THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, ANY MAY NOT BE SOLD,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS AN EXEMPTION FROM THE
REQUIREMENT OF SUCH REGISTRATION IS AVAILABLE UNDER THE
CIRCUMSTANCES AT THE TIME OBTAINING.
Void After 5:00 P.M. Houston, Texas Time on December 31, 1997
CHAPARRAL RESOURCES, INC.
-----------------------------
Common Stock Purchase Warrant
CHAPARRAL RESOURCES, INC., a Colorado corporation ("Chaparral" or the
"Company"), hereby certifies that, in connection with the subscription by
Victory Ventures LLC, a Delaware limited liability company with an office at 000
Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Victory"), as evidenced by
Subscription Agreement of even date hereof, and for other valuable consideration
received, Victory, or its permitted assigns, is entitled, subject to the terms
and conditions herein set forth, to purchase from the Company up to 4,615,385
fully paid and non-assessable shares of Common Stock, $.10 par value, of the
Company, at the per share purchase price (the "Purchase Price") of $0.65,
subject to adjustment as hereinafter provided, at any time or from time to time
on or after the date hereof and up to 5:00 P.M. New York City time on December
31, 1997 (the "Expiration Date"). The number and character of such shares of
Common Stock are subject to adjustment as p voided herein.
1. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
(a) "Act" shall mean the Securities Act of 1933, as amended.
(b) "Additional Shares of Common Stock" shall mean all shares
(including treasury shares) of Common Stock issued or sold (or, pursuant to
Section 3.7 hereof, deemed to be issued) by the Company after the date
hereof, whether or not subsequently reacquired or retired by the Company,
other than shares of Common Stock issuable pursuant to this Warrant.
(c) "Adjusted Exercise Price" shall have the meaning specified in
Section 3.2 hereof.
(d) "Company" means Chaparral Resources, Inc. or any corporation which
shall succeed to or assume the obligations of Chaparral Resources, Inc.
hereunder.
(e) "Common Stock" shall mean the Common Stock, par value $.10 per
share, of the Company and any stock into which such common stock shall have
been changed or any stock resulting from any reclassification of such
common stock, and shall include all other stock of any class (however
designated) of the Company the holders of which have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends
and distributions of any shares entitled to preference.
(f) "Convertible Securities" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock, other than
any securities issuable pursuant to this Warrant.
(g) "Market Price", as used with reference to any share of stock on
any specified date, shall mean:
(i) if such stock is listed and registered on any national
securities exchange or traded on The Nasdaq Stock Market
("Nasdaq"), (A) the last reported sale price on such exchange or
Nasdaq of such stock on the business day immediately preceding
the specified date, or (B) if there shall have been no such
reported sale price of such stock on the business day immediately
preceding the specified date, the average of the last reported
sale price on such exchange or on Nasdaq on (x) the day next
preceding the specified date for which there was a reported sale
price and (y) the day next succeeding the specified date for
which there was a reported sale price; or
(ii) if such stock is not at the time listed on any such
exchange or traded on Nasdaq but is traded on the
over-the-counter market as reported by the National Quotation
Bureau or other comparable service, (A) the average of the
closing bid and asked prices for such stock on the business day
immediately preceding the specified date, or (B) if there shall
have been no such reported bid and asked prices for such stock on
the business day immediately preceding the specified date, the
average of the last bid and asked prices on (X) the day next
preceding the specified date for which such information is
available and (Y) the day next succeeding the specified date for
which such information is available; or
(iii) if clauses (i) and (ii) above are not applicable, the
fair value per share of such stock as determined in good faith
and on a reasonable basis by the Board of Directors of the
Company and, if requested, set
2
forth in a certificate delivered to the holder of this Warrant
upon the exercise hereof.
(h) "Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible
Securities.
(i) "Other Securities" shall mean any stock and other securities of
the Company or any other person (corporate or otherwise) which the holders
of this Warrant at any time shall be entitled to receive, or shall have
received, upon the exercise of this Warrant, in lieu of or in addition to
the Common Stock, or which at any time shall be issuable or shall have been
issued to holders of the Common Stock in exchange for, in addition to or in
replacement of the Common Stock or Other Securities pursuant to Section 3.5
or otherwise.
(j) "Purchase Price" shall mean $0.65 per share, subject to adjustment
as provided herein.
2. Exercise of Warrant.
-------------------
2.1 Manner of Exercise.
------------------
(a) This Warrant may be exercised by the holder hereof, in whole
or in part (but not as to fewer than 1,000 shares of the Common Stock
unless, at the time of exercise, this Warrant entitles the holder to
purchase fewer than 1,000 shares of the Common Stock), on any business
day on or after the date hereof and before 5:00 P.M., Houston, Texas
time on December 31, 1997, by surrender of this Warrant, with the form
of subscription at the end hereof (or a reasonable facsimile thereof)
duly executed by such holder, to the Company at its office in Houston,
Texas, and, except as otherwise provided in Section 2.1(b),
accompanied by payment, by certified or official bank check payable to
the order of the Company, in the amount obtained by multiplying (x)
the number of shares of the Common Stock (without giving effect to any
adjustment therein) designated in such form of subscription (or such
reasonable facsimile) by (y) the Purchase Price, and such holder shall
thereupon be entitled to receive the number of shares of the Common
Stock determined as provided hereunder.
(b) In addition to the method of payment set forth in Section
2.1(a), and in lieu of any cash payment required thereunder, the
holder of this Warrant shall have the right at any time and from time
to time to exercise this Warrant in full or in part by surrendering
this Warrant, with the form of subscription at the end hereof (or a
reasonable facsimile thereof) duly executed by such holder, to the
Company at its office in Denver, Colorado, in exchange for which the
holder shall receive the number of shares of Common Stock equal to the
product of (x) the number of shares as to which the Warrant is being
exercised, multiplied
3
by (y) a fraction, the numerator of which is the Market Price of one
share of the Common Stock less the per share Purchase Price then in
effect and the denominator of which is the Market Price of one share
of the Common Stock.
2.2. When Exercise Effective. Each exercise of this Warrant shall be deemed
to have been effected immediately prior to the close of business on the business
day on which this Warrant shall have been surrendered to the Company as provided
in Section 2.1, and the person(s) in whose name(s) the certificate(s) for shares
of the Common Stock (or Other Securities) that are to be issued up.on such
exercise in accordance with Section 2.3 shall be deemed the holder(s) of record
thereof at such time.
2.3. Delivery of Stock Certificates, etc. As soon as practicable after the
exercise of this Warrant in full or in part in accordance herewith the Company,
at its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the holder hereof, or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct,
(a) a certificate or certificates, marked with an appropriate
legend referring to the terms of this Warrant and any applicable
restrictions on such shares imposed by the Federal or any state
securities laws, for the number of full shares of the Common Stock (or
Other Securities) to which such holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such holder
would otherwise be entitled, cash in an amount equal to the same
fraction of the Market Price of one full share of the Common Preferred
Stock on the business day next preceding the date of such exercise,
and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or faces
thereof for the number of shares of the Common Stock equal (without
giving effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant minus the number of shares
designated by the holder upon such exercise as provided in Section
2.1.
3. Common Stock Issuable Upon Exercise.
3.1. General. The number of shares of the Common Stock which the holder of
this Warrant shall be entitled to receive upon the exercise hereof or, if
securities or other property in addition to or in lieu of the Common Stock shall
by reason of the operation of the provisions of this Section be issuable upon
such exercise, the amount and kind of such securities or other property, shall
be adjusted or determined as provided in this Section 3.
3.2. Adjusted Exercise Price. The number of shares of the Common Stock
which the holder of this Warrant shall be entitled to receive upon the exercise
hereof shall be determined by multiplying the number of shares of the Common
Stock which, but for the
4
provisions of this Section 3, would otherwise be issuable upon such exercise, as
designated by the holder hereof pursuant to Section 2.1, by the fraction of
which the numerator is the per share Purchase Price and the denominator is the
per share Adjusted Exercise Price (as herein defined) in effect on the date of
such exercise. The per share Adjusted Exercise Price of the Common Stock shall
initially be the Purchase Price (as defined in Section 1) and shall be adjusted
and readjusted from time to time as provided in this Section 3 (and, as so
adjusted or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this Section 3).
3.3. Stock Dividends, Stock Splits, etc. In case the Company at any time or
from time to time after the date hereof shall declare or pay any dividend on the
Common Stock payable in Common Stock, or effect a subdivision of the outstanding
shares of the Common Stock into a greater number of shares of the Common Stock
(by reclassification or otherwise than by payment of a dividend in shares of
Common Stock), then, in any such event, the per share Adjusted Exercise Price
per share shall be adjusted effective as of the close of business on (i) the
record date for the determination of shareholders entitled to receive such
dividend if such dividend is in fact paid, or (ii) the day immediately preceding
the day upon which such subdivision shall become effective (any such day, as the
case may be, shall be referred to herein as the "Subdivision Effective Date"),
by multiplying the per share Adjusted Exercise Price in effect immediately prior
to the Subdivision Effective Date by the fraction of which (x) the numerator
shall be the number of shares of the Common Stock outstanding immediately prior
to the Subdivision Effective Date and (y) the denominator shall be the number of
shares of the Common Stock outstanding immediately prior to the Subdivision
Effective Date plus the number of shares of the Common Stock issuable upon the
payment of such dividend or the consummation of such subdivision, as the case
may be.
3.4. Adjustments for Combinations, etc. In case the outstanding shares of
the Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Adjusted Exercise
Price shall be adjusted, effective as of the close of business on the day
immediately preceding the day upon which such combination or consolidation is
effective (the "Combination Effective Date"), by multiplying the per share
Adjusted Exercise Price in effect immediately prior to the Combination Effective
Date by the fraction of which (x) the numerator shall be the number of shares of
the Common Stock outstanding immediately prior to the Combination Effective Date
and (y) the denominator shall be the number of shares of the Common Stock
outstanding immediately after the Combination Effective Date.
3.5. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization
etc. In case the Company, after the date hereof, (a) shall consolidate with or
merge into any other person and shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) shall permit any other
person to consolidate with or merge into the Company and the Company shall be
the continuing or surviving person but, in connection with such consolidation or
merger, the Common Stock shall be changed into or exchanged for stock or other
securities or property of any other person, or (c) shall effect a capital
reorganization or
5
reclassification of the Common Stock (other than a reclassification subject to
Sections 3.3 or 3.4), then, and in each such case, proper provision shall be
made so that the holder of this Warrant, upon the exercise hereof at any time
after the consummation of such consolidation, merger, reorganization or
reclassification, shall be entitled to receive, in lieu of the Common Stock (or
Other Securities) issuable upon such exercise prior to such consummation, the
stock and other securities and property to which such holder would have been
entitled upon such consummation if such holder had so exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for in this
Section 3.
3.6. Issuances of Securities. If, at any time while this Warrant (or any
portion thereof) is outstanding, the Company:
(i) issues or sells Additional Shares of Common Stock
without consideration or for a consideration per share less than
the Adjusted Exercise Price in effect immediately prior to such
issue or sale, or
(ii) declares, orders, pays or makes a dividend or other
distribution (including, without limitation, any distribution of
other or additional stock or other securities or property by way
of dividend or spinoff, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock other than a
dividend payable in Additional Shares of Common Stock,
then, and in each such case, the Adjusted Exercise Price shall, concurrently
with such issue or sale or immediately after the close of business on the record
date fixed for the determination of holders of any class of securities entitled
to receive such dividend or distribution, be reduced to a price (calculated to
the nearest cent, a half cent being considered a full cent) determined by
dividing:
(x) an amount equal to:
(i) the product obtained by multiplying the number of shares
of Common Stock outstanding immediately prior to such issue or
sale or at the close of business on such record date by the
Adjusted Exercise Price in effect at such time,
plus
(ii) in the case of any such issue or sale, the
consideration, if any, received by the Company upon such issue or
sale, or
minus
6
(iii) in the case of any such dividend or distribution, the
aggregate amount of such dividend or distribution, which amount
shall be valued in accordance with Section 3.8 hereof,
by
(y) the number of shares of Common Stock outstanding immediately after
such issue or sale or at the close of business on such record date,
provided that, this Section 3.6 shall not apply to the issuance or sale of
Additional Shares of Common Stock pursuant to any Option or commitment
outstanding prior to the date hereof set forth on Schedule A attached hereto,
and provided, further however, that for the purposes of this Section 3.6, (A)
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 3.7 hereof, such Additional Shares shall be deemed to be
outstanding and (B) treasury shares shall not be deemed to be outstanding.
3.7. Options and Convertible Securities. In case the Company at any time or
from time to time after the date hereof shall issue, sell, grant or assume any
Options or Convertible Securities, or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Section 3.8 hereof)
of such shares would be less than the Adjusted Exercise Price in effect
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date, as the case may be, and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(a) no further adjustment of the Adjusted Exercise Price shall be
made upon the subsequent issue or sale of Convertible Securities or
shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Company, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof (by change of rate or otherwise), then the Adjusted
Exercise Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of a record date
7
with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects
such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the Adjusted Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(i) in the case of Convertible Securities or Options for
Common Stock, the only Additional Shares of Common Stock issued
or sold were the shares of Common Stock, if any, actually issued
or sold upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for the
issue or sale of all such Convertible Securities which were
actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon such
conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only
the Convertible Securities, if any, actually issued or sold upon
the exercise thereof were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration
received by the Company for the Additional Shares of Common Stock
deemed to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or assumption
of all such options, whether or not exercised, plus the
consideration deemed to have been received by the Company
(pursuant to Section 3.8 hereof) upon the issue or sale of the
Convertible Securities with respect to which such Options were
actually exercised;
(d) no readjustment pursuant to clause (b) or (c) above shall
have the effect of increasing the Adjusted Exercise Price by an amount
in excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
8
(e) in the case of any Options to acquire Convertible Securities
which expire by their terms not more than 30 days after the date of
issue, sale, grant or assumption thereof, no adjustment of the
Adjusted Exercise Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the
manner provided in clause (c) above.
3.8. Computation of Consideration. For the purposes of this Section 3, the
consideration received by the Company for the issue or sale of any Additional
Shares of Common Stock shall be computed as follows:
(a) Nature of Consideration. Such consideration shall
(i) insofar as it consists of cash, be computed at the
actual amount paid by the purchaser of such Additional
Shares of Common Stock, without deduction for commissions,
concessions or discounts allowed to underwriters, dealers or
others in connection with such issue,
(ii) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board
of Directors of the Company; provided, however, that any
such property that consists of securities (A) that are
listed on any national securities exchange or if such
securities are traded on Nasdaq, then the per share (or
other unit) value shall be the last reported sale price of
such securities on the most recent trading day preceding the
day in question for which such information is available, or
(B) that are traded in the over-the-counter market but are
not traded on Nasdaq, then the per share (or other unit)
value shall be the average between the closing bid and asked
prices of such securities on the most recent trading day
preceding the day in question for which such information is
available, as reported by the NASD, and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for consideration which covers
both, be that portion of such consideration (computed as
provided in clauses (i) and (ii) above), which is determined
in good faith by the Board of Directors of the Company to be
allocable to such Additional Shares of Common Stock.
(b) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 3.7 hereof, relating to
Options and Convertible Securities, shall be determined by dividing:
9
(i) the total amount, if any, received or receivable by
the Company as consideration for the issue, sale, grant or
assumption of such Options or Convertible Securities, plus
the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Company
upon the exercise of such Options or the conversion or
exchange of such Convertible Securities or, in the case of
Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or
exchange of such Convertible Securities,
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
4. No Dilution or Impairment. The Company will not, by amendment of its
articles of organization 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 action as may be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution or other impairment.
5. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of the
Company to any other person or any consolidation or merger involving
the Company and any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
10
the Company will give to the holder of this Warrant a notice
specifying (i) the date or expected date on which any such record is
to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or
right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to
take place and the time, if any such time is to be fixed, as of which
the holders of record of the Common Stock (or Other Securities) shall
be entitled to exchange their shares of the Common Stock (or Other
Securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up. Unless
otherwise required by law to be given sooner, such notice shall be
mailed within a reasonable time prior to the date therein specified.
6. Reservation of Stock, etc. The Company will at all times reserve and
keep available out of its authorized but unissued Common Stock, solely for
issuance and delivery upon the exercise of this Warrant, the full number of
shares of Common Stock (or Other Securities) then issuable upon the exercise of
this Warrant. All shares of the Common Stock issuable upon the exercise of this
Warrant shall be duly authorized, and when issued and paid for in full, validly
issued, fully paid and non-assessable with no liability on the part of the
holders thereof.
7. Registration Rights.
(a) Definitions. For purposes of this Section 7, the following
terms shall have the following respective meanings:
(i) "Commission" shall mean the United States
Securities and Exchange Commission or any other Federal
agency at the time administering the Act.
(ii) The term "holder or holders of Registrable Stock"
shall mean the holders of Common Stock or Other Securities
issued pursuant to this Warrant.
(iii) The terms "register," "registered" and
"registration" refer to a registration effected by preparing
and filing a registration statement or similar document in
compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document by
the Commission.
(iv) The term "Registration Period" shall mean the
period commencing on the date hereof and ending (a) if this
Warrant shall expire without having been exercised in whole
or in part, the Expiration Date or (b) if this Warrant shall
have been exercised in whole or in part, at such time as no
shares of Registrable Stock remain outstanding.
11
(v) The term "Registrable Stock" means (a) the shares
of Common Stock issued or issuable upon the exercise of this
Warrant, and (b) any Other Securities issued or issuable
pursuant to this Warrant; provided, however, that shares of
Registrable Stock shall cease to be Registrable Stock if
they are sold or transferred pursuant to a registered public
offering or other transaction which does not result in
restrictions on resale being imposed on the transfer by
virtue of Federal or state securities laws; and provided
further that Registrable Stock shall cease to be Registrable
Stock if the holder could sell or transfer all such
securities held by him in one transaction pursuant to Rule
144 promulgated under the Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders
("Initiating Holders") of at least 306 of the shares of
Registrable Stock, which request shall be given during the
Registration Period, shall state the intended method of
disposition by such Initiating Holders and shall request
that the Company effect the registration of all or part of
the Registrable Stock under the Act, the Company shall
promptly give written notice of such requested registration
to all other holders, if any, of Registrable Stock. If,
after the expiration of thirty days from the giving of such
notice to the holders of Registrable Stock, the Company
shall have received written requests to register at least
50k of the shares of Registrable Stock, which requests shall
state the intended method of disposition of such securities
by such holders, the Company shall use all reasonable
efforts to prepare and file with the Commission a
registration statement and such other documents, including a
prospectus, as may be necessary to permit a public offering
and sale of such Registrable Stock in the United States in
compliance with the provisions of the Act, all to the extent
requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) by the holders of the
Registrable Stock so to be registered (the "Participating
Holders"). If such sale of Registrable Stock is to be
pursuant to an underwritten offering, the underwriter shall
be selected by the Initiating Holders and shall be
reasonably acceptable to the Company. If the underwriter
selected determines that the number of shares be included is
required to be limited due to market conditions or
otherwise, the holders of Registrable Stock proposing to
sell their shares in such underwritten registration shall
share pro rata (according to the number of shares requested
to be registered) in the number of shares being underwritten
(as determined by such underwriter) and registered for their
account. The Company shall only be required to effect two
registrations pursuant to this Section 7(b).
12
(ii) The Company shall not be required to effect any
registration under this Section 7(b) within nine months
after the completion of any public offering of its
securities pursuant to which the holders of Registrable
Stock were afforded the right to register as many shares of
their Registrable Stock as requested nor within six months
after any other public offering by the Company.
(iii) The Company shall have the right to include in
any registration statement or post-effective amendment filed
pursuant to this Section 7(b) other securities of the
Company then proposed to be distributed, except that, to the
extent consistent with the rights of other holders of the
Company's securities, if and to the extent that the
underwriter or underwriters acting with respect of such
public offering reasonably determine that the inclusion of
such other securities may substantially prejudice or hinder
the offering of Registrable Stock, the number of such other
securities shall be reduced or eliminated xxxxx.xx any
reduction in the number of shares of Registrable Stock so to
be registered.
(iv) If the registration under this paragraph (b) is
effected on a Form S-3 (or any successor form thereto), and
the effectiveness of such registration statement can be
maintained without significant additional expense to the
Company, then the Company agrees to maintain the
effectiveness of such registration statement for a period of
one year after its initial effective date.
(c) Incidental Registration.
(i) If, during the Registration Period, the Company at
any time or from time to time proposes to file with the
Commission a registration statement under the Act with
respect to any proposed distribution of any of its
securities (other than a registration to be effected on Form
S-4, S-8 or other similar limited purpose form), whether for
sale for its own account or for the account of any other
person holding registration rights with respect to the
securities of the Company, then the Company shall give
written notice of such proposed filing to the holders of
Registrable Stock at least thirty (30) days before the
anticipated filing date, and such notice shall describe in
detail the proposed registration and distribution (including
those jurisdictions where registration or qualification
under the securities or blue sky laws is intended) and shall
offer the holders of Registrable Stock the opportunity to
register such number of shares of Registrable Stock as the
holders of Registrable Stock may request. Upon receipt by
the Company by the anticipated filing date of written
requests from the Participating Holders of
13
Registrable Stock for the Company to register their
Registrable Stock, the Company shall permit, or in the event
of an underwritten offering, shall use its best efforts to
cause the managing underwriter or underwriters of such
proposed underwritten offering to permit, the Participating
Holders to include such securities in such offering on the
same terms and conditions as any similar securities of the
Company included therein; provided, however, that if in the
opinion of the managing underwriter or underwriters of such
offering, the inclusion of the total amount or kind of
securities which it or the Company, and any other persons or
entities, intend to include in such offering would
interfere, hinder, delay, reduce or prevent the
effectiveness or sale of the Company's shares of Common
Stock proposed to be so registered or would otherwise
adversely affect the success of such offering, then the
amount or kind of securities to be offered for the accounts
of the Company and each holder of Common Stock (including
without limitation Registrable Stock) or securities
convertible into or exercisable for Common Stock proposed to
be registered (other than any persons exercising demand
registration rights) shall be reduced (or eliminated) in
proportion to their respective values to the extent
necessary to reduce the total amount of securities to be
included in such offering on behalf of such holders of
securities to the amount recommended by such managing
underwriter. For purposes of this Section, "value" shall
mean principal amount with respect to debt securities and
the proposed offering price per share with respect to equity
securities. Notwithstanding the foregoing, if, at any time
after giving written notice of its intention to register
Common Stock or other securities convertible into or
exercisable for Common Stock and prior to the effectiveness
of the registration statement filed in connection with such
registration, the Company determines for any reason either
not to effect such registration or to delay such
registration, the Company may, at its election, by delivery
of written notice to the Participating Holders, (i) in the
case of a determination not to effect registration, relieve
itself of its obligations to register any Registrable Stock
in connection with such registration, or (ii) in the case of
determination to delay the registration, delay the
registration of such Registrable Stock for the same period
as the delay in the registration of such other shares of
Common Stock or other securities convertible into or
exercisable for Common Stock.
(ii) Exception. The Company shall not be required to
include any of the Registrable Stock of a Participating
Holder in any registration statement or post-effective
amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign
such documents as may be required by the Commission or
reasonably
14
requested by the Company in accordance with generally
accepted practices, in connection with such proposed
distribution.
(d) Covenants of the Company with Respect to Registration. In
connection with any registration under this Section 7, the Company
shall, as expeditiously as is reasonably possible:
(i) Prepare and file with the Commission a registration
statement with respect to the Participating Holders
Registrable Stock and, subject to the last sentence of
Section 7(c)(i) hereof, use its best efforts to cause such
registration statement to become effective.
(ii) Prepare and file with the Commission such
amendments and supplements to such registration statement
and prospectus used in connection with such registration
statement as may be necessary to comply with the provisions
of the Act with respect to the disposition of all securities
covered by such registration statement.
(iii) Furnish to the Participating Holders such numbers
of copies of a prospectus, including, if applicable, a
preliminary prospectus, in conformity with the requirements
of the Act, and such other documents as the selling
shareholders reasonably request in order to facilitate the
disposition of Registrable Stock owned by the Participating
Holders may reasonably request in order to facilitate the
disposition of Registrable Stock owned by the Participating
Holders.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions
within the United States as shall be reasonably requested by
the Participating Holders; provided, however, that the
Company shall not be required in connection therewith or as
a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing
underwriter of such offering. The Participating Holders
shall also-enter into and perform their obligations under
such an agreement.
(vi) Notify the Participating Holders, at any time when
a prospectus relating to Registrable Stock covered by such
registration statement is required to be delivered under the
Act, of the happening of any event as a result of which the
prospectus included in such registration
15
statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances then existing.
(vii) Furnish to the Participating Holders, on the date
that shares of Registrable Stock are delivered to the
underwriters for sale in connection with a registration
pursuant to this Section 7, if such securities are being
sold by underwriters, or, on the date that the registration
statement with respect to such securities becomes effective,
(i) an opinion as to matters of law only, dated such date,
of counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given
to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the
Participating Holders and (ii) a letter dated such date,
from the independent certified public accountants of the
Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in
an underwritten public offering, addressed to the
underwriters, and to the Participating Holders.
(e) The Company shall pay all costs, fees and expenses in
connection with all registration statements filed under this Section 7
including, without limitation, the Company's legal and accounting
fees, printing expenses and blue sky fees and expenses, but not
including the fees and expenses of counsel for the Participating
Holders in connection with such registration. However, the Company
shall not pay for underwriting discounts and commissions and
underwriters' expenses allocable to the Registrable Stock being
registered or state transfer taxes.
(f) Indemnification.
(i) The Company shall indemnify each Participating
Holder under this Agreement, its officers and directors and
any person controlling it within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, against any
loss, claim, damage, expense or liability (including without
limitation all expenses reasonably incurred in
investigating, preparing, or defending against any claim
whatsoever, such expenses to be reimbursed by the Company as
they are incurred) to which any of them may become subject
under the Act, the Exchange Act or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration
statement or prospectus or any amendments or supplements
thereto in which Registrable Stock is included or in any
application, statement or other document filed by the
Company with the
16
Commission or any securities exchange or in any jurisdiction
in connection with qualifying such shares under the
securities laws thereof, or (ii) the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, unless such statement or omission is made in
reliance upon and in conformity with written information
furnished to the Company by or on behalf of such
Participating Holder or an underwriter expressly for use in
any such registration statement or other document.
(ii) Each Participating Holder shall, as a condition to
such registration of Registrable Stock, agree to indemnify
the Company, its officers and directors and any person
controlling the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, against any
loss, claim, damage or expense or liability (including
without limitation all expenses reasonably incurred in
investigating, preparing or defending against any claim
whatsoever, such expenses to be reimbursed by the
undersigned as they are incurred) to which they may become
subject under the Act, the Exchange Act or otherwise,
arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement or prospectus or any amendments or
supplements thereto in which Registrable Stock is included
or in any application, statement or other document filed by
the Company with the Commission or any securities exchange
or in any jurisdiction in connection with qualifying such
shares under the securities laws thereof, or (ii) the
omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided in each case
that such statement or omission is made in reliance upon and
in conformity with written information furnished to the
Company by or on behalf of such Participating Holder
expressly for use in any such registration statement or
other document.
(iii) Promptly upon receipt by a party claiming
indemnification hereunder of notice of the commencement of
any action involving a claim referred to above, such
indemnified party will, if a claim in respect thereof is to
be made against . party which may be required to indemnify
such party hereunder, give written notice to the latter of
the commencement of such action. In case any such action is
brought against an indemnified party, the indemnifying party
shall be entitled to participate in and to assume the
defense of such action, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party.
Except as set forth herein, the indemnified party and any
party cooperating in the defense of such claim-shall not
settle or compromise any such claim or admit liability
without the express
17
written consent of the indemnifying party. The indemnified
party shall have the right to be represented by an advisory
counsel and accountants, at its own expense, and the
indemnified party shall be kept fully informed of such
action, suit or proceeding at all stages thereof whether or
not the indemnified party is so represented. After a period
of thirty days following the date the written notice of such
claim was given to the indemnifying party the indemnified
party may settle any such claim (and the amount of any such
settlement shall be subject to indemnification hereunder)
unless within such thirty-day period the indemnifying party
shall have provided the indemnified party with notice and
evidence to the indemnified party's satisfaction that the
indemnifying party reasonably disputes such claim and has
the financial ability to meet its indemnification
obligations hereunder. Notwithstanding the foregoing, the
indemnified party may immediately cause to be paid or
discharged any asserted claim the non-payment of which would
have an immediate substantial adverse impact on the
indemnified party and any claim which the indemnifying party
has not disputed within thirty days of notice as provided
above.
(iv) If the indemnification provided for in this
Section 7(f) is unavailable or insufficient to hold harmless
an indemnified party under such subsection in respect of any
losses, claims, damages or liabilities or action in respect
thereof or referred to therein, then each indemnifying party
shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages,
liabilities or actions in such proportion as is appropriate
to reflect the relative fault of the Company, on the one
hand, and the Participating Holders, on the other, in
connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or actions as
well as any other relevant equitable considerations,
including the failure to give the notice required under such
subsections. The relative fault shall be determined by
reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to
information supplied by the Company on the one hand, or the
Participating Holders, on the other hand, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or
omission. The Company and the Participating Holders agree
that it would not be just and equitable if contribution
pursuant to this Section 7(f)(iv) were determined by pro
rata allocation or by any other method of allocation which
did not take account of the equitable considerations
referred to above in this subsection. No person guilty of
fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act), shall be entitled to
18
contribution from any person who is not guilty of such
fraudulent misrepresentations.
(v) The obligations of the Company and the
Participating Holders under this Section 7(f) shall survive
the completion of any offering of Registrable Stock in a
registration statement under this Section 7.
(vi) The rights of indemnification contained in this
Section 7 shall not be deemed to be the exclusive remedy of
the parties hereto and such rights shall be in addition to
any other rights or remedies which any party hereto may have
at law or equity.
(g) Assignment of Registration Rights. The undersigned's rights
set forth in this Section 7 shall automatically be deemed assigned to
any transferee or assignee of this Warrant or shares of Common Stock
or Other Securities issuable hereunder, provided that immediately
following such transfer the further disposition of such securities by
the transferee or assignee is restricted under the Act; provided
however, that, the termination of registration rights in respect of
any shares of Registrable Stock by reason of the operation of Section
7(a) shall be binding upon any transferee of such shares. Upon the
request of any such holder, the Company will confirm in writing to any
transferee of such holder's Registrable Stock the Company's continuing
obligation to afford such transferee the benefits of the Company's
agreements contained in this Section 7, but no failure of the Company
to confirm such obligations shall in any way impair such transferee's
rights under this Section 7.
(h) Effect of Private Placement. Notwithstanding anything to the
contrary contained in this Section 7, if, prior to December 31, 1997,
the Company completes a private offering of equity securities in which
the Company realizes gross proceeds of at least $1 million and in
which one or more purchasers of such securities are granted more
favorable registration rights than those granted herein, the
registration rights granted to holders of Registrable Stock hereunder
shall be modified to be equivalent in all respects to the most
favorable registration rights granted in such private offering;
provided, however, that the provisions of Section 7(f) hereof shall
not be modified as a result of such private offering.
8. Substitution of Warrants.
8.1. Exchange of Warrants. Subject to the provisions appearing at the top
of the first page of this Warrant concerning, inter alia, the sale, transfer,
encumbrance or other disposition of this Warrant, upon surrender or exchange of
this Warrant, properly endorsed, to the Company, the Company at its expense will
issue and deliver to or upon the order of the holder thereof a new Warrant or
Warrants of like tenor, in the name of such holder or as such
19
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant or
Warrants so surrendered.
8.2. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Company, or,
in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
9. Ownership of Warrant. Until this Warrant is transferred on the books of
the Company, the Company may treat the person in whose name this Warrant is
issued as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary, except that, if and when this Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer hereof
as the absolute owner of this Warrant for all purposes, notwithstanding any
notice to the contrary. A Warrant, if properly assigned, may be exercised to the
extent provided herein by a new holder without first having a new Warrant
issued.
10. Notices, etc. All notices and other communications from the Company to
the holder of this Warrant or from the holder of this Warrant shall be delivered
personally, by facsimile (if confirmed and followed by delivery by first class
mail), reputable overnight courier service, or mailed by first class registered
or certified mail, postage prepaid, to the Company at 0000 Xxxxxxxxx, Xxxxx
#000, Xxxxxxx Xxxxx 00000. Attn: President, or to the holder at such address as
may have been furnished to the Company in writing by such holder, or, until an
address is so furnished, to and at the address of the last holder of this
Warrant who has so furnished an address to the Company. Any such notice shall be
deemed to have been given on the date of personal delivery, facsimile, delivery
to a reputable overnight courier service or deposit in the mail.
11. Warrant Holder Not a Shareholder. The holder of this Warrant, as such,
shall not be entitled by reason of this Warrant to any rights whatsoever as a
shareholder of the Company but shall be entitled to all such rights with respect
to shares of Common Stock actually issued upon exercise of this Warrant.
12. Miscellaneous. This Warrant and any term hereof may be amended,
changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and consented to in writing by the holder of this Warrant.
This Warrant shall be construed and enforced in accordance with and governed by
the laws of the-State of New York applicable to contracts made and to be
performed entirely therein. The headings in this Warrant are for reference
purposes only and shall not limit or otherwise affect the meaning hereof.
13. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Houston, Texas time on December 31, 1997.
20
Dated as of April 22, 1997.
CHAPARRAL RESOURCES, INC.
By:
-----------------------------------
Xxxxxx Xxxxxx, Chairman and
Chief Executive Officer
21
FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
To: CHAPARRAL RESOURCES, INC.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder,............. * shares of the Common Stock of CHAPARRAL
RESOURCES, INC. and herewith makes payment of $........... therefor, and
requests that the certificates for such shares be issued in the name of
............... , and delivered to,..................... , whose address is
..............................
Dated:
-----------------------------------------
(Signature must conform in all respects
to the name of the holder as specified on
on the face of the Warrant)
----------------------------------------
----------------------------------------
(Address)
* Insert the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of the Warrant, may be deliverable upon exercise.
22
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and transfers
unto .................. the right represented by the within Warrant to purchase
............... shares of the Common Stock of CHAPARRAL RESOURCES, INC. to which
the within Warrant relates, and appoints ........................ Attorney to
transfer such right on the books of CHAPARRAL RESOURCES, INC., with full power
of substitution in the premises.
Dated:
---------------------------------------
(Signature must conform in all respects
to the name of the holder as specified
on the face of the Warrant)
---------------------------------------
---------------------------------------
(Address)
Signed in the presence of:
-----------------------------------
(Witness)
23
