SUBSCRIPTION AGREEMENT
As of July 24, 1998
Chaparral Resources, Inc.
0000 Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Ladies/Gentlemen:
1. Subscription, Purchase and Closing.
1.1 The undersigned ("Subscriber"), intending to be legally bound,
hereby subscribes for and agrees to purchase the number of shares (the "Shares")
of the Common Stock, par value $.10 per share (the "Common Stock"), of Chaparral
Resources, Inc., a Colorado corporation (the "Company"), indicated on the
signature page hereto, at a price of $1.50 per Share and upon the terms and
conditions set forth in this subscription agreement (this "Agreement").
1.2 The Shares subscribed for hereby shall not be deemed owned by
Subscriber, nor shall Subscriber be deemed a holder of securities of the Company
until this subscription has been accepted by the Company and the purchase price
for the Shares subscribed for has been paid. Subscriber understands and agrees
that the Company reserves the right to reject this subscription for the Shares
in whole or in part, in its sole discretion, at any time through the Closing
Date (as that term is defined in Section 1.5). This subscription is subject to
allotment. If subscription for the Shares is oversubscribed, the Company will
determine which subscriptions shall be accepted.
1.3 In the event of rejection of this subscription, or in the event
the sale of the Shares is not consummated for any reason (in which event this
Agreement shall be deemed to be rejected), this Agreement shall have no force or
effect.
1.4 Subscriber hereby agrees to deliver the purchase price (the
"Purchase Price") required to purchase the number of Shares subscribed for
hereunder, as that amount may be reduced pursuant to Section 1.2 hereof, on the
Closing Date set by the Company pursuant to Section 1.5 hereof.
1.5 At such time as the Company and Xxxxx & Company Incorporated, as
placement agent (the "Placement Agent"), shall determine, the Placement Agent
shall establish and inform Subscriber of the closing date for such subscription
(the "Closing Date") and the date upon which the Purchase Price shall be
delivered to the Company.
1.6 Payment of the full Purchase Price for the Shares to be purchased
shall be made by 1:00 p.m. on the day prior to the applicable Closing Date by
wire transfer of immediately available funds or at such other time and by such
other means as the Company shall approve. The Company or the Placement Agent
will notify Subscriber as to payment instructions. Promptly after the Closing
Date, certificates representing the Shares purchased by Subscriber will be
delivered by the Company to Subscriber.
2. Representations, Warranties and Agreements of Subscriber. Subscriber
hereby represents and warrants to the Company, and hereby covenants and agrees
with the Company, as follows:
(a) Subscriber has carefully read this Agreement and, to the extent
Subscriber believes necessary, has discussed with Subscriber's counsel and other
professional advisor(s) the representations, warranties, covenants and
agreements which Subscriber makes by signing it, and any applicable limitations
upon Subscriber's transfer of the Shares issuable thereunder. Subscriber
acknowledges that Subscriber has not relied upon the legal counsel or
accountants for the Company regarding the transactions contemplated by this
Agreement, and Subscriber has been advised to engage separate legal counsel and
accountants to represent Subscriber's individual interest and advise Subscriber
regarding the structure of, and risks associated with, such transactions.
(b) Subscriber understands that as a publicly traded company, the
Company files with the Securities and Exchange Commission (the "SEC") various
reports, including quarterly and annual financial statements, annual reports to
shareholders, and proxy statements, and that all of such reports, statements and
information are available to the public, including Subscriber, from the SEC and
directly from the Company. Subscriber acknowledges that the Company has
delivered to Subscriber within a reasonable time prior to the execution of this
Subscription Agreement a copy of the following: (i) a discussion of certain of
the risks inherent in investing in the Shares entitled "Risk Factors"; (ii) the
Company's Form 10-K for the fiscal year ended December 31, 1997; (iii) the
Company's Form 10-Q for the fiscal quarter ended March 31, 1998; (iv) the
Company's press releases since December 31, 1997; (v) the Company's Form 8-K
filings since December 31, 1997; and (vi) such of the books and records of the
Company and such other documents as Subscriber (and Subscriber's attorney,
accountant and/or other advisors) deemed pertinent in order for Subscriber to
make an informed investment decision (the documents identified in clauses (i)
through (vi) herein are collectively referred to herein as the "Documents").
Subscriber further acknowledges that Subscriber is entering into this
Agreement solely on the basis of information contained in the Documents and not
on the basis of any information, representations or agreements made by any other
person, and that no representations or warranties of any nature have been made
to Subscriber with respect to the ultimate economic consequences or tax
consequences of Subscriber's investment in the Company. Subscriber acknowledges
that any forecasted financial data which may have been given to Subscriber is
for illustration purposes only and no assurance is given that actual results
will correspond with the results contemplated in any such data.
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(c) Subscriber acknowledges that Subscriber has had the opportunity to
ask questions of, and receive answers from, or obtain additional information
from, the executive officers of the Company concerning the financial and other
affairs of the Company, and, to the extent deemed necessary in light of
Subscriber's personal knowledge of the Company's affairs, Subscriber has asked
such questions and received satisfactory answers and desires to invest in the
Company. Subscriber has been advised and acknowledges that no federal or state
agency has made any finding or determination as to the fairness or merits of an
investment in the Company and that no such agency has made any recommendation or
endorsement whatsoever with respect to such an investment.
(d) Subscriber is an "accredited investor" as that term is defined in
Rule 501 of Regulation D promulgated by the SEC under the Securities Act of
1933, as amended (the "Securities Act"). For this purpose, Subscriber
understands that an "accredited investor" includes:
(i) any individual who: (A) has a net worth (with spouse) in
excess of $1 million; or (B) has had an individual income in excess of
$200,000 (or joint income with spouse in excess of $300,000) in each
of the two most recent years and who reasonably expects the same
income level for the current year; or (C) who is an executive officer
or director of the Company;
(ii) any entity in which all of the equity owners or partners are
"accredited investors"; or
(iii) any corporation or partnership with total assets in excess
of $5,000,000 that was not formed for the specific purpose of
purchasing the securities subscribed hereunder.
(e) Subscriber considers himself/herself/itself to be a sophisticated
investor in companies similarly situated to the Company, and Subscriber has
substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in investments based on actual participation) such that
Subscriber is capable of evaluating the merits and risks of the prospective
investment in the Company.
(f) Subscriber's current address and, if Subscriber is an entity,
Subscriber's state of incorporation or organization, are as set forth on the
signature page hereof. If Subscriber is an entity which does not meet the
classification set forth under Section 1(d)(iii) above, each of Subscriber's
equity owners and/or partners has the same state of residence as the
Subscriber's state of organization and none of Subscriber's equity owners and/or
partners has any present intention of moving from such state of residency.
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(g) Subscriber has been advised and acknowledges that the issuance of
the Shares has not been registered under the Securities Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Subscriber also
acknowledges that the issuance of the Shares has not be registered under the
securities laws of any state. Consequently, Subscriber agrees that the Shares
cannot be resold unless they are registered under the Securities Act (pursuant
to Section 5.1 hereof or otherwise) and applicable state securities laws, or
unless an exemption from such registration requirements is available. Subscriber
has been advised and acknowledges that the Company is under no obligation to
take any action necessary in order to make available any exemption for the
transfer of the Shares without registration.
(h) Subscriber is purchasing the Shares solely for Subscriber's own
account and not as nominee for, representative of, or otherwise on behalf of,
any other person. Subscriber is purchasing the Shares with the intention of
holding the Shares for investment, with no present intention of participating
directly or indirectly in a subsequent public distribution of the Shares unless
registered under the Securities Act and applicable state securities laws, or
unless an exemption from such registration requirements is available. Subscriber
shall not make any sale, transfer or other disposition of the Shares in
violation of state or federal law.
(i) Subscriber has been advised that there is no assurance than an
active market for the Shares will continue in the future. Subscriber is aware
that Subscriber's investment in the Company is speculative and involves a high
degree of risk of loss arising from, among other things, substantial market,
operational, competitive and other risks, and, having made Subscriber's own
evaluation of the risks associated with this investment, Subscriber is aware and
Subscriber has been advised that Subscriber must bear the economic risks of a
purchase of the Shares indefinitely.
(j) Subscriber acknowledges that the Shares were not offered to
Subscriber by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature,
including (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media, or broadcast over
television or radio, or (ii) any seminar or meeting to which Subscriber was
invited by any of the foregoing means of communication.
(k) Subscriber understands and agrees that the Company, and all
current and further shareholders of the Company, are relying on the agreements
and representations contained herein.
(l) In connection with the purchase of the Shares by Subscriber,
Subscriber has not and will not pay, and has no knowledge of the payment of, any
commission or other direct or indirect remuneration to any person or entity for
soliciting or otherwise coordinating the purchase of the Shares, except to such
persons or entities (including the Placement Agent) as are duly licensed and/or
registered to engage in securities offering and selling activities (or are
exempt from such licensing and/or registration requirements) in the state(s) in
which such activities have taken place in connection with the transaction
contemplated by this Agreement.
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(m) Subscriber has been advised and agrees that there will be placed
on any certificates representing the Shares, or any substitution(s) thereof, a
legend stating in substance the following (and including any restrictions or
conditions that may be required by any applicable state law), and Subscriber has
been advised and further agrees that the Company will refuse to permit the
transfer of the Shares out of Subscriber's name in the absence of compliance
with the terms of such legend:
"The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended, or under any state securities
laws and may not be sold, pledged, transferred,
assigned or otherwise disposed of except in
accordance with such Act and the rules and
regulations thereunder and in accordance with
applicable state securities laws. The Company will
transfer such securities only upon receipt of
evidence satisfactory to the Company, which may
include an opinion of counsel, that the
registration provisions of such Act have been
compiled with or that such registration is not
required and that such transfer will not violate
any applicable state securities laws."
(n) Subscriber is aware that the Company may offer and sell additional
shares of common stock in the future, thereby diluting Subscriber's percentage
equity ownership of the Company.
3. Representations of the Company. As used in this Section 3, the following
capitalized terms shall have the meanings set forth below:
"Contract" means any agreement, indenture, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, insurance policy,
annuity, mortgage, restriction, commitment, obligation or other contract,
agreement or instrument (whether written or oral).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect from time to time.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"Material Adverse Change" or "Material Adverse Effect" means, with respect
to any Person, any change or effect that is or is reasonably likely to be
materially adverse to the financial condition, business, prospects or results of
operations of such Person.
"Person(s)" means any individual, sole proprietorship, partnership, joint
venture, trust, limited liability company, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).
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"Requirement of Law" means, as to any Person, the articles of
incorporation, bylaws or other organizational or governing documents of such
Person, and any domestic or foreign and federal, state or local law, rule,
regulation, statute or ordinance or determination of any arbitrator or a court
or other governmental authority, in each case applicable to or binding upon such
Person or any of its properties or to which such person or any of its property
is subject.
Subscriber is subscribing for the Shares based upon the following
representations and warranties of the Company, which the Company hereby confirms
by accepting this subscription:
(a) Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and has
the corporate power to own and/or lease its properties and to conduct its
business in the places where such properties are now owned, leased or operated
or such business is presently conducted. The Company is duly qualified and
licensed as a foreign corporation in each jurisdiction in which it owns or
leases real property or in which its operations or activities would otherwise
require such qualification, except where the failure to so qualify would not
have a material adverse effect on its business.
(b) Authorization. The execution, delivery and performance of this
Agreement by the Company has been duly and validly authorized and approved by
its Board of Directors, and this Agreement, when executed by a duly authorized
officer of this Company, will be a valid and binding agreement of the Company,
enforceable in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization or other similar laws and
legal and equitable principles limiting or affecting the rights of creditors
generally and/or (ii) general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
(c) Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $.10 par value per share, and
225,000 shares of preferred stock, without par value. All issued and outstanding
shares of capital stock of the Company have been, and as of the Closing Date
will be, duly authorized and validly issued and are fully paid and
non-assessable. As of the date of this Agreement, (i) 51,215,456 shares of
Common Stock are issued and outstanding; (ii) there are no more than 4,700,000
warrants to purchase Common Stock issued and outstanding; (iii) there are no
more than 4,500,000 options to purchase Common Stock issued and outstanding; and
(iv) there are 50,000 shares of Series A Preferred Stock issued and outstanding.
(d) No Violations; Defaults. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not (i) violate, result (with the lapse of time or giving of
notice, or both) in a violation of, conflict with, or constitute a default
under, or permit the termination or acceleration of the maturity of, any
material indebtedness or material obligation of the Company; (ii) violate,
result (with the lapse of time or giving of notice, or both) in a violation of,
conflict with or constitute a default under, any material term of, or permit the
termination of, any material note, mortgage, indenture, license, agreement,
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contract, arrangement, understanding or other instrument to which the Company is
a party, or by which it is bound or the Certificate of Incorporation or By Laws
of the Company; (iii) except as contemplated by this Agreement or where the
absence would not have a material adverse effect on the Company or its
subsidiaries, taken as a whole, require consent, approval, waiver or
authorization from or registration or filing with any party, including but not
limited to any party to any material agreement to which the Company is a party
or by which it is bound or by any regulatory or governmental agency, body or
entity; or (iv) violate any statute, law, rule, regulation or ordinance, or any
judgment, decree, order, regulation or rule of any court, tribunal,
administrative or governmental agency, body or entity to which the Company or
its properties are subject.
(e) Validity of Securities. The Shares when issued in accordance with
the terms and conditions hereof will be validly authorized, legally issued,
fully paid and non-assessable and the delivery to Subscriber of the Shares
delivered pursuant to this Agreement shall vest in it good and marketable title
thereto, free of any and all liens, options, encumbrances, charges, third-party
rights or claims of any nature whatsoever except for restrictions on transfers
set forth herein or imposed by law.
(f) Disclosure. The Company is aware of no facts which lead it to
believe that the Documents contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(g) Consents/Approvals. No consent, approval, waiver or other action
by any Person under any Contract to which the Company is a party, or by which
any of its properties or assets are bound, is required or necessary for the
execution, delivery or performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby, except where the failure
to obtain such consents, filings, authorizations, approvals or waivers or make
such filings would not have a Material Adverse Effect on the Company.
(h) SEC Reports and Nasdaq Compliance. Since January 1, 1997, the
Company has made all filings (the "SEC Reports") required to be made by it under
the Securities Act and the Exchange Act. The SEC Reports, when filed, complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act and the securities laws, rules and regulations of any state
and pursuant to any Requirements of Law. The SEC Reports, when filed, did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Company will use its best efforts to ensure its continued
inclusion in, and the continued eligibility of the Common Stock (including the
Shares purchased hereunder) for trading on, the Nasdaq over-the-counter market
under all currently effective and currently proposed inclusion requirements
prior to and after the Closing.
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(i) Financial Statements. Each of the balance sheets included in the
Documents (including any related notes and schedules) fairly presents in all
material respects the financial position of the Company as of its date, and each
of the other financial statements included in the Documents (including any
related notes and schedules) fairly presents in all material respects the
results of operations or other information therein of the Company for the
periods or as of the dates therein set forth in accordance with GAAP
consistently applied during the periods involved (except that the interim
reports are subject to normal recording adjustments which might be required as a
result of year-end audit and except as otherwise stated therein).
(j) Material Changes. Except as set forth in the SEC Reports, or as
otherwise contemplated herein, since December 31, 1997, there has been no
Material Adverse Change in the Company. Except as set forth in the SEC Reports,
since September 30, 1997, there has not been (i) any direct or indirect
redemption, purchase or other acquisition by the Company of any shares of the
Common Stock or (ii) declaration, setting aside or payment of any dividend or
other distribution by the Company with respect of the Common Stock.
(h) No Commissions. In connection with the purchase of the Shares
hereunder, the Company has agreed to pay the Placement Agent a placement fee and
certain expenses relating to the transactions contemplated hereunder. Except for
such placement fee and expenses, the Company has not incurred any other
obligation for any finder's or broker's or agent's fees or commissions in
connection with the sale of the Shares.
The Company represents that the foregoing representations and
warranties are true and correct as of the date hereof and, unless the Company
otherwise notifies Subscriber prior to the Closing Date, shall be true and
correct as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.
4. Make Whole. During the period from July 28, 1998 to January 28, 1999
(the "Adjustment Period"), at any time when the Company issues, or permits any
person to subscribe for or purchase, Common Stock (or rights, options or
warrants exercisable for Common Stock, or securities convertible into Common
Stock, collectively, "New Equity Securities"), at a price per share of Common
Stock (the "New Price") which is less than $1.50 per share, then Subscriber
shall be entitled to receive the number of additional shares of Common Stock
such that the weighted average price of all shares of Common Stock purchased by
Subscriber hereunder and issued to Subscriber pursuant to this provision shall
be equal to the New Price. Such adjustment shall be made whenever any such New
Equity Securities are issued during the Adjustment Period, and shall become
effective retroactively as of the record date for the issuance of such New
Equity Securities.
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5. Registration Rights.
5.1 Registration of Shares. As soon as practicable, but in any event
no later than September 1, 1998, the Company will file an amendment to its
registration statement on Form S-1, originally filed April 29, 1998 (the
"Registration Statement"), in order to register all of the Shares (collectively,
the "Subject Stock"), and the Company shall use its best efforts to cause such
Registration Statement to become effective as soon as practicable after filing.
In connection therewith, each holder of Shares (each, a "Holder") will provide
in a timely manner all such information and materials pertaining to it as may be
required in order to permit the Company to comply with all applicable
requirements of the Commission and to obtain the acceleration of the effective
date of the Registration Statement. In connection with such registration, the
Company shall:
(a) keep the Registration Statement effective until the earliest
of (i) when each Holder has sold its Subject Stock, (ii) one year following the
effective date of the Registration Statement, or (iii) the date the Shares may
be sold under Rule 144 under the Securities Act of 1933;
(b) as expeditiously as possible furnish to each Holder such
reasonable numbers of copies of the prospectus as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Subject Stock;
(c) as expeditiously as possible use its best efforts to register
or qualify the Subject Stock under the securities or Blue Sky laws of such
states as Subscriber shall reasonably request, provided, however, that the
Company shall not be required in connection with this paragraph (c) to qualify
as a foreign corporation or execute a general consent to service of process in
any jurisdiction;
(d) pay all costs and expenses incident to registration
hereunder, except as set forth in Section 5.2.
5.2 Holder's Fees. Each Holder shall pay any and all underwriters'
discounts, brokerage fees and transfer taxes incident to the sale of the Subject
Stock sold by such Holder pursuant to this Section and the fees and expenses of
its counsel.
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5.3 Indemnification.
(a) In connection with any registration effected pursuant hereto,
the Company will indemnify each Holder, each of such Holder's officers and
directors, and each person controlling such Holder within the meaning of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereto) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus (including any
related registration statement, notification or the like) incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and will reimburse each Holder, such Holder's officers and
directors, and each person controlling such Holder, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder specifically for use therein.
(b) In connection with any registration effected pursuant hereto,
each Holder will indemnify the Company, each of the Company's directors and
officers and each person controlling the Company within the meaning of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact provided to the Company by such Holder and
contained in any such registration statement or prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading relating to such
information provided by such Holder, or any violation by such Holder of any rule
or regulation promulgated under the Securities Act applicable to such Holder and
relating to action or inaction required of such Holder in connection with such
registration, and will reimburse the Company, such directors, officers and
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein.
5.4 Further Actions. In connection with any registration effected
pursuant hereto, each Holder shall execute, deliver, furnish or file with the
Company, the underwriter(s), or the appropriate regulatory body, any
information, representations, undertakings and agreements necessary to carry out
the registration covenant or to otherwise effect the registration of the Shares.
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6. Miscellaneous.
6.1 Neither this Agreement nor any provisions hereof shall be
modified, discharged or terminated except by an instrument in writing signed by
the party against whom any such waiver, change, discharge or termination is
sought to be enforced.
6.2 Any notice, demand or other communication which any party hereby
may be required or may elect, to give to anyone interested hereunder shall be
sufficiently given if (a) deposited, postage prepaid, in a United States mail
letter box, registered or certified mail, return receipt requested, addressed to
such address as may be given herein three business days after such deposit, or
(b) delivered personally at such address. The Company's address for notices is
set forth on the first page hereof.
6.3 This Agreement may be executed through the use of separate
signature pages or in any number of counterparts, and each of such counterparts
shall, for all purposes, constitute one agreement binding on all the parties,
notwithstanding that all parties are not signatories to the same counterpart.
6.4 Except as otherwise provided herein, the agreement shall be
binding upon and inure to the benefit of the parties and their successors, legal
representatives and assigns.
6.5 This instrument contains the entire agreement of the parties, and
there are no representations, covenants or other agreements except as stated or
referred to herein.
6.6 This Agreement is not transferable or assignable by Subscriber
except as may be provided herein.
6.7 This Agreement shall be governed by and construed in accordance
with the law of the State of New York applicable to agreements made and to be
performed in that State.
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IN WITNESS WHEREOF, Subscriber has caused to be executed this Agreement as
of the date indicated and agrees to be bound by this Agreement.
SUBSCRIBER:
------------------------------------
By:
---------------------------------
Name:
Title:
------------------------------------
[Principal Address]
------------------------------------
[Tax Identification Number]
Number of Shares
to be Purchased: _____
Price per Share: $1.50
Total Purchase
Price: _____
Accepted By:
CHAPARRAL RESOURCES, INC.
By:____________________________
Name:
Title:
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IN WITNESS WHEREOF, Subscriber has caused to be executed this Agreement as
of the date indicated and agrees to be bound by this Agreement.
SUBSCRIBER:
XXXXX & COMPANY INCORPORATED
By: ____________________________
Name:
Title:
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
-------------------------------
[Principal Address]
-------------------------------
[Tax Identification Number]
Number of Shares
to be Purchased: 166,668
Price per Share: $1.50
Total Purchase
Price: $250,000.00 *
* In lieu of paying $250,000 in cash, the Subscriber hereby accepts 166,668
shares at $1.50 per share in partial repayment of the $1,000,000 principal
amount plus $10,500 accrued interest due July 28, 1998 pursuant to Section
1.1 (a) of the Subordinated Loan Agreement, dated as of June 4, 1998,
between the Company and Subscriber.
Accepted By:
CHAPARRAL RESOURCES, INC.
By:____________________________
Name:
Title:
13
