Document:

Exhibit 10.21

Exhibit 10.21

RESTRICTED STOCK AWARD AGREEMENT

 

THIS RESTRICTED STOCK AWARD AGREEMENT (“Agreement”) is made and entered into as of the _____ day of _____, 20___ by and between COVENTRY HEALTH CARE, INC., a Delaware corporation, (the “Company”) and                                     (“Holder”).

 

1.         Restricted Stock Award.  The Company hereby awards Holder _____ shares (the “Restricted Stock,” which shall include any additional shares or other securities received in respect of the Restricted Stock through stock splits or stock dividends pursuant to Section 3 below or under the Company’s 2004 Incentive Plan) of the Company’s Common Stock (the “Common Stock”), subject to the terms and conditions of this Agreement and the terms and conditions of the 2004 Incentive Plan.  If the terms of this Agreement conflict with or are inconsistent with the terms of the 2004 Incentive Plan, the 2004 Incentive Plan shall control.

 

2.         Restrictions, Performance Goals and Conditions:  (a)(i)  Restrictions.  Commencing with the date hereof, the Holder agrees Holder has no right to, and shall not, sell, transfer, pledge or assign, in whole or in part, the Restricted Stock until (x) all performance goals set forth herein have been attained and (y) the required time period with respect to each increment of Restricted Stock shall have lapsed.       

 

 (ii)    Performance Goals.  This award of Restricted Stock is contingent upon the attainment of the following performance goal:  For the year ending December 31, 20___, the Company shall have attained earnings equal to $______ per diluted share of Common Stock.  In the event the foregoing performance goal shall not be attained, then this award of Restricted Stock and any cash dividends received on the shares of Restricted Stock shall be forfeited, and this Agreement shall become null and void.   

 

 (iii)   Lapse of Restrictions.   In the event that the performance goal(s) set forth in Subsection 2(a)(ii) above shall have been met, then the restrictions set forth in Section 2(a)(i)(x) above shall lapse and be no longer in force and effect, and the required time period referenced in Section 2(a)(i)(y) above shall lapse in annual cumulative increments of [one-third] [one-fourth] the number of shares of Restricted Stock awarded herein, with the first annual increment beginning on ________, 20___.   From and after each annual date, the shares as to which the above restrictions have lapsed shall be owned by Holder free and clear of all restrictions or limitations of this Agreement.  As soon as reasonably practicable after each date the restrictions shall lapse, the Company shall deliver the
unrestricted shares to Holder, either by issuing a stock certificate for the unrestricted shares or by transferring the unrestricted shares electronically to Holder’s brokerage account.

 

 (b)       Except as provided in this Agreement to the contrary, the Holder shall have, with respect to the Restricted Stock, all of the rights of a shareholder of the Company, including the right to vote the shares and the right to receive any cash dividends.  Pursuant to Section 3 below, stock or other security dividends or stock splits issued with respect to Restricted Stock shall be treated as additional Restricted Stock that are subject to the same restrictions and other terms and conditions that apply to the Restricted Stock with respect to which such dividends or splits are issued.

 

 (c)        Upon termination of Holder’s service as an employee of the Company for any reason during the term of this Agreement, all shares still subject to restriction will be forfeited, unless such termination is the result of Holder’s death or Disability, in which case the Restricted Stock subject to restriction will immediately vest.

 

 (d)       In the event of a Change in Control of the Company, Restricted Stock as to which restrictions have not lapsed will vest as of the date the Change in Control, as applicable, is deemed to have occurred.

 

3.         Adjustments.  In the event of any merger, reorganization, consolidation, recapitalization, extraordinary cash dividend, stock dividend, stock split or other change in corporate structure affecting the Common Stock, such substitution or adjustment shall be made in the maximum number of shares of Restricted Stock as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any award shall always be a whole number.

 

4.         Restricted Account/Stock Legend.  Holder acknowledges that the Company will either issue the Restricted Stock covered by this Agreement in the name of Holder to be held in an uncertificated restricted account or will issue a stock certificate for the Restricted Stock covered by this Agreement registered in the name of Holder, which certificate bear will bear the legend set forth below and any additional legend required by applicable securities law or by the New York Stock Exchange or any exchange on which the Common Stock may be listed:

 

The shares evidenced by this certificate are subject to the terms and conditions of a Restricted Stock Agreement dated _______, 20___ between Coventry Health Care, Inc. and the registered holder hereof.

 

Holder acknowledges that the certificates evidencing the Restricted Stock, whether certificated or uncertificated, shall be held in the custody of the Company in the name of the Holder until the restrictions lapse and that it is a condition to the effectiveness of this Agreement and the award of the Restricted Stock that Holder deliver to the Company the stock power enclosed herewith, endorsed in blank.

 

5.         Non transferability.  The Holder’s rights hereunder shall not be transferable otherwise than as provided in the 2004 Incentive Plan, and the terms thereof shall be binding on the executors, administrators, heirs and successors of Holder. 

 

6.         Defined Terms.  Defined terms used herein and not defined shall have the meanings ascribed to them in the 2004 Incentive Plan.

 

7.         Amendment:  Choice of Law.  This Agreement may be amended as provided in the Plan.  This Agreement shall be governed by Maryland law.

 

	
             
 	
            COVENTRY HEALTH CARE, INC.
 	
            HOLDER:
 

 

	
             
 	
            By:                                              
 	
                                                         
 
	
             
 	
            Dale B. Wolf
 	
             

					

Chief Executive Officer                                                                                                                                
SS#Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy, Inc. - Exhibit 4.2

EXHIBIT 4.2

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

TERAX ENERGY, INC.

WARRANT

	Warrant No. [  ]	Original Issue Date: [  ], 2006
  

          Terax
  Energy, Inc., a Nevada corporation (the "Company"), hereby certifies
  that, for value received, [      ] or its registered
  assigns (the "Holder"), is entitled to purchase from the Company up to
  a total of [                             ]1
  shares of Common Stock, subject to adjustment in accordance herewith (each such
  share, a "Warrant Share" and all such shares, the "Warrant Shares"),
  at any time and from time to time from and after the date hereof through and
  including [ five years from the Closing Date as defined by the Purchase Agreement
  ] (the "Expiration Date"), and subject to the following terms and conditions:

          1.      Definitions.
As used in this Warrant, the following terms shall have the respective
definitions set forth in this Section 1. Capitalized terms that are used and not
defined in this Warrant that are defined in the Purchase Agreement (as defined
below) shall have the respective definitions set forth in the Purchase
Agreement.

          "Business
Day" means any day except Saturday, Sunday and any day that is a federal
legal holiday in the United States or a day on which banking institutions in the
State of New York State of Connecticut or the Commonwealth of Massachusetts are
authorized or required by law or other government action to close.

          "Common
Stock" means the common stock of the Company, par value $0.001 per share,
and any securities into which such common stock may hereafter be reclassified.

__________________________________________
1 A
number of shares as equals the Investment Amount (as defined in the Purchase
Agreement), divided by $1.25.

          "Exercise
Price" means $1.50, subject to adjustment in accordance with Section
9.

          "Fundamental
Transaction" means any of the following: (1) the Company effects any merger
or consolidation of the Company with or into another Person, (2) the Company
effects any sale of all or substantially all of its assets in one or a series of
related transactions, (3) any Person becomes the holder of more than 50% of the
outstanding shares of the Company’s Common Stock, (4) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (5) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property.

          “Original
Issue Date” means the Original Issue Date first set forth on the first page
of this Warrant.

          “New
York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.

          "Purchase
Agreement" means the Securities Purchase Agreement, dated , 2006, to which
the Company and the original Holder are parties.

          "Trading
Day" means (i) a day on which the Common Stock is traded on a Trading
Market, or (ii) if the Common Stock is not quoted on any Trading Market, a day
on which the Common Stock is quoted in the over-the-counter market as reported
by the Pink Sheets, LLC (or any similar organization or agency succeeding to its
functions of reporting prices).

          "VWAP"
means on any particular Trading Day or for any particular period, the volume
weighted average trading price per share of Common Stock on such date or for
such period as reported by the Bloomberg L.P., or by any successor performing
similar functions.

          2.     
Registration of Warrant. The Company shall register this Warrant upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

          3.     
Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration or transfer,
a new Warrant to purchase Common Stock, in substantially the form of this
Warrant (any such new Warrant, a "New Warrant"), evidencing the portion
of this Warrant so transferred shall be issued to the transferee and a New
Warrant evidencing the remaining portion of this Warrant not so transferred, if
any, shall be issued to the transferring Holder. The acceptance of the New
Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a Warrant.

          4.      Exercise
and Duration of Warrants.

2

                    (a)     
This Warrant shall be exercisable by the registered Holder at any time and from
time to time on or after the date hereof through and including the Expiration
Date. At 6:30 p.m., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no
value. Except as provided in Section 4(b) below, the Company may not call or
redeem any portion of this Warrant without the prior written consent of the
affected Holder.

                    (b)      Subject
to the provisions of this Section 4(b), if at any time: (i) the VWAP of the
Common Stock for each of 30 consecutive Trading Days each is greater than $2.50
(subject to adjustment pursuant to Section 9), (ii) the Warrant Shares are
either registered for resale pursuant to an effective registration statement
naming the Holder as a selling stockholder thereunder (and the prospectus
thereunder is available for use by the Holder as to all Warrant Shares) or
freely transferable without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act, during the entire 30 Trading Day period
referenced in (i) above through the expiration of the Call Date as set forth in
the Company’s notice pursuant to this Section (the “Call Condition
Period”), (iii) the Company shall have complied in all material respects
with its obligations under this Warrant and the Transaction Documents and (iv)
the Common Stock shall at all times be listed or quoted on a Trading Market,
then, subject to the conditions set forth in this Section, the Company may, in
its sole discretion, elect to require the exercise of all of the then
unexercised portion of this Warrant, on the date that is the fifth Trading Day
after written notice thereof (a “Call Notice”) is received by the Holder
(such fifth Trading Day shall be known as the “Call Date”) at the address
last shown on the records of the Company for the Holder or given by the Holder
to the Company for the purpose of notice; provided, that the conditions
to giving such notice must be in effect at all times during the Call Condition
Period or any such Call Notice shall be null and void. The Company and the
Holder agree that, if and to the extent Section 11 of this Warrant would
restrict the ability of the Holder to exercise this Warrant in the event of a
delivery of a Call Notice, then notwithstanding anything to the contrary set
forth in the Call Notice, the Call Notice shall be deemed automatically amended
to apply only to such portion of this Warrant as may be exercised by the Holder
by the Call Date in accordance with such Section. The Holder will promptly (and,
in any event, prior to the Call Date) notify the Company in writing following
receipt of a Call Notice if Section 11 would restrict its exercise of the
Warrant, specifying therein the number of Warrant Shares so restricted.

          5.      Delivery
of Warrant Shares.

                    (a)      To
effect exercises hereunder, the Holder shall not be required to physically
surrender this Warrant unless the aggregate Warrant Shares represented by this
Warrant is being exercised. Upon delivery of the Exercise Notice (in the form
attached hereto) to the Company (with the attached Warrant Shares Exercise Log)
at its address for notice set forth herein and upon payment of the Exercise
Price multiplied by the number of Warrant Shares that the Holder intends to
purchase hereunder, the Company shall promptly (but in no event later than three
Trading Days after the Date of Exercise (as defined herein)) issue and deliver
to the Holder, a certificate for the Warrant Shares issuable upon such exercise,
which, unless otherwise required by the Purchase Agreement, shall be free of
restrictive legends. The Company shall, upon request of the Holder and
subsequent to the date on which a registration statement covering the resale of
the Warrant Shares has been declared effective by the Securities and Exchange
Commission, use its reasonable best efforts to deliver Warrant Shares hereunder
electronically 

3

through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available,
provided, that, the Company may, but will not be required to change its
transfer agent if its current transfer agent cannot deliver Warrant Shares
electronically through the Depository Trust Corporation. A "Date of
Exercise" means the date on which the Holder shall have delivered to the
Company: (i) the Exercise Notice (with the Warrant Exercise Log attached to it),
appropriately completed and duly signed and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the Holder to be purchased.

                    (b)      If
by the third Trading Day after a Date of Exercise the Company fails to deliver
the required number of Warrant Shares in the manner required pursuant to Section
5(a), then the Holder will have the right to rescind such exercise.

                    (c)     
If by the third Trading Day after a Date of Exercise the Company fails to
deliver the required number of Warrant Shares in the manner required pursuant to
Section 5(a), and if after such third Trading Day and prior to the receipt of
such Warrant Shares, the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the
exercise at issue by (B) the closing bid price of the Common Stock on the Date
of Exercise and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of Warrant Shares for which such exercise was
not honored or deliver to the Holder the number of shares of Common Stock that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. The Holder shall provide the Company written
notice indicating the amounts payable to the Holder in respect of the
Buy-In.

                    (d)      The
Company's obligations to issue and deliver Warrant Shares in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company's failure to
timely deliver certificates representing Warrant Shares upon exercise of the
Warrant as required pursuant to the terms hereof.

          6.     
Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, 

4

however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the registration of
any certificates for Warrant Shares or Warrants in a name other than that of the
Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring this Warrant or receiving Warrant
Shares upon exercise hereof.

          7.      Replacement
of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation hereof, or in lieu of and substitution for this Warrant, a New
Warrant, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity (which shall not include a surety bond), if requested. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable third-party
costs as the Company may prescribe. If a New Warrant is requested as a result of
a mutilation of this Warrant, then the Holder shall deliver such mutilated
Warrant to the Company as a condition precedent to the Company’s obligation to
issue the New Warrant.

          8.      Reservation
of Warrant Shares. The Company covenants that it will at all times reserve
and keep available out of the aggregate of its authorized but unissued and
otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of Persons other than the Holder (taking into account
the adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable.

          9.      Certain
Adjustments. The Exercise Price and number of Warrant Shares issuable upon
exercise of this Warrant are subject to adjustment from time to time as set
forth in this Section 9.

                    (a)      Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.

                    (b)     
Fundamental Transactions. If, at any time while this Warrant is
outstanding there is a Fundamental Transaction, then the Holder shall have the
right thereafter to 

5

receive, upon exercise of this Warrant, the same amount and
kind of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant
Shares then issuable upon exercise in full of this Warrant (the "Alternate
Consideration"). For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and the Company
shall apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder's option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall, either (1) issue to the
Holder a new warrant substantially in the form of this Warrant and consistent
with the foregoing provisions and evidencing the Holder's right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof,
or (2) purchase the Warrant from the Holder for a purchase price, payable in
cash within five Trading Days after such request (or, if later, on the effective
date of the Fundamental Transaction), equal to the Black Scholes value of the
remaining unexercised portion of this Warrant on the date of such request. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (b) and insuring that the Warrant (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

                    (c)      Number
of Warrant Shares. Simultaneously with any adjustment to the Exercise Price
pursuant to this Section 9, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for
the adjusted number of Warrant Shares shall be the same as the aggregate
Exercise Price in effect immediately prior to such adjustment.

                    (d)     
Calculations. All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.

                    (e)     
Notice of Adjustments. Upon the occurrence of each adjustment pursuant to
this Section 9, the Company at its expense will promptly compute such adjustment
in accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company's Transfer
Agent.

6

                    (f)     
Notice of Corporate Events. If the Company (i) declares a dividend or any
other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction (but only to the extent such disclosure
would not result in the dissemination of material, non-public information to the
Holder or if such disclosure would not result in the dissemination of material,
non-public information to the Holder, the Holder is given the opportunity to
receive such information upon execution of a customary non-disclosure agreement
on terms and conditions reasonably acceptable the Holder) at least 10 calendar
days prior to the applicable record or effective date on which a Person would
need to hold Common Stock in order to participate in or vote with respect to
such transaction, and the Company will take all steps reasonably necessary in
order to insure that the Holder is given the practical opportunity to exercise
this Warrant prior to such time so as to participate in or vote with respect to
such transaction; provided, however, that the failure to deliver such notice or
any defect therein shall not affect the validity of the corporate action
required to be described in such notice.

          10.      Payment
of Exercise Price. The Holder may pay the Exercise Price in one of
the following manners:

                    (a)     
Cash Exercise. The Holder may deliver immediately available funds; or

                    (b)     
Cashless Exercise. If an Exercise Notice is delivered anytime after one
year from the date of this Agreement and at a time when a registration statement
permitting the Holder to resell the Warrant Shares is not then effective or the
prospectus forming a part thereof is not then available to the Holder for the
resale of the Warrant Shares as required pursuant to this Agreement, then the
Holder may notify the Company in an Exercise Notice of its election to utilize
cashless exercise, in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:

X = Y [(A-B)/A]

where:

X = the number of Warrant Shares to be
issued to the Holder.

Y = the number of Warrant Shares with
respect to which this Warrant is being exercised.

A = the average of the closing prices
for the five Trading Days immediately prior to (but not including) the Exercise
Date.

B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act,
it is intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed 

7

to have been acquired by the Holder, and the holding period for
the Warrant Shares shall be deemed to have commenced, on the date this Warrant
was originally issued.

          11.     
Limitations on Exercise. Notwithstanding anything to the contrary
contained herein, the number of Warrant Shares that may be acquired by the
Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall
be limited to the extent necessary to insure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with the Holder's for purposes of
Section 13(d) of the Exchange Act, does not exceed 9.99% [4.99%]of the total
number of issued and outstanding shares of Common Stock (including for such
purpose the shares of Common Stock issuable upon such exercise). For such
purposes, beneficial ownership shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder.
This provision shall not restrict the number of shares of Common Stock which a
Holder may receive or beneficially own in order to determine the amount of
securities or other consideration that such Holder may receive in the event of a
Fundamental Transaction as contemplated in Section 9 of this Warrant. This
restriction may be waived upon 61 day’s prior written notice to the Company.

          12.     
No Fractional Shares. No fractional shares of Warrant Shares will be issued in
connection with any exercise of this Warrant. In lieu of any fractional shares
which would, otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the closing price of one Warrant Share as
reported by the applicable Trading Market on the date of exercise.

          13.      Notices.
Any and all notices or other communications or deliveries hereunder (including,
without limitation, any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (iv)
upon actual receipt by the party to whom such notice is required to be given.
The addresses for such communications shall be the registered address of the
Company or the Holder, as applicable, or such other address as either party may
provide the other in writing.

          14.     
Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 10 calendar days' notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

8

          15.      Miscellaneous.

                    (a)      This
Warrant shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.

                    (b)      All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York (except for matters governed by
corporate law in the State of Nevada), without regard to the principles of
conflicts of law thereof. Each party agrees that all legal proceedings
concerning the interpretations, enforcement and defense of this Warrant and the
transactions herein contemplated (“Proceedings”) (whether brought against
a party hereto or its respective Affiliates, employees or agents) shall be
commenced in the New York Courts. Each party hereto hereby irrevocably submits
to the jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any Proceeding, that such Proceeding has been commenced in an improper or
inconvenient forum. Each party hereto hereby irrevocably waives personal service
of process and consents to process being served in any such Proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. Each party hereto hereby irrevocably waives, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Warrant or the transactions
contemplated hereby. If either party shall commence a Proceeding to enforce any
provisions of this Warrant, then the prevailing party in such Proceeding shall
be reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.

                    (c)      The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

                    (d)     
In case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

                    (e)      Prior
to exercise of this Warrant, the Holder hereof shall not, by reason of being a
Holder, be entitled to any rights of a stockholder with respect to the Warrant
Shares.

9

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, 
SIGNATURE PAGE
FOLLOWS]

 

 

 

10

          IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its
authorized officer as of the date first indicated above.

	 	TERAX ENERGY,
      INC. 	 
	 	 	  	 
	 	 	  	 
	 	 	  	 
	 	By: 	 	 
	 	 	Lawrence Finn, 	 
	 	 	Chief Executive Officer 	 

11

EXERCISE NOTICE 
TERAX ENERGY, INC.

The undersigned Holder hereby irrevocably elects to purchase
_____________ shares of Common Stock pursuant to the above referenced Warrant.
Capitalized terms used herein and not otherwise defined have the respective
meanings set forth in the Warrant.

(1)     The undersigned Holder hereby
exercises its right to purchase _________________ Warrant Shares pursuant to the
Warrant.

(2)     The Holder intends that payment of
the Exercise Price shall be made as (check one):

	 	 	 	“Cash Exercise” under Section 10 
	 	 	 	 
	 	 	 	“Cashless Exercise” under Section 10
  

(3)     If the holder has elected a Cash
Exercise, the holder shall pay the sum of $____________ to the Company in
accordance with the terms of the Warrant.Pursuant to this Exercise Notice, the
Company shall deliver to the holder _______________ Warrant Shares in
accordance with the terms of the Warrant.

(4)     By its delivery of this Exercise
Notice, the undersigned represents and warrants to the Company that in giving
effect to the exercise evidenced hereby the Holder will not beneficially own in
excess of the number of shares of Common Stock (determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned
under Section 11 of this Warrant to which this notice relates. Notwithstanding
the foregoing, in the event the Holder waived the restriction contained in
Section 11 of the Warrant and such waiver occurred more than 61 days prior to
the date hereof, the representation in this Section 5 shall be deemed not to
have been given by the Holder.

	Dated: _______________, ______		Name of Holder: 
	  	  	  
	  	  	(Print)
      ____________________________________________________
	  	  	  
	  	  	By:
      ______________________________________________________
	  	  	Name:
      ____________________________________________________
	  	  	Title:
      _____________________________________________________
	  	  	  
			
      (Signature must conform in all respects to name of holder
      as specified on the face of the Warrant) 

Warrant Shares Exercise Log

	Date 

	Number of Warrant 
Shares
      Available to be 
Exercised 	Number of Warrant Shares
      
Exercised 
	Number of 
Warrant Shares
      
Remaining to 
be Exercised 

	  	 
    	
       

       

       

       

       

       

       

       

       

       

       

       

       

       
	

TERAX ENERGY, INC.

 

FORM OF ASSIGNMENT

 

          [To
be completed and signed only upon transfer of Warrant]

          FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the above-captioned
Warrant to purchase ____________ shares of Common Stock to which such Warrant
relates and appoints ________________ attorney to transfer said right on
the books of the Company with full power of substitution in the premises.

	Dated: _______________, _______	 
	 	 
		(Signature must conform in all
      respects to name of 
		holder as specified on the face
      of the Warrant) 
	 	 
	 	 
	 	 
	 	 
		Address of Transferee 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 
	In the presence of: 	 
	 	 
	 _______________________________________

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