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WARRANT AGREEMENT
BETWEEN
CHAPARRAL RESOURCES, INC.
AND
SHELL CAPITAL LIMITED
DATED AS OF FEBRUARY 8, 2000
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WHITE & CASE
0-00 Xxxxxxxx
Xxxxxx XX0X 0XX
WARRANT AGREEMENT (this "Agreement") dated as of February 8, 2000,
between CHAPARRAL RESOURCES, INC., a Delaware corporation (the "Company"),
and SHELL CAPITAL LIMITED a company organised and existing under the laws
of England (the "Purchaser") and its assignees or designees (the "Holder").
W I T N E S S E T H:
WHEREAS, the Company has entered into a Loan Agreement dated November
1, 1999 (the "Loan Agreement") between the Company, Central Asian Petroleum
(Guernsey) Limited, Central Asian Petroleum, Inc. and Closed Type JSC
Karakudukmunay, as the Co-Obligors, Shell Capital Limited ("Shell") as the
Facility Agent, Shell Capital Services Limited as the Arranger, Shell as
the Modeller and the Lenders (each such term as defined in the Loan
Agreement); and
WHEREAS, in order to induce Shell to enter into the Loan Agreement,
the Company has authorized the issuance of the warrants (the "Warrants")
which are exercisable, pursuant to their terms and conditions, for shares
of common stock par value $ .0001 per share of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereto agree as
follows:
1. DEFINITIONS.
"COMMENCEMENT DATE" means the earlier of
(a) the Project Completion Date; and
(b) September 30, 2001.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means
(a) the class of stock designated as common stock in the certificate
of incorporation of the Company as amended as of the date of this
Agreement; or
(b) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value or from no par value to par value.
"COMMON STOCK EXERCISE PRICE" has the meaning provided in Section 2.
"EMPLOYEE STOCK OPTIONS" means up to fifteen percent (15%) of the
Common Stock of the Company issuable or issued in connection with incentive
or non-qualified stock options or grants to directors, officers and
consultants of the Company or the Co-Obligors (as defined in the Loan
Agreement).
"EVENT OF DEFAULT" has the meaning provided in the Loan Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED WARRANTS" means the Warrants to acquire shares of the
Company held by each of Xxxxx & Company Incorporated and Whittien Ventures,
L.L.C.
"EXPIRATION DATE" means the fifth anniversary of the Commencement
Date.
"HOLDER(S)" means the Purchaser (so long as it holds any Warrants or
Warrant Shares) and any other registered holder(s) of any of the Warrants
or Warrant Shares.
"INDEPENDENT FINANCIAL EXPERT" means a nationally recognized appraiser
or investment banking firm that does not (and whose affiliates do not) have
a direct or indirect financial interest in the Company, the Holder (other
than in its trading accounts or as a participating underwriter in an
offering of securities) or any of the shareholders of the Company, that has
not been, and at the time it is called upon to determine Market Price (or
any of the other valuations referred to in Section 11), is not (and none of
whose affiliates is) a promoter, director or officer of the Company or any
of its affiliates or the Holder or an underwriter with respect to any of
the securities of the Company, and that has not provided any advice or
opinions to the Company during the two years prior to the date it is called
upon to serve as Independent Financial Expert, except as an Independent
Financial Expert pursuant to this Agreement.
"LOAN AGREEMENT" has the meaning provided in the first Whereas clause.
"MAJORITY" means in excess of fifty percent (50%) of the then
outstanding Warrants or Warrant Shares that (i) are not held by the Company
or any of its affiliates, officers, creditors, employees, or agents or any
of their respective affiliates, members of their family, persons acting as
nominees or in conjunction with any of them or (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission
under the Securities Act.
"MARKET PRICE" means at any date, the last reported sale price, or, in
case no such reported sale takes place on such day, the average of the last
reported sale prices for the last three (3) trading days, in either case as
officially reported by the principal securities exchange on which the
Common Stock is listed or admitted to trading, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the
average closing sale price as furnished by the NASD through NASDAQ or
similar organization if NASDAQ is no longer reporting such information, or
if the Common Stock is not quoted on NASDAQ, the OTC Electronic Bulletin
Board, or as determined by an Independent Financial Expert selected by the
Holders holding a Majority of the Warrants or Warrant Shares, and
reasonably acceptable to the Company.
"NASDAQ" means The NASDAQ Stock Market Inc.
"PERSON" means an individual, a corporation, a limited liability
company, a company, a voluntary association, a general partnership, a
limited partnership, a trust, an unincorporated organization or a
government or any agency, instrumentality or political subdivision of a
government.
"PROJECT COMPLETION DATE" has the meaning provided in the Loan
Agreement.
"REQUESTING HOLDERS" has the meaning provided in Section 9.3.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SURRENDER" has the meaning provided in Section 5.
"TRANSFER AGENT" has the meaning provided in Section 14.
"UNITED STATES DOLLARS" means the national currency of the United
States of America;
"WARRANT CERTIFICATES" means the certificates evidencing the Warrants.
"WARRANT SHARES" means all the shares of Common Stock issuable or
issued upon the exercise of the Warrants.
"WARRANTS" has the meaning provided in the second Whereas clause.
2. GRANT. Subject to the terms of this Agreement, the Holder will
have the right, which may be exercised at any time between the Commencement
Date and the Expiration Date, to purchase up to 146,693 shares of Common
Stock representing fifteen percent (15%) of the issued Common Stock of the
Company at the time of such purchase, par value $ .0001 per share, of the
Company. The price at which the Warrants are exercisable (subject to
adjustment as provided in Section 11) is $15.45 per share (the "Common
Stock Exercise Price"). Each Warrant not exercised by 5:00 p.m., Houston
time on the Expiration Date will become void and all rights under and in
respect of such Warrants under this Agreement will cease as of such time;
provided that the occurrence of the Expiration Date will not relieve the
Company of any obligation to the Holder which arose pursuant to the terms
of this Agreement prior to such date.
3. WARRANT CERTIFICATES. The Warrant Certificates delivered and to
be delivered pursuant to this Agreement are in the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions, and
other variations as required or permitted by this Agreement.
4. REGISTRATION OF WARRANT. The Warrants will be numbered and will
be registered on the books of the Company when issued.
5. EXERCISE OF WARRANT. A Warrant may be exercised, upon surrender
to the Company at its address set forth on the signature pages of this
Agreement, of the Warrant Certificate or Warrant Certificates to be
exercised with the annexed Purchase Form duly executed, together with
payment to the Company of the Common Stock Exercise Price for the number of
shares of Common Stock purchased (collectively, the "Surrender"). The
Holder will pay the aggregate Common Stock Exercise Price by wire transfer
to an account designated by the Company. Upon the Surrender, the Holder
will be entitled to receive a certificate or certificates for the shares of
Common Stock so purchased. The rights represented by each Warrant
Certificate are exercisable at the option of the Holder in whole or in
part, provided that such exercise is in respect of at least five percent
(5%) of the Warrant Shares. In the case of the purchase of less than all
of the shares purchasable under any Warrant Certificate, the Company will
cancel that Warrant Certificate upon its surrender and will execute and
deliver a new Warrant Certificate of like tenor for the balance of the
shares of Common Stock which may be purchased pursuant to that Warrant
Certificate.
6. ISSUANCE OF CERTIFICATES. The issuance of certificates for
Common Stock underlying each Warrant will be made (and in any event within
ten (10) business days) after the exercise of the Warrant without charge to
the Holder including, without limitation, any tax or other governmental
charges (including all documentary stamp taxes, but excluding income taxes
payable by a Holder) which may be payable in respect of the issuance of
such certificates, and such certificates will (subject to the provisions of
Sections 7 and 9) be issued in the name of, or in such names as may be
directed by, the Holder; provided that the Company will not be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other than that of
the Holder and the Company will not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
of such certificates has paid to the Company the amount of such tax or has
established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Common
Stock issued upon exercise of the Warrants must be executed on behalf of
the Company by the manual or facsimile signature of a duly authorized
officer of the Company. Warrant Certificates will be dated the date of
execution by the Company upon initial issuance, division, exchange,
substitution or transfer.
7. TRANSFER OF WARRANT. The Warrants are transferable only on the
books of the Company maintained at its principal office, where its
principal office may then be located, upon delivery of the Warrant
Certificate duly endorsed by the Holder or by its duly authorized attorney-
in-fact or representative accompanied by proper evidence of succession,
assignment or authority to transfer; provided, however, that the Purchaser
may only transfer Warrants to affiliates of such Purchaser or any successor
thereof. Upon any registration of transfer, the Company will execute and
deliver the new Warrant Certificate to the person entitled to it.
8. NOTICE OF EXPIRATION. The Company will, upon request of any
Holder as reflected in the books and records of the Company, give written
notice of the Expiration Date. Such notice must be delivered not less than
ten (10) days after such request is made.
9. REGISTRATION RIGHTS. Nothing contained in this Agreement shall
be construed as requiring the Holder(s) to exercise their Warrants prior to
the initial filing of any registration statement or its effectiveness.
9.1 RESTRICTIVE LEGENDS. Each Warrant Certificate and each
certificate representing the Warrant Shares will bear the following legend
unless (a) such Warrant or Warrant Shares are distributed to the public or
sold to underwriters for distribution to the public pursuant to this
Section 9 or otherwise pursuant to a registration statement filed under the
Securities Act, or (b) the Company has received an opinion of counsel, in
form and substance reasonably satisfactory to counsel for the Company, that
such legend is unnecessary for any such certificate:
THE SECURITES REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT
TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT"), (II) TO THE EXTENT APPLICABLE, RULE 144
UNDER THE ACT (OR ANY SIMILAR OR SUCCESSOR RULE UNDER THE ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT
AGREEMENT BETWEEN CHAPARRAL RESOURCES, INC. AND SHELL CAPITAL
LIMITED DATED AS OF FEBRUARY 8, 2000, AS THE SAME MAY BE AMENDED,
MODIFIED OR SUPPLEMENTED FROM TIME TO TIME.
9.2 PIGGYBACK REGISTRATION. If the Company proposes to register
any of its securities under the Securities Act, it will give written
notice, at least thirty (30) days prior to the filing of a registration
statement pursuant to the Securities Act, to the Holders of its intention
to do so. If the Holders notify the Company within ten (10) business days
of receipt of any such notice of their desire to include any of their
Warrants and Warrant Shares in such proposed registration statement, the
Company shall afford the opportunity to have any of their Warrants and
Warrant Shares registered under such registration statement. In the event
that the managing underwriter for the said offering advises the Company in
writing that in its opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without causing a diminution in the offering price or otherwise
adversely affecting the offering, the Company will include in such
registration
(a) FIRST, the securities the Company proposes to sell; and
(b) SECOND, the Warrants, Warrant Shares and other securities of the
Company requested to be included in such registration which in the opinion
of such underwriter can be sold, pro rata among the holders on the basis of
the number of Warrants, Warrant Shares or other securities requested to be
registered by such holders.
Notwithstanding the provisions of this Section 9.2, the Company shall
have the right at any time after it has given written notice pursuant to
this Section 9.2 (irrespective of whether a written request for inclusion
of any such securities has been made) to elect not to file any such
proposed registration statement or to withdraw the same after the filing
but prior to the effective date thereof.
9.3 DEMAND REGISTRATION.
(a) The Holders representing a Majority of the Warrants and Warrant
Shares shall have the right (which right is in addition to the registration
rights under Section 9.2), exercisable by written notice to the Company, to
have the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as
may be necessary in the opinion of both counsel for the Company and counsel
for the Holders, in order to comply with the provisions of the Securities
Act, so as to permit a public offering and sale by such Holders and any
other Holders who notify the Company within fifteen (15) days after the
Company mails notice of such request pursuant to Section 9.3(b)
(collectively, the "Requesting Holders") of their Warrants and Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the
sale of all of the Warrants and Warrant Shares requested to be registered
by the Requesting Holders. Registration and all costs incidental to such
registration shall be at the expense of the Company.
(b) The Company shall give written notice of any registration request
under this Section 9.3 by any Holder or Holders representing a Majority of
the Warrants and Warrant Shares to all other Holders of the Warrants and
the Warrant Shares within ten (10) days from the date of the receipt of any
such registration request.
(c) In addition to the registration rights under Section 9.2 and
subsection (a) of this Section 9.3, the Holders of a Majority of the
Warrants and Warrant Shares shall have the right on one occasion,
exercisable by written request to the Company, to have the Company prepare
and file with the Commission a registration statement so as to permit a
public offering and sale by such Holders of their Warrants and Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the
sale of all of the Warrant Shares requested to be registered by such
Holders; provided, however, registration and all costs incidental to such
registration shall be shared equally between the Holder or Holders making
such request and the Company. If the Holders have exercised their rights
under Section 9.3(a) then the Holders may not exercise their rights under
this Section 9.3(c) for a period of six (6) months following the effective
date of any registration statement filed pursuant to Section 9.3(a).
(d) In addition to the registration rights under Section 9.2 and
subsections (a) and (c) of this Section 9.3, the Holders of a Majority of
the Warrants and Warrant Shares shall have the right on one occasion,
exercisable by written request to the Company, to have the Company prepare
and file with the Commission a registration statement so as to permit a
public offering and sale by such Holders of their Warrants and Warrant
Shares for the earlier of (i) six (6) consecutive months or (ii) until the
sale of all of the Warrant Shares requested to be registered by such
Holders; provided, however, registration and all costs incidental to such
registration shall be at the expense of the Holder or Holders making such
request. If the Holders have exercised their rights under Section 9.3(a)
or Section 9.3(c) then the Holders may not exercise their rights under this
Section 9.3(d) for a period of six (6) months following the effective date
of any registration statement filed pursuant to Section 9.3(a) or 9.3(c).
(e) Notwithstanding anything to the contrary contained in this
Agreement, if the Company has not filed a registration statement for the
Warrants and Warrant Shares within the time period specified in Section
9.4(a) pursuant to the written notice specified in Section 9.3(a), 9.3(c)
or 9.3(d) of the Holders of a Majority of the Warrants and Warrant Shares,
the Company shall repurchase (i) any and all Warrant Shares at the higher
of the Market Price per share of Common Stock on (A) the date of the notice
sent pursuant to Section 9.3(a), 9.3(c) or 9.3(d), as the case may be, or
(B) the expiration of the period specified in Section 9.4(a) and (ii) any
and all Warrants at such Market Price less the Common Stock Exercise Price
of such Warrant. Such repurchase shall be in immediately available funds
and shall close within two (2) days after the later of (i) the expiration
of the period specified in Section 9.4(a) or (ii) the delivery of the
written notice of election specified in this Section 9.3(e).
9.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In
connection with any registration under Sections 9.2 or 9.3, the Company
will:
(a) use its best efforts to file a registration statement within
sixty (60) days of receipt of any demand pursuant to Section 9.3, and to
have any registration statements declared effective at the earliest
possible time, and will furnish each Holder desiring to sell Warrant Shares
such number of prospectuses as shall reasonably be requested;
(b) pay all reasonable costs, fees and expenses (excluding: (i) fees
and expenses of Holder(s); and (ii) any underwriting or selling
commissions) in connection with all registration statements filed pursuant
to Sections 9.2, 9.3(a) and to the extent provided in 9.3(c), including,
without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses;
(c) take all action which may be required in qualifying or
registering the Warrant Shares included in a registration statement for
offering and sale under the securities or blue sky laws of such states as
reasonably are requested by the Holder(s), provided that the Company shall
not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the
laws of any such jurisdiction;
(d) indemnify the Holder(s) of the Warrant Shares to be sold pursuant
to any registration statement and each person, if any, who controls such
Holders within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them
may become subject under the Securities Act, the Exchange Act or otherwise,
arising from such registration statement;
(e) not permit the inclusion of any securities other than the
Warrants and Warrant Shares to be included in any registration statement
filed pursuant to Section 9.3, or permit any other registration statement
to be or remain effective during the effectiveness of a registration
statement filed pursuant to Section 9.3, without the prior written consent
of the Holders of a Majority of Warrants and Warrant Shares or as otherwise
required by the terms of any existing registration rights granted prior to
the date of this Agreement by the Company to the holders of any of the
Company's securities;
(f) furnish to each Holder participating in the offering and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included in the registration statement) and,
in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities;
(g) as soon as practicable after the effective date of the
registration statement, and in any event within 15 months thereafter, make
generally available to its security holders an earnings statement (within
the meaning of Rule 158 under the Securities Act)(which need not be
audited) complying with Section 11(a) of the Securities Act and covering a
period of at least 12 consecutive months beginning after the effective date
of the registration statement; and
(h) shall enter into an underwriting agreement with the managing
underwriters selected for such underwriting by Holders holding a Majority
of the Warrant Shares requested to be included in such underwriting. Such
agreement shall be satisfactory in form and substance to the Company, each
Holder and such managing underwriters, and shall contain such
representations, warranties and covenants by the Company and such other
terms as are customarily contained in agreements of that type used by the
managing underwriter. The Holders shall be parties to any underwriting
agreement relating to an underwritten sale of their Warrant Shares and may,
at their option, require that any or all the representations, warranties
and covenants of the Company to or for the benefit of such underwriters
shall also be made to and for the benefit of such Holders. Such Holders
shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters except as they may relate
to such Holders and their intended methods of distribution.
9.5 INDEMNIFICATION WITH RESPECT TO REGISTRATION. The Holder(s) of
the Warrant Shares to be sold pursuant to a registration statement, and
their successors and assigns, will severally, and not jointly, indemnify
the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to
which they may become subject under the Securities Act, the Exchange Act or
otherwise, arising from information furnished by or on behalf of such
Holders, or their successors or assigns, for specific inclusion in such
registration statement.
10. OBLIGATIONS OF HOLDERS. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 9 that
the Holders of the Warrant Shares to be sold pursuant to a registration
statement will:
(a) furnish to the Company such information regarding themselves, the
Warrant Shares held by them, the intended method of sale or other
disposition of such securities, the identity of and compensation to be paid
to any underwriters proposed to be employed in connection with such sale or
other disposition, and such other information as may be necessary to effect
the registration of their Warrant Shares; and
(b) notify the Company, at any time when a prospectus relating to the
Warrant Shares covered by a registration statement is required to be
delivered under the Securities Act, of the happening of any event with
respect to such selling Holder as a result of which the prospectus included
in such registration 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.
11. ADJUSTMENTS TO COMMON STOCK EXERCISE PRICE AND NUMBER OF
SECURITIES. The Common Stock Exercise Price in effect at any time and the
number and kind of securities purchased upon the exercise of the Warrants
will be subject to adjustment from time to time only upon the happening of
the following events:
11.1 ADJUSTMENT FOR CHANGES IN COMMON STOCK.
(a) (i) If at any time or from time to time the Company:
(A) pays a dividend or makes a distribution on its Common
Stock payable in shares of its Common Stock or other capital
stock or equity interests of the Company;
(B) subdivides any of its outstanding shares of Common
Stock into a larger number of shares of Common Stock;
(C) combines any of its outstanding shares of Common Stock
into a smaller number of shares of Common Stock; or
(D) increases or decreases the number of shares of Common
Stock outstanding by reclassification of its Common Stock,
then
(ii) the number of shares of Common Stock issuable upon
exercise of each Warrant immediately after the happening of such event
will be adjusted to a number determined by:
(A) multiplying the number of shares of Common Stock that
such Holder would have owned or have been entitled to receive
upon exercise had such Warrants been exercised immediately prior
to the happening of the events described in paragraphs (i)(A)-
(i)(D) above (or, in the case of a dividend or distribution of
Common Stock or other shares of the Company's capital stock,
immediately prior to the record date therefor); by
(B) a fraction:
(I) the numerator of which will be the total number of
shares of Common Stock outstanding immediately after the
happening of the events described in paragraphs (i)(A)-
(i)(D) above; and
(II) the denominator of which will be the total number
of shares of Common Stock outstanding immediately prior to
the happening of the events described in paragraphs (i)(A)-
(i)(D) above.
(b) The Common Stock Exercise Price for each Warrant will be adjusted
to a number determined by dividing the Common Stock Exercise Price
immediately prior to such event by the fraction described in Section
11.1(a)(ii)(B).
(c) An adjustment made pursuant to this Section 11.1 will become
effective immediately after the effective date of such event, retroactive
to the record date for such event in the case of a dividend or distribution
in shares of Common Stock or other shares of the Company's capital stock.
11.2 ADJUSTMENT FOR CASH DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) (i) If at any time or from time to time, the Company distributes
to all holders of Common Stock:
(A) any dividend or other distribution of cash, evidences
of its indebtedness, or any other assets, properties or debt
securities; or
(B) any options, warrants or other rights to subscribe for
or purchase any additional shares of Common Stock (other than, in
each case, (x) any rights, options, warrants or securities
described in Section 11.3 and (y) any cash dividends or other
cash distributions from current or retained earnings),
then
(ii) the number of shares of Common Stock issuable upon the
exercise of each Warrant will be increased to a number determined by:
(A) multiplying the number of shares of Common Stock
issuable upon the exercise of such Warrant immediately prior to
the record date for any such dividend or distribution; by
(B) a fraction:
(I) the numerator of which will be the current Market
Price per share of Common Stock on the record date for such
dividend or distribution; and
(II) the denominator of which will be such current
Market Price per share of Common Stock on the record date
for such dividend or distribution less the sum of :
(X) the amount of cash, if any, distributed per
share of Common Stock; and
(Y) the fair value (as determined in good faith
by the Board, whose determination shall be evidenced by
a board resolution, a copy of which will be sent to
Holders upon request) of the portion, if any, of the
distribution applicable to one share of Common Stock,
consisting of evidences of indebtedness, shares of
stock, securities, other assets or property, warrants,
options or subscription or purchase rights;
(b) The Common Stock Exercise Price will be adjusted to a number
determined by dividing the Common Stock Exercise Price immediately prior to
such record date by the such fraction described in Section 11.2(a)(ii)(B).
Such adjustments will be made whenever any distribution is made and will
become effective as of the date of distribution, retroactive to the record
date for any such distribution; provided that the Company is not required
to make an adjustment pursuant to this Section 11.2 if at the time of such
distribution the Company makes the same distribution to Holders of Warrants
as it makes to holders of Common Stock pro rata based on the number of
shares of Common Stock for which such Warrants are exercisable (whether or
not currently exercisable).
(c) In the event that Holders of a Majority of the Warrants and
Warrant Shares disagree with the Company's determination of the fair value
of any evidences of indebtedness, shares of stock, securities, other assets
or property pursuant to this Section 11.2, then such fair value shall be
determined by an Independent Financial Expert selected by the Holders of a
Majority of the Warrants and Warrant Shares, and reasonably acceptable to
the Company. The Holders and the Company will share equally the costs of
the Independent Financial Expert.
(d) No adjustment will be made pursuant to this Section 11.2 which
has the effect of decreasing the number of shares of Common Stock issuable
upon exercise of each Warrant or increasing the Common Stock Exercise
Price.
11.3 ADJUSTMENT FOR RIGHTS ISSUED TO ALL HOLDERS OF COMMON STOCK.
(a) (i) Except for transactions by the Company contemplated by
section 17.17(a)(ii), (iii), (iv) and (vi) of the Loan Agreement, if at any
time or from time to time the Company issues to all holders of Common
Stock:
(A) any charge, rights, options or warrants entitling the
holders of such rights, options or warrants to subscribe for
additional shares of Common Stock at a price per share that is
lower at the record date for such issuance than the then current
Market Price per share of Common Stock; or
(B) securities convertible into or exchangeable or
exercisable for additional shares of Common Stock, entitling such
holders to subscribe for or purchase shares of Common Stock at a
price per share that is lower at the record date for such
issuance than the then current Market Price per share of Common
Stock,
then
(ii) the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be increased to a number determined by:
(A) multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant; by
(B) a fraction:
(I) the numerator of which will be the number of
shares of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or securities
plus the number of additional shares of Common Stock
subscribed for or purchased or into or for which such
subscribed for or purchased securities are convertible,
exchangeable or exercisable; and
(II) the denominator of which will be the number of
shares of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or securities
plus the total number of shares of Common Stock which the
aggregate consideration received by the Company (assuming
the exercise or conversion of all such rights, options,
warrants or securities) would purchase at the then current
Market Price per share of Common Stock.
(b) In the event of any increase described in Section 11.3(a), the
Common Stock Exercise Price shall be adjusted to a number determined by
dividing:
(i) the Common Stock Exercise Price immediately prior to such
date of issuance; by
(ii) the fraction described in Section 11.3(a)(ii)(B).
Such adjustment will be made immediately after such rights, options or
warrants are issued and will become effective, retroactive to the record
date for the determination of stockholders entitled to receive such rights,
options, warrants or securities.
(c) No adjustment will be made pursuant to this Section 11.3 which
has the effect of decreasing the number of shares of Common Stock
purchasable upon exercise of each Warrant or of increasing the Common Stock
Exercise Price.
11.4 ADJUSTMENT FOR OTHER ISSUANCES OF COMMON STOCK OR RIGHTS.
(a) Except for transactions by the Company contemplated by section
17.17(a)(ii), (iii), (iv) and (vi) of the Loan Agreement and Employee Stock
Options and the Excluded Warrants, if at any time or from time to time the
Company issues:
(A) shares of Common Stock (subject to the provisions
below);
(B) rights, options or warrants entitling the Holder
thereof to subscribe for shares of Common Stock (provided,
however, that no adjustment shall be made upon the exercise of
such rights, options or warrants); or
(C) securities convertible into or exchangeable or
exercisable for Common Stock (provided, however, that no
adjustment shall be made upon the conversion, exchange or
exercise of such securities (other than issuances specified in
(i), (ii) or (iii) which are made as the result of anti-dilution
adjustments in such securities)), at a price per share at the
record date of such issuance that is less than the then current
Market Price per share of Common Stock as of such date,
then
(ii) the number of shares of Common Stock issuable upon the
exercise of each Warrant will be increased to a number determined by:
(A) multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Warrant; by
(B) a fraction:
(I) the numerator of which will be the number of
shares of Common Stock outstanding immediately prior to such
sale or issuance plus the number of additional shares of
Common Stock subscribed for or purchased or into or for
which such securities subscribed for or purchased that are
issued are convertible, exchangeable or exercisable; and
(II) the denominator of which will be the number of
shares of Common Stock outstanding immediately prior to such
sale or issuance plus the total number of shares of Common
Stock which the aggregate consideration received by the
Company (assuming the exercise or conversion of all such
rights, options, warrants or securities, if any) would
purchase at the then current Market Price per share of
Common Stock.
(b) The Common Stock Exercise Price will be adjusted to a number
determined by dividing the Common Stock Exercise Price immediately prior to
such date of issuance by the fraction described in Section 11.4(a)(ii)(B).
Such adjustments shall be made whenever such rights, options or warrants or
convertible securities are issued.
(c) No adjustment will be made pursuant to this Section 11.4 which
has the effect of decreasing the number of shares of Common Stock issuable
upon exercise of each warrant or of increasing the Common Stock Exercise
Price.
(d) For purposes of this Section 11.4 only, any issuance of Common
Stock, or rights, options or warrants to subscribe for, or other securities
convertible into or exercisable or exchangeable for, Common Stock, which
issuance (or agreement to issue) is:
(i) in exchange for or otherwise in connection with the
acquisition of the property (excluding any such exchange exclusively
for cash) of any Person; and
(ii) at a price per share equal to the current Market Price at
the time of signing a definitive agreement
shall be deemed to have been made at a price per share equal to the current
Market Price per share at the record date with respect to such issuance
(the time of closing or consummation of such exchange or acquisition) if
such definitive agreement is entered into within 90 days of the date of
such agreement in principle.
11.5 NO ADJUSTMENT. No adjustment in the number of shares of Common
Stock issuable upon the exercise of each Warrant shall be required under
this Agreement unless such adjustment would result in an increase or
decrease of at least one percent (1%) of the Common Stock Exercise Price;
provided, that any adjustments which by reason of this Section 11.5 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest one-
hundredth of a cent or to the nearest one-thousandth of a share, as the
case may be.
11.6 NOTICE OF ADJUSTMENT. Whenever the Common Stock Exercise Price
or the number of shares of Common Stock and other property, if any,
issuable upon exercise of the Warrants is adjusted, as provided in this
Agreement, the Company shall deliver to the Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, including a description of
the basis on which:
(a) it determined the fair value of any evidences of indebtedness,
other securities or property or warrants, options or other subscription or
purchase rights; and
(b) the current Market Price of the Common Stock was determined, if
either of such determinations were required), and specifying the Common
Stock Exercise Price and the number of shares of Common Stock issuable upon
exercise of Warrants after giving effect to such adjustment.
11.7 MERGER OR CONSOLIDATION. In case of any consolidation of the
Company with, or merger of the Company into, another corporation (other
than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the
Holder of each Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, the kind and amount of shares of stock and other
securities and property receivable upon such consolidation or merger by a
Holder of the number of shares of Common Stock for which such Warrant might
have been exercised immediately prior to such consolidation or merger.
Such supplemental warrant agreement shall provide for adjustments which
shall be identical to the adjustments provided in this Section 11. This
subsection shall similarly apply to successive consolidations or mergers.
12. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant
Certificate is exchangeable, without expense, upon its surrender by the
Holder at the principal executive office of the Company for a new Warrant
Certificate of like tenor and date representing in the aggregate the right
to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate,
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 the Warrant, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu of such Warrant Certificate.
13. LIMITATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional Warrant Shares upon exercise of the Warrants
or distribute Warrant Certificates that evidence fractional Warrant Shares.
In addition, in no event shall the Holder be required to make any payment
of a fraction of a cent. In lieu of fractional Warrant Shares, there shall
be paid to the holders of Warrant Certificates at the time the Warrants are
exercised an amount in cash equal to the same fraction of the current
Market Price per Warrant Share on the business day preceding the date the
Warrant Certificates evidencing such Warrants are surrendered for exercise.
Such payments shall be made by check or by wire transfer to an account
designated by such Holder. If any Holder surrenders for exercise more than
one Warrant Certificate, the number of Warrant Shares deliverable to such
Holder may, at the option of the Company, be computed on the basis of the
aggregate amount of all the Warrants exercised by such Holder.
14. RESERVATION AND LISTING OF SECURITIES. The Company will at all
times reserve and keep available shares of Common Stock, free from
preemptive rights, out of its authorized but unissued shares of Common
Stock, for the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon exercise of Warrants. Every transfer agent ("Transfer
Agent") for the Common Stock and other securities of the Company issuable
upon the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares of Common
Stock as shall be necessary for such purpose. The Company will supply
every such Transfer Agent with duly executed stock and other certificates,
as appropriate, for such purpose. Upon exercise of the Warrants and
payment of the Common Stock Exercise Price, all shares of Common Stock upon
such exercise will be duly and validly issued, fully paid, non-assessable
and not subject to the preemptive rights of any stockholder. Upon exercise
of the Warrants, the Company will use its best efforts to cause all shares
of Common Stock issued in connection with such exercise to be listed
(subject to official notice of issuance) on all securities exchanges on
which the Common Stock issued to the public in connection herewith may then
be listed and quoted on NASDAQ or the OTC Electronic Bulletin Board.
15. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as
having any rights whatsoever as a stockholder of the Company. If, however,
at any time prior to the Expiration Date:
(a) the Company takes 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 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) a dissolution, liquidation or winding up of the Company, a
consolidation or merger, or sale of all or substantially all of its
property, assets and business as an entirety shall be proposed,
the Company will give written notice of such event at least fifteen
(15) days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled to
such dividend, distribution, convertible or exchangeable securities or
subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date
or the date of closing the transfer books, as the case may be. Failure to
give such notice or any defect therein shall not affect the validity of any
action taken in connection with the declaration or payment of any such
dividend, or any proposed dissolution, liquidation, winding up,
consolidation, merger or sale.
16. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have
been duly made and sent when delivered, or mailed by registered or
certified mail, return receipt requested:
(a) if to a Holder, to the address of such Holder as shown on the
books of the Company or to such other address as such Holder may designate
by notice to the Company; or
(b) if to the Company, to the address set forth on the signature
pages to this Agreement or to such other address as the Company may
designate by notice to the Holders.
17. SUPPLEMENTS; AMENDMENTS; ENTIRE AGREEMENT.
(a) Any provisions of this Agreement or the Warrants may be amended
or waived if, but only if, such amendment or waiver is in writing and
signed by the Company and the Holders of a Majority of the Warrants and
Warrant Shares.
(b) This Agreement (including the Loan Agreement to the extent
portions of it are referred to in this Agreement) constitutes the entire
obligations of the parties to this Agreement and supersedes, any previous
expressions of intent or understanding in respect of this transaction.
18. SUCCESSORS. All of the covenants and provisions of this
Agreement shall be binding upon and inure to the benefit of the Company,
the Holders and their respective successors and assigns hereunder.
19. GOVERNING LAW. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED UNDER THIS AGREEMENT IS GOVERNED BY NEW YORK LAW.
20. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.
21. CAPTIONS. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they
be construed as, a part of this Agreement and shall be given no substantive
effect.
22. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and
the Holders any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of
the Company and any Holders.
23. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts which when
taken together shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
ADDRESS FOR NOTICES:
Chaparral Resources, Inc.
00000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000 CHAPARRAL RESOURCES, INC.
Attn: President By: /S/ XXXXX X. XXXXX
Telephone: 000-000-0000 ------------------------------
Fax: 000-000-0000 Name: Xxxxx X. Xxxxx
Title: Co-Chairman
Shell Capital Limited
Shell Centre
London SE1 7NA
England SHELL CAPITAL LIMITED
Attn: The Financial Controller By: /S/ XXXX X.X. XXXXXX
Telephone: ------------------------------
Fax: 00-000-000-0000 Name: Xxxx X.X. Xxxxxx
Title: Attorney-in-Fact
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), (ii)
TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR OR
SUCCESSOR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES),
OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY
SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT (THE
"WARRANT AGREEMENT") BETWEEN CHAPARRAL RESOURCES, INC. AND SHELL CAPITAL
LIMITED DATED AS OF FEBRUARY 8, 2000, AS THE SAME MAY BE AMENDED, MODIFIED
OR SUPLEMENTED FROM TIME TO TIME.
Warrant No.
Issuable for
146,693 Shares of Common Stock
WARRANT CERTIFICATE
This Warrant Certificate certifies that Shell Capital Limited, or
registered assigns, is the Holder of Warrants and shall have the right,
which may be exercised at any time between the Commencement Date and the
Expiration Date, to purchase up to 146,693 shares of Common Stock, par
value $.0001 per share, of the Company (the "Common Stock"). The price at
which the Warrant shall be exercisable shall be $15.45 per share (the
"Common Stock Exercise Price").
A Warrant may be exercised upon surrender of this Warrant Certificate
and payment of the Common Stock Exercise Price at an office or agency of
the Company, but subject to the conditions set forth herein and in the
Warrant Agreement. Payment of the Common Stock Exercise Price shall be
made by wire transfer to an account designated by the Company or by
certified or official bank check payable to the order of the Company in
United States Dollars.
No Warrant may be exercised after 5:00 p.m., Houston time, on the
Expiration Date, at which time all Warrants evidenced by this Certificate,
unless exercised prior to that time, shall be void.
The Warrant evidenced by this Warrant Certificate is part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is incorporated by reference in and made a part of
this Warrant Certificate and is referred to for a description of the
rights, limitation of rights, obligations, duties and immunities of the
Company and the holders of the Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Common Stock Exercise Price and the type and number of the
Company's securities issuable upon the occurrence of such events may,
subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the Holder, issue a new Warrant Certificate
evidencing the adjustment in the Common Stock Exercise Price and the number
and type of securities issuable upon the exercise of the Warrant; provided
that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter or otherwise impair, the rights of the
Holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of the Warrant evidenced by this Warrant
Certificate shall be issued to the transferees in exchange for this Warrant
Certificate, subject to the limitations provided in this Warrant
Certificate and in the Warrant Agreement, without any charge except for any
tax or other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrant evidenced by this
Warrant Certificate, the Company shall forthwith issue to the Holder a new
Warrant Certificate representing such unexercised Warrant.
The Company may deem and treat the Holder(s) of this Warrant
Certificate as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing made by anyone
on this Warrant Certificate), for the purpose of any exercise of the
Warrant, and of any distribution to the Holder(s) of this Warrant
Certificate, and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
This Warrant Certificate does not entitle any Holder to any of the
rights of a shareholder of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated as of February 8, 2000.
CHAPARRAL RESOURCES, INC.
By: ________________________________
Name:
Title:
PURCHASE FORM
The undersigned irrevocably elects to exercise the right, represented
by this Warrant Certificate, to purchase __________ shares of Common Stock,
and makes payment for such securities by wire transfer to an account
designated by the Chaparral Resources, Inc. in the amount of $____________,
all in accordance with the terms of Section 5 of the Warrant Agreement
between the Company and Shell Capital Limited dated as of February 8, 2000.
The undersigned requests that a certificate for such securities be
registered in the name of _____________, whose address is
__________________________ and that such certificate to be delivered to
_______________ whose address is __________________, and if said number of
shares shall not be all the shares purchasable under this Warrant
Certificate, that a new Warrant Certificate for the balance of the shares
purchasable under the within Warrant Certificate be registered in the name
of the undersigned warrant Holder or his assignee as below indicated and
delivered to the address stated below.
Dated: _________________________
Signature: _____________________
ASSIGNMENT FORM
(TO BE EXECUTED BY THE HOLDER IF SUCH
HOLDER DESIRES TO TRANSFER THIS WARRANT CERTIFICATE.)
FOR VALUE RECEIVED ________________ hereby sells, assigns and transfers
unto
Name ____________________________
Address _________________________
this Warrant Certificate, together with all right, title and interest in
the Warrant and does hereby irrevocably constitute and appoint
________________, attorney, to transfer the within Warrant Certificate on
the book of the within-named Company, with full power of substitution.
Dated: __________________________
Signature: ______________________
