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 __________________
CHAPARRAL RESOURCES, INC.
Common Stock Purchase Warrant
CHAPARRAL RESOURCES, INC., a Colorado corporation ("Chaparral" or the
"Company"), hereby certifies that, as partial consideration for a loan granted
to the Company by ________________________, with an office at
___________________________________- _________________ ("______________") as
evidenced by the Promissory Note in the amount of $_____________ dated as of
____________________, and for other valuable consideration received,
________________, or its permitted assigns, is entitled, subject to the terms
and conditions herein set forth, to purchase from the Company up to ___________
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 $0.25,
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. Houston, Texas time on
_____________________ (the "Expiration Date"). The number and character of such
shares of Common Stock are subject to adjustment as provided
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,
(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 which
there was a reported sale price; and
(ii) if such stock is not at the time listed on any such exchange or
traded on Nasdaq but is traded on the over-the-counter market as
reported by the National Quotation Bureau or other comparable service,
(A) the average of the closing bid and asked prices for such stock on
the business day immediately preceding the specified date, or (B) if
there shall have been no such reported bid and asked prices for such
stock on the business day immediately preceding the specified date,
the average of the last bid and asked prices on (x) the day next
preceding the specified date for which such information is available
and (y) the day next succeeding the specified date for which such
information is available; or
(iii) if clauses (i) and (ii) above are not applicable, the fair value
per share of such stock as determined in good faith and on a
reasonable basis by the Board of Directors of the Company and, if
requested, set 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
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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 $0.25 per share, subject to adjustment as
provided herein.
2. Exercise of Warrant.
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2.1 Manner of Exercise.
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(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 ____________________, by surrender of this Warrant, with the
form of subscription at the end hereof (or a reasonable facsimile
thereof) duly executed by such holder, to the Company at its office in
Houston, Texas, and, except as otherwise provided in Section 2.1(b),
accompanied by payment, by certified or official bank check payable to
the order of the Company, in the amount obtained by multiplying (x)
the number of shares of the Common Stock (without giving effect to any
adjustment therein) designated in such form of subscription (or such
reasonable facsimile) by (y) the Purchase Price, and such holder shall
thereupon be entitled to receive the number of shares of the Common
Stock determined as provided hereunder.
(b) In addition to the method of payment set forth in Section 2.1(a),
and in lieu of any cash payment required thereunder, the holder of
this Warrant shall have the right at any time and from time to time to
exercise this Warrant in full or in part by surrendering this Warrant,
with the form of subscription at the end hereof (or a reasonable
facsimile thereof) duly executed by such holder, to the Company at its
office in Houston, Texas, 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.
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2.3. Delivery of Stock Certificates. etc. As soon as practicable after the
exercise of this Warrant in full or in part in accordance herewith the Company,
at its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the holder hereof, or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct,
(a) a certificate or certificates, marked with an appropriate legend
referring to the terms of this Warrant and any applicable restrictions
on such shares imposed by the Federal or any state securities laws,
for the number of full shares of the Common Stock (or Other
Securities) to which such holder shall be entitled. upon such exercise
plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash in an amount equal to the same fraction of
the Market Price of one full share of the Common Preferred Stock on
the business day next preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof
for the number of shares of the Common Stock equal (without giving
effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the number of shares designated
by the holder upon such exercise as provided in Section 2.1.
3. Common Stock Issuable Upon Exercise.
-----------------------------------
3.1. General. The number of shares of the Common Stock which the holder of this
Warrant shall be entitled to receive upon the exercise hereof or, if securities
or other property in addition to or in lieu of the Common Stock shall by reason
of the operation of the provisions of this Section be issuable upon such
exercise, the amount and kind of such securities or other property, shall be
adjusted or determined as provided in this Section 3.
3.2. Adjusted Exercise Price. The number of shares of the Common Stock which the
holder of this Warrant shall be entitled to receive upon the exercise hereof
shall be determined by multiplying the number of shares of the Common Stock
which, but for the 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
4
(by reclassification or otherwise than by payment of a dividend in shares of
Common Stock), then, in any such event, the per share Adjusted Exercise Price
per share shall be adjusted effective as of the close of business on (i) the
record date for the determination of shareholders entitled to receive such
dividend if such dividend is in fact paid, or (ii) the day immediately preceding
the day upon which such subdivision shall become effective (any such day, as the
case may be, shall be referred to herein as the "Subdivision Effective Date"),
by multiplying the per share Adjusted Exercise Price in effect immediately prior
to the Subdivision Effective Date by the fraction of which (x) the numerator
shall be the number of shares of the Common Stock outstanding immediately prior
to the Subdivision Effective Date and (y) the denominator shall be the number of
shares of the Common Stock outstanding immediately prior to the Subdivision
Effective Date plus the number of shares of the Common Stock issuable upon the
payment of such dividend or the consummation of such subdivision, as the case
may be.
3.4. Adjustments for Combinations. etc. In case the outstanding shares of the
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Adjusted Exercise
Price shall be adjusted, effective as of the close of business on the day
immediately preceding the day upon which such combination or consolidation is
effective (the "Combination Effective Date"), by multiplying the per share
Adjusted Exercise Price in effect immediately prior to the Combination Effective
Date by the fraction of which (x) the numerator shall be the number of shares of
the Common Stock outstanding immediately prior to the Combination Effective Date
and (y) the denominator shall be the number of shares of the Common Stock
outstanding immediately after the Combination Effective Date.
3.5. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization. etc.
In case the Company, after the date hereof, (a) shall consolidate with or merge
into any other person and shall not be the continuing or surviving corporation
of such consolidation or merger, or (b) shall permit any other person to
consolidate with or merge into the Company and the Company shall be the
continuing or surviving person but, in connection with such consolidation or
merger, the Common Stock shall be changed into or exchanged for stock or other
securities or property of any other person, or (c) shall effect a capital
reorganization or 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.
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3.6. Issuances of Securities. If, at any time while this Warrant (or any portion
thereof) is outstanding, the Company:
(a) 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
(b) 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, for the purposes of this Section 3.6, (a) immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Section 3.7
hereof, such Additional Shares shall be deemed to be outstanding and (b)
treasury shares shall not be deemed to be outstanding.
6
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 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,
7
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 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
8
securities are traded on Nasdaq, then the per share (or other unit)
value shall be the last reported sale price of such securities on the
most recent trading day preceding the day in question for which such
information is available, or (b) that are traded in the
over-the-counter market but are not traded on Nasdaq, then the per
share (or other unit) value shall be the average between the closing
bid and asked prices of such securities on the most recent trading day
preceding the day in question for which such information is available,
as reported by the NASD, and
(iii) in case Additional Shares of Common Stock are issued or sold
together with other stock or securities or other assets of the Company
for consideration which covers both, be that portion of such
consideration (computed as provided in clauses (i) and (ii) above),
which is determined in good faith by the Board of Directors of the
Company to be allocable to such Additional Shares of Common Stock.
(b) Options and Convertible Securities. The consideration per share
received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 3.7 hereof, relating to Options and
Convertible Securities, shall be determined by dividing:
(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
9
necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution or other impairment.
5. Notices of Record Date. etc. In the event of
----------------------
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any transfer of all
or substantially all the assets of the Company to any other person or any
consolidation or merger involving the Company and any other person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Company,
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 any such
character of such dividend, distribution or right, and (ii) the date or expected
date on which reorganization, reclassifica- tion, 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.
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(a) Definitions. For purposes of this Section 7, the following terms shall
have the following respective meanings:
10
(i) "Commission" shall mean the United States Securities and Exchange
Commission or any other Federal agency at the time administering the
Act.
(ii) The term "holder or holders of Registrable Stock" shall mean the
holders of Common Stock or Other Securities issued pursuant to this
Warrant.
(iii) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement
or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document
by the Commission.
(iv) The term "Registration Period" shall mean the period commencing
on the date hereof and ending (a) if this Warrant shall expire without
having been exercised in whole or in part, (the Expiration Date) or
(b) if this Warrant shall have been exercised in whole or in part, at
such time as no shares of Registra- ble 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
11
offering and sale of such Registrable Stock in the United States in
compliance with the provisions of the Act, all to the extent requisite
to permit the disposition (in accordance with the intended methods
thereof as aforesaid) by the holders of the Registrable Stock, so to
be registered (the "Participating Holders"). If such sale of
Registrable Stock is to be pursuant to an underwritten offering, the
underwriter or underwriters shall be selected by the Initiating
Holders and shall be reasonably acceptable to the Company. If the
underwriter or underwriters 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 one registration 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
12
for its own account or for the account of any other person holding
registration rights with respect to the securities of the Company,
then the Company shall give written notice of such proposed filing to
the holders of Registrable Stock at least thirty (30) days before the
anticipated filing date, and such notice shall describe in detail the
proposed registration and distribution (including those jurisdictions
where registration or qualification under the securities or blue sky
laws is intended) and shall offer the holders of Registrable Stock the
opportunity to register such number of shares of Registrable Stock as
the holders of Registrable Stock may request. Upon receipt by the
Company by the anticipated filing date of written requests from the
Participating Holders of Registrable Stock for the Company to register
their Registrable Stock, the Company shall permit, or in the event of
an underwritten offering, shall use its best efforts to cause the
managing underwriter or underwriters of such proposed underwritten
offering to permit, the Participating Holders to include such
securities in such offering on the same terms and conditions as any
similar securities of the Company included therein; provided, however,
that if in the opinion of the managing underwriter or underwriters of
such offering, the inclusion of the total amount or kind of securities
which it or the Company, and any other persons or entities, intend to
include in such offering would interfere, hinder, delay, reduce or
prevent the effectiveness or sale of the Company's shares of Common
Stock proposed to be so registered or would otherwise adversely affect
the success of such offering, then the amount or kind of securities to
be offered for the accounts of the Company and each holder of Common
Stock (including without limitation Registrable Stock) or securities
convertible into or exercisable for Common Stock proposed to be
registered (other than any persons exercising demand registration
rights) shall be reduced (or eliminated) in proportion to their
respective values to the extent necessary to reduce the total amount
of securities to be included in such offering on behalf of such
holders of securities to the amount recommended by such managing
underwriter. For purposes of this Section, "value" shall mean
principal amount with respect to debt securities and the proposed
offering price per share with respect to equity securities.
Notwithstanding the foregoing, if, at any time after giving written
notice of its intention to register Common Stock or other securities
convertible into or exercisable for Common Stock and prior to the
effectiveness of the registration statement filed in connection with
such registration, the Company determines for any reason either not to
effect such registration or to delay such registration, the Company
may, at its election, by delivery of written notice to the
Participating Holders, (i) in the case of a determination not to
effect registration, relieve itself of its obligations to register any
Registrable Stock in connection with such registration, or (ii) in the
case of determination to delay the registration, delay the
registration of such Registrable Stock for the same period as the
delay in the registration of such other shares of Common Stock or
other securities convertible into or exercisable for Common Stock.
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(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 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
15
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, 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 (l) any untrue
statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus or any amendments or
supplements thereto in which Registrable Stock is included or in any
application, statement or other document filed by the Company with the
Commission or any securities exchange or in any jurisdiction in
connection with qualifying such shares under the securities laws
thereof, or (ii) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided in each case that such
statement or omission is made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such
Participating Holder expressly for use in any such registration
statement or other document.
(iii) Promptly upon receipt by a party claiming indemnification
hereunder of notice of the commencement of any action involving a
claim referred to above, such indemnified party will, if a claim in
respect thereof is to be made against party which may be required to
indemnify such party hereunder, give written notice to the latter of
the commencement of such action. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled
to participate in and to assume the defense of such action, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party. Except as set forth herein, the indemnified party
and any party cooperating in the defense of such claim shall not
settle or compromise any such claim or admit liability without the
express written consent of the indemnifying party. The indemnified
16
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.
17
(v) The obligations of the Company and the Participating Holders under
this Section 7(f) shall survive the completion of any offering of
Registrable Stock in a registration statement under this Section 7.
(vi) The rights of indemnification contained in this Section 7 shall
not be deemed to be the exclusive remedy of the parties hereto and
such rights shall be in addition to any other rights or remedies which
any party hereto may have at law or equity.
(g) Assignment of Registration Rights. The undersigned's rights set forth
in this Section 7 shall automatically be deemed assigned to any transferee
or assignee of this Warrant or shares of Common Stock or Other Securities
issuable hereunder, provided that immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act; provided, however, that the termination of
registration rights in respect of any shares of Registrable Stock by reason
of the operation of Section 7(a) shall be binding upon any transferee of
such shares. Upon the request of any such holder, the Company will confirm
in writing to any transferee of such holder's Registrable Stock the
Company's continuing obligation to afford such transferee the benefits of
the Company's agreements contained in this Section 7, but no failure of the
Company to confirm such obligations shall in any way impair such
transferee's rights under this Section 7.
(h) Effect of Private Placement. Notwithstanding anything to the contrary
contained in this Section 7, if, prior to December 4, 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.
8.1 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
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
18
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 3400 Bissonnet, Suite
#135, Houston Texas 77005. Attn: President, or to the holder at such address as
may have been furnished to the Company in writing by such holder, or, until an
address is so furnished, to and at the address of the last holder of this
Warrant who has so furnished an address to the Company. Any such notice shall be
deemed to have been given on the date of personal delivery, facsimile, delivery
to a reputable overnight courier service or deposit in the mail.
11. Warrant Holder Not a Shareholder. The holder of this Warrant, as such, shall
not be entitled by reason of this Warrant to any rights whatsoever as a
shareholder of the Company but shall be entitled to all such rights with respect
to shares of Common Stock actually issued upon exercise of this Warrant.
12. Miscellaneous. This Warrant and any term hereof may be amended, changed,
waived, discharged or terminated only by an instrument in writing signed by the
Company and consented to in writing by the holder of this Warrant. This Warrant
shall be construed and enforced in accordance with and governed by the laws of
the State of New York applicable to contracts made and to be performed entirely
therein. The headings in this Warrant are for reference purposes only and shall
not limit or, otherwise affect the meaning hereof.
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13. Expiration. The right to exercise this Warrant shall expire at 5:00 P.M.,
Houston, Texas time, on _______________.
Dated as of _______________.
CHAPARRAL RESOURCES, INC.
By
--------------------------------------
20
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.
21
FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
Forvalue 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)
22