GALAXY ENERGY CORP
EXH 10-4 WARRANT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>exh-10_4.txt
<DESCRIPTION>EXH 10-4 WARRANT
<TEXT>













                                  EXHIBIT 10.4

                     FORM OF COMMON STOCK PURCHASE WARRANT
                         EXERCISABLE AT $0.83 PER SHARE










<PAGE>


NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
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.  THIS  SECURITY  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES

                          COMMON STOCK PURCHASE WARRANT

                  To Purchase _______ Shares of Common Stock of

                            GALAXY ENERGY CORPORATION

                  THIS COMMON STOCK PURCHASE  WARRANT  CERTIFIES that, for value
received,  _____________________________ (the "HOLDER"),  is entitled,  upon the
terms and subject to the limitations on exercise and the conditions  hereinafter
set forth,  at any time on or after  September 24, 2003 (the  "INITIAL  EXERCISE
DATE") and on or prior to the close of business on the fifth  anniversary of the
Initial Exercise Date (the "TERMINATION DATE") but not thereafter,  to subscribe
for and purchase from Galaxy Energy Corporation,  a corporation  incorporated in
Colorado (the "COMPANY"),  up to _______ shares (the "WARRANT SHARES") of Common
Stock,  par value $.001 per share,  of the Company  (the  "COMMON  STOCK").  The
purchase  price of one share of Common Stock (the  "EXERCISE  PRICE") under this
Warrant shall be $0.83, subject to adjustment hereunder.  CAPITALIZED TERMS USED
AND NOT  OTHERWISE  DEFINED  HEREIN  SHALL HAVE THE  MEANINGS  SET FORTH IN THAT
CERTAIN  SECURITIES  PURCHASE  AGREEMENT  (THE  "PURCHASE   AGREEMENT"),   DATED
SEPTEMBER 24, 2003, BETWEEN THE COMPANY AND THE PURCHASERS SIGNATORY THERETO.






                                       1


<PAGE>




                  1. TITLE TO WARRANT. Prior to the Termination Date and subject
to compliance with  applicable laws and Section 7 of this Warrant,  this Warrant
and all rights hereunder are transferable, in whole or in part, at the office or
agency of the  Company by the Holder in person or by duly  authorized  attorney,
upon surrender of this Warrant  together with the Assignment Form annexed hereto
properly  endorsed.  The transferee shall sign an investment  letter in form and
substance reasonably satisfactory to the Company.

                  2. AUTHORIZATION OF WARRANT SHARES. The Company represents and
warrants  that all Warrant  Shares  which may be issued upon the exercise of the
purchase rights  represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant,  be duly authorized,  validly issued,  fully
paid and nonassessable and free from all taxes,  liens and charges in respect of
the issue  thereof  (other  than  taxes in  respect  of any  transfer  occurring
contemporaneously with such issue).

                  3. EXERCISE OF WARRANT.

                       (a) Exercise of the purchase  rights  represented by this
         Warrant  may be made at any  time or  times  on or  after  the  Initial
         Exercise Date and on or before the Termination  Date by delivery to the
         Company of a duly  executed  facsimile  copy of the Notice of  Exercise
         Form  annexed  hereto (or such other office or agency of the Company as
         it may designate by notice in writing to the  registered  Holder at the
         address  of  such  Holder  appearing  on the  books  of  the  Company);
         PROVIDED,  HOWEVER,  within 5 Trading  Days of the date said  Notice of
         Exercise is delivered to the Company, the Holder shall have surrendered
         this Warrant to the Company and the Company shall have received payment
         of the aggregate Exercise Price of the shares thereby purchased by wire
         transfer or cashier's check drawn on a United States bank. Certificates
         for shares purchased  hereunder shall be delivered to the Holder within
         the earlier of (i) 5 Trading Days after the date on which the Notice of
         Exercise  shall have been delivered by facsimile copy or (ii) 3 Trading
         Days from the delivery to the Company of the Notice of Exercise Form by
         facsimile copy,  surrender of this Warrant and payment of the aggregate
         Exercise  Price as set forth above  ("WARRANT  SHARE  DELIVERY  DATE");
         PROVIDED,  HOWEVER,  in the event the Warrant is not surrendered or the
         aggregate  Exercise  Price  is not  received  by the  Company  within 5
         Trading  Days after the date on which the Notice of  Exercise  shall be
         delivered by facsimile  copy,  the Warrant Share Delivery Date shall be
         extended  to the extent  such 5 Trading  Day period is  exceeded.  This
         Warrant  shall be deemed to have been  exercised on the date the Notice
         of Exercise is delivered to the Company by facsimile  copy. The Warrant
         Shares  shall be deemed to have been  issued,  and  Holder or any other
         person so designated to be named therein shall be deemed to have become
         a holder of record of such shares for all purposes,  as of the date the
         Warrant has been  exercised  by payment to the Company of the  Exercise
         Price and all taxes required to be paid by the Holder, if any, pursuant
         to Section 5 prior to the issuance of such shares,  have been paid.  If
         the  Company  fails  to  deliver  to  the  Holder  a   certificate   or
         certificates  representing  the Warrant Shares pursuant to this Section
         3(a) by the Warrant Share Delivery Date,  then the Holder will have the
         right to  rescind  such  exercise.  In  addition  to any  other  rights
         available to the Holder,  if the Company fails to deliver to the Holder
         a

                                       2


<PAGE>

         certificate or certificates  representing the Warrant Shares pursuant
         to an exercise on or before the Warrant  Share  Delivery  Date,  and if
         after such date the Holder is required by its broker to purchase (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  times (B) the price at which the sell order  giving
         rise to such purchase obligation was executed, 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.  For example, if the Holder purchases
         Common Stock having a total purchase price of $11,000 to cover a Buy-In
         with respect to an attempted exercise of shares of Common Stock with an
         aggregate  sale  price  giving  rise to  such  purchase  obligation  of
         $10,000,  under clause (1) of the  immediately  preceding  sentence the
         Company  shall be required to pay the Holder  $1,000.  The Holder shall
         provide the Company  written notice  indicating the amounts  payable to
         the  Holder  in  respect  of  the  Buy-In,   together  with  applicable
         confirmations and other evidence  reasonably  requested by the Company.
         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  shares of Common Stock upon exercise of the
         Warrant as required pursuant to the terms hereof.

                       (b) If this  Warrant  shall have been  exercised in part,
         the  Company  shall,  at the time of  delivery  of the  certificate  or
         certificates  representing  Warrant  Shares,  deliver  to  Holder a new
         Warrant  evidencing  the rights of Holder to purchase  the  unpurchased
         Warrant  Shares called for by this Warrant,  which new Warrant shall in
         all other respects be identical with this Warrant.

                       (c) The  Company  shall not effect any  exercise  of this
         Warrant,  and the  Holder  shall  not have the  right to  exercise  any
         portion of this Warrant,  pursuant to Section 3(a) or otherwise, to the
         extent that after giving effect to such issuance  after  exercise,  the
         Holder  (together  with the Holder's  affiliates),  as set forth on the
         applicable  Notice of  Exercise,  would  beneficially  own in excess of
         4.99%  of  the  number  of  shares  of  the  Common  Stock  outstanding
         immediately  after giving effect to such issuance.  For purposes of the
         foregoing  sentence,  the number of shares of Common Stock beneficially
         owned by the  Holder and its  affiliates  shall  include  the number of
         shares of Common  Stock  issuable  upon  exercise of this  Warrant with
         respect to which the  determination of such sentence is being made, but
         shall  exclude  the  number of shares of Common  Stock  which  would be
         issuable upon (A) exercise of the  remaining,  nonexercised  portion of
         this Warrant  beneficially owned by the Holder or any of its affiliates
         and (B)  exercise or  conversion  of the  unexercised  or  nonconverted
         portion of any other  securities  of the  Company  (including,  without
         limitation,  any other Debentures or Warrants)  subject to a


                                       3


<PAGE>

         limitation  on  conversion  or  exercise  analogous  to the  limitation
         contained  herein  beneficially  owned  by  the  Holder  or  any of its
         affiliates. Except as set forth in the preceding sentence, for purposes
         of this Section  3(c),  beneficial  ownership  shall be  calculated  in
         accordance  with Section  13(d) of the Exchange Act. To the extent that
         the   limitation   contained  in  this  Section   3(c)   applies,   the
         determination  of whether this Warrant is  exercisable  (in relation to
         other  securities  owned by the  Holder) and of which a portion of this
         Warrant is exercisable  shall be in the sole discretion of such Holder,
         and the  submission of a Notice of Exercise  shall be deemed to be such
         Holder's  determination  of whether  this  Warrant is  exercisable  (in
         relation to other securities owned by such Holder) and of which portion
         of this Warrant is exercisable,  in each case subject to such aggregate
         percentage  limitation,  and the Company  shall have no  obligation  to
         verify or confirm the accuracy of such  determination.  For purposes of
         this Section 3(c), in determining  the number of outstanding  shares of
         Common Stock,  the Holder may rely on the number of outstanding  shares
         of Common Stock as reflected in (x) the Company's most recent Form 10-Q
         or Form 10-K, as the case may be, (y) a more recent public announcement
         by the Company or (z) any other notice by the Company or the  Company's
         Transfer  Agent  setting  forth the  number  of shares of Common  Stock
         outstanding.  Upon the  written  or oral  request  of the  Holder,  the
         Company shall within two Trading Days confirm  orally and in writing to
         the Holder the number of shares of Common  Stock then  outstanding.  In
         any case,  the number of  outstanding  shares of Common  Stock shall be
         determined  after  giving  effect  to the  conversion  or  exercise  of
         securities of the Company, including this Warrant, by the Holder or its
         affiliates since the date as of which such number of outstanding shares
         of Common Stock was reported.  The  provisions of this Section 3(c) may
         be waived by the Holder upon,  at the election of the Holder,  not less
         than 61 days' prior notice to the Company,  and the  provisions of this
         Section 3(c) shall continue to apply until such 61st day (or such later
         date, as  determined by the Holder,  as may be specified in such notice
         of waiver).

                       (d) At any  time  following  the date of  issuance,  this
         Warrant  may also be  exercised  by means of a "cashless  exercise"  in
         which the Holder  shall be  entitled to receive a  certificate  for the
         number of Warrant  Shares  equal to the  quotient  obtained by dividing
         [(A-B) (X)] by (A), where:

          (A) = the VWAP on the Trading Day preceding the date of such election;

          (B) = the Exercise Price of the Warrants, as adjusted; and

          (X) = the  number of  Warrant  Shares  issuable upon  exercise of this
                Warrant in accordance with the terms of this Warrant.

                  4. NO  FRACTIONAL  SHARES OR SCRIP.  No  fractional  shares or
scrip  representing  fractional shares shall be issued upon the exercise of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase  upon such  exercise,  the Company  shall pay a cash  adjustment  in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

                                       4

<PAGE>



                  5. CHARGES,  TAXES AND EXPENSES.  Issuance of certificates for
Warrant  Shares  shall be made  without  charge to the  Holder  for any issue or
transfer  tax or other  incidental  expense in respect of the  issuance  of such
certificate,  all of which taxes and expenses shall be paid by the Company,  and
such  certificates  shall be issued in the name of the Holder or in such name or
names as may be  directed by the Holder;  PROVIDED,  HOWEVER,  that in the event
certificates  for Warrant  Shares are to be issued in a name other than the name
of the Holder,  this Warrant when  surrendered for exercise shall be accompanied
by the  Assignment  Form attached  hereto duly  executed by the Holder;  and the
Company may require, as a condition thereto,  the payment of a sum sufficient to
reimburse it for any transfer tax incidental thereto.

                  6.   CLOSING  OF  BOOKS.   The  Company  will  not  close  its
stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.

                  7. TRANSFER, DIVISION AND COMBINATION.

                       (a) Subject to compliance with any applicable  securities
         laws and the  conditions set forth in Sections 1 and 7(e) hereof and to
         the provisions of Section 4.1 of the Purchase  Agreement,  this Warrant
         and all rights  hereunder are  transferable,  in whole or in part, upon
         surrender  of this  Warrant  at the  principal  office of the  Company,
         together with a written assignment of this Warrant substantially in the
         form  attached  hereto  duly  executed  by the  Holder  or its agent or
         attorney and funds  sufficient  to pay any transfer  taxes payable upon
         the making of such transfer. Upon such surrender and, if required, such
         payment,  the  Company  shall  execute  and  deliver a new  Warrant  or
         Warrants  in  the  name  of  the  assignee  or  assignees  and  in  the
         denomination   or   denominations   specified  in  such  instrument  of
         assignment,  and shall issue to the  assignor a new Warrant  evidencing
         the portion of this  Warrant not so assigned,  and this  Warrant  shall
         promptly  be  cancelled.  A  Warrant,  if  properly  assigned,  may  be
         exercised  by a new holder for the purchase of Warrant  Shares  without
         having a new Warrant issued.

                       (b) This  Warrant may be divided or  combined  with other
         Warrants  upon  presentation  hereof  at the  aforesaid  office  of the
         Company,  together  with a  written  notice  specifying  the  names and
         denominations  in which new  Warrants  are to be issued,  signed by the
         Holder or its agent or  attorney.  Subject to  compliance  with Section
         7(a),  as to any  transfer  which may be involved  in such  division or
         combination,  the  Company  shall  execute and deliver a new Warrant or
         Warrants  in  exchange  for the  Warrant or  Warrants  to be divided or
         combined in accordance with such notice.

                       (c) The Company shall  prepare,  issue and deliver at its
         own  expense  (other than  transfer  taxes) the new Warrant or Warrants
         under this Section 7.

                       (d) The  Company  agrees to  maintain,  at its  aforesaid
         office,  books for the registration and the registration of transfer of
         the Warrants.

                       (e) If, at the time of the  surrender  of this Warrant in
         connection  with any  transfer of this  Warrant,  the  transfer of this
         Warrant shall not be registered  pursuant to an effective  registration
         statement  under  the  Securities  Act  and  under   applicable   state


                                       5

<PAGE>

         securities or blue sky laws, the Company may require, as a condition of
         allowing  such  transfer  (i) that the  Holder  or  transferee  of this
         Warrant,  as the case may be, furnish to the Company a written  opinion
         of  counsel  (which  opinion  shall be in  form,  substance  and  scope
         customary  for opinions of counsel in comparable  transactions)  to the
         effect that such  transfer may be made without  registration  under the
         Securities Act and under  applicable state securities or blue sky laws,
         (ii) that the holder or  transferee  execute and deliver to the Company
         an investment  letter in form and  substance  acceptable to the Company
         and (iii) that the transferee be an "accredited investor" as defined in
         Rule 501(a) promulgated under the Securities Act.

                  8. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE.  This Warrant does
not entitle the Holder to any voting rights or other rights as a shareholder  of
the Company prior to the exercise hereof. Upon the surrender of this Warrant and
the  payment  of the  aggregate  Exercise  Price  (or  by  means  of a  cashless
exercise),  the Warrant Shares so purchased  shall be and be deemed to be issued
to such Holder as the record owner of such shares as of the close of business on
the later of the date of such surrender or payment.

                  9. LOSS,  THEFT,  DESTRUCTION  OR MUTILATION  OF WARRANT.  The
Company  covenants  that upon  receipt  by the  Company of  evidence  reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
or any stock  certificate  relating to the Warrant Shares,  and in case of loss,
theft or  destruction,  of indemnity or security  reasonably  satisfactory to it
(which, in the case of the Warrant,  shall not include the posting of any bond),
and upon surrender and  cancellation  of such Warrant or stock  certificate,  if
mutilated,  the Company will make and deliver a new Warrant or stock certificate
of like  tenor and dated as of such  cancellation,  in lieu of such  Warrant  or
stock certificate.

                  10.  SATURDAYS,   SUNDAYS,  HOLIDAYS,  ETC.  If  the  last  or
appointed  day for the  taking  of any  action  or the  expiration  of any right
required or granted herein shall be a Saturday,  Sunday or a legal holiday, then
such action may be taken or such right may be exercised  on the next  succeeding
day not a Saturday, Sunday or legal holiday.

                 11. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.

                       (a) STOCK SPLITS,  ETC. The number and kind of securities
         purchasable  upon the exercise of this  Warrant and the Exercise  Price
         shall be subject to adjustment  from time to time upon the happening of
         any of the  following.  In case the Company shall (i) pay a dividend in
         shares of Common Stock or make a distribution in shares of Common Stock
         to  holders  of  its  outstanding  Common  Stock,  (ii)  subdivide  its
         outstanding  shares of Common  Stock  into a greater  number of shares,
         (iii)  combine its  outstanding  shares of Common  Stock into a smaller
         number  of  shares of Common  Stock,  or (iv)  issue any  shares of its
         capital  stock in a  reclassification  of the  Common  Stock,  then the
         number of Warrant  Shares  purchasable  upon  exercise of this  Warrant
         immediately prior thereto shall be adjusted so that the Holder shall be
         entitled  to receive  the kind and  number of  Warrant  Shares or other
         securities  of the  Company  which it  would  have  owned or have  been
         entitled to receive had such Warrant been exercised in advance thereof.
         Upon each such  adjustment of the kind and number of Warrant  Shares or
         other  securities of the Company which are purchasable  hereunder,  the
         Holder shall  thereafter  be entitled to purchase the

                                       6

<PAGE>


         number  of  Warrant  Shares  or other  securities  resulting  from such
         adjustment  at an Exercise  Price per Warrant  Share or other  security
         obtained by multiplying the Exercise Price in effect  immediately prior
         to such adjustment by the number of Warrant Shares purchasable pursuant
         hereto  immediately prior to such adjustment and dividing by the number
         of Warrant  Shares or other  securities of the Company  resulting  from
         such  adjustment.  An adjustment  made pursuant to this paragraph shall
         become  effective  immediately  after the effective  date of such event
         retroactive to the record date, if any, for such event.

                       (b) ANTI-DILUTION PROVISIONS. During the Exercise Period,
         the Exercise Price shall be subject to adjustment  from time to time as
         provided in this Section 11(b). In the event that any adjustment of the
         Exercise Price as required herein results in a fraction of a cent, such
         Exercise Price shall be rounded up or down to the nearest cent.

                       (i)  ADJUSTMENT  OF EXERCISE  PRICE.  If and whenever the
                  Company  issues  or  sells,  or  in  accordance  with  Section
                  11(b)(ii)  hereof is deemed to have issued or sold, any shares
                  of Common  Stock by means of Capital  Shares  Equivalents  (as
                  defined  in  the   Purchase   Agreement)   for  an   effective
                  consideration  per share of less than the then Exercise  Price
                  or for no  consideration  (such lower  price,  the "BASE SHARE
                  PRICE"   and  such   issuances   collectively,   a   "DILUTIVE
                  Issuance"), then, the Exercise Price shall be reduced to equal
                  the Base Share Price.  Such adjustment  shall be made whenever
                  such shares of Common Stock or Capital  Shares  Equivalent are
                  issued.

                       (ii)  EFFECT ON  EXERCISE  PRICE OF CERTAIN  EVENTS.  For
                  purposes of  determining  the  adjusted  Exercise  Price under
                  Section 11(b) hereof, the following will be applicable:

                                (A)  ISSUANCE  OF  RIGHTS  OR  OPTIONS.  If  the
                       Company  in any  manner  issues or grants  any  warrants,
                       rights   or   options,   whether   or   not   immediately
                       exercisable, to subscribe for or to purchase Common Stock
                       or Capital Shares  Equivalent (such warrants,  rights and
                       options  to  purchase  Common  Stock  or  Capital  Shares
                       Equivalent are hereinafter  referred to as "OPTIONS") and
                       the  effective  price per share for which Common Stock is
                       issuable  upon the  exercise of such Options is less than
                       the Exercise Price ("BELOW BASE PRICE OPTIONS"), then the
                       maximum  total number of shares of Common Stock  issuable
                       upon the  exercise  of all such Below Base Price  Options
                       (assuming  full  exercise,   conversion  or  exchange  of
                       Capital Shares Equivalent, if applicable) will, as of the
                       date of the  issuance  or grant of such  Below Base Price
                       Options,  be  deemed to be  outstanding  and to have been
                       issued and sold by the  Company  for such price per share
                       and the maximum consideration payable to the Company upon
                       such  exercise  (assuming  full  exercise,  conversion or
                       exchange of Capital  Shares  Equivalent,  if  applicable)
                       will be deemed to have been received by the Company.  For
                       purposes of the preceding sentence,  the "effective price
                       per share for which  Common  Stock is  issuable  upon the
                       exercise of such Below Base Price  Options" is determined
                       by dividing  (i) the total  amount,  if any,  received or
                       receivable  by  the  Company  as  consideration  for  the


                                       7

<PAGE>

                       issuance  or  granting  of  all  such  Below  Base  Price
                       Options,  plus the minimum aggregate amount of additional
                       consideration,  if any,  payable to the Company  upon the
                       exercise of all such Below Base Price  Options,  plus, in
                       the case of Capital Shares  Equivalent  issuable upon the
                       exercise  of such Below Base Price  Options,  the minimum
                       aggregate amount of additional consideration payable upon
                       the exercise,  conversion or exchange thereof at the time
                       such Capital Shares Equivalent first become  exercisable,
                       convertible  or  exchangeable,  by (ii) the maximum total
                       number  of  shares  of  Common  Stock  issuable  upon the
                       exercise of all such Below Base Price  Options  (assuming
                       full   conversion  of  Capital  Shares   Equivalent,   if
                       applicable).  No further adjustment to the Exercise Price
                       will be made  upon the  actual  issuance  of such  Common
                       Stock or Convertible Securities upon the exercise of such
                       Below Base Price Options or upon the exercise, conversion
                       or exchange of Capital  Shares  Equivalent  issuable upon
                       exercise of such Below Base Price Options.

                                (B) ISSUANCE OF CAPITAL  SHARES  EQUIVALENT.  If
                       the  Company  in any manner  issues or sells any  Capital
                       Shares Equivalent, whether or not immediately convertible
                       (other  than where the same are treated as Options or are
                       issuable  upon the  exercise  of  Options  under  Section
                       11(b)(ii)(A)) and the effective price per share for which
                       Common Stock is issuable upon such  exercise,  conversion
                       or exchange  is less than the  Exercise  Price,  then the
                       maximum  total number of shares of Common Stock  issuable
                       upon the  exercise,  conversion  or  exchange of all such
                       Capital  Shares  Equivalent  will,  as of the date of the
                       issuance of such Capital Shares Equivalent,  be deemed to
                       be  outstanding  and to have been  issued and sold by the
                       Company   for  such  price  per  share  and  the  maximum
                       consideration  payable to the Company upon such  exercise
                       (assuming  full  exercise,   conversion  or  exchange  of
                       Capital Shares Equivalent,  if applicable) will be deemed
                       to have been received by the Company. For the purposes of
                       the preceding  sentence,  the "effective  price per share
                       for which  Common Stock is issuable  upon such  exercise,
                       conversion or exchange" is determined by dividing (i) the
                       total  amount,  if any,  received  or  receivable  by the
                       Company as consideration  for the issuance or sale of all
                       such  Capital   Shares   Equivalent,   plus  the  minimum
                       aggregate  amount of  additional  consideration,  if any,
                       payable to the Company upon the  exercise,  conversion or
                       exchange   thereof  at  the  time  such  Capital   Shares
                       Equivalent  first  become  exercisable,   convertible  or
                       exchangeable,  by (ii) the maximum total number of shares
                       of Common Stock issuable upon the exercise, conversion or
                       exchange  of  all  such  Capital  Shares  Equivalent.  No
                       further  adjustment  to the  Exercise  Price will be made
                       upon  the  actual  issuance  of such  Common  Stock  upon
                       exercise,  conversion or exchange of such Capital  Shares
                       Equivalent.

                                (C) CHANGE IN OPTION PRICE OR  CONVERSION  RATE.
                       If  there is a change  at any time in (i) the  amount  of
                       additional  consideration


                                       8

<PAGE>

                       payable to the Company upon the exercise of any  Options;
                       (ii)  the  amount  of  additional consideration,  if any,
                       payable to the Company  upon the exercise,  conversion or
                       exchange of any  Capital  Shares Equivalent; or (iii) the
                       rate   at  which  any   Capital   Shares  Equivalent  are
                       convertible  into  or  exchangeable for Common  Stock (in
                       each   such  case,  other  than  under  or  by reason  of
                       provisions   designed  to protect against dilution),  the
                       Exercise Price in effect at the time of such  change will
                       be readjusted  to the  Exercise  Price which  would  have
                       been  in  effect at such time had such Options or Capital
                       Shares  Equivalent  still  outstanding  provided for such
                       changed  additional  consideration or changed  conversion
                       rate, as the case may be, at the  time initially granted,
                       issued or sold.

                                (D) CALCULATION OF  CONSIDERATION  RECEIVED.  If
                       any Common Stock,  Options or Capital  Shares  Equivalent
                       are issued,  granted or sold for cash, the  consideration
                       received  therefor  for  purposes of this Warrant will be
                       the  amount  received  by the  Company  therefor,  before
                       deduction   of   reasonable   commissions,   underwriting
                       discounts or allowances or other reasonable expenses paid
                       or  incurred  by the  Company  in  connection  with  such
                       issuance,  grant  or  sale.  In case  any  Common  Stock,
                       Options or Capital  Shares  Equivalent are issued or sold
                       for a  consideration  part or all of which shall be other
                       than  cash,  the amount of the  consideration  other than
                       cash  received  by the  Company  will be the fair  market
                       value   of  such   consideration,   except   where   such
                       consideration  consists of securities,  in which case the
                       amount of  consideration  received by the Company will be
                       the fair market value  (closing  bid price,  if traded on
                       any market)  thereof as of the date of  receipt.  In case
                       any Common Stock,  Options or Capital  Shares  Equivalent
                       are issued in connection with any merger or consolidation
                       in which the Company is the  surviving  corporation,  the
                       amount of consideration therefor will be deemed to be the
                       fair market  value of such  portion of the net assets and
                       business   of  the   non-surviving   corporation   as  is
                       attributable  to such  Common  Stock,  Options or Capital
                       Shares  Equivalent,  as the case may be. The fair  market
                       value of any consideration  other than cash or securities
                       will be determined in good faith by an investment  banker
                       or  other  appropriate  expert  of  national   reputation
                       selected by the Company and reasonably  acceptable to the
                       holder  hereof,  with the costs of such  appraisal  to be
                       borne by the Company.

                                (E) EXCEPTIONS TO ADJUSTMENT OF EXERCISE  PRICE.
                       Notwithstanding the foregoing, no adjustment will be made
                       under this  Section  11(b) in respect of (1) the granting
                       of options to  employees,  officers and  directors of the
                       Company pursuant to any stock option plan duly adopted by
                       a majority  of the  non-employee  members of the Board of
                       Directors  of the Company or a majority of the members of
                       a committee of  non-employee  directors  established  for
                       such purpose,  (2) upon the exercise of the Debentures or
                       any  Debentures  of this series or of any other series or


                                       9

<PAGE>

                       security  issued by the  Company in  connection  with the
                       offer and sale of this Company's  securities  pursuant to
                       the  Purchase  Agreement,  or (3) upon the exercise of or
                       conversion  of any Capital  Shares  Equivalent or Options
                       issued  and  outstanding  on  the  Original  Issue  Date,
                       provided that the securities  have not been amended since
                       the date of the Purchase  Agreement except as a result of
                       the Purchase Agreement,  or (4) acquisitions or strategic
                       investments, the primary purpose of which is not to raise
                       capital.


                       (iii) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment
                  of the Exercise  Price shall be made in an amount of less than
                  1% of the Exercise Price in effect at the time such adjustment
                  is  otherwise  required  to  be  made,  but  any  such  lesser
                  adjustment  shall be carried  forward and shall be made at the
                  time and together with the next subsequent  adjustment  which,
                  together with any adjustments so carried forward, shall amount
                  to not less than 1% of such Exercise Price.

                  12. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION  OF  ASSETS.  In case the  Company  shall  reorganize  its  capital,
reclassify  its  capital  stock,  consolidate  or  merge  with or  into  another
corporation  (where the Company is not the surviving  corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business  to another  corporation  and,  pursuant to the terms of such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever
(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("OTHER
PROPERTY"),  are to be received by or distributed to the holders of Common Stock
of the Company,  then the Holder shall have the right thereafter to receive,  at
the option of the  Holder,  (a) upon  exercise  of this  Warrant,  the number of
shares of Common  Stock of the  successor  or  acquiring  corporation  or of the
Company, if it is the surviving corporation,  and Other Property receivable upon
or as a result of such reorganization,  reclassification,  merger, consolidation
or disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is  exercisable  immediately  prior to such event or (b) cash
equal  to the  value  of this  Warrant  as  determined  in  accordance  with the
Black-Scholes  option  pricing  formula.  In  case of any  such  reorganization,
reclassification,  merger, consolidation or disposition of assets, the successor
or acquiring  corporation (if other than the Company) shall expressly assume the
due and  punctual  observance  and  performance  of each and every  covenant and
condition of this  Warrant to be  performed  and observed by the Company and all
the obligations and liabilities hereunder,  subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for  adjustments of Warrant Shares
for which this Warrant is  exercisable  which shall be as nearly  equivalent  as
practicable to the adjustments  provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring  corporation" shall
include  stock of such  corporation  of any class which is not  preferred  as to
dividends or assets over any other class of stock of such  corporation and which
is  not  subject  to  redemption

                                       10

<PAGE>


and  shall  also  include  any  evidences  of indebtedness,  shares of stock  or
other securities which are convertible into or exchangeable  for any such stock,
either  immediately or upon the arrival of a specified  date or the happening of
a specified  event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing  provisions of this Section  12  shall   similarly
apply to successive  reorganizations, reclassifications, mergers, consolidations
or disposition of assets.

                  13.  VOLUNTARY  ADJUSTMENT BY THE COMPANY.  The Company may at
any time during the term of this Warrant reduce the then current  Exercise Price
to any  amount  and for any period of time  deemed  appropriate  by the Board of
Directors of the Company.

                  14.  NOTICE OF  ADJUSTMENT.  Whenever  the  number of  Warrant
Shares or number or kind of securities or other  property  purchasable  upon the
exercise of this Warrant or the Exercise Price is adjusted,  as herein provided,
the Company  shall give notice  thereof to the Holder,  which notice shall state
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise  Price of such Warrant Shares (and
other  securities  or property)  after such  adjustment,  setting  forth a brief
statement  of  the  facts  requiring  such  adjustment  and  setting  forth  the
computation by which such adjustment was made.

                  15. NOTICE OF CORPORATE ACTION. If at any time:

                       (a) the Company shall take a record of the holders of its
         Common Stock for the purpose of entitling them to receive a dividend or
         other  distribution,  or any right to  subscribe  for or  purchase  any
         evidences of its indebtedness,  any shares of stock of any class or any
         other securities or property, or to receive any other right, or

                       (b)  there  shall be any  capital  reorganization  of the
         Company,  any reclassification or recapitalization of the capital stock
         of the Company or any  consolidation  or merger of the Company with, or
         any sale, transfer or other disposition of all or substantially all the
         property, assets or business of the Company to, another corporation or,

                       (c)   there   shall  be  a   voluntary   or   involuntary
         dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases,  the Company shall give to Holder (i) at
least 20 days' prior written  notice of the date on which a record date shall be
selected for such dividend,  distribution or right or for determining  rights to
vote  in  respect  of  any  such   reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days'  prior  written  notice of the date when the same shall take  place.  Such
notice in accordance  with the foregoing  clause also shall specify (i) the date
on which  any such  record  is to be taken  for the  purpose  of such  dividend,
distribution  or right,  the date on which the holders of Common  Stock shall be
entitled  to any such  dividend,  distribution  or  right,  and the  amount  and
character  thereof,  and  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such time


                                       11

<PAGE>

is to be fixed,  as of which the  holders of Common  Stock  shall be entitled to
exchange their Warrant Shares for securities or other property  deliverable upon
such  disposition,  dissolution,  liquidation  or winding up. Each such  written
notice shall be sufficiently given if addressed to Holder at the last address of
Holder  appearing on the books of the Company and delivered in  accordance  with
Section 17(d).

                  16. AUTHORIZED  SHARES.  The Company covenants that during the
period the Warrant is  outstanding,  it will  reserve  from its  authorized  and
unissued Common Stock a sufficient  number of shares to provide for the issuance
of the  Warrant  Shares  upon the  exercise of any  purchase  rights  under this
Warrant.  The Company further  covenants that its issuance of this Warrant shall
constitute  full  authority  to its  officers  who are charged  with the duty of
executing stock certificates to execute and issue the necessary certificates for
the Warrant Shares upon the exercise of the purchase  rights under this Warrant.
The Company will take all such  reasonable  action as may be necessary to assure
that such Warrant Shares may be issued as provided  herein without  violation of
any applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.

                       Except and to the extent as waived or consented to by the
Holder,  the Company  shall not by any action,  including,  without  limitation,
amending  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 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 Holder
as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior to
such  increase  in par value,  (b) take all such action as may be  necessary  or
appropriate  in order that the Company may validly and legally  issue fully paid
and nonassessable  Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having  jurisdiction  thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.

                       Before  taking  any  action  which  would  result  in  an
adjustment in the number of Warrant Shares for which this Warrant is exercisable
or in the Exercise Price,  the Company shall obtain all such  authorizations  or
exemptions  thereof,  or consents  thereto,  as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.

                  17.  MISCELLANEOUS.

                       (a)   JURISDICTION.   This  Warrant  shall  constitute  a
         contract  under the laws of Nevada,  without  regard to its conflict of
         law, principles or rules.

                       (b)  RESTRICTIONS.   The  Holder  acknowledges  that  the
         Warrant  Shares  acquired  upon the  exercise of this  Warrant,  if not
         registered,  will have  restrictions  upon resale  imposed by state and
         federal securities laws.

                                       12

<PAGE>

                       (c) NONWAIVER  AND EXPENSES.  No course of dealing or any
         delay or failure to exercise any right  hereunder on the part of Holder
         shall operate as a waiver of such right or otherwise prejudice Holder's
         rights,  powers  or  remedies,  notwithstanding  all  rights  hereunder
         terminate  on the  Termination  Date.  If  the  Company  willfully  and
         knowingly  fails to comply with any  provision of this  Warrant,  which
         results in any material damages to the Holder, the Company shall pay to
         Holder  such  amounts  as shall be  sufficient  to cover  any costs and
         expenses  including,  but not limited to,  reasonable  attorneys' fees,
         including  those  of  appellate  proceedings,  incurred  by  Holder  in
         collecting  any amounts due pursuant  hereto or in otherwise  enforcing
         any of its rights, powers or remedies hereunder.

                       (d)  NOTICES.  Any  notice,  request  or  other  document
         required or  permitted  to be given or  delivered  to the Holder by the
         Company shall be delivered in accordance with the notice  provisions of
         the Purchase Agreement.

                       (e) LIMITATION OF LIABILITY.  No provision hereof, in the
         absence of any affirmative action by Holder to exercise this Warrant or
         purchase  Warrant  Shares,  and no enumeration  herein of the rights or
         privileges  of Holder,  shall give rise to any  liability of Holder for
         the  purchase  price of any  Common  Stock or as a  stockholder  of the
         Company,  whether  such  liability  is  asserted  by the  Company or by
         creditors of the Company.

                       (f) REMEDIES.  Holder,  in addition to being  entitled to
         exercise all rights granted by law, including recovery of damages, will
         be entitled to specific  performance  of its rights under this Warrant.
         The  Company  agrees  that  monetary  damages  would  not  be  adequate
         compensation  for any loss  incurred by reason of a breach by it of the
         provisions  of this  Warrant and hereby  agrees to waive the defense in
         any  action  for  specific  performance  that a remedy  at law would be
         adequate.

                       (g)  SUCCESSORS   AND  ASSIGNS.   Subject  to  applicable
         securities laws, this Warrant and the rights and obligations  evidenced
         hereby shall inure to the benefit of and be binding upon the successors
         of the Company and the successors and permitted assigns of Holder.  The
         provisions  of this  Warrant are  intended to be for the benefit of all
         Holders from time to time of this Warrant and shall be  enforceable  by
         any such Holder or holder of Warrant Shares.

                       (h) AMENDMENT. This Warrant may be modified or amended or
         the  provisions  hereof waived with the written  consent of the Company
         and the Holder.

                       (i) SEVERABILITY.  Wherever  possible,  each provision of
         this Warrant shall be interpreted in such manner as to be effective and
         valid under  applicable law, but if any provision of this Warrant shall
         be prohibited by or invalid under  applicable law, such provision shall
         be ineffective to the extent of such prohibition or invalidity, without
         invalidating   the  remainder  of  such  provisions  or  the  remaining
         provisions of this Warrant.

                       (j)  HEADINGS.  The headings used in this Warrant are for
         the  convenience of reference  only and shall not, for any purpose,  be
         deemed a part of this Warrant.

                              ********************






                                       13
<PAGE>





                  IN WITNESS WHEREOF,  the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.


Dated:  September 24, 2003
                                   GALAXY ENERGY CORPORATION



                                   By:__________________________________________
                                      Name: Marc E. Bruner
                                      Title: President

















                                       14


<PAGE>

                               NOTICE OF EXERCISE

To:   GALAXY ENERGY CORPORATION

            (1) The  undersigned  hereby  elects to  purchase  ________  Warrant
Shares of  Galaxy  Energy  Corporation  pursuant  to the  terms of the  attached
Warrant  (only if  exercised  in full),  and  tenders  herewith  payment  of the
exercise price in full, together with all applicable transfer taxes, if any.

            (2) Payment shall take the form of (check applicable box):

                  [  ] in lawful money of the United States; or

                  [  ] the cancellation  of such number of Warrant  Shares as is
                  necessary,  in accordance  with  the  formula  set  forth  in
                  subsection  3(d),  to  exercise  this  Warrant with respect to
                  the maximum number of Warrant Shares  purchasable  pursuant to
                  the cashless exercise procedure set forth in subsection 3(d).

            (3) Please issue a certificate  or  certificates  representing  said
Warrant  Shares  in the  name of the  undersigned  or in such  other  name as is
specified below:

                    ----------------------------------------


The Warrant Shares shall be delivered to the following:

                    ----------------------------------------

                    ----------------------------------------

                    ----------------------------------------

            (4) ACCREDITED INVESTOR. The undersigned is an "accredited investor"
as defined in  Regulation D  promulgated  under the  Securities  Act of 1933, as
amended.

                                       [PURCHASER]


                                       By: ______________________________
                                           Name:
                                           Title:

                                       Dated:  ________________________




<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)



            FOR VALUE RECEIVED,  the foregoing  Warrant and all rights evidenced
thereby are hereby assigned to


_______________________________________________ whose address is


__________________________________________________________.



___________________________________________________________________

                                       Dated:  ______________, _______


                  Holder's Signature:   ____________________________

                  Holder's Address:     ____________________________

                                        ____________________________



Signature Guaranteed:  ___________________________________________


NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.




</TEXT>
</DOCUMENT>
