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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CHAPARRAL RESOURCES, INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
159 420 207
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(CUSIP Number)
Herbert M. Friedman, Esq.
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
(212) 486-1700
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(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
April 23, 1997
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(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box.
[ ]
Page 1 of 15 Pages.
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CUSIP No. 159 420 207 13D
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1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS:
Victory Ventures LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS:
WC
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
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NUMBER OF 7 SOLE VOTING POWER:
SHARES
BENEFICIALLY 8,590,299
OWNED BY -------------------------------------------------------
EACH 8 SHARED VOTING POWER:
REPORTING
PERSON WITH -------------------------------------------------------
9 SOLE DISPOSITIVE POWER:
8,590,299
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10 SHARED DISPOSITIVE POWER:
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
8,590,299
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):
18.4%
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14 TYPE OF REPORTING PERSON:
OO
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Item 1 - Security and Issuer.
This Schedule 13D relates to shares of the common stock, $.10 par
value per share ("Common Stock"), of Chaparral Resources, Inc., a Colorado
corporation (the "Company"), whose principal executive offices are located at
3400 Bissonet, Houston, Texas 77005.
Item 2 - Identity and Background.
This Schedule 13D is being filed on behalf of Victory Ventures LLC,
a Delaware limited liability company ("Victory"). Victory conducts its
operations through small and medium size companies in which it holds either
equity or convertible debt interests. The address of the principal business
office of Victory is 645 Madison Avenue, Suite 2200, New York, New York 10022.
Set forth on Schedule A hereto is the name, the citizenship (or
place of organization in the case of a corporation), the business address, the
present principal occupation or employment (or business in the case of a
corporation) and the name, principal business and address of any corporation or
other organization in which such occupation or employment is conducted, of each
executive officer and director of Victory.
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During the last five years, neither Victory nor, to the best
knowledge of Victory, any other person identified on Schedule A hereto has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
During the last five years, neither Victory nor, to the best
knowledge of Victory, any other person identified on Schedule A hereto was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
On April 23, 1997, pursuant to a subscription agreement
dated April 22, 1997 (the "Subscription Agreement"), Victory acquired an
aggregate of 3,849,914 shares of Common Stock at a purchase price of $0.65 per
share or an aggregate purchase price of $2,502,444, $2,000,000 of which was paid
in cash from working capital and $502,444 was paid by delivery and surrender of
a $500,000 promissory note dated December 6, 1996 (together with interest
accrued thereon through April 22, 1997 of $2,444) previously made by the Company
in favor of Victory.
As additional consideration for the execution of the
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Subscription Agreement by Victory, the Company granted Victory a warrant to
purchase 4,615,385 additional shares of Common Stock at an exercise price of
$0.65 per share, exercisable no later than December 31, 1997.
Item 4. Purpose of Transaction.
Victory acquired the shares for investment purposes.
Victory intends to review its holdings in the Company on a
continuing basis. Depending upon various factors, including, but not limited to,
the Company's business, prospects and financial condition and other developments
concerning the Company, available opportunities for Victory to acquire or
dispose of Common Stock, other business opportunities available to Victory, and
other relevant factors, Victory may in the future take such actions with respect
to its holdings in the Company as it deems appropriate in light of the
circumstances and conditions existing from time to time. Such actions may
include the purchase of additional Common Stock in the open market, the purchase
of additional Common Stock in privately negotiated transactions or otherwise,
the disposition, from time to time or at any time, of all or a portion of the
Common Stock now owned or hereafter acquired by Victory, either in a
distribution of Common Stock to Victory's members or in the sale(s) of Common
Stock in the open market, or the sale(s) of Common Stock in privately negotiated
transactions to one or more purchasers.
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Except as described herein, Victory has not formulated any plans
or proposals which relate to or would result in any of the following:
(a) The acquisition by any person of additional
securities of the Company, or the disposition of securities of
the Company;
(b) An extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the Company or
any of its subsidiaries;
(c) A sale or transfer of a material amount of assets
of the Company or any of its subsidiaries;
(d) Any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board; provided, however,
that in connection with the execution of the Subscription Agreement the Company
agreed to nominate Walter Carozza, as a candidate for election to the Board of
Directors of the Company at the Annual Meeting of Shareholders held in June,
1997. Mr. Carozza, who is President of Victory, was elected to the Board of
Directors of the Company at that meeting;
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(e) Any material change in the present capitalization
or dividend policy of the Company;
(f) Any other material change in the Company's
business or corporate structure;
(g) Changes in the Company's charter, by-laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Company by any person;
(h) Causing a class of securities of the Company to be delisted
from a national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) A class of equity securities of the Company becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended; or
(j) Any action similar to any of those enumerated
above.
Item 5. Interest in Securities of the Issuer.
(a) (b) On the date hereof, Victory owns directly an
aggregate of 3,849,914 shares of Common Stock, which shares
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constitute, to the best knowledge of Victory, approximately 9.2% of the issued
and outstanding shares of Common Stock on the date hereof. Victory has the sole
power to vote or direct the vote and to dispose or direct the disposition of
such shares.
In addition, Victory is the owner of currently exercisable
warrants to purchase an aggregate of 4,740,385 shares of Common Stock. In the
event of such exercise Victory would own 8,590,299 shares of Common Stock
(or approximately 18.4%).
To the best of Victory's knowledge, none of the persons named in
Schedule A hereto are beneficial owners of shares of Common Stock.
(c) Except for the transaction described in Item 3 above, to the
best knowledge of Victory, there were no transactions in shares of the Common
Stock effected by the persons named in response to paragraph (a) of this Item 5
during the past sixty days.
(d) Not applicable.
(e) Not applicable.
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Item 6 - Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Pursuant to the Subscription Agreement Victory was granted
certain demand and "piggy-back" registration rights.
As additional consideration for the execution of the Subscription
Agreement by Victory, the Company granted Victory a warrant to purchase
4,615,385 additional shares of Common Stock at an exercise price of $0.65 per
share, exercisable no later than December 31, 1997.
On December 6, 1996, in connection with a previous financing, the
Company granted Victory a warrant to purchase 125,000 shares of Common Stock at
an exercise price of $.25 per share.
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Item 7 - Material to be Filed as Exhibits.
(a) Subscription Agreement dated April 22, 1997
between Chaparral and Victory.
(b) Warrant dated April 22, 1997.
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After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned hereby certifies that the information set
forth in this statement is true, complete and correct.
Dated: August 4, 1997
VICTORY VENTURES LLC
By:/s/ Walter Carozza
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Walter Carozza
President
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SCHEDULE A
TO SCHEDULE 13D FILED
BY
VICTORY VENTURES LLC
The following table sets forth certain information, as of the
date hereof, concerning each executive officer and director of Victory.
Name: Louis Marx, Jr.
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Co-Chairman of the Board
and Director
Citizenship: American
Business Address: 667 Madison Avenue, Suite 2500
New York, New York 10021
Principal Occupation: Private Investor
Name: Montague H. Hackett, Jr.
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Co-Chairman of the Board
and Director
Citizenship: American
Business Address: 645 Madison Avenue, Suite 2200
New York, New York 10022
Principal Occupation: Private Investor
Name: Walter Carozza
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President, Director
Citizenship: American
Business Address: 645 Madison Avenue, Suite 2200
New York, New York 10022
Principal Occupation: President of Victory
Ventures LLC
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Name: Herbert M. Friedman
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Director
Citizenship: American
Business Address: 460 Park Avenue
New York, New York 10022
Principal Occupation: Partner, Zimet, Haines,
Friedman & Kaplan, Attorneys
at Law
Name: M. Leo Hart
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Director
Citizenship: American
Business Address: 200 Crescent Court, Suite 1375
Dallas, Texas 75201
Principal Occupation: Chief Executive Officer of
Brae Group, Inc.
Name: Michael L. Keough
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Director
Citizenship: American
Business Address: c/o DMK International, Inc.
200 Galleria Parkway, Suite 970
Atlanta, Georgia 30339
Principal Occupation: Private Investor
Name: Harold J. Newman
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Director
Citizenship: American
Business Address: Neuberger & Berman
605 Third Avenue
New York, New York 10016
Principal Occupation: Private Investor
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Name: Alexander Paluch
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Director
Citizenship: American
Business Address: 4800 Hampden Lane, Suite 600
Bethesda, Maryland 20814
Principal Occupation: General Partner - East River
Ventures L.P. (a small business
investment entity)
Name: Stanley R. Rawn, Jr.
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Director
Citizenship: American
Business Address: 667 Madison Avenue
New York, New York 10021
Principal Occupation: Chief Executive Officer of
Noel Group, Inc.
Name: Priscilla Eaves Reiss
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Director
Citizenship: American
Business Address: c/o TANO Automation
3826 One Shell Square
701 Poydras Street
New Orleans, Louisiana 70139
Principal Occupation: Private Investor
Name: Perry C. Rogers
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Director
Citizenship: American
Business Address: 2300 West Sahara, Suite 1150
Las Vegas, Nevada 89102
Principal Occupation: Chief Operating Officer of
Agassi Enterprises
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Name: Michael M. Weatherly
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Director
Citizenship: American
Business Address: 1036 Harbor Road
Southport, Connecticut 06490
Principal Occupation: Private Investor
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April 22, 1997
Chaparral Resources, Inc.
Attn: Howard Karren, Chairman and CEO
3400 Bissonnet
Houston, Texas 77005
Gentlemen:
1. Subscription. The undersigned, VICTORY VENTURES, LLC (the
"Subscriber"), intending to be legally bound, irrevocably applies to purchase
from Chaparral Resources, Inc., a corporation organized under the laws of the
State of Colorado (the "Company") (i) 3,076,923 shares of the Company's Common
Stock, par value $.10 per share ("Common Stock"), for a purchase price of $0.65
per share or in the aggregate amount of Two Million Dollars ($2,000,000) payable
in cash (the "Cash Purchase Price") and (ii) an additional 772,991 shares of
Common Stock (collectively, the "Shares"), for a purchase price of $0.65 per
share or in the aggregate amount of Five Hundred and Two Thousand Four Hundred
Forty-Four Dollars ($502,444) payable by delivery and surrender of that certain
8% Convertible Promissory Note dated December 6, 1996 in the principal amount of
$500,000 made by the Company in favor of the Subscriber (the "Promissory Note")
together with the right to receive Two Thousand Four Hundred and Forty Four
Dollars ($2,444) which amount represents all accrued and unpaid interest on the
Promissory Note through April 22, 1997. The Shares are being offered to the
Subscriber without registration under the Securities Act of 1933, as amended
(the "Securities Act").
2. Acceptance. The subscription shall be deemed accepted by
the Company upon receipt by the Company of (i) the Cash Purchase Price and the
Promissory Note (the "Purchase Price") and a duly executed copy of this
Agreement. The Cash Purchase Price is being made by wire transfer payable to the
Company.
3. Warrant. As additional consideration for the execution of
this Agreement by the undersigned, the Company hereby agrees to grant the
Subscriber a warrant
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to purchase up to 4,615,385 additional shares of Common Stock at an exercise
price of $.65 per share, exercisable at any time and from time to time not later
than December 31, 1997.
4. Delivery of Certificate for Shares. As soon as practicable
after receipt of the Purchase Price, the Company will deliver to the Subscriber
a certificate or certificates representing the Shares subscribed for hereby,
registered in the name of the Subscriber.
5. Representations, Warranties and Covenants of Subscriber. In
order to induce the Company to sell the Shares to the Subscriber, the Subscriber
hereby represents, warrants and covenants to the Company as follows:
(a) The Subscriber is acquiring the Shares solely for investment
purposes only and not with a view to resale or distribution, or for the account,
in whole or in part, of others. No other person has or will have a direct or
indirect beneficial interest in the Shares.
(b) The Subscriber recognizes the restrictions on the
transferability of the Shares and the Subscriber is able to bear the substantial
economic risk of an investment therein, including a complete loss thereof, for
an indefinite period of time.
(c) The Subscriber understands that the sale of the Shares
hereunder is intended to be exempt from registration under the Securities Act,
by virtue of Section 4(2) thereof (and the rules and regulations promulgated
under the Securities Act) and applicable state securities laws. The Subscriber
will not sell or otherwise transfer any or all of the Shares without
registration under the Securities Act or an exemption therefrom.
(d) The Subscriber acknowledges that the certificate or
certificates representing the Shares shall bear a legend restricting the
transfer of the Shares.
(e) The Subscriber further represents and warrants that in order
to make an informed decision in connection with the purchase of the Shares:
(i) the Subscriber has reviewed the merits and risks of
an investment in the Shares; and
(ii) the Subscriber recognizes that an investment in the
Shares involves a number of significant risks; the Subscriber has
such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an
investment in the Shares.
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(f) The Subscriber represents and warrants that it is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Securities Act.
(g) The Subscriber is not subscribing to purchase the Shares as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or presented at any seminar or meeting, or any
solicitation of a subscription by a person not previously known to the
Subscriber in connection with investments in securities generally.
(h) The Subscriber understands that all documents, records and
books pertaining to this investment have been made available for inspection by
the undersigned, the undersigned's attorney and/or accountant including, but not
limited to, the Company's Annual Report on Form 10-K for the fiscal year ended
November 30, 1996.
(i) The Subscriber has had a reasonable opportunity to ask
questions of and receive answers from a person or persons acting on behalf of
the Company concerning the Company and the offering of the securities
contemplated hereby, and all such questions have been answered to the full
satisfaction of the undersigned.
6. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Subscriber that the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado and has all corporate power and authority to own and
lease its properties and to conduct its business as presently conducted. The
Company further represents and warrants to the Subscriber that the issuance of
the Shares has been duly authorized and, upon the issuance thereof and payment
therefor in the manner provided herein, will be duly authorized, validly issued,
fully-paid and non-assessable.
7. Registration Rights.
(a) Definitions. For purposes of this Section 7, the following
terms shall have the respective meanings set forth below:
(i) "Commission" shall mean the 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 any holder of any Shares issued pursuant to this Agreement, including any
transferee of any Subscriber.
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(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 Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document by the Commission.
(iv) The term "Registrable Stock" means (a) the Shares issued
pursuant to this Agreement; 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 Shares
held by him in one transaction pursuant to Rule 144 promulgated under the
Securities 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 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 Securities Act, the Company shall
promptly give written notice of such requested registration to all other
holders, if any, of Registrable Stock. If, after the expiration of thirty days
from the giving of such notice to the holders of Registrable Stock, the Company
shall have received written requests to register at least 50% of the shares of
Registrable Stock, which requests shall state the intended method of disposition
of such securities by such holders, the Company shall use all reasonable efforts
to prepare and file with the Commission a registration statement and such other
documents, including a prospectus, as may be necessary to permit a public
offering and sale of such Registrable Stock in the United States in compliance
with the provisions of the Securities Act, all to the extent required 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 shall be selected by the Initiating
Holders and shall be reasonably acceptable to the Company. If the underwriter
selected determines that the number of shares so to be included is required to
be limited due to market conditions or otherwise, the holders of Registrable
Stock proposing to sell their shares in such underwritten registration shall
share pro rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such underwriter) and
registered for their account. The Company shall only be required to effect two
registrations pursuant to this Section 7(b).
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(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 the Company at any time or from time to time proposes
to file with the Commission a registration statement under the Securities Act
with respect to any proposed distribution of any of its securities (other than a
registration to be effected on Form S-4, S-8 or other similar limited purpose
form), whether for sale for its own 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 Participating Holders 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
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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.
(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 such Participating Holders 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
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registration statement as may be necessary to comply with the provisions of the
Securities 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 Securities 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.
(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 Securities 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 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.
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(e) The Company shall pay all costs, fees and expenses in
connection with all registration statements filed under this Section 7
including, without limitation, the Company's legal and accounting fees, printing
expenses and blue sky fees and expenses, but not including the fees and expenses
of counsel for the Participating Holders in connection with such registration.
However, the Company shall not pay for underwriting discounts and commissions
and underwriters' expenses allocable to the Registrable Stock being registered
or state transfer taxes.
(f) Indemnification.
(i) The Company shall indemnify each Participating Holder
under this Agreement, its officers and directors and any person controlling it
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Securities Exchange Act of 1934, as amended, 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 it
may become subject under the Securities Act, the Exchange Act or otherwise,
arising out of or based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus or any amendments or supplements thereto in which Registrable Stock
is included or in any application, statement or other document filed by the
Company with the Commission or any securities exchange or in any jurisdiction in
connection with qualifying such shares under the securities laws thereof, or
(ii) the omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not misleading,
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 Securities 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 Securities Act,
the Exchange Act or otherwise, arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus or any amendments or supplements thereto in
which Registrable Stock is included or in any application, statement or other
document filed by the Company with the Commission or any securities exchange or
in any jurisdiction in connection with qualifying such shares under the
securities laws thereof, or (ii) the omission or alleged omission
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therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided in each case that such statement
or omission is made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such Participating Holder expressly
for use in any such registration statement or other document.
(iii) Promptly upon receipt by a party claiming
indemnification hereunder of notice of the commencement of any action involving
a claim referred to above, such indemnified party will, if a claim in respect
thereof is to be made against a party which may be required to indemnify such
party hereunder, give written notice to the latter of the commencement of such
action. In case any such action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
of such action, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party. Except as set forth herein, the
indemnified party and any party cooperating in the defense of such claim shall
not settle or compromise any such claim or admit liability without the express
written consent of the indemnifying party. The indemnified party shall have the
right to be represented by an advisory counsel and accountants, at its own
expense, and the indemnified party shall be kept fully informed of such action,
suit or proceeding at all stages thereof whether or not the indemnified party is
so represented. After a period of thirty days following the date the written
notice of such claim was given to the indemnifying party the indemnified party
may settle any such claim (and the amount of any such settlement shall be
subject to indemnification hereunder) unless within such thirty-day period the
indemnifying party shall have provided the indemnified party with notice and
evidence to the indemnified party's satisfaction that the indemnifying party
reasonably disputes such claim and has the financial ability to meet its
indemnification obligations hereunder. Notwithstanding the foregoing, the
indemnified party may immediately cause to be paid or discharged any asserted
claim the non-payment of which would have an immediate substantial adverse
impact on the indemnified party and any claim which the indemnifying party has
not disputed within thirty days of notice as provided above.
(iv) If the indemnification provided for in this Section 7(f)
is unavailable or insufficient to hold harmless an indemnified party under such
subsection in respect of any losses, claims, damages or liabilities or action in
respect thereof or referred to therein, then each indemnifying party shall in
lieu of indemnifying such indemnified party contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or actions in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and the Participating Holder, 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
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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 Holder
agree that it would not be just and equitable if contribution pursuant to this
Section 7(f)(iv) were determined by pro rata allocation or by any other method
of allocation which did not take account of the equitable considerations
referred to above in this subsection. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentations.
(v) The obligations of the Company and the Participating
Holder 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
and obligations set forth in this Section 7 shall automatically be deemed
assigned to any transferee or assignee of shares of Common Stock issued
hereunder, provided that immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act; provided however, that, the termination of registration
rights in respect of any shares of Registrable Stock by reason of the operation
of Section 7(a) shall be binding upon any transferee of such shares. Upon the
request of any such holder, the Company will confirm in writing to any
transferee of such holder's Registrable Stock the Company's continuing
obligation to afford such transferee the benefits of the Company's agreements
contained in this Section 7, but no failure of the Company to confirm such
obligations shall in any way impair such transferee's rights under this Section
7.
(h) Effect of Private Placement. Notwithstanding anything to the
contrary contained in this Section 7, if, prior to December 31, 1997, the
Company completes a private offering of equity securities in which the Company
realizes gross proceeds of at least of $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 6(f) hereof shall not be
modified as a result of such private offering.
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7. Governing Law. This Agreement has been made in, and shall
be construed in accordance with, the laws of the State of New York applicable to
contracts made and to be fully performed therein.
8. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes all negotiations, representations and other agreements
made by and between such parties with respect hereto.
VICTORY VENTURES LLC
By:/s/ Louis Marx, Jr.
-------------------
Name: Louis Marx , Jr.
Title: Co-Chairman
Agreed to and accepted
this 23rd day of April, 1997.
By:/s/ Howard Karren
-------------------
Name: Howard Karren
Title: Chairman and CEO
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THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS AN EXEMPTION FROM THE
REQUIREMENT OF SUCH REGISTRATION IS AVAILABLE UNDER THE
CIRCUMSTANCES AT THE TIME OBTAINING.
Void After 5:00 P.M. Houston, Texas Time on December 31, 1997
CHAPARRAL RESOURCES, INC.
Common Stock Purchase Warrant
CHAPARRAL RESOURCES, INC., a Colorado corporation ("Chaparral" or
the "Company"), hereby certifies that, in connection with the subscription by
Victory Ventures LLC, a Delaware limited liability company with an office at 645
Madison Avenue, New York, New York 10021 ("Victory"), as evidenced by
Subscription Agreement of even date hereof, and for other valuable consideration
received, Victory, or its permitted assigns, is entitled, subject to the terms
and conditions herein set forth, to purchase from the Company up to 4,615,385
fully paid and non-assessable shares of Common Stock, $.10 par value, of the
Company, at the per share purchase price (the "Purchase Price") of $0.65,
subject to adjustment as hereinafter provided, at any time or from time to time
on or after the date hereof and up to 5:00 P.M. New York City time on December
31, 1997 (the "Expiration Date"). The number and character of such shares of
Common Stock are subject to adjustment as provided herein.
1. Definitions. As used herein, unless the context
otherwise requires, the following terms have the following
respective meanings:
(a) "Act" shall mean the Securities Act of 1933, as
amended.
(b) "Additional Shares of Common Stock" shall mean all shares
(including treasury shares) of Common Stock issued or sold (or,
pursuant to Section 3.7 hereof, deemed to be issued) by the
Company after the date hereof, whether or not subsequently
reacquired or retired by the Company, other than shares of Common
Stock issuable pursuant to this Warrant.
(c) "Adjusted Exercise Price" shall have the meaning specified in
Section 3.2 hereof.
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(d) "Company" means Chaparral Resources, Inc. or any
corporation which shall succeed to or assume the
obligations of Chaparral Resources, Inc. hereunder.
(e) "Common Stock" shall mean the Common Stock, par value $.10
per share, of the Company and any stock into which such common
stock shall have been changed or any stock resulting from any
reclassification of such common stock, and shall include all
other stock of any class (however designated) of the Company the
holders of which have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends
and liquidating dividends after the payment of dividends and
distributions of any shares entitled to preference.
(f) "Convertible Securities" shall mean any evidences of
indebtedness, shares of stock (other than Common Stock) or other
securities directly or indirectly convertible into or
exchangeable for Common Stock, other than any securities issuable
pursuant to this Warrant.
(g) "Market Price", as used with reference to any share of stock
on any specified date, shall mean:
(i) if such stock is listed and registered on any national
securities exchange or traded on The Nasdaq Stock Market
("Nasdaq"), (A) the last reported sale price on such
exchange or Nasdaq of such stock on the business day
immediately preceding the specified date, or (B) if there
shall have been no such reported sale price of such stock
on the business day immediately preceding the specified
date, the average of the last reported sale price on such
exchange or on Nasdaq on (x) the day next preceding the
specified date for which there was a reported sale price
and (y) the day next succeeding the specified date for
which there was a reported sale price; or
(ii) if such stock is not at the time listed on any such
exchange or traded on Nasdaq but is traded on the
over-the-counter market as reported by the National
Quotation Bureau or other comparable service, (A) the
average of the closing bid and asked prices for such stock
on the business day immediately preceding the specified
date, or (B) if there shall have been no such reported bid
and asked prices for such stock on the business day
immediately preceding the specified date, the average of
the last bid and
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asked prices on (x) the day next preceding the specified
date for which such information is available and (y) the
day next succeeding the specified date for which such
information is available; or
(iii) if clauses (i) and (ii) above are not applicable,
the fair value per share of such stock as determined in
good faith and on a reasonable basis by the Board of
Directors of the Company and, if requested, set forth in a
certificate delivered to the holder of this Warrant upon
the exercise hereof.
(h) "Options" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(i) "Other Securities" shall mean any stock and other securities
of the Company or any other person (corporate or otherwise) which
the holders of this Warrant at any time shall be entitled to
receive, or shall have received, upon the exercise of this
Warrant, in lieu of or in addition to the Common Stock, or which
at any time shall be issuable or shall have been issued to
holders of the Common Stock in exchange for, in addition to or in
replacement of the Common Stock or Other Securities pursuant to
Section 3.5 or otherwise.
(j) "Purchase Price" shall mean $0.65 per share, subject to
adjustment as provided herein.
2. Exercise of Warrant.
2.1 Manner of Exercise. (a) This Warrant may be exercised by the
holder hereof, in whole or in part (but not as to fewer than 1,000 shares of the
Common Stock unless, at the time of exercise, this Warrant entitles the holder
to purchase fewer than 1,000 shares of the Common Stock), on any business day on
or after the date hereof and before 5:00 P.M., Houston, Texas time on December
31, 1997, by surrender of this Warrant, with the form of subscription at the end
hereof (or a reasonable facsimile thereof) duly executed by such holder, to the
Company at its office in Houston, Texas, and, except as otherwise provided in
Section 2.1(b), accompanied by payment, by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying (x)
the number of shares of the Common Stock (without giving effect to any
adjustment therein) designated in such form of subscription (or such reasonable
facsimile) by (y) the Purchase Price, and such holder shall thereupon be
entitled to receive the number of shares of the Common Stock determined as
provided hereunder.
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<PAGE>
(b) In addition to the method of payment set
forth in Section 2.1(a), and in lieu of any cash payment required thereunder,
the holder of this Warrant shall have the right at any time and from time to
time to exercise this Warrant in full or in part by surrendering this Warrant,
with the form of subscription at the end hereof (or a reasonable facsimile
thereof) duly executed by such holder, to the Company at its office in Denver,
Colorado, in exchange for which the holder shall receive the number of shares of
Common Stock equal to the product of (x) the number of shares as to which the
Warrant is being exercised, multiplied by (y) a fraction, the numerator of which
is the Market Price of one share of the Common Stock less the per share Purchase
Price then in effect and the denominator of which is the Market Price of one
share of the Common Stock.
2.2. When Exercise Effective. Each exercise of this Warrant shall
be deemed to have been effected immediately prior to the close of business on
the business day on which this Warrant shall have been surrendered to the
Company as provided in Section 2.1, and the person(s) in whose name(s) the
certificate(s) for shares of the Common Stock (or Other Securities) that are to
be issued upon such exercise in accordance with Section 2.3 shall be deemed the
holder(s) of record thereof at such time.
2.3. Delivery of Stock Certificates, etc. As soon as practicable
after the exercise of this Warrant in full or in part in accordance herewith the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the holder
hereof, or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct,
(a) a certificate or certificates, marked with an appropriate
legend referring to the terms of this Warrant and any applicable
restrictions on such shares imposed by the Federal or any state
securities laws, for the number of full shares of the Common
Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash in an
amount equal to the same fraction of the Market Price of one full
share of the Common Preferred Stock on the business day next
preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or
Warrants of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of the Common Stock equal
(without giving effect to any adjustment therein) to the number
of such
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<PAGE>
shares called for on the face of this Warrant minus the number of
shares designated by the holder upon such exercise as provided in
Section 2.1.
3. Common Stock Issuable Upon Exercise.
3.1. General. The number of shares of the Common Stock which the
holder of this Warrant shall be entitled to receive upon the exercise hereof or,
if securities or other property in addition to or in lieu of the Common Stock
shall by reason of the operation of the provisions of this Section be issuable
upon such exercise, the amount and kind of such securities or other property,
shall be adjusted or determined as provided in this Section 3.
3.2. Adjusted Exercise Price. The number of shares of the Common
Stock which the holder of this Warrant shall be entitled to receive upon the
exercise hereof shall be determined by multiplying the number of shares of the
Common Stock which, but for the provisions of this Section 3, would otherwise be
issuable upon such exercise, as designated by the holder hereof pursuant to
Section 2.1, by the fraction of which the numerator is the per share Purchase
Price and the denominator is the per share Adjusted Exercise Price (as herein
defined) in effect on the date of such exercise. The per share Adjusted Exercise
Price of the Common Stock shall initially be the Purchase Price (as defined in
Section 1) and shall be adjusted and readjusted from time to time as provided in
this Section 3 (and, as so adjusted or readjusted, shall remain in effect until
a further adjustment or readjustment thereof is required by this Section 3).
3.3. Stock Dividends, Stock Splits, etc. In case the Company at
any time or from time to time after the date hereof shall declare or pay any
dividend on the Common Stock payable in Common Stock, or effect a subdivision of
the outstanding shares of the Common Stock into a greater number of shares of
the Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock), then, in any such event, the per share Adjusted
Exercise Price per share shall be adjusted effective as of the close of business
on (i) the record date for the determination of shareholders entitled to receive
such dividend if such dividend is in fact paid, or (ii) the day immediately
preceding the day upon which such subdivision shall become effective (any such
day, as the case may be, shall be referred to herein as the "Subdivision
Effective Date"), by multiplying the per share Adjusted Exercise Price in effect
immediately prior to the Subdivision Effective Date by the fraction of which (x)
the numerator shall be the number of shares of the Common Stock outstanding
immediately prior to the Subdivision Effective Date and (y) the denominator
shall be the number of shares of the Common Stock outstanding immediately
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<PAGE>
prior to the Subdivision Effective Date plus the number of shares of the Common
Stock issuable upon the payment of such dividend or the consummation of such
subdivision, as the case may be.
3.4. Adjustments for Combinations, etc. In case the outstanding
shares of the Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Adjusted Exercise Price shall be adjusted, effective as of the close of
business on the day immediately preceding the day upon which such combination or
consolidation is effective (the "Combination Effective Date"), by multiplying
the per share Adjusted Exercise Price in effect immediately prior to the
Combination Effective Date by the fraction of which (x) the numerator shall be
the number of shares of the Common Stock outstanding immediately prior to the
Combination Effective Date and (y) the denominator shall be the number of shares
of the Common Stock outstanding immediately after the Combination Effective
Date.
3.5. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company, after the date hereof, (a) shall
consolidate with or merge into any other person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving person but, in connection with such
consolidation or merger, the Common Stock shall be changed into or exchanged for
stock or other securities or property of any other person, or (c) shall effect a
capital reorganization or reclassification of the Common Stock (other than a
reclassification subject to Sections 3.3 or 3.4), then, and in each such case,
proper provision shall be made so that the holder of this Warrant, upon the
exercise hereof at any time after the consummation of such consolidation,
merger, reorganization or reclassification, shall be entitled to receive, in
lieu of the Common Stock (or Other Securities) issuable upon such exercise prior
to such consummation, the stock and other securities and property to which such
holder would have been entitled upon such consummation if such holder had so
exercised this Warrant immediately prior thereto, subject to adjustments
(subsequent to such corporate action) as nearly equivalent as possible to the
adjustments provided for in this Section 3.
3.6. Issuances of Securities. If, at any time while
this Warrant (or any portion thereof) is outstanding, the Company:
(i) issues or sells Additional Shares of Common
Stock without consideration or for a consideration per
share less than the Adjusted Exercise Price in effect
immediately prior to such issue or sale, or
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<PAGE>
(ii) declares, orders, pays or makes a dividend or
other distribution (including, without limitation, any
distribution of other or additional stock or other securities or
property by way of dividend or spinoff, reclassification,
recapitalization or similar corporate rearrangement) on the
Common Stock other than a dividend payable in Additional Shares
of Common Stock,
then, and in each such case, the Adjusted Exercise Price shall, concurrently
with such issue or sale or immediately after the close of business on the record
date fixed for the determination of holders of any class of securities entitled
to receive such dividend or distribution, be reduced to a price (calculated to
the nearest cent, a half cent being considered a full cent) determined by
dividing:
(x) an amount equal to:
(i) the product obtained by multiplying the number
of shares of Common Stock outstanding immediately prior to
such issue or sale or at the close of business on such
record date by the Adjusted Exercise Price in effect at
such time,
plus
(ii) in the case of any such issue or sale,
the consideration, if any, received by the Company
upon such issue or sale, or
minus
(iii) in the case of any such dividend or
distribution, the aggregate amount of such dividend or
distribution, which amount shall be valued in accordance
with Section 3.8 hereof,
by
(y) the number of shares of Common Stock outstanding
immediately after such issue or sale or at the close of business
on such record date,
provided that, this Section 3.6 shall not apply to the issuance or sale of
Additional Shares of Common Stock pursuant to any Option or commitment
outstanding prior to the date hereof set forth on Schedule A attached hereto,
and provided, further however, that for the purposes of this Section 3.6, (A)
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Section 3.7 hereof, such Additional
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<PAGE>
Shares shall be deemed to be outstanding and (B) treasury shares shall not be
deemed to be outstanding.
3.7. Options and Convertible Securities. In case the Company at
any time or from time to time after the date hereof shall issue, sell, grant or
assume any Options or Convertible Securities, or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue, sale, grant or assumption or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Section 3.8 hereof)
of such shares would be less than the Adjusted Exercise Price in effect
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date, as the case may be, and provided,
further, that in any such case in which Additional Shares of Common Stock are
deemed to be issued:
(a) no further adjustment of the Adjusted Exercise Price
shall be made upon the subsequent issue or sale of Convertible
Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible
Securities;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any
increase in the consideration payable to the Company, or decrease
in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof (by change of rate or
otherwise), then the Adjusted Exercise Price computed upon the
original issue, sale, grant or assumption thereof (or upon the
occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options, or
the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration of any such Options or
any rights of conversion or exchange under such
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Convertible Securities which shall not have been exercised, the
Adjusted Exercise Price computed upon the original issue, sale,
grant or assumption thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(i) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of
Common Stock issued or sold were the shares of Common
Stock, if any, actually issued or sold upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus the
consideration actually received by the Company upon such
exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged,
plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange,
and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued or sold upon the exercise thereof were
issued at the time of the issue, sale, grant or assumption
of such Options, and the consideration received by the
Company for the Additional Shares of Common Stock deemed
to have then been issued was the consideration actually
received by the Company for the issue, sale, grant or
assumption of all such options, whether or not exercised,
plus the consideration deemed to have been received by the
Company (pursuant to Section 3.8 hereof) upon the issue or
sale of the Convertible Securities with respect to which
such Options were actually exercised;
(d) no readjustment pursuant to clause (b) or (c) above
shall have the effect of increasing the Adjusted Exercise Price
by an amount in excess of the amount of the adjustment thereof
originally made in respect of the issue, sale, grant or
assumption of such Options or Convertible Securities; and
(e) in the case of any Options to acquire Convertible
Securities which expire by their terms not more than 30 days
after the date of issue, sale, grant or assumption thereof, no
adjustment of the Adjusted
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Exercise Price shall be made until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the
manner provided in clause (c) above.
3.8. Computation of Consideration. For the purposes of
this Section 3, the consideration received by the Company for the
issue or sale of any Additional Shares of Common Stock shall be
computed as follows:
(a) Nature of Consideration. Such consideration
shall,
(i) insofar as it consists of cash, be computed at
the actual amount paid by the purchaser of such Additional
Shares of Common Stock, without deduction for commissions,
concessions or discounts allowed to underwriters, dealers
or others in connection with such issue,
(ii) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the
Board of Directors of the Company; provided, however, that
any such property that consists of securities (A) that are
listed on any national securities exchange or if such
securities are traded on Nasdaq, then the per share (or
other unit) value shall be the last reported sale price of
such securities on the most recent trading day preceding
the day in question for which such information is
available, or (B) that are traded in the over-the-counter
market but are not traded on Nasdaq, then the per share
(or other unit) value shall be the average between the
closing bid and asked prices of such securities on the
most recent trading day preceding the day in question for
which such information is available, as reported by the
NASD, and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for consideration which covers
both, be that portion of such consideration (computed as
provided in clauses (i) and (ii) above), which is
determined in good faith by the Board of Directors of the
Company to be allocable to such Additional Shares of
Common Stock.
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(b) Options and Convertible Securities. The consideration
per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 3.7 hereof,
relating to Options and Convertible Securities, shall be
determined by dividing:
(i) the total amount, if any, received or
receivable by the Company as consideration for the issue,
sale, grant or assumption of such Options or Convertible
Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of
such Convertible Securities,
by
(ii) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without
regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of
such Options or the conversion or exchange of such
Convertible Securities.
4. No Dilution or Impairment. The Company will not, by amendment
of its articles of organization or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of this
Warrant against dilution or other impairment.
5. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other
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securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of
the Company to any other person or any consolidation or merger
involving the Company and any other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
the Company will give to the holder of this Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, and (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place
and the time, if any such time is to be fixed, as of which the holders of record
of the Common Stock (or Other Securities) shall be entitled to exchange their
shares of the Common Stock (or Other Securities) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Unless otherwise required by law to be given sooner, such notice
shall be mailed within a reasonable time prior to the date therein specified.
6. Reservation of Stock, etc. The Company will at all times
reserve and keep available out of its authorized but unissued Common Stock,
solely for issuance and delivery upon the exercise of this Warrant, the full
number of shares of Common Stock (or Other Securities) then issuable upon the
exercise of this Warrant. All shares of the Common Stock issuable upon the
exercise of this Warrant shall be duly authorized, and when issued and paid for
in full, validly issued, fully paid and non-assessable with no liability on the
part of the holders thereof.
7. Registration Rights.
(a) Definitions. For purposes of this Section 7, the
following terms shall have the following respective meanings:
(i) "Commission" shall mean the United States
Securities and Exchange Commission or any other Federal agency at
the time administering the Act.
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(ii) The term "holder or holders of Registrable Stock" shall
mean the holders of Common Stock or Other Securities issued pursuant to this
Warrant.
(iii) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
(iv) The term "Registration Period" shall mean the period
commencing on the date hereof and ending (a) if this Warrant shall expire
without having been exercised in whole or in part, the Expiration Date or (b) if
this Warrant shall have been exercised in whole or in part, at such time as no
shares of Registrable Stock remain outstanding.
(v) The term "Registrable Stock" means (a) the shares of
Common Stock issued or issuable upon the exercise of this Warrant, and (b) any
Other Securities issued or issuable pursuant to this Warrant; provided, however,
that shares of Registrable Stock shall cease to be Registrable Stock if they are
sold or transferred pursuant to a registered public offering or other
transaction which does not result in restrictions on resale being imposed on the
transfer by virtue of Federal or state securities laws; and provided further
that Registrable Stock shall cease to be Registrable Stock if the holder could
sell or transfer all such securities held by him in one transaction pursuant to
Rule 144 promulgated under the Act.
(b) Demand Registration.
(i) Upon the written request of any holder or holders
("Initiating Holders") of at least 30% of the shares of Registrable Stock, which
request shall be given during the Registration Period, shall state the intended
method of disposition by such Initiating Holders and shall request that the
Company effect the registration of all or part of the Registrable Stock under
the Act, the Company shall promptly give written notice of such requested
registration to all other holders, if any, of Registrable Stock. If, after the
expiration of thirty days from the giving of such notice to the holders of
Registrable Stock, the Company shall have received written requests to register
at least 50% of the shares of Registrable Stock, which requests shall state the
intended method of disposition of such securities by such holders, the Company
shall use all reasonable efforts to prepare and file with the Commission a
registration statement and such other documents, including a prospectus, as may
be necessary to permit a public offering and sale of such Registrable Stock in
the United States in compliance with the provisions of the Act, all to the
extent requisite to permit the disposition (in accordance with the intended
methods thereof as
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aforesaid) by the holders of the Registrable Stock so to be registered (the
"Participating Holders"). If such sale of Registrable Stock is to be pursuant to
an underwritten offering, the underwriter shall be selected by the Initiating
Holders and shall be reasonably acceptable to the Company. If the underwriter
selected determines that the number of shares so to be included is required to
be limited due to market conditions or otherwise, the holders of Registrable
Stock proposing to sell their shares in such underwritten registration shall
share pro rata (according to the number of shares requested to be registered) in
the number of shares being underwritten (as determined by such underwriter) and
registered for their account. The Company shall only be required to effect two
registrations pursuant to this Section 7(b).
(ii) The Company shall not be required to effect any
registration under this Section 7(b) within nine months after the completion of
any public offering of its securities pursuant to which the holders of
Registrable Stock were afforded the right to register as many shares of their
Registrable Stock as requested nor within six months after any other public
offering by the Company.
(iii) The Company shall have the right to include in any
registration statement or post-effective amendment filed pursuant to this
Section 7(b) other securities of the Company then proposed to be distributed,
except that, to the extent consistent with the rights of other holders of the
Company's securities, if and to the extent that the underwriter or underwriters
acting with respect of such public offering reasonably determine that the
inclusion of such other securities may substantially prejudice or hinder the
offering of Registrable Stock, the number of such other securities shall be
reduced or eliminated prior to any reduction in the number of shares of
Registrable Stock so to be registered.
(iv) If the registration under this paragraph (b) is effected
on a Form S-3 (or any successor form thereto), and the effectiveness of such
registration statement can be maintained without significant additional expense
to the Company, then the Company agrees to maintain the effectiveness of such
registration statement for a period of one year after its initial effective
date.
(c) Incidental Registration.
(i) If, during the Registration Period, the Company at any
time or from time to time proposes to file with the Commission a registration
statement under the Act with respect to any proposed distribution of any of its
securities (other than a registration to be effected on Form S-4, S-8 or other
similar limited purpose form), whether for sale for its own
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account or for the account of any other person holding registration rights with
respect to the securities of the Company, then the Company shall give written
notice of such proposed filing to the holders of Registrable Stock at least
thirty (30) days before the anticipated filing date, and such notice shall
describe in detail the proposed registration and distribution (including those
jurisdictions where registration or qualification under the securities or blue
sky laws is intended) and shall offer the holders of Registrable Stock the
opportunity to register such number of shares of Registrable Stock as the
holders of Registrable Stock may request. Upon receipt by the Company by the
anticipated filing date of written requests from the Participating Holders of
Registrable Stock for the Company to register their Registrable Stock, the
Company shall permit, or in the event of an underwritten offering, shall use its
best efforts to cause the managing underwriter or underwriters of such proposed
underwritten offering to permit, the Participating Holders to include such
securities in such offering on the same terms and conditions as any similar
securities of the Company included therein; provided, however, that IF in the
opinion of the managing underwriter or underwriters of such offering, the
inclusion of the total amount or kind of securities which it or the Company, and
any other persons or entities, intend to include in such offering would
interfere, hinder, delay, reduce or prevent the effectiveness or sale of the
Company's shares of Common Stock proposed to be so registered or would otherwise
adversely affect the success of such offering, THEN the amount or kind of
securities to be offered for the accounts of the Company and each holder of
Common Stock (including without limitation Registrable Stock) or securities
convertible into or exercisable for Common Stock proposed to be registered
(other than any persons exercising demand registration rights) shall be reduced
(or eliminated) in proportion to their respective values to the extent necessary
to reduce the total amount of securities to be included in such offering on
behalf of such holders of securities to the amount recommended by such managing
underwriter. For purposes of this Section, "value" shall mean principal amount
with respect to debt securities and the proposed offering price per share with
respect to equity securities. Notwithstanding the foregoing, if, at any time
after giving written notice of its intention to register Common Stock or other
securities convertible into or exercisable for Common Stock and prior to the
effectiveness of the registration statement filed in connection with such
registration, the Company determines for any reason either not to effect such
registration or to delay such registration, the Company may, at its election, by
delivery of written notice to the Participating Holders, (i) in the case of a
determination not to effect registration, relieve itself of its obligations to
register any Registrable Stock in connection with such registration, or (ii) in
the case of determination to delay the registration, delay the registration of
such Registrable Stock for the same period as the delay in the registration of
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such other shares of Common Stock or other securities convertible into or
exercisable for Common Stock.
(ii) Exception. The Company shall not be required to include
any of the Registrable Stock of a Participating Holder in any registration
statement or post-effective amendment prepared at its own instance unless such
Participating Holder shall furnish such information and sign such documents as
may be required by the Commission or reasonably requested by the Company in
accordance with generally accepted practices, in connection with such proposed
distribution.
(d) Covenants of the Company with Respect to Registration. In
connection with any registration under this Section 7, the Company shall, as
expeditiously as is reasonably possible:
(i) Prepare and file with the Commission a registration
statement with respect to the Participating Holders' Registrable Stock and,
subject to the last sentence of Section 7(c)(i) hereof, use its best efforts to
cause such registration statement to become effective.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(iii) Furnish to the Participating Holders such numbers of
copies of a prospectus, including, if applicable, a preliminary prospectus, in
conformity with the requirements of the Act, and such other documents as the
selling shareholders may reasonably request in order to facilitate the
disposition of Registrable Stock owned by the Participating Holders.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions within the United States as shall be
reasonably requested by the Participating Holders; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(v) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. The
Participating Holders shall also enter into and perform their obligations under
such an agreement.
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(vi) Notify the Participating Holders, at any time when a
prospectus relating to Registrable Stock covered by such registration statement
is required to be delivered under the Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(vii) Furnish to the Participating Holders, on the date that
shares of Registrable Stock are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 7, if such securities
are being sold by underwriters, or, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion as to matters
of law only, dated such date, of counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Participating Holders and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
and to the Participating Holders.
(e) The Company shall pay all costs, fees and expenses in
connection with all registration statements filed under this Section 7
including, without limitation, the Company's legal and accounting fees, printing
expenses and blue sky fees and expenses, but not including the fees and expenses
of counsel for the Participating Holders in connection with such registration.
However, the Company shall not pay for underwriting discounts and commissions
and underwriters' expenses allocable to the Registrable Stock being registered
or state transfer taxes.
(f) Indemnification.
(i) The Company shall indemnify each Participating Holder
under this Agreement, its officers and directors and any person controlling it
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against any loss, claim, damage, expense or liability (including without
limitation all expenses reasonably incurred in investigating, preparing, or
defending against any claim whatsoever, such expenses to be reimbursed by the
Company as they are incurred) to which any of them may become subject under the
Act, the Exchange Act or otherwise, arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus or any amendments or supplements thereto in
which
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Registrable Stock is included or in any application, statement or other document
filed by the Company with the Commission or any securities exchange or in any
jurisdiction in connection with qualifying such shares under the securities laws
thereof, or (ii) the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless such statement or omission is made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Participating Holder or an underwriter expressly for use in any such
registration statement or other document.
(ii) Each Participating Holder shall, as a condition to such
registration of Registrable Stock, agree to indemnify the Company, its officers
and directors and any person controlling the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any loss,
claim, damage or expense or liability (including without limitation all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever, such expenses to be reimbursed by the undersigned as they are
incurred) to which they may become subject under the Act, the Exchange Act or
otherwise, arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus or any amendments or supplements thereto in which Registrable Stock
is included or in any application, statement or other document filed by the
Company with the Commission or any securities exchange or in any jurisdiction in
connection with qualifying such shares under the securities laws thereof, or
(ii) the omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not misleading,
provided in each case that such statement or omission is made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Participating Holder expressly for use in any such registration
statement or other document.
(iii) Promptly upon receipt by a party claiming
indemnification hereunder of notice of the commencement of any action involving
a claim referred to above, such indemnified party will, if a claim in respect
thereof is to be made against a party which may be required to indemnify such
party hereunder, give written notice to the latter of the commencement of such
action. In case any such action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
of such action, to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party. Except as set forth herein, the
indemnified party and any party cooperating in the defense of such claim shall
not settle or compromise any such claim or admit liability without the express
written consent of the indemnifying
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party. The indemnified party shall have the right to be represented by an
advisory counsel and accountants, at its own expense, and the indemnified party
shall be kept fully informed of such action, suit or proceeding at all stages
thereof whether or not the indemnified party is so represented. After a period
of thirty days following the date the written notice of such claim was given to
the indemnifying party the indemnified party may settle any such claim (and the
amount of any such settlement shall be subject to indemnification hereunder)
unless within such thirty-day period the indemnifying party shall have provided
the indemnified party with notice and evidence to the indemnified party's
satisfaction that the indemnifying party reasonably disputes such claim and has
the financial ability to meet its indemnification obligations hereunder.
Notwithstanding the foregoing, the indemnified party may immediately cause to be
paid or discharged any asserted claim the non-payment of which would have an
immediate substantial adverse impact on the indemnified party and any claim
which the indemnifying party has not disputed within thirty days of notice as
provided above.
(iv) If the indemnification provided for in this Section 7(f)
is unavailable or insufficient to hold harmless an indemnified party under such
subsection in respect of any losses, claims, damages or liabilities or action in
respect thereof or referred to therein, then each indemnifying party shall in
lieu of indemnifying such indemnified party contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or actions in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and the Participating Holders,
on the other, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or actions as well as any other
relevant equitable considerations, including the failure to give the notice
required under such subsections. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact relates to information supplied by the Company on the one
hand, or the Participating Holders, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Participating Holders agree that
it would not be just and equitable if contribution pursuant to this Section
7(f)(iv) were determined by pro rata allocation or by any other method of
allocation which did not take account of the equitable considerations referred
to above in this subsection. No person guilty of fraudulent misrepresentations
(within the meaning of Section 11(f) of the Securities Act), shall be entitled
to contribution from any person who is not guilty of such fraudulent
misrepresentations.
(v) The obligations of the Company and the
Participating Holders under this Section 7(f) shall survive the
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completion of any offering of Registrable Stock in a registration statement
under this Section 7.
(vi) The rights of indemnification contained in this Section
7 shall not be deemed to be the exclusive remedy of the parties hereto and such
rights shall be in addition to any other rights or remedies which any party
hereto may have at law or equity.
(g) Assignment of Registration Rights. The undersigned's rights
set forth in this Section 7 shall automatically be deemed assigned to any
transferee or assignee of this Warrant or shares of Common Stock or Other
Securities issuable hereunder, provided that immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act; provided however, that, the termination of
registration rights in respect of any shares of Registrable Stock by reason of
the operation of Section 7(a) shall be binding upon any transferee of such
shares. Upon the request of any such holder, the Company will confirm in writing
to any transferee of such holder's Registrable Stock the Company's continuing
obligation to afford such transferee the benefits of the Company's agreements
contained in this Section 7, but no failure of the Company to confirm such
obligations shall in any way impair such transferee's rights under this Section
7.
(h) Effect of Private Placement. Notwithstanding anything to the
contrary contained in this Section 7, if, prior to December 31, 1997, the
Company completes a private offering of equity securities in which the Company
realizes gross proceeds of at least $1 million and in which one or more
purchasers of such securities are granted more favorable registration rights
than those granted herein, the registration rights granted to holders of
Registrable Stock hereunder shall be modified to be equivalent in all respects
to the most favorable registration rights granted in such private offering;
provided, however, that the provisions of Section 7(f) hereof shall not be
modified as a result of such private offering.
8. Substitution of Warrants.
8.1. Exchange of Warrants. Subject to the provisions appearing at
the top of the first page of this Warrant concerning, inter alia, the sale,
transfer, encumbrance or other disposition of this Warrant, upon surrender or
exchange of this Warrant, properly endorsed, to the Company, the Company at its
expense will issue and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such holder
(upon payment by such holder of any applicable transfer taxes) may direct,
calling in the aggregate on the face or faces thereof for the number of shares
of Common
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Stock called for on the face or faces of the Warrant or Warrants so surrendered.
8.2. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Company, or,
in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
9. Ownership of Warrant. Until this Warrant is transferred on the
books of the Company, the Company may treat the person in whose name this
Warrant is issued as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary, except that, if and when this Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer hereof as the absolute owner of this Warrant for all purposes,
notwithstanding any notice to the contrary. A Warrant, if properly assigned, may
be exercised to the extent provided herein by a new holder without first having
a new Warrant issued.
10. Notices, etc. All notices and other communications from the
Company to the holder of this Warrant or from the holder of this Warrant shall
be delivered personally, by facsimile (if confirmed and followed by delivery by
first class mail), reputable overnight courier service, or mailed by first class
registered or certified mail, postage prepaid, to the Company at 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
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for reference purposes only and shall not limit or otherwise
affect the meaning hereof.
13. Expiration. The right to exercise this Warrant
shall expire at 5:00 P.M., Houston, Texas time, on December 31,
1997.
Dated as of April 22, 1997.
CHAPARRAL RESOURCES, INC.
By: /s/ Howard Karren
------------------------------
Howard Karren, Chairman and
Chief Executive Officer
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FORM OF SUBSCRIPTION
[To be signed only upon exercise of the Warrant]
To: CHAPARRAL RESOURCES, INC.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _____________* shares of the Common Stock of
CHAPARRAL RESOURCES, INC. and herewith makes payment of $ therefor, and requests
that the certificates for such shares be issued in the name of ________________,
and delivered to, _________________, whose address is _________________________.
Dated:
..................................
(Signature must conform in all
respects to the name of the holder
as specified on the face of the
Warrant)
..................................
(Address)
- ----------------------
* Insert the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any
adjustment for additional Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of the Warrant, may be deliverable upon exercise.
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FORM OF ASSIGNMENT
[To be signed only upon transfer of the Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto the right represented by the within Warrant to purchase shares of
the Common Stock of CHAPARRAL RESOURCES, INC. to which the within Warrant
relates, and appoints Attorney to transfer such right on the books of CHAPARRAL
RESOURCES, INC., with full power of substitution in the premises.
Dated:
.......................................
--------------------------------------
(Signature must conform in all
respects to the name of the holder
as specified on the face of the
Warrant)
..................................
(Address)
Signed in the presence of:
.............................
(Witness)
