<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November, 1, 1995
CHAPARRAL RESOURCES, INC.
(exact name of registrant as specified in its charter)
Colorado 0-7261 84-0630863
(State of other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation Identification No.)
621 - 17th Street, Suite 1301, Denver, Colorado 80293
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (303) 293-2340
12 Total Pages
1
<PAGE>
Item 5. Other Events
On November 1, 1995, the Company borrowed $750,000 from Brae Group, Inc.
("Brae") of Houston, Texas, pursuant to a Promissory Note ("Note") that bears
interest at 8% per annum and is due and payable on April 30, 1997; or earlier
if the Company receives additional financing sufficient to pay the Note.
In addition, the Company agreed to issue Brae warrants to purchase 500,000
shares of the Company's common stock at $.25 per share. The warrants will
expire on October 30, 1998.
In the event the Company has not repaid the Note in full on or before April
30, 1996, the Company is required to issue Brae additional warrants to purchase
100,000 shares of the Company's common stock at $.25 per share. These warrants,
if issued, will expire on April 30, 1999.
In the event the Company has not repaid the Note in full on or before
October 30, 1996, the Company is required to issue Brae additional warrants to
purchase 200,000 shares of the Company's common stock at $.25 per share. These
warrants, if issued, will expire on October 30, 1999.
In addition, not later than December 31, 1995 (unless prior to such date
the Note has been paid in full), the Company is required to appoint Howard
Karren, Peter G. Dilling and James A. Jeffs as directors and to appoint Howard
Karren as Chairman of the Board of Directors. The Company is required to keep
such persons as directors until the Note is paid in full. If any such person
declines or ceases to serve as a director, then Brae, until the Note is paid in
full, may designate another person to serve on the Company's Board in place of
such person.
The Company has a 45% beneficial ownership interest in Central Asian
Petroleum Guernsey Limited ("CAP-G"). CAP-G has a 50% beneficial ownership
interest in Karakuduk-Munay, Inc. ("KKM"), the operating company for the
development of the Karakuduk Field. The Company, through its 45% beneficial
ownership interest in CAP-G, has a 22.5% beneficial ownership interest in the
Karakuduk Field.
The Company will use $695,000 of the $750,000 borrowed for its share of
KKM's operating budget for the remainder of 1995. The balance, $55,000, will be
used for the Company's operations for the remainder of fiscal 1995.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
(10.1) Promissory Note dated November 1, 1995, from Chaparral
Resources, Inc. to Brae Group, Inc.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 7, 1995
CHAPARRAL RESOURCES, INC.
By /s/ Paul V. Hoovler
----------------------------------------
Paul V. Hoovler, President
4
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
(10.1) Promissory Note Dated November 1, 1995, from 6
Chaparral Resources, Inc. to Brae Group, Inc.
5
<PAGE>
PROMISSORY NOTE
November 1, 1995 $750,0000.00
New York, New York
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC. a Colorado corporation
with offices at 621 Seventeenth Street, Suite 1301, Denver, Colorado 80293
("Maker"), DOES HEREBY PROMISE to pay to the order of BRAE GROUP, INC., a
Delaware corporation ("Payee"), the principal amount (the "Principal Amount") of
SEVEN HUNDRED FIFTY THOUSAND DOLLARS ($750,000.00), together with interest
thereon at the rate equal to the lower of (i) eight percent (8%) per annum, or
(ii) the highest rate permitted by applicable law, from the date hereof to and
including the day on which the indebtedness evidenced by this Promissory Note
(this "Note") is paid in full.
The following additional terms shall govern this Note:
1. The entire Principal Amount of and accrued and unpaid interest on this
Note shall be due and payable on the day (the "Repayment Date") which shall be
the earlier to occur of:
(i) the third business day following the receipt by Maker of any
proceeds from (A) the sale or issuance after the date hereof, by
Maker, of Maker's equity securities (including without limitation any
securities convertible into or exchangeable for Maker's equity
securities), whether in one or more public or private transactions, or
(B) any debt financing provided or guaranteed by the Overseas Private
Investment Corporation or other governmental or quasi-governmental
organization or entity, or any combination of (A) or (B), above (
each, a "Financing"), provided, that in the event that the proceeds of
any such Financing is less than the amount then due on this Note, then
the amount of principal and interest that becomes due by operation of
this clause (i) shall be limited to the amount of such proceeds and
this clause (i) shall remain in effect with respect to each subsequent
Financing; or
(ii) April 30, 1997.
2. Interest and principal in respect of this Note shall be paid in lawful
currency of the United States, in immediately available funds, at the principal
executive offices of Payee, 333 Clay Street, Suite 4500, Houston, Texas 77002,
or at such other place as Payee may designate in a written notice to Maker.
/s/PVH
<PAGE>
3. All interest hereunder shall be computed on the basis of the actual
number of days elapsed over a year of 360 days and shall be payable monthly in
arrears on the first day of each month beginning December 1, 1995.
4. (a) As additional consideration for the loan evidenced by this Note,
Maker shall issue to Payee warrants (the "Initial Warrants") to purchase for
$0.25 per share, 500,000 shares of Maker's common stock, exercisable at any time
and from time to time not later than October 30, 1998.
(b) In the event that this Note has not been repaid in full
(including principal and accrued interest) on or before April 30, 1996, Maker
shall issue to Payee additional warrants to purchase for $0.25 per share,
100,000 shares of Maker's common stock (subject to adjustment in the manner
provided in subsection (d) of this Section 6), exercisable at any time and from
time to time not later than April 30, 1999.
(c) In the event that this Note has not been repaid in full
(including principal and accrued interest) on or before October 30, 1996, Maker
shall issue to Payee additional warrants to purchase for $0.25 per share,
200,000 shares of Maker's common stock (subject to adjustment in the manner
provided in subsection (d) of this Section 6), exercisable at any time and from
time to time not later than October 30, 1999.
(d) The warrants issuable to Payee pursuant to this Section 4 (the
"Warrants") shall be on such other terms and in such form (including
representations, warranties and covenants) as shall be acceptable to Payee in
Payee's sole discretion. Without limiting the generality of the foregoing, the
terms of such Warrants shall include (i) economic dilution provisions such that
in the event that any shares of Maker's common stock, or securities exchangeable
for or convertible into common stock, are issued for a price of less than $0.25
per share, the exercise price of the Warrants shall be proportionately decreased
and the number of shares issuable under such Warrants shall be increased
accordingly and also provisions for adjustment for stock splits, stock
dividends, reverse stock splits and similar changes; and (ii) registration
rights permitting Payee (or its assigns) to participate in any future
registrations of Maker's common stock ("piggyback" registration rights) and
permitting Payee (or its assigns) not less than one demand registration. With
respect to such registration rights, it is understood and agreed that in the
event that not later than September 30, 1996, Maker completes a private offering
of its equity securities in which Maker raises gross proceeds of not less than
$1,000,000 and in which the purchasers are granted registration rights , Payee's
registration rights with respect to shares issuable under the Warrants shall be
substantially the same as the most favorable rights granted to purchasers in the
private placement rather than the registration rights set forth above; PROVIDED,
HOWEVER, that the exercise of Payee's registration rights shall not be subject
to any requirement that any other holders of registration rights join Payee in
/s/PVH
2
<PAGE>
any request to participate in or to demand a registration, and any participation
in or demand for a registration by any other holder of registration rights shall
not affect Payee's right to participate in or demand a registration on any
future occasion.
5. Not later than December 31, 1995 (unless prior to such date this Note
shall have been paid in full), Maker shall take such actions or cause such
actions to be taken as may be required (including without limitation any
increase in the number of directors comprising Maker's board of directors) to
cause Howard Karren, Peter G. Dilling and James A. Jeffs to be elected, and
until this Note is paid in full, re-elected, as directors of Maker and to cause
Howard Karren to be elected and re-elected as Chairman of the board of
directors; provided, however, that if any or all of such persons declines, or
ceases to serve as a director of Maker, until this Note is paid in full Payee
may designate one or more (as the case may be) nominees to serve as director(s)
of Maker in place of such person or persons, and until this Note is paid in
full, Maker shall take such actions or cause such actions to be taken as may be
required to cause such nominee or nominees to be elected or re-elected (as the
case may be) as director(s) of Maker.
6. In the event that either the Warrants to be issued to Payee pursuant
to Section 4 hereof are not issued (i) in the case of the Initial Warrants, not
later than November 30, 1995, and (ii) in the case of the remaining Warrants,
not later than thirty (30) days following the respective dates set forth in such
Section 4 as the dates on which such Warrants are to be issued, and in each case
on such terms and in such form as may be acceptable to Payee in Payee's sole
discretion, then notwithstanding the provisions of Section 1 hereof, this Note
shall automatically and without any further notice or action on the part of
Maker or Payee, become a demand note and shall upon written demand made by Payee
to Maker become immediately due and payable.
7. The obligations of Maker hereunder are absolute and unconditional and
payment of the Principal Amount and all interest accrued thereon shall not be
subject to any defense, counterclaim or right of set-off.
8. Maker represents, warrants, covenants and agrees with Payee as
follows:
(a) From and after the date of this Note and until this Note has been
satisfied in full, Maker will furnish to Payee such reports and other
information with respect to Maker, Maker's business and Maker's financial
condition as Payee may from time to time request.
(b) This Note has been duly authorized by all necessary corporate
action on the part of Maker. This Note has been duly executed and delivered by
Maker and constitutes the valid and binding agreement of Maker, enforceable
/s/PVH
3
<PAGE>
against Maker in accordance with its terms, except as the enforceability hereof
may be subject to applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting creditors' rights generally and to general principles of
equity.
Maker and constitutes the valid and binding agreement of Maker, enforceable
against Maker in accordance with its terms, except as the enforceability hereof
may be subject to applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting creditors' rights generally and to general principles of
equity.
(c) Neither the execution and delivery by Maker of this Note, nor the
consummation by Maker of the transactions contemplated hereby, nor compliance by
Maker with any of the provisions hereof will (i) violate or conflict with any
provision of the Certificate or Articles of Incorporation or By-laws of the
Maker, (ii) result in a violation of any order, writ, injunction, decree,
judgment, ruling, law, rule, or regulation, of any court or governmental
authority, applicable to Maker, (iii) result in the breach of or otherwise
affect any of the terms, conditions, or provisions of, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, contract, agreement, or
other instrument or commitment or obligation of Maker, or (iv) require any
consent, approval, or authorization of, or notice to, or declaration, filing, or
registration with, any governmental or regulatory authority or any other person,
except for such consents, approvals, authorizations, notices, declarations,
filings or registrations which have been obtained, given or made, as the case
may be, and which are unconditional and in full force and effect.
(d) Maker is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Colorado and is qualified to do business
in the jurisdictions where the nature of its business or properties makes such
qualification necessary. Maker has all requisite corporate power and authority
to own, operate, and lease its properties and to carry on its business as now
being conducted.
(e) As of the date hereof, there are issued and outstanding not more than
22,400,000 shares of Maker's common stock (including as if issued shares
issuable under outstanding warrants, options, convertible debt and other
securities and rights convertible into or exchangeable for Maker's equity
securities) and such shares are the only shares of Maker's equity securities of
any class or series that are issued and outstanding on the date hereof.
9. The following shall constitute an "Event of Default" within the
meaning of this Note:
(a) Maker shall fail or refuse to make any payment of principal or
interest with respect to this Note when the same shall become due; or
(b) Any of the representations or warranties of Maker made or deemed
to be made in this Note or in any written agreement between Maker and Payee
(including without limitation the Warrants) shall prove to have been false or
misleading in any material respect when so made or deemed to be made; or
/s/PVH
4
<PAGE>
(c) Maker shall default in the due observance or performance of any
of the covenants or conditions contained in this Note or in respect of any of
its obligations under the terms of any written agreement between Maker and Payee
(including without limitation the Warrants) and such default shall continue for
10 days following written notice thereof to Maker; or
(d) an event shall occur which constitutes, or, upon the sending of
notice or the passage of time or both, would constitute, a breach or default
with respect to the payment of principal or interest under any other
indebtedness of Maker; or
(e) an event shall occur which constitutes a breach of default (after
any applicable grace periods), other than with respect to the payment of
principal or interest, under any other indebtedness of Maker; or
(f) an event shall occur which constitutes a breach or default (after
any applicable grace periods) under the terms of any agreement or instrument
between Maker and any third party as a result of which Maker is rendered liable
for an amount in excess of $25,000 or giving such third party rights of
acceleration or similar rights (whether or not exercised) with respect to any
indebtedness in an amount in excess of $25,000; or
(g) Maker shall make a general assignment for the benefit of its
creditors, the adjudication in bankruptcy of the Maker, or the filing of a
voluntary petition by the Maker under any of the provisions of the United States
Bankruptcy Code; the filing of any answer or other pleading admitting the
material allegations of any petition filed against the Maker in any bankruptcy,
insolvency or other such proceeding; the filing of a petition against the Maker
under any of the provisions of any bankruptcy laws of the United States or
similar laws of any jurisdiction and the failure of such petition to be
dismissed within thirty days; or the petition for, or the appointment of, or
possession by, a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Maker or any substantial part of
its properties or assets.
10. In the event of the occurrence of an Event of Default described in
paragraphs (a), (b), (c), (d), (e), or (f) of Section 9 hereof, Payee may, by
notice in writing to Maker, declare the principal of this Note and all interest
accrued thereon to be immediately due and payable; and in the event of the
occurrence of an Event of Default described in paragraph (g) of Section 9
hereof, the principal of this Note and all interest accrued thereon shall
automatically become immediately due and payable, in each case without
presentment, demand, protest or any notice of any kind, all of which are hereby
waived.
11. Maker shall pay all out-of-pocket expenses (including reasonable
attorneys' fees and expenses) incurred by Payee in connection with the
/s/PVH
5
<PAGE>
enforcement of Payee's rights hereunder and under any documents or agreements
entered into between Maker and Payee in connection herewith.
12. This Note shall remain in full force and effect and continue to be
effective should any petition be filed by or against Maker for liquidation or
reorganization, should Maker become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
significant part of Maker's assets, and shall continue to be effective or be
reinstated, if at any time payment and performance of Maker's obligations
hereunder, or any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by any obligee of
Maker's obligations hereunder, whether as a "voidable preference," "fraudulent
conveyance," or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, Maker's obligations hereunder shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
13. This note shall in all respects be governed by the laws of the State
of New York applicable to contracts made and to be performed entirely within
such State. This Note may not be altered or amended, except by a writing duly
signed by the party against whom such alteration or amendment is sought to be
enforced.
14. From and after the date of this Note, the outstanding Principal Amount
may be prepaid by Maker, in whole or in part, on written notice from Maker to
Payee specifying the date of prepayment ("Prepayment Date"), which shall be no
less than two (2) business days from the date of notice. On the Prepayment
Date, upon receipt of the original Note, Maker shall pay to Payee the Principal
Amount to be prepaid plus accrued and unpaid interest thereon to and including
the prepayment Date. In the event of a prepayment hereunder of less than the
entire Principal Amount then outstanding, then promptly upon such partial
prepayment, Maker shall issue and deliver to Payee a new Note, of like tenor
hereto, equal in principal amount to the unpaid Principal Amount of this Note.
15. Any waiver by Payee of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which Payee
would otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of Payee, any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law. In the event of any litigation with respect to this Note,
/s/PVH
6
<PAGE>
Maker hereby waives (to the extent permitted by law) the right to trial by
jury.
16. This Note and all obligations of Maker hereunder shall be binding upon
the successors and assigns of Maker, and shall, together with the rights and
remedies of Payee hereunder, inure to the benefit of Payee, and its successors
and assigns.
17. Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or enforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability of such provision in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.
18. This Note and all obligations of Maker hereunder shall be binding upon
the successors and assigns of Maker, and shall, together with the rights and
remedies of Payee hereunder, inure to the benefit of Payee, and its successors
and assigns.
19. Maker hereby agrees that it will execute and deliver to Payee any and
all documents, in addition to those expressly provided for in this Note, all in
form and substance satisfactory to Payee in Payee's sole discretion, that may be
reasonably necessary or appropriate to carry out the purposes of this Note and
the transactions contemplated hereby.
20. Maker hereby waives presentment for payment, demand, notice of
dishonor, notice of protest and protest and diligence in taking any action to
collect amounts due hereunder.
21. All notices and other communications to be given or made hereunder
shall be mailed by first class registered or certified mail, postage prepaid, or
sent via Federal Express or similar overnight courier service, to the Maker or
Payee, as the case may be, at such address as may have been furnished to the
other party in writing by such addressee. Either party may by written notice to
the other change the address to which notices and other communications should be
sent.
CHAPARRAL RESOURCES, INC.
By:/s/ Paul V. Hoovler
---------------------------------
Name: Paul V. Hoovler
Title: President
/s/PVH
7
