thereto by any Initial
Purchaser, if necessary, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer in
connection with the offering and sale of the Exchange Securities covered by the
prospectus, or any amendment or supplement thereto, included in such Exchange
Offer Registration Statement.

 

(h)  Prior to any public offering of the Securities
pursuant to any Registration Statement the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or “blue sky” laws of such
states of the United States as any Holder of the Securities reasonably requests
in writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such jurisdictions of the Securities covered by
such Registration Statement; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where
it is not then so qualified, (ii) take any action which would subject it
to general service of process or to taxation in any jurisdiction where it is
not then so subject, or (iii) cause the Securities to be listed on any non-U.S.
securities exchange.

 

(i)  If the Securities have been issued in
certificated form, then the Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to any Registration Statement
free of any restrictive legends.

 

(j)  Upon the occurrence of any event contemplated
by paragraphs (ii) through (v) of Section 3(b) above during the
period for which the Company is required to maintain an effective Registration
Statement, the Company shall promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter delivered to
Holders of the Securities or purchasers of Securities, the prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.  If the Company notifies the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b)
above to suspend the use of the prospectus

 

8

 

until the
requisite changes to the prospectus have been made, then the Initial
Purchasers, the Holders of the Securities and any such Participating
Broker-Dealers shall suspend use of such prospectus, and the period of
effectiveness of the Shelf Registration Statement provided for in Section 2(b)
above and the Exchange Offer Registration Statement provided for in Section 1
above shall each be extended by the number of days from and including the date
of the giving of such notice to and including the date when the Initial
Purchasers, the Holders of the Securities and any known Participating
Broker-Dealer shall have received such amended or supplemented prospectus
pursuant to this Section 3(j).

 

(k)  Not later than the effective date of the
applicable Registration Statement, the Company will obtain a CUSIP number for
the Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
certificates for the Initial Securities, the Exchange Securities or the Private
Exchange Securities, as the case may be, in a form eligible for deposit with
The Depository Trust Company.

 

(l)  The Issuer will comply with all rules
and regulations of the Commission to the extent and so long as they are
applicable to the Registered Exchange Offer or the Shelf Registration and will
make generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, no later
than 45 days after the end of a 12-month period (or 90 days, if such period is
a fiscal year) beginning with the first month of the Issuer’s first fiscal quarter commencing after the effective
date of the Registration Statement, which statement shall cover such 12-month
period.

 

(m)  The Company shall cause the Indenture to be
qualified under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification.  In the event that such
qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to the
applicable provisions of the Indenture.

 

(n)  The Company may require each Holder of
Securities to be sold pursuant to the Shelf Registration Statement to furnish
to the Company such information regarding the Holder and the distribution of
the Securities as the Company may from time to time reasonably require for
inclusion in the Shelf Registration Statement, including requiring the Holder
to properly complete and execute such selling Security Holder notice and
questionnaires, and any amendments or supplements thereto, as the Company may
reasonably deem necessary or appropriate, and the Company may exclude from such
registration the Securities of any Holder that fails to furnish such
information within a reasonable time after receiving such request. No Holder
shall be entitled to Additional Interest under Section 6 if such Holder
fails to timely provide such information.

 

(o)  The Company shall enter into such customary
agreements (including, if requested, an underwriting agreement in customary
form) and take all such other action, if any, as any Holder of the Securities
shall reasonably request in order to facilitate the disposition of the
Securities pursuant to any Shelf Registration.

 

9

 

(p)  In the case of any Shelf Registration, the
Company shall (i) make reasonably available for inspection during normal business
hours by the Holders of the Securities, any underwriter participating in any
disposition pursuant to the Shelf Registration Statement and any attorney,
accountant or other agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent corporate
documents and properties of the Company and (ii) cause the Company’s
officers, directors, employees, accountants and auditors to supply all relevant
information reasonably requested by the Holders of the Securities or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to
enable such persons, to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Initial Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in Section 4
hereof.

 

(q)  In
the case of any Shelf Registration, the Company, if requested by any Holder of
Securities covered thereby, shall use its reasonable best efforts to cause
(i) its counsel to deliver an opinion or opinions in form and substance
reasonably satisfactory to such Holders and updates thereof relating to the
Securities in customary form addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial opinion,
the effective date of such Shelf Registration Statement, covering the matters
customarily covered in opinions requested in similar underwritten offerings and
such other matters as may be reasonably requested by such Holders (it being
agreed that the matters to be covered by such opinion may be subject to
customary qualifications and exceptions); (ii) its officers to execute and
deliver all customary documents and certificates and updates thereof requested
by any underwriters of the applicable Securities and (iii) its independent
public accountants and the independent public accountants with respect to any
other entity for which financial information is provided in the Shelf
Registration Statement to provide to the selling Holders of the applicable Securities
and any underwriter therefor a comfort letter in customary form and covering
matters of the type customarily covered in comfort letters in connection with
primary underwritten offerings, subject to receipt of appropriate documentation
as contemplated, and only if permitted, by Statement of Auditing Standards No.
72.

 

(r)  In the case of the Registered Exchange Offer,
if requested by any Initial Purchaser or any known Participating Broker-Dealer,
the Company shall cause (i) its counsel to deliver to such Initial
Purchaser or such Participating Broker-Dealer a signed opinion in form and
substance reasonably satisfactory to such Initial Purchaser or such
Participating Broker-Dealer, covering the matters customarily covered in
opinions requested in connection with Exchange Offer Registration Statements
and such other matters as may be reasonably requested (it being agreed that the
matters to be covered by such opinion may be subject to customary
qualifications and exceptions) and (ii) its independent public accountants and
the independent public accountants with respect to any other entity for which
financial information is provided in the Registration Statement to deliver to
such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Section 5(d) of the Purchase Agreement, with appropriate date
changes.

 

10

 

(s)   If a Registered Exchange Offer or a Private
Exchange is to be consummated, upon delivery of the Initial Securities by
Holders to the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Securities or the Private Exchange Securities, as the
case may be, the Company shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as the
case may be; in no event shall the Initial Securities be marked as paid or
otherwise satisfied.

 

(t)  The Company will use its reasonable best
efforts to (a) if the Initial Securities have been rated prior to the initial
sale of such Initial Securities, confirm such ratings will apply to the
Securities covered by a Registration Statement, or (b) if the Initial
Securities were not previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate rating agencies, if so
requested by Holders of a majority in aggregate principal amount of Securities
covered by such Registration Statement, or by the managing underwriters, if
any.

 

(u)  In the event that any broker-dealer
registered under the Exchange Act shall underwrite any Securities or
participate as a member of an underwriting syndicate or selling group or “assist
in the distribution” (within the meaning of the Conduct Rules (the “Rules”) of
the National Association of Securities Dealers, Inc. (“NASD”)) thereof, whether
as a Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company will assist
such broker-dealer in complying with the requirements of such Rules, including,
without limitation, by (i) if such Rules, including Rule 2720, shall so
require, engaging a “qualified independent underwriter” (as defined in
Rule 2720) to participate in the preparation of the Registration Statement
relating to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities, (ii)
indemnifying any such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof and (iii)
providing such information to such broker-dealer as may be required in order
for such broker-dealer to comply with the requirements of the Rules.

 

(v)  The Company shall use its reasonable best
efforts to take all other steps necessary to effect the registration of the
Securities covered by a Registration Statement contemplated hereby.

 

4.  Registration Expenses.

 

(a) All
expenses incident to the Company’s performance of and compliance with this
Agreement will be borne by the Company, regardless of whether a Registration
Statement is ever filed or becomes effective, including without limitation;

 

(i)  all registration and filing fees and
expenses;

 

11

 

(ii)  all fees and expenses of compliance with
federal securities and state “blue sky” or securities laws;

 

(iii)  all expenses of printing (including printing
of Prospectuses), messenger and delivery services and telephone;

 

(iv)  all fees and disbursements of counsel for the
Company; and

 

(v)  all fees and disbursements of independent
certified public accountants or outside reservoir engineers of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).

 

The Company will bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any person, including special experts,
retained by the Company.

 

(b)  In connection with any Shelf Registration
Statement required by this Agreement, the Company will reimburse the Initial
Purchasers and the Holders of Transfer Restricted Securities who are selling or
reselling Securities pursuant to the Shelf Registration Statement, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Vinson & Elkins L.L.P. unless another firm shall be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.

 

5.  Indemnification.

 

(a)  The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and
each person, if any, who controls such Holder or such Participating
Broker-Dealer within the meaning of the Securities Act or the Exchange Act
(each Holder, any Participating Broker-Dealer and such controlling persons are
referred to collectively as the “Indemnified Parties”) from and against any
losses, claims, damages or liabilities, joint or several, or any actions in
respect thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities) to
which each Indemnified Party may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities
or actions arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement or
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise out of, or are based
upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse, as incurred, the Indemnified Parties for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action in
respect thereof; provided, however, that (i) the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in a

 

12

 

Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration in reliance upon and in
conformity with written information pertaining to such Holder and furnished to
the Company by or on behalf of such Holder specifically for inclusion therein
and (ii) with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus relating to a Shelf
Registration Statement, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Holder or Participating Broker-Dealer
from whom the person asserting any such losses, claims, damages or liabilities
purchased the Securities concerned, to the extent that a prospectus relating to
such Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and any
such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or given to such person,
at or prior to the written confirmation of the sale of such Securities to such
person, a copy of the final prospectus if the Company had previously furnished
copies thereof to such Holder or Participating Broker-Dealer; provided further,
however, that this indemnity agreement will be in addition to any liability
which the Company may otherwise have to such Indemnified Party.  The Company shall also indemnify
underwriters, their officers and directors and each person who controls such
underwriters within the meaning of the Securities Act or the Exchange Act to
the same extent as provided above with respect to the indemnification of the
Holders of the Securities if requested by such Holders.

 

(b)  Each Holder of the Securities, severally and
not jointly, will indemnify and hold harmless the Company and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act from and against any losses, claims, damages or liabilities or any
actions in respect thereof, to which the Company or any such controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
omission or alleged untrue statement or omission was made in reliance upon and
in conformity with written information pertaining to such Holder and furnished
to the Company by or on behalf of such Holder specifically for inclusion
therein; and, subject to the limitation set forth immediately preceding this
clause, shall reimburse, as incurred, the Company for any legal or other
expenses reasonably incurred by the Company or any such controlling person in
connection with investigating or defending any loss, claim, damage, liability
or action in respect thereof.  This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.

 

(c)  Promptly after receipt by an indemnified
party under this Section 5 of notice of the commencement of any action or
proceeding (including a governmental investigation), such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 5, notify the indemnifying party of the

 

13

 

commencement thereof;
but the omission so to notify the indemnifying party will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b)
above.  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 therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), 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 5
for any legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof.  In no event shall the
indemnifying party or parties be liable for the fees and expenses of more than
one counsel (in addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.  No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened action in respect of
which any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party unless such settlement (i)
includes an unconditional release of such indemnified party from all liability
on any claims that are the subject matter of such action, and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.

 

(d)  If the indemnification provided for in this Section 5
is unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsection (a) or (b) above in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties on the one hand
and the indemnified party on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations.  The relative fault of
the parties 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 such Holder or such other indemnified party, as
the case may be, on the other, and the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.  The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which
is the subject of this subsection (d). 
Notwithstanding any other provision of this Section 5(d), the
Holders of the Securities shall not be required to contribute any amount in
excess of the amount by which the total price received by such Holders from the
sale of the Securities pursuant to a Registration Statement exceeds the amount
of damages

 

14

 

which such
Holders have otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.  For
purposes of this paragraph (d), each person, if any, who controls such
indemnified party within the meaning of the Securities Act or the Exchange Act
shall have the same rights to contribution as such indemnified party and each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as the
Company.

 

(e)  The agreements contained in this Section 5
shall survive the sale of the Securities pursuant to a Registration Statement
and shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement or any investigation made by or on behalf of any
indemnified party.

 

6.  Additional Interest Under Certain Circumstances.

 

(a)  By way of liquidated damages, additional
interest (the “Additional Interest”) with respect to the Securities shall be
assessed as follows if any of the following events occur (each such event in
clauses (i) through (iv) below being herein called a “Registration Default”):

 

(i)  any Registration Statement required by this
Agreement is not filed with the Commission on or prior to the Filing Deadline
or Shelf Filing Deadline, as applicable;

 

(ii)  any Registration Statement required by this
Agreement is  not declared effective by
the Commission on or prior to the applicable Effectiveness Deadline;

 

(iii)  the Registered Exchange Offer has not been
consummated on or prior to the Consummation Deadline; or

 

(iv)  any Registration Statement required by this
Agreement has been declared effective by the Commission but (A) in the case of
a Shelf Registration Statement only, such Registration Statement thereafter
ceases to be effective or (B) such Registration Statement or the related
prospectus ceases to be usable in connection with resales of Transfer
Restricted Securities during the periods specified herein because either (1)
any event occurs as a result of which the related prospectus forming part of such
Registration Statement would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein in the
light of the circumstances under which they were made not misleading, or (2) it
shall be necessary to amend such Registration Statement or supplement the
related prospectus, to comply with the Securities Act or the Exchange Act or
the respective rules thereunder.

 

Each
of the foregoing will constitute a Registration Default whatever the reason for
any such event and whether it is voluntary or involuntary or is beyond the
control of the

 

15

 

Company
or pursuant to operation of law or as a result of any action or inaction by the
Commission.

 

Additional Interest shall accrue on the Securities
over and above the interest set forth in the title of the Securities from and
including the date on which any such Registration Default shall occur to but
excluding the date on which all such Registration Defaults have been cured, at
a rate of .25% per annum (the “Additional Interest Rate”) for the first 90-day
period immediately following the occurrence of such Registration Default.  The Additional Interest Rate shall increase
by an additional .25% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum Additional
Interest Rate of 1.0% per annum.

 

(b)  A Registration Default
referred to in Section 6(a)(iv) hereof shall be deemed not
to have occurred and be continuing in relation to a Shelf Registration
Statement or the related
prospectus if (i) such Registration Default has occurred solely as a result of
(x) the filing of a post-effective amendment to such Shelf Registration
Statement to incorporate annual audited financial information with respect to
the Company where such post-effective amendment is not yet effective and needs
to be declared effective to permit Holders to use the related prospectus or (y)
other material events, with respect to the Company that would need to be
described in such Shelf Registration Statement or the related prospectus and
(ii) in the case of clause (y), the Company is proceeding promptly and in good
faith to amend or supplement such Shelf Registration Statement and related
prospectus to describe such events; provided, however, that in any case if such
Registration Default occurs for a continuous period in excess of 30 days,
Additional Interest shall be payable in accordance with the above paragraph
from the day such Registration Default occurs until such Registration Default
is cured.

 

(c)  Any amounts of Additional Interest due
pursuant to Section 6(a) will be payable in cash on the regular interest
payment dates with respect to the Securities. 
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest Rate by the principal amount of the Securities
and further multiplied by a fraction, the numerator of which is the number of
days such Additional Interest Rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.

 

(d)  “Transfer Restricted Securities” means each
Security until (i) the date on which such Security has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in
the Registered Exchange Offer of an Initial Security for an Exchange Security,
the date on which such Exchange Security is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Security is distributed to the public
pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k)
under the Securities Act.

 

16

 

7.  Rules 144 and 144A.  The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the request of any Holder of
Securities, make publicly available other information so long as necessary to
permit sales of their securities pursuant to Rules 144 and 144A.  The Company covenants that it will take such
further action as any Holder of Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)).  The Company will provide a
copy of this Agreement to prospective purchasers of Initial Securities
identified to the Company by the Initial Purchasers upon request.  Upon the request of any Holder of Initial
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. 
Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed to require the Company to register any of its securities pursuant to the
Exchange Act.

 

8.  Underwritten Registrations.  If any of the Transfer Restricted Securities
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
administer the offering (“Managing Underwriters”) will be selected, with the
reasonable approval of the Company, by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Securities to be included in such
offering.

 

No person may participate in any underwritten
registration hereunder unless such person (i) agrees to sell such person’s
Transfer Restricted Securities on the basis reasonably provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.

 

9.  Miscellaneous.

 

(a)  Remedies.  Each of the parties hereto acknowledges and
agrees that the payment of Additional Interest as provided in Section 6
hereof shall be the exclusive remedy for any failure by the Company to comply
with its obligations under Sections 1 and 2 hereof.

 

(b)  No
Inconsistent Agreements.  The
Company will not on or after the date of this Agreement enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.  The rights granted to
the Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Company’s securities under any
agreement in effect on the date hereof.

 

(c)  Amendments
and Waivers.  The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, except by
the Company and the written consent of the Holders of a majority in principal
amount of the Securities affected by such

 

17

 

amendment,
modification, supplement, waiver or consent. 
Without the consent of the Holder of each Security, however, no
modification may change the provisions relating to the payment of Additional
Interest.

 

(d)  Notices.  All notices and other communications provided
for or permitted hereunder shall be made in writing by hand delivery,
first-class mail, facsimile transmission, or air courier which guarantees
overnight delivery:

 

(1)  if to a Holder of the Securities, at the most
current address given by such Holder to the Company;

 

(2)  if to the Initial Purchasers, to them in care
of:

 

Merrill Lynch & Co.

Merrill Lynch, Pierce, Fenner & Smith Incorporated

4 World
Financial Center

New York, NY
10080

Fax No.:  (212) 449-3207

Attention:  Marcelo Cosma

 

with a copy
to:

 

Vinson &
Elkins L.L.P.

1001 Fannin
Street

2300 First City
Tower

Houston, TX
77002-6760

Fax No.:  (713) 615-5531

Attention:  T. Mark Kelly; or

 

(3) if to the
Company at its address as follows:

 

Carriage
Services, Inc.

1900 Saint
James Place

4th Floor

Houston, TX
77056

Fax No.:  (713) 332-8401

Attention:  Chief Financial Officer

 

with a copy
to:

 

Thompson &
Knight LLP

333 Clay
Street

Suite 3300

Houston, TX
77002

Fax No.:  (713) 654-1871

Attention:  W. Christopher Schaeper

 

18

 

All
such notices and communications shall be deemed to have been duly given:  at the time delivered by hand, if personally
delivered; three business days after being deposited in the mail, postage
prepaid, if mailed; when receipt is acknowledged by recipient’s facsimile
machine operator, if sent by facsimile transmission; and on the day delivered,
if sent by overnight air courier guaranteeing next day delivery.

 

(e) Third Party Beneficiaries.  The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right
to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder.

 

(f)  Successors and
Assigns.  This Agreement shall
inure to the benefit of and be binding upon each of the parties hereto.

 

(g)  Counterparts.  This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

 

(h)  Headings.  The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

 

(i)  Governing
Law.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

 

(j)  Severability.  If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

 

(k)  Securities
Held by the Company.  Whenever
the consent or approval of Holders of a specified percentage of principal
amount of Securities is required hereunder, Securities held by the Company or
its affiliates (other than subsequent Holders of Securities if such subsequent
Holders are deemed to be affiliates solely by reason of their holdings of such
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.

 

(l)  Submission
to Jurisdiction.  By the
execution and delivery of this Agreement, the Company submits to the
nonexclusive jurisdiction of the competent Federal and state courts in the
Borough of Manhattan in the City of New York in any suit or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby.

 

19

 

If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the Issuer a
counterpart hereof, whereupon this instrument, along with all counterparts,
will become a binding agreement among the several Initial Purchasers and the
Company in accordance with its terms.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  CARRIAGE SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Joseph Saporito

  	
   

  
	
   

  	
   Name:

  	
  Joe Saporito

  
	
   

  	
   Title:

  	
  Executive Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CARRIAGE
  FUNERAL HOLDINGS, INC.

  
	
   

  	
  CFS FUNERAL
  SERVICES, INC.

  
	
   

  	
  CARRIAGE
  HOLDING COMPANY, INC.

  
	
   

  	
  CARRIAGE
  FUNERAL SERVICES OF

  MICHIGAN, INC.

  
	
   

  	
  CARRIAGE
  FUNERAL SERVICES OF

  KENTUCKY, INC.

  
	
   

  	
  CARRIAGE
  FUNERAL SERVICES OF

  CALIFORNIA, INC.

  
	
   

  	
  CARRIAGE
  CEMETERY SERVICES OF IDAHO,

  INC.

  
	
   

  	
  WILSON &
  KRATZER MORTUARIES

  
	
   

  	
  ROLLING
  HILLS MEMORIAL PARK

  
	
   

  	
  CARRIAGE
  SERVICES OF CONNECTICUT,

  INC.

  
	
   

  	
  CSI FUNERAL
  SERVICES OF

  MASSACHUSETTS, INC.

  
	
   

  	
  CHC
  INSURANCE AGENCY OF OHIO, INC.

  
	
   

  	
  BARNETT,
  DEMROW & ERNST, INC.

  
	
   

  	
  CARRIAGE
  SERVICES OF NEW MEXICO, INC.

  
	
   

  	
  FORASTIERE
  FAMILY FUNERAL SERVICE,

  INC.

  
	
   

  	
  CARRIAGE
  CEMETERY SERVICES, INC.

  
	
   

  	
  CARRIAGE
  SERVICES OF OKLAHOMA, L.L.C.

  
	
   

  	
  CARRIAGE
  SERVICES OF NEVADA, INC.

  
	
   

  	
  HUBBARD
  FUNERAL HOME, INC.

  
	
   

  	
  CARRIAGE
  TEAM CALIFORNIA

  (CEMETERY), LLC

  
	
   

  	
  CARRIAGE
  TEAM CALIFORNIA (FUNERAL),

  LLC

  
						

 

Registration Rights Agreement Signature Page

 

 

	
   

  	
  CARRIAGE
  TEAM FLORIDA (CEMETERY),

  LLC

  
	
   

  	
  CARRIAGE
  TEAM FLORIDA (FUNERAL), LLC

  
	
   

  	
  CARRIAGE
  SERVICES OF OHIO, LLC

  
	
   

  	
  CARRIAGE
  TEAM KANSAS, LLC

  
	
   

  	
  CARRIAGE
  MUNICIPAL CEMETERY

  SERVICES OF NEVADA, INC.

  
	
   

  	
  CARRIAGE
  CEMETERY SERVICES OF

  CALIFORNIA, INC.

  
	
   

  	
  CARRIAGE
  INTERNET STRATEGIES, INC.

  
	
   

  	
  CARRIAGE INVESTMENTS,
  INC. (for itself and

  as general partner of Carriage Management, L.P.)

  
	
   

  	
  CARRIAGE
  MANAGEMENT, L.P.

  
	
   

  	
  HORIZON
  CREMATION SOCIETY, INC.

  
	
   

  	
  CARRIAGE
  LIFE EVENTS, INC.

  
	
   

  	
  CARRIAGE
  MERGER I, INC.

  
	
   

  	
  CARRIAGE
  MERGER II, INC.

  
	
   

  	
  CARRIAGE
  MERGER III, INC.

  
	
   

  	
  CARRIAGE
  MERGER IV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Joseph Saporito

  	
   

  
	
   

  	
   

  	
  Joseph
  Saporito

  
	
   

  	
   

  	
  Executive
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CARRIAGE
  INSURANCE AGENCY OF

  MASSACHUSETTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Melvin C. Payne

  	
   

  
	
   

  	
   

  	
  Melvin C.
  Payne

  
	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COCHRANE’S CHAPEL OF THE ROSES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Wendy Wilson Boyer

  	
   

  
	
   

  	
   

  	
  Wendy Wilson
  Boyer

  
	
   

  	
   

  	
  President

  

 

Registration Rights Agreement
Signature Page

 

 

The foregoing Registration

Rights Agreement is hereby confirmed

and accepted as of the date first

above written.

 

MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED

BANC OF AMERICA SECURITIES
LLC

 

	
  By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Joseph C. Gatto, Jr.

  	
   

  	
   

  
	
   

  	
  Joseph C. Gatto, Jr.

  	
   

  
	
   

  	
  Director

  	
   

  
				

 

Registration Rights Agreement
Signature Page

 

 

ANNEX A

 

Each broker-dealer that receives Exchange
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such
Exchange Securities.  The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an “underwriter” within
the meaning of the Securities Act.  This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received
in exchange for Initial Securities where such Initial Securities were acquired
by such broker-dealer as a result of market-making activities or other trading
activities.  The Company has agreed that,
for a period of 180 days after the Expiration Date (as defined herein), it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale.  See “Plan of
Distribution.”

 

 

ANNEX B

 

Each broker-dealer that receives Exchange Securities
for its own account in exchange for Initial Securities, where such Initial
Securities were acquired by such broker-dealer as a result of market- making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities.  See “Plan of Distribution.”

 

 

ANNEX C

 

PLAN OF DISTRIBUTION

 

Each broker-dealer that receives Exchange Securities
for its own account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities.  This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of Exchange Securities received in exchange for Initial
Securities where such Initial Securities were acquired as a result of
market-making activities or other trading activities.  The Company has agreed that, for a period of
180 days after the Expiration Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale.  In addition, until                   , 200 ,  all dealers effecting transactions in the
Exchange Securities may be required to deliver a prospectus.

 

The Company will not receive any proceeds from any
sale of Exchange Securities by broker-dealers. 
Exchange Securities received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Securities or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices.  Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. 
Any broker-dealer that resells Exchange Securities that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed
to be an “underwriter” within the meaning of the Securities Act and any profit
on any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act.  The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an “underwriter” within the meaning of the Securities Act.

 

For a period of 180 days after the Expiration Date the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. 
The Company has agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the Holders of the Securities)
other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Securities (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.

 

 

ANNEX D

 

If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Securities. 
If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an “underwriter”
within the meaning of the Securities Act.EXHIBIT 10.81

                      AMENDMENT TO SHARE PURCHASE AGREEMENT

      THIS AMENDMENT TO SHARE PURCHASE AGREEMENT (the "Amendment") is made and
entered into as of January 24, 2005 by and among HiEnergy Technologies, Inc., a
Delaware corporation (the "Company") and Bullbear Capital Partners LLC (the
"Purchaser"). Capitalized terms used herein but not defined herein shall have
the meanings assigned thereto in the Share Purchase Agreement (as defined
below).

                                    RECITALS

      A.    The parties listed above are parties to a Share Purchase Agreement,
            dated as of February 9, 2004 (the "Purchase Agreement").

      B.    The First Closing occurred on February 9, 2004. At the First
            Closing, the Purchaser paid the Minimum Purchase Price, and the
            Company issued to Purchaser 333,333 shares of common stock of the
            Company (the "Shares") and accompanying Warrants pursuant to Section
            1 of the Purchase Agreement.

      C.    The parties desire to reduce the prices of the Warrants issued in
            the First Closing, as well as provide for cashless exercise of the
            $0.45 Warrants; reduce the prices of the Warrants in connection with
            the Second Closing (as defined below), as well as provide for
            cashless exercise of the $0.45 Warrants.

      NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other premises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereby agree as follows:

      The Purchase Agreement is hereby amended as follows:

      1. SECTION 1. PURCHASES AND SALE of the Purchase Agreement is hereby
amended and restated in its entirety to read as follows:

                           (1).  Purchase and Sale. Purchaser agrees to buy and
                  the Company agrees to sell and issue to Purchaser, at the
                  First Closing, for an aggregate purchase price of One Hundred
                  and Fifty Thousand Dollars ($150,000) in cash (the "Minimum
                  Purchase Price"): (a) 333,333 shares of the Company's
                  authorized and previously unissued common stock, par value
                  $0.001 per share ("Common Stock"); (b) a warrant to purchase
                  Common Stock in substantially the form attached hereto as
                  Attachment B, with an initial exercise price of $0.45 per
                  share, subject to adjustment, for the purchase initially of up
                  to 333,333 shares of Common Stock, with a cashless exercise
                  provision; (c) a warrant to purchase Common Stock in
                  substantially the form attached hereto as Attachment B, with
                  an exercise price of $0.75 per share, subject to adjustment,
                  for the purchase initially of up to 200,000 shares of Common
                  Stock; (d) a warrant to purchase Common Stock in substantially
                  the form attached hereto as Attachment B, with an exercise
                  price of $1.25 per share, subject to adjustment, for the
                  purchase initially of up to 120,000 shares of Common Stock;
                  and (e) a warrant to purchase Common Stock in substantially
                  the form attached hereto as Attachment B, with an initial
                  exercise price of $0.45 per share, subject to adjustment, for
                  the purchase initially of up to 333,333 shares of Common
                  Stock, with a cashless exercise provision. All of such revised
                  Warrants shall be dated February 9, 2004 and their term shall
                  expire 3 1/2 years from the effective date of the Company's
                  Registration Statement.

<PAGE>

                           (2) Purchaser shall have the right to purchase the
                  following shares of common stock and warrants, and if the
                  Purchaser exercises such right as provided hereinafter, the
                  Company agrees to sell and issue to Purchaser upon the Second
                  Closing, for an aggregate purchase price of up to Eight
                  Hundred and Fifty Thousand Dollars ($850,000) in cash (the
                  "Additional Purchase Price"): (a) one whole share of the
                  Common Stock for each $0.45 of the Additional Purchase Price
                  (the "Additional Shares"); (b) a warrant to purchase Common
                  Stock in substantially the form attached hereto as Attachment
                  B, with an initial exercise price of $0.45 per share, subject
                  to adjustment, covering the number of shares of Common Stock
                  that could be purchased at the exercise price with an amount
                  in cash equal to the Additional Purchase Price, with a
                  cashless exercise provision; (c) a warrant to purchase Common
                  Stock in substantially the form attached hereto as Attachment
                  B, with an exercise price of $0.75 per share, subject to
                  adjustment, covering the number of shares of Common Stock that
                  could be purchased at that exercise price with an amount in
                  cash equal to the Additional Purchase Price; (d) a warrant to
                  purchase Common Stock in substantially the form attached
                  hereto as Attachment B, with an exercise price of $1.25 per
                  share covering the number of shares of Common Stock that could
                  be purchased at that exercise price with an amount in cash
                  equal to the Additional Purchase Price; and (e) a warrant to
                  purchase Common Stock in substantially the form attached
                  hereto as Attachment B, with an initial exercise price of
                  $0.45 per share, subject to adjustment, covering the number of
                  shares of Common Stock that could be purchased at the exercise
                  price with an amount in cash equal to the Additional Purchase
                  Price, with a cashless exercise provision. All of such
                  Warrants shall be dated the date of the Second Closing and
                  their term shall expire 3 1/2 years from the effective date of
                  the Company's Registration Statement.

      "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) or such
other senior United States trading facility as in the issuer may elect;
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.

<PAGE>

      The First Closing occurred on February 9, 2004. In the event that all
conditions set forth herein have been satisfied, the Second Closing shall occur
concurrently with the execution of this Amendment. The Second Closing (the
"Closing") shall be conducted via telephone and facsimile transmission. At the
Second Closing, the Purchaser shall pay the Additional Purchase Price by wire
transfer against delivery to the Purchaser by facsimile of the Additional Shares
and the Warrants. The Company agrees to remit to the Purchaser from proceeds
$7,800.00 in reimbursement of Purchaser's legal fees and expenses

      2. Notwithstanding anything in Section 5 of the Purchase Agreement, the
Additional Shares and Warrants issued to the Purchaser in connection with this
Second Closing (the "Second Closing Securities") shall not be subject to the two
percent payments on a monthly basis; provided however, that if the Purchaser
continues to hold the Second Closing Securities and if the Company has not
caused the shares underlying the Second Closing Securities to become registered
by April 9, 2005, the Company shall pay to Purchaser in like kind a number of
securities equal to two percent of the Second Closing Securities in the same
manner as prescribed in Section 5 of the Purchase Agreement. In all cases, the
Company shall not be obligated to pay penalties on the additional Warrants
issued to the Purchaser as a result of the repricing of the First Closing.

      3. Except as specifically set forth herein, the remaining sections of the
Purchase Agreement shall not be amended, modified or otherwise altered.

      4. The Company will not file any registration statement of Form S-8
without the review and approval of Bullbear Capital Partners LLC. Bullbear
Capital Partners LLC agrees to not unreasonably prevent the Company from filing
a registration statement on Form S-8 relating to the registration of not more
than 500,000 shares of common stock of the Company issued to specified employees
and/or consultants for qualified services, so long as the Company makes
full-disclosure of the services rendered by each employee and/or consultant, and
obtains an opinion of counsel that such shares may be registered on Form S-8
under the Securities Act of 1933, as amended.

      5. The Company agrees to include all of the shares of Common Stock owned
by the Purchaser and its representatives, including all of the shares of Common
Stock underlying warrants owned by the Purchaser, and its representatives, in
its next Registration Statement.

      6. Notwithstanding anything in the Purchase Agreement (and excluding
Section 4 of this Amendment), the Purchaser shall have the right to assign,
without the approval or consent of the Company, its rights in the Purchase
Agreement and this Amendment to any third party or parties (the "Assigned
Party"), subject to the Purchaser's participation and that of each Assigned
Party in the Closing described herein. The Purchaser shall provide to the
Company in anticipation of the Closing a written notice specifying the name of
each Assigned Party on or before the date of the Closing.

<PAGE>

      7. The Company hereby represents and warrants that Bogdan C. Maglich,
Chairman, Chief Executive Officer and Treasurer of the Company, has the express
authority to execute and deliver this Amendment pursuant to written
authorization of the Board of Directors of the Company dated January 12, 2005.

      IN WITNESS WHEREOF, the parties have caused this Amendment to be signed as
of the date first written above.

         COMPANY:

         HIENERGY TECHNOLOGIES, INC.

         By: __________________________
         Name:  Bogdan C. Maglich

         Title: Chairman, Chief Executive Officer and Treasurer

         PURCHASER:

         BULLBEAR CAPITAL PARTNERS LLC

         By:__________________________
         Name:  Brian D. Corday
         Title: President

<PAGE>

                                  ATTACHMENT B

                    TO HIENERGY/BULLBEAR AMENDED AND RESTATED
                    -----------------------------------------
                            STOCK PURCHASE AGREEMENT

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 HIENERGY TECHNOLOGIES, INC. SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL 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

                           HIENERGY TECHNOLOGIES, INC.

       Expires: 3 1/2 years after effectiveness of registration statement

Holder:
Warrant No.: W-___
Number of Warrant Shares: __________
Exercise Price: $____ per Warrant Share
Original Issue Date: ________________

      FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, HiEnergy Technologies, Inc., a Delaware corporation (together with
its successors and assigns, the "Issuer"), hereby certifies that the Holder or
its registered assign or assigns (individually or collectively referred to as
the "Holder") is entitled to subscribe for and purchase, during the period
defined below in this Warrant as the Term, the number of Warrant Shares
indicated above shares (subject to adjustment as hereinafter provided) of the
duly authorized, validly issued, fully paid and non-assessable shares of the
Issuer's Common Stock, as defined below in this Warrant, 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.

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

      "Board" means the Board of Directors of the Issuer.

<PAGE>

      "Business Day" means any day except a Saturday, Sunday or any day on which
commercial banks in Irvine, California or New York, New York are authorized or
required by law or other government action to close.

      "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.

      "Certificate of Incorporation" means the Certificate 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.

      "Common Stock" means the Common Stock, par value $0.001 per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.

      "Effectiveness Date" means the date that the Registration Statement as
described in Section 5 of the Purchase Agreement becomes effective with respect
to the Warrant Shares to be issued upon the exercise of this Warrant by the
Holder.

      "Exercise Date" means the date that the amount payable under Section 3(b)
is received in full by the Issuer in immediately available U.S. dollar
denominated funds in the account of the Issuer at a financial institution
designated from time to time by the Issuer pursuant to the Purchase Agreement;
or the date the Holder executes the cashless exercise provision provided for
herein and pursuant to the conditions set forth Section 3 (c).

      "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 HiEnergy Technologies, Inc., a Delaware corporation, and
its successors.

      "Majority Holders" means at any time the Holders of Warrants exercisable
for a majority of the Warrant Shares issuable under the Warrants at the time
outstanding.

      "Original Issue Date" means the date of the Closing as defined in the
Purchase Agreement.

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

<PAGE>

      "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.

      "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 sale
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),
or as reported by such other senior United States trading facility as the Issuer
may elect, 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) or by such other senior United States trading facility as the
Issuer may elect, then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Board, 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 Amended and Restated Stock Purchase
Agreement dated as of _______________ between the Issuer and the investors party
thereto.

      "Registration Statement" means the registration statement on Form SB-2 or
another available form registering the Warrant Shares as described in Section 5
of 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 2 hereof.

<PAGE>

      "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) or such
other senior United States trading facility as in the issuer may elect;
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 the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of Section 3(d), 3(e) or 3(f) hereof or of any of such other
Warrants.

      "Warrant Price" initially means U.S. $____, as such price may be adjusted
from time to time as shall result from the adjustments specified in this
Warrant, including Section 5 hereto.

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

      "Warrant Shares" means shares of Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant or
Warrants.

2. Term. The right to subscribe for and purchase Warrant Shares represented
hereby shall commence on February 9, 2004 and shall expire at 5:00 pm, Eastern
Time, on the date that is three and one-half years after the Effectiveness Date
(such period sometimes herein called the "Term").

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

      (a) Time of Exercise. The purchase rights represented by this Warrant may
be exercised in whole or in part at any time and from time to time during the
Term, and this Warrant shall be considered exercised on the date (the "Exercise
Date") that the amount payable under Section 3(b) is received in full by the
Issuer in immediately available U.S. dollar denominated funds in the account of
the Issuer at a financial institution designated from time to time by the Issuer
pursuant to the Purchase Agreement; or Warrant shall be considered exercised on
the date the Holder executes the cashless exercise provision provided for herein
and pursuant to the conditions set forth Section 3(c).

<PAGE>

      (b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by (1) a facsimile transmission executed and sent to the
attention of the Secretary of the Company, and (2) the physical surrender on the
next Trading Day of this Warrant (with the exercise form attached hereto duly
executed) at the principal office of the Issuer, and (2) by the payment in full
to the order of the Issuer on the next trading day of an amount of consideration
therefor equal to the Warrant Price in effect on the Exercise Date multiplied by
the number of Warrant Shares with respect to which this Warrant is then being
exercised, payable in immediately available U.S. dollar denominated funds by
check or by wire to the account of the Issuer at a financial institution
designated from time to time by the Issuer pursuant to the Purchase Agreement.

      (c) Cashless Exercise. Notwithstanding any provisions herein to the
contrary, if the underlying securities are not registered by February 9, 2005,
and if the closing bid price for one share of Common Stock at the close of
business on the date of exercise in the over-the-counter market as reported by
the OTC Bulletin Board, or as reported in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices, or as reported by such other senior United States trading
facility as the Issuer may elect (the "Per Share Market Price"), is greater than
the Exercise Price on the date of exercise, then the Holder may exercise this
Warrant by a cashless exercise, in lieu of exercising this Warrant by payment of
cash, and shall receive the number of shares of Common Stock equal to the amount
determined below by surrender of this Warrant at the principal office of the
Issuer together with properly endorsed Notice of Exercise in which event the
Issuer shall issue to the Holder a number of shares of Common Stock computed
using the following formula:

     X = Y - (A)(Y)
             ------

               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 a partial exercise, the number of shares underlying the portion
being exercised;

<PAGE>

      A = the Exercise Price;

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

      (d) Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the Warrant Shares so purchased
shall be dated as of the Exercise Date and delivered to the Holder hereof within
a reasonable time, not exceeding three (3) Trading Days after the Exercise Date,
and the Holder hereof shall be deemed for all purposes to be the Holder of the
Warrant Shares so purchased as of the Exercise Date and (ii) unless this Warrant
has expired, a new Warrant representing the number of Warrant Shares, 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 3(g), this Warrant may
be transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph, and subject to the provisions of Section 3 (g), 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 Warrant Shares, each new Warrant to
represent the right to purchase such number of Warrant Shares 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 Warrant Shares issuable
pursuant hereto.

<PAGE>

      (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 Warrant Shares 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 Warrant Shares 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 Warrant Shares 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 HIENERGY TECHNOLOGIES, INC. SHALL HAVE RECEIVED AN
         OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
         SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES
         LAWS IS NOT REQUIRED.

      (iii) The restrictions imposed by this subsection (g) upon the transfer of
this Warrant or the Warrant Shares to be purchased upon exercise hereof shall
terminate (A) when such securities shall have been resold pursuant to an
effective registration statement under the Securities Act, (B) upon the Issuer's
receipt of an opinion of counsel, in form and substance reasonably satisfactory
to the Issuer, addressed to the Issuer to the effect that such restrictions are
no longer required to ensure compliance with the Securities Act and state
securities laws or (C) upon the Issuer's receipt of other evidence reasonably
satisfactory to the Issuer that such registration and qualification under the
Securities Act and state securities laws are not required. Whenever such
restrictions shall cease and terminate as to any such securities, the Holder
thereof shall be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if any), new
Warrants (or, in the case of Warrant Shares, new stock certificates) of like
tenor not bearing the applicable legend required by paragraph (ii) above
relating to the Securities Act and state securities laws.

<PAGE>

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

      (a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all Warrant Shares which may be issued upon the exercise of this
Warrant or any shares of capital stock otherwise issuable hereunder will, upon
issuance, be duly authorized, validly issued, fully paid and non-assessable and
free from all taxes, liens and charges created by, through or under Issuer,
other than resale restrictions under the federal or state securities laws.

      (b) Reservation. The Issuer 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. 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, upon
notice from the Holder of such requirement, in good faith use its 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 Warrant Shares from
time to time issued upon exercise of this Warrant or as otherwise provided
hereunder, and, to the extent permissible under the applicable securities
exchange rules, all unissued Warrant Shares 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 Certificate 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 Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect the rights of the 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 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.

<PAGE>

5. Adjustment of Warrant Price and Warrant Share Number. The number of shares of
Common Stock for which this Warrant is exercisable, and 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 5. The Issuer shall
give the Holder notice of any event described below which requires an adjustment
pursuant to this Section 5 in accordance with Section 6.

      (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 with or merge into
     any other Person and the Issuer shall not be the continuing or surviving
     corporation of such consolidation or merger, or (b) permit any other Person
     to consolidate with or merge into the Issuer and the Issuer shall be the
     continuing or surviving Person but, in connection with such consolidation
     or merger, any Capital Stock of the Issuer shall be changed into or
     exchanged for Securities of any other Person or cash or any other property,
     or (c) transfer all or substantially all of its properties or assets to any
     other Person, or (d) effect a capital reorganization or reclassification of
     its Capital Stock, 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 5.

                  (ii) Notwithstanding anything contained in this Warrant to the
         contrary, the Issuer will not effect any Triggering Event 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
         an opinion of counsel for such Person, which counsel shall be
         reasonably satisfactory to such Holder, 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:

<PAGE>

                  (i) take a record of 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.

      (c) 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.

      (d) Escrow of Warrant Shares. If after any property becomes distributable
pursuant to this Section 5 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.

6. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 5 hereof (for purposes of this Section 6,
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 five" 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. 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.

<PAGE>

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

8. Call. Notwithstanding anything herein to the contrary, commencing any time
during the effectiveness of the registration statement registering the Warrant
Shares, the Issuer, at its option, may call up to one hundred percent (100%) of
this Warrant if the Per Share Market Value of the Common Stock has been equal to
or greater than $2.50 per share for a period of five (5) consecutive Trading
Days immediately prior to the date of delivery of the Call Notice (a "Call
Notice Period") by providing the Holder of this Warrant written notice pursuant
to Section 12 (the "Call Notice"). The rights and privileges granted pursuant to
this Warrant with respect to the Warrant Shares subject to the Call Notice (the
"Called Warrant Shares") shall expire on the twentieth (20th) day after the
Holder receives the Call Notice (the "Early Termination Date") if this Warrant
is not exercised with respect to such Called Warrant Shares prior to such Early
Termination Date. In the event this Warrant is not exercised with respect to the
Called Warrant Shares, the Issuer shall remit to the Holder of this Warrant (i)
$.01 per Called Warrant Share and (ii) a new Warrant representing the number of
Warrant Shares, if any, which shall not have been subject to the Call Notice
upon the Holder tendering to the Issuer the applicable Warrant certificate.

9. 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

<PAGE>

      (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 action in question and not less than twenty (20) days
prior to the record date or the date on which the Issuer's transfer books are
closed in respect thereto. The Holder shall have the right to send two (2)
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.

10. 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 10 except with the consent of the Holder of this Warrant or pursuant to
this Warrant Agreement.

11. 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.

12. Notices. All notices, requests, consents 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 Business Day, or if not, then on the next Business Day, (ii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service specifying next-day delivery with verification of
delivery or (iii) actual receipt by the party to whom such notice is required to
be given. The addresses for such communications shall be at the relevant
Holder's 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:

         HiEnergy Technologies, Inc.
         Attn: Corporate Secretary
         1601B Alton Parkway
         Irvine, California 92606
         Attention: Chief Executive Officer
         Tel. No.: (949) 757-0855
         Fax No.: (949) 757-1477

with a copy to:

<PAGE>

         August Law Group, P.C.
         The Atrium
         19200 Von Karman Ave., Suite 500
         Irvine, CA 92612
         Attention: Kenneth S. August, Esq.
         Tel No.: (949) 752-7772
         Fax No.: (949) 752-7776

Copies of notices to the Holder shall be sent to the attorney indicated in the
signature pages to this Warrant. Any party hereto may from time to time change
its or its attorney's address for notices by giving at least ten (10) days
written notice of such changed address to the other party hereto.

13. Warrant Transfer Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent or more than one agent having an office in New
York, New York for the purpose of being directly involved with Holder in respect
to issuing Warrant Shares upon the exercise of this Warrant pursuant to
subsections (b) and (c) of Section 3 hereof, transferring or exchanging this
Warrant or any Warrant Certificate pursuant to subsection (e) of Section 3
hereof or replacing this Warrant or any Warrant Certificate pursuant to
subsection (d) of Section 4 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 or agents, as designated from time to time by the
Issuer.

14. 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, and the
Holder likewise stipulates that the remedies at law of the Issuer, 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, interim relief, or by an injunction for
performance or against a violation of any of the terms hereof. This Warrant is
acquired by the Holder pursuant to and subject to the terms of the Purchase
Agreement.

15. Successors and Assigns. All respective rights, powers and privileges and
respective obligations evidenced by this Warrant shall inure to the benefit of
and be binding upon the Issuer and only the registered successors and registered
assigns of the Holder hereof and (to the extent provided herein) the Holders of
Warrant Shares issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Shares.

16. 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.

17. Headings. The headings of the Sections of this Warrant are for convenience
of reference only and shall not, for any purpose, be deemed to modify any other
term or provision of this Agreement.

<PAGE>

      IN WITNESS WHEREOF, the Issuer has executed this Warrant to Purchase
Shares of Common Stock of HiEnergy Technologies, Inc., Warrant No. W-___, as of
the date first above written.

HIENERGY TECHNOLOGIES, INC.

By:
    ----------------------------------------
Name: Dr. Bogdan C. Maglich
Title: Chief Executive Officer

<PAGE>

                                   Schedule A

(Accurate only as of the date of the date first set forth above, and subject to
future changes in the registered Holder as listed above and successors and
assigns registered pursuant to the Warrant.)

Registered Holder                                    Copy To
-----------------                                    -------

<PAGE>

                           HIENERGY TECHNOLOGIES, INC.

                                  EXERCISE FORM

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase ________ shares of Common Stock of HiEnergy
Technologies, Inc. covered by the within Warrant.

Dated: _________________
Signature: ___________________________

Address: _____________________

         _____________________

                                 ASSIGNMENT FORM

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 FORM

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ Warrant Shares 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 :_____________________

         _____________________

<PAGE>

                           HIENERGY TECHNOLOGIES, INC.

                             CASHLESS EXERCISE FORM

       (To be executed upon exercise of Warrant pursuant to Section 3(c) )

The undersigned ______________hereby irrevocably elects a cashless exercise of
the right of purchase represented by the within the Warrant for, and to purchase
thereunder, ______________ shares of Common Stock, as provided for in Section 3
(c) therein.

If said number of shares shall not be all the shares purchasable under the
within the Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder
rounded up to the next higher number of shares.

         Please issue a certificate or certificates for such Common Stock in the
name of, and pay any cash for any fractional shares to:

NAME:       ___________________________________________
            (Please Print Name)

ADDRESS:    ___________________________________________

            ___________________________________________

SOCIAL SECURITY NUMBER:    ________________________________

SIGNATURE:                 ________________________________

NOTE: The above signature should correspond exactly with the name on the first
page of this Warrant or with the name the assignee appearing in the assignment
form on the preceding page.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}]]