COMMONSTOCK PURCHASE WARRANT

 

1.

Exercise of Warrant. The purchase rights represented by this Warrant are exercisable at the option of the holder thereof (“Holder”), in whole or in part during any period in which this Warrant may be exercised as set forth above. This common stock purchase warrant (the “Warrant”) is exercisable at a price of $0.03 per share (subject to adjustment as provided below) payable in cash or by certified or official bank check in New York Clearing House funds, subject to adjustment as provided in Section 5 hereof. Upon surrender of this Warrant with the Purchase Price (as hereinafter defined) for the shares of Common Stock purchased, at the Company’s principal executive offices (presently located at 2500 City West Boulevard, Suite 300, Houston, Texas 77042), Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased.

 

2.

Issuance of Stock Certificates. Upon receipt of the Purchase Price and a request to exercise this Warrant properly directed to the Company’s Secretary, certificates for the Common Stock shall be issued in the name of, or in such names as may be directed by, the Holder; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of such certificate in a name other than that of the holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

3.

Restriction on Transfer of Warrant. The holder of this Warrant, by his acceptance hereof, covenants, and agrees that this Warrant can be pledged or hypothecated, but it cannot be sold, transferred, or assigned other than in connection with such hypothecation, unless a registration statement is filed under the Securities Act of 1933 and any applicable state securities laws.

 

4.

Price. The initial purchase price shall be $0.03 per share of Common Stock. The adjusted purchase price shall result from time to time from any and all adjustments of the initial purchase price in accordance with the provisions of Article 5 hereof. The term “Purchase Price” herein shall mean the initial purchase price or the adjusted purchase price, as the context may require.

 

5.

 

(a)

Subdivision and Combination. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Purchase Price shall forthwith be proportionately decreased in the case of subdivision or increased in the case of combination.

 

(b)

Reclassification, Consolidation, Merger, Etc. In case of any reclassification or change of the outstanding shares of Common Stock (other than a change in par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in the case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the surviving corporation and which does not result in any reclassification or change of the outstanding shares of Common Stock, except a change as a result of a subdivision or combination of such shares or a change in par value, as aforesaid), or in the case of a sale or conveyance to another corporation of the property of the Company as an entirety, the holder of this Warrant shall thereafter have the right to purchase the kind and number of shares of stock and other securities and property which would have been received upon such reclassification, change, consolidation, merger, sale or conveyance if such holder had exercised this Warrant immediately prior to such transaction, at a price equal to the product of (x) the number of shares issuable upon exercise of this Warrant and (y) the Purchase Price in effect immediately prior to the record date for such reclassification, change, consolidation, merger, sale or conveyance.

 

(c)

No Adjustment of Purchase Price in Certain Cases. No adjustment of the Purchase Price shall be made upon the issuance or becoming issuable of shares of Common Stock pursuant to the antidilution provisions contained in any of the Company’s securities.

 

(d)

Adjustment in Number of Shares. Upon each adjustment of the Purchase Price pursuant to the provisions of this Section 5, the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted to the nearest full share by multiplying the Purchase Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of the Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Purchase Price.

 

6.

Replacement of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant.

 

7.

Elimination of Fractional Interests. The Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, nor shall it be required to issue scrip or pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated.

 

8.

Authorized Capital of the Company. The initial purchaser of this warrant acknowledges that the Company has insufficient authorized capital to permit exercise of this Warrant. The Company plans on submitting to shareholders a plan to increase the Company’s authorized capital in order to have sufficient authorized shares to cover the shares issuable hereunder. In the event that the Company does not increase its authorized capital in an amount sufficient to cover all shares exercisable hereunder, the initial purchaser of this Warrant and the Company agree that the purchase of this Warrant shall be rescinded and the initial purchaser’s consideration returned (without payment of interest).

 

9.

Notices to Warrant Holders. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a shareholder in respect of any meetings of shareholders for the election of directors or any other matter, or as having any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of the Warrant and prior to its exercise, any of the following events shall occur:

 

(a)

The Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or

 

(b)

The Company shall offer to all the holders of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or

 

(c)

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

10.

Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested:

 

(a)

If to the registered holder of this Warrant, to the address of such holder as shown on the books of the Company; or

 

(b)

If to the Company, to the address set forth on the first page of this Warrant.

11.

Successors. All the covenants, agreements, representations and warranties contained in this Warrant shall bind the parties hereto and their respective heirs, executors, administrators, distributees, successors and assigns.

12.

Headings. The article and section headings in this Warrant are inserted for purposes of convenience only and shall have no substantive effect.