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THESE WARRANTS AND THE SHARES OF COMMON STOCK THAT MAY BE PURCHASED ON THE
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THESE WARRANTS AND THE SHARES OF COMMON
STOCK THAT MAY BE PURCHASED ON THE EXERCISE HEREOF ARE BEING OFFERED AND SOLD
FOR INVESTMENT. EXCEPT AS PROVIDED IN SECTION 7(B) HEREOF, THESE WARRANTS MAY
NOT BE TRANSFERRED. THE SHARES OF COMMON STOCK ISSUED OR ISSUABLE UPON EXERCISE
OF THESE WARRANTS ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN
SECTION 4 OF THIS WARRANT.
COLONY ENERGY, INC.
WARRANTS FOR THE PURCHASE OF
SHARES OF COMMON STOCK OF
COLONY ENERGY, INC.
(A DELAWARE CORPORATION)
VOID AFTER 5:00 P.M., CENTRAL STANDARD TIME,
ON SEPTEMBER 28, 2012
Colony Energy, Inc., a Delaware corporation (the "Company") hereby
certifies that Kent E. Lovelace, Jr., (together with his permitted assigns, the
"Registered Holder"), is the holder of 194,126 of the Company's Warrants
(singly, a "Warrant," and collectively, the "Warrants") thus entitling him,
subject to the terms set forth below, to purchase from the Company, at any time
or from time to time on or after September 28, 2007 and on or before September
28, 2012 at not later than 5:00 p.m. (Central Standard Time), one share of
Common Stock of the Company ("Common Stock") for each Warrant at a purchase
price of $.50 per share. The number of shares purchasable upon exercise of a
Warrant, and the purchase price per share, each as adjusted from time to time
pursuant to the provisions of this Warrant Certificate, are hereinafter referred
to as the "Warrant Stock" and the "Purchase Price", respectively.
1. Period of Exercise.
(a) This Warrant Certificate may be exercised by the Registered Holder,
in whole or in part, by surrendering this Warrant Certificate, with the purchase
form appended hereto as Exhibit A duly executed by such Registered Holder, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full, by bank or certified
check in lawful money of the United States, of the Purchase Price payable in
respect of the number of shares of Warrant Stock purchased upon such exercise.
(b) Each exercise of a Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
Certificate shall have been surrendered to the Company as provided in subsection
1(a) above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise as provided
in subsection 1(c) below shall be deemed to have become the holder or holders of
record of the Warrant Stock represented by such certificates.
(c) As soon as practicable after the exercise of a Warrant, and in any
event within ten (10) days thereafter, the Company at its expense shall cause to
be issued in the name of, and delivered to, the Registered Holder, or, subject
to the terms and conditions hereof, as the Registered Holder (upon payment by
the Registered Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of full shares of
Warrant Stock to which such Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal (without
giving effect to any adjustment therein) to the number of such shares called for
on the face of this Warrant Certificate minus the number of such shares
purchased by the Registered Holder upon such exercise as provided in subsection
1(a) above.
2. Adjustments.
(a) If the outstanding shares of the Company's Common Stock shall be
subdivided into a greater number of shares or a dividend in Common Stock shall
be paid in respect of Common Stock, the Purchase Price in effect immediately
prior to such subdivision or at the record date of such dividend shall
simultaneously with the effectiveness of such subdivision or immediately after
the record date of such dividend be proportionately reduced. If the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Purchase Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price,
the number of shares of Warrant Stock purchasable upon the exercise of a Warrant
shall be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of a Warrant immediately prior to
such adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.
(b) If there shall occur any capital reorganization or reclassification
of the Company's Common Stock (other than a change in par value or a subdivision
or combination as provided for in subsection 2(a) above), or any consolidation
or merger of the Company with or into another corporation, or a transfer of all
or substantially all of the assets of the Company, or the payment of a
liquidating distribution then, as part of any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution,
lawful provision shall be made so that the Registered Holder of this Warrant
Certificate shall have the right thereafter to receive upon the exercise hereof
(to the extent, if any, still exercisable) the kind and amount of shares of
stock or other securities or property which such Registered Holder would have
been entitled to receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger, sale or liquidating distribution, as
the case may be, such Registered Holder had held the number of shares of Common
Stock which were then purchasable upon the exercise of a Warrant. In any such
case, appropriate adjustment (as reasonably determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth
herein with respect to the rights and interests thereafter of the Registered
Holder of this Warrant Certificate such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of a Warrant.
(c) In any case in which this Section 2 shall require that any
adjustment in the number of shares of Warrant Stock or other property for which
a Warrant may be exercised be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event issuing
to the Registered Holder the amount of Warrant Stock and other property, if any,
issuable upon exercise of a Warrant after such record date that is over and
above the Warrant Stock and other property, if any, issuable upon exercise of a
Warrant as in effect prior to such adjustment; provided that upon request the
Company shall deliver to the Registered Holder a due bill or other appropriate
instrument evidencing the Registered Holder's right to receive such additional
shares or property upon the occurrence of the event requiring such adjustment.
(d) When any adjustment is required to be made in the Purchase Price,
the Company shall promptly mail to the Registered Holder a certificate setting
forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property for which
a Warrant shall be exercisable following the occurrence of any of the events
specified in subsection 2(a) or 2(b) above.
3. Fractional Shares.
The Company shall not be required upon the exercise of a Warrant to issue
any fractional shares, but shall make an adjustment therefor in cash on the
basis of the mean between the low bid and high asked prices of the Warrant Stock
on the OTC Bulletin Board, or the mean between the low bid and high asked prices
of the Warrant Stock on the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotations ("NASDAQ") System or the
closing market price of the Warrant Stock on a national securities exchange on
the trading day immediately prior to the date of exercise, whichever is
applicable, or if none is applicable, then on the basis of the then market value
of the Warrant Stock as shall be reasonably determined by the Board of Directors
of the Company.
4. Limitation on Sales.
(a) The Registered Holder, and each subsequent holder of this Warrant
Certificate, if any, acknowledges that the Warrants and the Warrant Stock have
not been registered under the Securities Act of 1933, as now in force or
hereafter amended, or any successor legislation (the "Act"), and agrees not to
sell, pledge, distribute, offer for sale, transfer or otherwise dispose of any
of the Warrants or the Warrant Stock issued upon its exercise in the absence of
(i) an effective registration statement under the Act as to a Warrant or such
Warrant Stock and registration or qualification of a Warrant or such Warrant
Stock under any applicable blue sky or state securities law then in effect, or
(ii) an opinion of counsel, satisfactory to the Company, that such registration
and qualification are not required. Without limiting the generality of the
foregoing, unless the offering and sale of the Warrant Stock to be issued upon
the particular exercise of a Warrant shall have been effectively registered
under the Act, the Company shall be under no obligation to issue the shares or
warrants covered by such exercise unless and until the Registered Holder shall
have executed an investment letter in form and substance satisfactory to the
Company, including a warranty at the time of such exercise that he is acquiring
such shares or warrants for his own account, for investment and not with a view
to, or for sale in connection with, the distribution of any such shares or
warrants, in which event the Registered Holder shall be bound by the provisions
of a legend to such effect on the certificate(s) representing the Warrant Stock.
In addition, without limiting the generality of the foregoing, the Company may
delay issuance of the Warrant Stock until completion of any action or obtaining
of any consent, which the Company believes necessary or advisable under any
applicable law (including without limitation state securities or "blue sky"
laws).
(b) The Registered Holder agrees, and each other holder of Warrant
Stock agrees, if requested by the Company and/or the representative of the
underwriters underwriting an offering of Common Stock (or other securities of
the Company) from time to time, not to sell or otherwise transfer or dispose of
any Warrant Stock then held by the Registered Holder and/or such other holder
during such period of time following the effective date of any registration
statement of the Company filed under the Act for the period of time with respect
to which a majority of the executive officers of the Company agree not to sell
shares of Common Stock (or other securities of the Company). Such agreement
shall be in writing in a form satisfactory to the Company and such
representative. The Company may impose stop-transfer instructions with respect
to the Warrant Stock subject to the foregoing restriction until the end of such
period.
5. Reservation of Stock.
The Company shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of a Warrant, such shares of Warrant
Stock and other stock, securities and property, as from time to time shall be
issuable upon the exercise of a Warrant.
6. Replacement of Warrant Certificates.
Upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant Certificate and (in the
case of loss, theft or destruction) upon delivery of an indemnity agreement
(with surety if reasonably required) in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation of this
Warrant Certificate, the Company shall issue, in lieu thereof, a new Warrant
Certificate of like tenor.
7. Transfers. etc.
Subject to Section 4 above:
(a) The Company shall maintain a register containing the names and
addresses of the Registered Holders of this Warrant Certificate. The Registered
Holder may change his address as shown on the warrant register by written notice
to the Company requesting such change.
(b) This Warrant Certificate shall not be transferable by the
Registered Holder and shall be exercisable only by the Registered Holder;
provided that this Warrant Certificate may be transferred to, and may be
exercisable by, provided that this Warrant may be transferred to, and may be
exercisable by, the Registered Holder's spouse, the Registered Holder's
naturally born or legally adopted heirs or their issue, or a trust for the
benefit of any of the foregoing persons, or to and by any family planning entity
herebefore or hereafter established by the Registered Holder or any company or
entity that directly, or indirectly through one or more intermediaries, is
controlled by, or is under common control with, the Registered Holder. Subject
to the foregoing, this Warrant Certificate shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process without the prior written
consent of the Company. Any attempted transfer, assignment, pledge,
hypothecation or other disposition of this Warrant Certificate or of any rights
granted hereunder contrary to the provisions of this Section 7, or the levy of
any attachment or similar process upon this Warrant Certificate or such rights,
shall be null and void.
(c) Until any transfer of this Warrant Certificate is made in the
warrant register, the Company may treat the Registered Holder of this Warrant
Certificate as the absolute owner hereof for all purposes; provided, however,
that if and when this Warrant Certificate is properly assigned in blank, the
Company may (but shall not be obligated to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.
8. Mailing of Notices, etc.
All notices and other communications from the Company to the Registered
Holder of this Warrant shall be mailed by first-class certified or registered
mail, postage prepaid, to the address furnished to the Company in writing by the
last Registered Holder of this Warrant Certificate who shall have furnished an
address to the Company in writing. All notices and other communications from
the Registered Holder of this Warrant Certificate or in connection herewith to
the Company shall be mailed by first-class certified or registered mail, postage
prepaid, to the Company at its offices at 2100 West Loop South, Suite 900,
Houston, Texas 77027, or such other address as the Company shall so notify the
Registered Holder.
9. No Rights as Stockholder.
Until the exercise of a Warrant, the Registered Holder of this Warrant
Certificate shall not have or exercise any rights by virtue hereof as a
stockholder of the Company.
10. Change or Waiver.
Any term of this Warrant Certificate may be changed or waived only by an
instrument in writing signed by the party against which enforcement of the
change or waiver is sought.
11. Headings.
The headings in this Warrant Certificate are for purposes of reference only
and shall not limit or otherwise affect the meaning of any provision of this
Warrant Certificate.
12. Governing Law.
THIS WARRANT CERTIFICATE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the undersigned has set his hand hereunto as of the
28th day of September, 2007.
COLONY ENERGY, INC.
By:________________________________________
Kent E. Lovelace, Jr., President
EXHIBIT A
PURCHASE FORM
Colony Energy, Inc.
2100 West Loop South, Suite 900
Houston, Texas 77027
Gentlemen:
The undersigned pursuant to the provisions set forth in the attached
Warrant Certificate hereby irrevocably elects to purchase _________ shares of
the Common Stock (the "Common Stock") covered by such Warrant Certificate and
herewith makes payment of $_____________, representing the full purchase price
for such shares at the price per share provided for in such Warrant Certificate.
The undersigned understands and acknowledges the terms and restrictions on
the right to transfer or dispose of the Common Stock set forth in Section 4 of
the attached Warrant Certificate, which the undersigned has carefully reviewed.
The undersigned consents to the placing of a legend on his certificate for the
Common Stock referring to such restrictions and the placing of stop transfer
orders until the Common Stock may be transferred in accordance with the terms of
such restrictions.
By:_________________________________
Name:______________________________
Title:_______________________________
Dated:______________________________