THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND 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 provided 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
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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 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.
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(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 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 upon 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
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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 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
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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 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
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(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
(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
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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 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
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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
(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
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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.
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(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:
(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
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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,
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.
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(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.
(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 30% 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 50% 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
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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 so to 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).
(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 prior to 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
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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
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
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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 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 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.
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(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 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
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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, 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 a 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
written consent of the indemnifying
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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 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
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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 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
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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
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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.
Dated as of April 22, 1997.
CHAPARRAL RESOURCES, INC.
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, Chairman and
Chief Executive Officer
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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 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.
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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)