Energy Search, Inc. #466892 EXHIBIT 10.27 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, PURSUANT TO ONE OR MORE EXEMPTIONS THEREFROM. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED...

Energy Search, Inc. #466892


EXHIBIT 10.27

THIS WARRANT HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
PURSUANT TO ONE OR MORE EXEMPTIONS THEREFROM. THIS WARRANT MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
UNLESS THE PROVISIONS OF ARTICLE II ARE SATISFIED.

Warrant No. Series W-1

WARRANT
to Purchase Common Stock of
ENERGY SEARCH, INCORPORATED
Expiring June 23, 2004

        THIS IS TO CERTIFY THAT, for value received, SOUTHERN PRODUCER SERVICES,
L.P., a Delaware limited partnership ("Southern"), or its successors or
assigns, is entitled to purchase, at any time on or before 5:00 P.M. Central
time, June 23, 2004 (the "Expiration Date"), at the place where the Warrant
Office designated pursuant to Section 2.1 is located, at a purchase price
of $6.50 per share of Common Stock (as herein defined) (such purchase price,
as adjusted pursuant to the terms of this Warrant, being referred to herein
as the "Exercise Price"), up to 100,000 shares (such number of shares,
as adjusted as hereafter provided, being referred to herein as the "Warrant
Shares") of duly authorized, validly issued, fully paid and nonassessable
shares, fully registered under the Securities Act and any applicable state
securities laws, of Common Stock, no par value, of the Company (the "Common
Stock"), and is entitled also to exercise the other appurtenant rights,
powers and privileges hereinafter set forth. This Warrant is exercisable
in whole or in part. The Exercise Price and the number of Warrant Shares
are subject to adjustment in accordance with Article III hereof.
        Certain terms used in this Warrant are defined in Article IV hereof.

 

 





1




ARTICLE I.

EXERCISE/PUT OF WARRANT

        1.1         Method of Exercise.   To exercise this Warrant in whole
or in part, the holder hereof shall deliver to the Company, at the Warrant
Office designated pursuant to Section 2.1 hereof, (a) a written notice
in substantially the form of the Exercise Notice attached as Exhibit A
hereto (the "Exercise Notice"), of such holder's election to exercise this
Warrant, which shall specify the number of shares of Common Stock to be
purchased, (b) payment of the aggregate Exercise Price (in the manner described
below), and (c) this Warrant. Subject to Section 3.1(a)(vii), this Warrant
shall be deemed to be exercised on the date when delivery of an Exercise
Notice is made, and any such date is referred to herein as the "Exercise
Date." Upon exercise, the Company shall promptly issue and deliver to such
holder a certificate for the number of full shares of Common Stock to which
such holder is entitled and, in case of an exercise of only part of this
Warrant, a new Warrant of like tenor representing the right to purchase
the then remaining number of Warrant Shares as to which this Warrant had
not been exercised. The full amount of the Exercise Price shall be payable
by the holder hereof by wire transfer or in cash by certified or cashier's
check. The Person in whose name the certificate for Common Stock is to
be issued shall be deemed to have become a holder of record of such Common
Stock on the applicable Exercise Date. Notwithstanding the foregoing, and
to the extent that Southern is the holder of the Warrant at the time the
Warrant is exercised, Southern shall be entitled to apply all or part of
the Obligations owed by the Company to Southern under the Credit Agreement
against the payment of the Exercise Price required in connection with the
exercise of this Warrant.
        1.2         Fractional Shares.   Instead of any fractional shares
of Common Stock which would otherwise be issuable upon exercise of this
Warrant, the Company shall issue a certificate for the next lower number
of whole shares of Common Stock and the exercise price shall be reduced
by the exercise price attributable to such fractional share.

ARTICLE II.

WARRANT OFFICE: TRANSFER OF WARRANTS

        2.1         Warrant Office.   The Company shall maintain an office
for certain purposes specified herein (the "Warrant Office"), which office
shall initially be the Company's office at 000 Xxxx Xxxxxxx Xxxx., Xxxxx
000, Xxxxxxxxx, Xxxxxxxxx 00000, and may subsequently be such other office
of the Company or of any transfer agent of the Company in the continental
United States as to which written notice has previously been given to the
holders of this Warrant.
        2.2         Ownership of Warrant.   The Company may deem and treat
the person in whose name this Warrant is registered as the holder and owner
hereof (notwithstanding any notations of ownership or writing hereon made
by anyone other than the Company) for all purposes and shall


2



not be affected
by any notice to the contrary, until presentation of this Warrant for registration
of transfer as provided in this Article II.
        2.3         Transfer of Warrants.   The Company agrees to maintain
at the Warrant Office books for the registration of this Warrant and the
registration of transfers of this Warrant. Subject to the conditions set
forth below, this Warrant may be transferred in whole or in part to any
other Person, subject to any restrictions on transfer imposed under hereunder
and the Securities Act and all applicable securities laws of any state.
Any transfer, in whole or in part of this Warrant, is conditioned upon
delivery to the Company, at the expense of the Warrant Holder, of an opinion
of legal counsel acceptable to the Company that the proposed transfer is
exempt from registration under federal and applicable state securities
laws, and is otherwise consistent in all material respects with such laws.
Upon (a) surrender of this Warrant together with a duly executed written
assignment in the form of Exhibit B hereto, and (b) delivery to the transferee
of a copy of the Credit Agreement (hereinafter defined), the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee
(and in the name of the assignor if only a part hereof is transferred),
and this Warrant shall promptly be canceled.
        2.4         Expenses of Delivery of Warrants.   The Company shall
pay all expenses, taxes and other charges payable in connection with the
Company's preparation, issuance and delivery of Warrants hereunder or Common
Stock issuable upon the exercise hereof.

ARTICLE III.

ANTI-DILUTION PROVISIONS AND PREEMPTIVE RIGHTS

        3.1         Certain Adjustments.
                (a)         The Exercise Price and the number of Warrant Shares shall be subject
to adjustment from time to time as follows:

                (i)         Sale of Shares Below Exercise Price.   (A) If at any
time or from time to time after June 23, 1999 (the "Commitment Date"),
the Company issues or sells, or is deemed by the express provisions of
this paragraph 3.1(a)(i) to have issued or sold, Additional Shares of Common
Stock (other than as a dividend or subdivision of Common Stock as provided
in Section 3.1(a)(ii), or upon a combination of shares of Common Stock
as provided in Section 3.1(a)(iii), or as a dividend or distribution of
securities other than Common Stock as provided in Section 3(a)(iv)) or
any right, option, warrant or convertible security (collectively "Convertible
Securities"), or any right or option to purchase Convertible Securities
containing the right to subscribe for, purchase or, upon the exercise or
conversion thereof (including the exercise of any Convertible Securities
underlying any right or option described above), to receive shares of Common
Stock, then at any time after the Commitment Date that the holder hereof
proposes to exercise the Warrant in whole or in part then the then existing
Exercise Price applicable to such proposed exercise shall be subject to
adjustment as follows:

 



3




                (1)         If the Effective Price (as defined in Section 3.1(a)(i)(E)) of
all Additional Shares of Common Stock issued, or deemed by this Section
3.1(a) to have been issued by the Company, on or before the date of such
proposed exercise is less than the then existing Exercise Price, then the
then existing Exercise Price shall be reduced automatically to such Effective
Price for purposes of the then proposed exercise; moreover, the number
of Warrant Shares purchasable upon the exercise of this Warrant shall be
adjusted as of the date of such proposed exercise to be equal to that number
determined by multiplying the number of Warrant Shares issuable upon exercise
immediately prior to such adjustment by a fraction, of which the numerator
is the sum of the number of shares of Common Stock outstanding immediately
after the adjustment plus the number of Additional Shares of Common Stock
issued and deemed issued immediately after the adjustment in effect immediately
prior to such adjustment and the denominator is the sum of the number of
shares of Common Stock outstanding immediately prior to such adjustment
plus the number of Additional Shares of Common Stock issued and deemed
issued immediately prior to such adjustment; and
                (2)         If the Effective Price as determined in accordance with (1) above
is equal to or greater than the then existing Exercise Price, then no adjustment
shall be made to the then existing Exercise Price for purposes of the then
proposed exercise. If the number of Warrant Shares purchasable upon the
exercise of this Warrant as determined in accordance with (1) above is
equal to or less than the then existing number of Warrant Shares subject
to this Warrant, then no adjustment shall be made to the then existing
number of Warrant Shares subject to this Warrant for purposes of the then
proposed exercise.

 

                (B)         For the purpose of making any adjustment required under this Section
3.1(a)(i), the consideration received by the Company for any issue or sale
of securities shall (aa) to the extent it consists of cash, be computed
at the net amount of cash received by the Company after deduction of any
underwriting, investment banking or similar commissions, compensation,
or concessions paid or allowed by the Company in connection with such issue
or sale, (bb) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith
by the Board of Directors, and (cc) if Additional Shares of Common Stock,
Convertible Securities or rights or options to purchase either Additional
Shares of Common Stock or Convertible Securities are issued or sold together
with other stock or securities or other assets of the Company for a consideration
which covers both, be computed as the portion of the consideration so received
that may be reasonably determined in good faith by


4



at least a majority
of the members of the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
                (C)         For the purpose of the adjustment required under this Section 3.1(a)(i),
the Company shall be deemed to have issued immediately prior to such adjustment
the maximum number of Additional Shares of Common Stock issuable upon exercise
or conversion of the then outstanding Convertible Securities and to have
received as consideration for the issuance of such shares an amount equal
to the total amount of the consideration, if any, received by the Company
for the issuance of such Convertible Securities, plus the minimum amounts
of consideration, if any, payable to the Company (other than by cancellation
of liabilities or obligations evidenced by such Convertible Securities)
upon the conversion thereof.
                (D)         For the purpose of the adjustment required under this Section 3.1(a)(i),
if at the time of such adjustment there are then outstanding any rights
or options for the purchase of Convertible Securities, then in each such
case the Company shall be deemed to have issued at the time of such adjustment
the maximum number of Additional Shares of Common Stock issuable upon conversion
of the total amount of Convertible Securities covered by such rights or
options and to have received as consideration for the issuance of such
Additional Shares of Common Stock an amount equal to the amount of consideration,
if any, received by the Company for the issuance of such rights or options,
plus the minimum amounts of consideration, if any, payable to the Company
upon the exercise of such rights or options and plus the minimum amount
of consideration, if any, payable to the Company upon the conversion of
such Convertible Securities.
                (E)         "Additional Shares of Common Stock" shall mean as of any date on
which the holder of this Warrant proposes to exercise this Warrant in whole
or in part all shares of Common Stock issued by the Company and deemed
by this Paragraph 3.1(a)(i) to have been issued by the Company after the
Commitment Date and on or before such proposed exercise date, whether or
not subsequently reacquired or retired by the Company. The "Effective Price"
of Additional Shares of Common Stock shall mean as of any date on which
the holder of this Warrant proposes to exercise this Warrant in whole or
in part the quotient determined by dividing the total number of Additional
Shares of Common Stock issued or sold or deemed to have been issued or
sold under this Section 3.1(a)(i) after the Commitment Date and on or before
such proposed exercise date into the aggregate consideration received,
or deemed to have been received under this Section 3.1(a)(i), by the Company
for such issue of such Additional Shares of Common Stock.





5



                (ii)        Stock Dividends, etc.   If the number of shares of Common
Stock outstanding at any time after the Commitment Date is increased by
a stock dividend payable in shares of Common Stock or by a subdivision
or split-up of shares of Common Stock, then immediately after the record
date fixed for the determination of holders of Common Stock entitled to
receive such stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Exercise Price shall be appropriately
reduced and the number of Warrant shares proportionately increased so that
the holder of this Warrant shall be entitled to receive the number of shares
of Common Stock of the Company which the holder would have owned immediately
following such action had this Warrant been exercised immediately prior
thereto upon payment of the aggregate consideration therefor based upon
the Exercise Price in effect immediately prior to such action.
                (iii)         Combination of Stock.   If the number of shares of
Common Stock outstanding at any time after the Commitment Date is decreased
by a combination of the outstanding shares of Common Stock, then, immediately
after the effective date of such combination, the Exercise Price shall
be appropriately increased and the number of Warrant Shares proportionately
decreased so that the holder of this Warrant shall be entitled to receive
the number of shares of Common Stock of the Company which the holder would
have owned immediately following such action had this Warrant been exercised
immediately prior thereto upon payment of the aggregate consideration therefor
based upon the Exercise Price in effect immediately prior to such action.
                (iv)         Adjustments for Other Dividends and Distributions.   In
the event the Company at any time or from time to time after the Commitment
Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable
in securities of the Company other than shares of Common Stock or rights
or options for the purchase of, or other securities convertible into, Common
Stock or other assets or property, then and in each such event provision
shall be made so that the holder of this Warrant shall receive upon exercise
hereof, in addition to the number of shares of Common Stock receivable
thereupon, and for no additional consideration, the amount of securities,
assets or property of the Company which it would have received had this
Warrant been converted into Common Stock on the date of such event and
had it thereafter, during the period form the date of such event to and
including the Exercise Date, retained such securities, assets or property
receivable by it as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 3.1(a)(iv).
                (v)         Adjustment for Reclassification, Exchange and Substitution.   In the event
that at any time or from time to time after the Commitment
Date, the Common Stock issuable upon the exercise of this Warrant is changed
into the same or a different number of shares of any class or classes of
stock, whether by recapitalization,


6



reclassification, reorganization or
otherwise (other than a subdivision or combination of shares or stock dividend
or a merger, consolidation, conversion or sale of assets, provided for
elsewhere in this Section 3.1(a)), then and in any such event the holder
of this Warrant shall have the right thereafter to exercise this Warrant
with respect to the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification, reorganization
or other change, by holders of the maximum number of shares of Common Stock
with respect to which this Warrant could have been exercised immediately
prior to such recapitalization, reclassification, reorganization or change,
all subject to further adjustment as provided herein.
                (vi)         Mergers, Consolidations or Sales of Assets; Liquidation and
Dissolution.   If at any time or from time to time after the Commitment
Date there is a merger, conversion or consolidation of the Company with
or into a Related Person (regardless of whether the Company is the surviving
entity) or with any Person if the Company is the surviving entity or the
sale of all or substantially all of the Company's properties and assets
to a Related Person, then, as a part of such merger, conversion, consolidation,
sale, lease or other disposition, provision shall be made so that the holder
of this Warrant shall thereafter be entitled to receive upon exercise of
this Warrant the number of shares of stock or other securities or property
of the Company, or of the successor corporation resulting from such merger,
conversion, consolidation, sale, lease or other disposition, to which a
holder of the number of shares of Common Stock deliverable upon exercise
would have been entitled on such merger, consolidation, sale, lease or
other disposition. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 3.1(a) with respect
to the rights of the holder of this Warrant after the reorganization, merger,
conversion, consolidation, sale, lease or other disposition to the end
that the provisions of this Section 3.1(a) (including adjustment of the
Exercise Price then in effect and the number of shares purchasable upon
exercise of this Warrant) shall be applicable after that event and be as
nearly equivalent as may be practicable. If, however, at any time or from
time to time after the Commitment Date there is a merger, conversion or
consolidation of the Company with any Person other than a Related Person
and such Person is the surviving entity or a sale, lease or other disposition
of all or substantially all of the Company's properties and assets to any
Person other than a Related Person (any such merger, conversion or consolidation
with, or sale, lease or other disposition to, such Person who is not a
Related Person being referred to as a "True Sale"), the foregoing provisions
of this Section 3.1(a)(vi) shall not apply to such True Sale; rather the
Company shall notify the holder of this Warrant of such proposed True Sale
at the time and in the manner described in Section 3.1(c) below


7



and shall
ensure that the holder of this Warrant shall have the right to exercise
this Warrant and participate in such True Sale as a holder of Common Stock.
Moreover, if at any time after the Commitment Date the Company proposes
(or is required) to liquidate or dissolve, the Company shall notify the
holder of this Warrant of such proposed liquidation or dissolution at the
time and in the manner described in Section 3.1(c) below and shall ensure
that the holder of this Warrant shall have the right to exercise this Warrant
in such liquidation or dissolution as a holder of Common Stock.
                (vii)         Timing of Issuance of Additional Common Stock Upon Certain
Adjustments.   In any case in which the provisions of this Section
3.1(a) shall require that an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the occurrence
of such event issuing to the holder of this Warrant upon exercise thereof
after such record date and before the occurrence of such event the Additional
Shares of Common Stock or other property issuable or deliverable upon exercise
by reason of the adjustment required by such event over and above the shares
of Common Stock or other property issuable or deliverable upon such exercise
before giving effect to such adjustment; provided, however
that the Company upon request shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive
such additional shares or other property, and such cash, upon the occurrence
of the event requiring such adjustment.



                (b)         Statement Regarding Adjustments.   Whenever the Exercise
Price or number of shares subject to this Warrant shall be adjusted as
provided in Section 3.1(a), the Company shall forthwith file, at the office
of any transfer agent for this Warrant and at the principal office of the
Company, a statement showing in detail the facts requiring such adjustment
and the Exercise Price or number of shares subject to this Warrant that
shall be in effect after such adjustment, and the Company shall also cause
a copy of such statement to be sent by mail, first class postage prepaid,
to the holder of this Warrant at its address appearing on the Company's
records. Each such statement shall be signed by the Company's president
or other authorized officer. Where appropriate, such copy may be given
in advance and may be included as part of a notice required to be mailed
under the provisions of Section 3.1(c).
        In each case of any such adjustment or readjustment, at the request
of the holder of this Warrant, the Company at its expense will promptly
cause independent certified public accountants of recognized standing selected
by the Company (with the consent of the holder of this Warrant in its reasonable
discretion) to compute such adjustment or readjustment in accordance with
the terms of the Warrant and prepare a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment
or readjustment is based, (a) the consideration received or receivable
by the Company for any Additional Shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of
shares of Common Stock (or Other Securities) outstanding or deemed to be
outstanding, and (c) the Purchase Price in effect and number and type of
Shares for which the Warrant was exercisable immediately prior to such
issue or sale and as each is adjusted and readjusted on account thereof.
The Company will forthwith mail a copy of each such certificate to each
holder of a Warrant, and will, on the written request at any time of any
holder of a Warrant, furnish to the holder a like certificate setting forth
the Exercise Price and the number and type of Warrant Shares at the time
in effect and showing how it was calculated. As used herein, the term "Other
Securities" refers to any stock (other than Common Stock) and other


8



securities
of the Company or any other person (corporate or otherwise) which the holder
of this Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or Other Securities
pursuant to this Warrant.
                (c)         Notice to Holders.   In the event the Company shall
propose to take any action of the type described in clause (ii), (iii),
(iv), (v) or (vi) of Section 3.1(a), the Company shall give notice to the
holder of this Warrant, in the manner set forth in Section 3.1(b), which
notice shall specify the record date, if any, with respect to any such
action and the approximate date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Exercise Price
and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action
or deliverable upon exercise of this Warrant. In the case of any action
which would require the fixing of a record date, such notice shall be given
at least 30 days prior to the date so fixed, and in case of all other action,
such notice shall be given at least 30 days prior to the taking of such
proposed action.
                (d)         Costs.   The Company shall pay all documentary, stamp,
transfer or other transactional taxes attributable to the issuance or delivery
of shares of Common Stock of the Company upon exercise of this Warrant.
                (e)         Reservations of Shares.   The Company shall reserve
at all times so long as this Warrant remains outstanding, free from preemptive
rights, out of its treasury Common Stock or its authorized but unissued
shares of Common Stock, or both, solely for the purpose of effecting the
exercise of this Warrant, sufficient shares of Common Stock to provide
for the exercise hereof.
                (f)         Approvals.   If any shares of Common Stock to be reserved
for the purpose of exercise of this Warrant require registration with or
approval of any governmental authority under any Federal or state law before
such shares may be validly issued or delivered upon exercise, then the
Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be.
                (g)         Valid Issuance.   All shares of Common Stock which may
be issued upon exercise of this Warrant will upon issuance by the Company
be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof and the
Company shall take no action which will cause a contrary result (including
without limitation, any action which would cause the Exercise Price to
be less than the par value, if any, of the Common Stock).



9



                (h)         No Dilution or Impairment.   The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of the 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 action as may be necessary or appropriate in order to protect
the rights of the holder of the Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will
not increase the par value of any shares of stock receivable on the exercise
of the Warrant above the amount payable therefor on such exercise, (b)
will at all times reserve and keep available out of its authorized capital
stock, solely for the purpose of issue upon exercise of this Warrant as
herein provided, such number of shares of Common Stock as shall then be
issuable upon exercise of this Warrant in full and shall take all such
action as may be necessary or appropriate in order that all shares of Common
Stock that shall be so issuable shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof, (c) will not effect a subdivision or split-up
of shares or similar transaction with respect to any class of the Common
Stock without effecting an equivalent transaction with respect to all other
classes of Common Stock, and (d) will not issue any capital stock of any
class which is preferred as to dividends or as to the distribution of assets
upon voluntary or involuntary dissolution, liquidation or winding up, unless
the rights of the holders thereof shall be limited to a fixed sum or percentage
of par value in respect of participation in dividends and in any such distribution
of assets.
                (i)         Financial Information.   Prior to the exercise or expiration
of the right to exercise this Warrant the Company shall furnish to the
holder of the Warrant the same information at the same time as the Company
furnishes to its holders of Common Stock.

ARTICLE IV.

TERMS DEFINED

        As used in this Warrant, unless the context otherwise requires, the
following terms have the respective meanings set forth below or in the
Section indicated:
        Additional Shares of Common Stock -- shall have
the meaning set forth in Section 3.1(a)(i)(E).
        Approved Independent Engineer -- shall mean an
independent petroleum engineer selected by the Company and acceptable to
the holder of this Warrant, in its sole and absolute discretion.
        Board of Directors -- the Board of Directors of
the Company.
        Common Stock -- shall have the meaning set forth
in the Preamble to this Warrant.



10



        Company -- ENERGY SEARCH, INCORPORATED, a Tennessee
corporation, and its successors and assigns and any other corporation or
Person assuming or required to assume the obligations undertaken in connection
with this Warrant.
        Credit Agreement -- shall mean that certain Credit Agreement,
dated as of June ___, 1999, between Company and Southern, as it may be
amended, supplemented, restated or otherwise modified from time to time.
        Effective Price -- shall have the meaning set forth
in Section 3(a)(i)(E).
        Person -- any individual, corporation, limited
liability company, partnership, trust, organization, association or other
entity.
        Related Person -- with respect to any merger or
consolidation or sale of assets by the Company described in Section 3.1(a)(vi),
a Person who immediately after giving effect to such merger, consolidation
or sale has over 50% of such Person's issued and outstanding voting securities
directly or indirectly owned by Persons who were shareholders of the Company
immediately prior to such merger, consolidation or sale.
        Securities Act -- the Securities Act of 1933, as
amended.
        Warrant -- this Warrant and any Warrant delivered
in accordance with Sections 1.1, 2.3 or 6.8.
        Warrant Office -- as defined in Section 2.1.
        Warrant Shares -- the shares of Common Stock into
which this Warrant is exercisable from time to time.
        All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in that certain Credit Agreement, as if such
terms were fully incorporated herein; provided, however,
that in the event the Credit Agreement has been terminated or ceases to
be in full force and effect, such terms shall have the meanings ascribed
to them in the Credit Agreement immediately prior to the time the Credit
Agreement has been terminated or ceases to be in full force and effect.
Each of the Company and the holder of this Warrant acknowledges that it
has received and reviewed a copy of the Credit Agreement.

ARTICLE V.

COVENANT OF THE COMPANY

        5.1         Binding on Successors.   The Company covenants and agrees
that this Warrant shall be binding upon any corporation succeeding to the
Company by merger, consolidation or acquisition of all or substantially
all of the Company's assets.



11




ARTICLE VI.

MISCELLANEOUS

        6.1         Entire Agreement.   This Warrant, the Shareholder Agreement,
the Credit Agreement (including the Exhibits and Schedules thereto) and
the Loan Documents contain the entire agreement between the holder hereof
and the Company with respect to the shares which it can purchase upon exercise
hereof and supersedes all prior arrangements or understanding with respect
thereto.
        6.2         GOVERNING LAW   THIS WARRANT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
        6.3         Waiver and Amendment.   Any term or provision of this
Warrant may be waived at any time by the party which is entitled to the
benefits hereof and any term or provision of this Warrant may be amended
or supplemented at any time by agreement of the holder hereof and the Company,
except that any waiver of any term or condition, or any amendment or supplementation,
of this Warrant must be in a writing signed by the holder of this Warrant.
A waiver of any breach or failure to enforce any of the terms or conditions
of this Warrant shall not in any way effect, limit or waive a party's rights
hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
        6.4         Illegality.   In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for
whom the benefit of the provision exists, be in any way impaired.
        6.5         File of Warrant.   A copy of this Warrant shall be filed
among the records of the Company.
        6.6         Notice.   Any notice or other document required or permitted
to be given or delivered to the holder hereof shall be delivered at, or
sent by certified or registered mail to, each such holder at the last address
shown on the books of the Company maintained at the Warrant Office for
the registration of and the registration of transfers of this Warrant or
at any more recent address of which the holder hereof shall have notified
the Company in writing. Any notice or other document required or permitted
to be given or delivered to the Company under this Warrant shall be delivered
at, or sent by certified or registered mail to, the office of the Company
at the Warrant Office or such other address within the continental United
States as shall have been furnished by the Company to the holders of this
Warrant. Any notice given under this Warrant shall be deemed given and
delivered on the date hand delivered, or three (3) business days following
the date deposited in the U.S. Mail by first class registered or certified



12



mail (return receipt requested), or when receipt is confirmed by an individual
if sent by legible telex or telecopy.
        6.7         Limitation of Liability.   No provision hereof, in the
absence of affirmative action by the holder hereof to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges
of the holder hereof, shall give rise to any liability of such holder for
the purchase price of any shares of Common Stock or as a stockholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company.
        6.8         Loss, Destruction, etc. of Warrant.   Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity in such form and amount
as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of this Warrant, the Company
will make and deliver a new Warrant, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant; provided, however,
that the original recipient of this Warrant shall not be required to provide
any such bond of indemnity and may in lieu thereof provide its agreement
of indemnity. Any Warrant issued under the provisions of this Section 6.8
in lieu of any warrant alleged to be lost, destroyed or stolen, or in lieu
of any mutilated Warrant, shall constitute an original contractual obligation
on the part of the Company.
        6.9         Remedies.   The Company stipulates that the remedies
at law of the holder of this Warrant in the event of any default or threatened
default by the Company in the performance of or compliance with any of
the terms of this Warrant are not and will not be adequate, and that such
terms may be specifically enforced by a decree for the specific performance
of any agreement contained herein or by an injunction against a violation
of any of the terms hereof or otherwise.
        6.10         Registration of Common Stock.   All shares of Common
Stock delivered to Southern pursuant to the terms of this Warrant must
be fully registered under the Securities Act and any applicable state securities
laws.
        6.11.         Forum Selection and Consent to Jurisdiction.   ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS WARRANT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF SOUTHERN OR COMPANY SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE


00



XXXXX XX XXXXX XX XX XXX XXXXXX
XXXXXX DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL
OR OTHER PROPERTY MAY BE BROUGHT, AT SOUTHERN'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID,
OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS. COMPANY HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE
AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, BORROWER HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.
        6.12.         Waiver of Jury Trial.   SOUTHERN AND COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
SOUTHERN OR COMPANY. COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR SOUTHERN ENTERING INTO THIS WARRANT.




14



        IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered by one of its duly authorized officers in its corporate
name.

 





S - 1

DATED:      June 23, 1999 
ENERGY SEARCH, INCORPORATED

 
 By:   
Name:   Xxxxxxx X. Xxxxxx, Xx.

Title:      Chief Executive Officer