<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
CHAPARRAL RESOURCES, INC.
(Name of Issuer)
Common Stock, Par Value, $0.10 Per Share
(Title of Class of Securities)
159420207
(CUSIP Number)
Gaetano J. Casillo
Allen & Company Incorporated
711 Fifth Avenue, New York, New York 10022, (212) 832-8000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
September 10, 1998
(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 Section 240.13d-1(e),(f) or (g), check the
following box [ ].
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE>
<PAGE>
SCHEDULE 13D
- -------------------
CUSIP No. 159420207
- -------------------
==============================================================================
1 NAME OF REPORTING PERSON - S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON
Allen Holding Inc.
- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS
Not Applicable
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- -----------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
- -----------------------------------------------------------------------------
7 SOLE VOTING POWER
11,104,107 (includes 2,578,720 shares underlying warrants to purchase
shares of the Issuer's Common Stock.)
- -----------------------------------------------------------------------------
8 SHARED VOTING POWER
0
- -----------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
11,104,107 (includes 2,578,720 shares underlying warrants to purchase
shares of the Issuer's Common Stock.)
- -----------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- -----------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,104,107 (includes 2,578,720 shares underlying warrants to purchase
shares of the Issuer's Common Stock.)
- -----------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [x]
- -----------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.37%
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
HC
==============================================================================
<PAGE>
<PAGE>
SCHEDULE 13D
- -------------------
CUSIP No. 159420207
- -------------------
==============================================================================
1 NAME OF REPORTING PERSON - S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON
Allen & Company Incorporated
- -----------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- -----------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- -----------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(E) [ ]
- -----------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- ------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
- ------------------------------------------------------------------------------
7 SOLE VOTING POWER
11,104,107 (includes 2,578,720 shares underlying warrants to purchase
shares of the Issuer's Common Stock.)
- -----------------------------------------------------------------------------
8 SHARED VOTING POWER
0
- -----------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
11,104,107 (includes 2,578,720 shares underlying warrants to purchase
shares of the Issuer's Common Stock.)
- -----------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- ---------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11,104,107 (includes 2,578,720 shares underlying warrants to purchase
shares of the Issuer's Common Stock.)
- -----------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [x]
- -----------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.37%
- -----------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO, BD
==============================================================================
<PAGE>
<PAGE>
AMENDMENT NO. 2
TO THE
SCHEDULE 13D
The Reporting Persons hereby amend their Schedule 13D relating to
the common stock, par value $0.10 per share (the "Common Stock"), of Chaparral
Resources, Inc. (the "Issuer"), to report an acquisition of warrants to
purchase 975,000 shares of Common Stock in connection with a bridge financing
as further described below, as well as the purchase of 923,000 shares of
Common Stock.
The Reporting Persons note that the Issuer's outstanding shares
increased significantly due to issuances through private placement of the
Issuer's Common Stock for which shares were issued in April and July, 1998.
Item 3. Source and Amount of Funds or Other Consideration
ACI was issued 975,000 warrants to purchase shares of the Issuer's
Common Stock at $3.50 per share in connection with a Warrant Certificate and a
Subordinated Loan Agreement (the "Subordinated Loan") (copies of which are
attached hereto as Exhibits B and C) dated June 4, 1998. The source of funds
for the Subordinated Loan and for all other transactions reported herein was
working capital.
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on September 4, 1998, the Reporting
Persons, by virtue of the language of Rule 13d-3(d)(1)(i), may be deemed to
own beneficially in the aggregate 11,104,107 shares of the Issuer's Common
Stock which constitutes 18.37% of the outstanding shares (based upon the
number of shares that were reported to be outstanding in the Issuer's Report
on Form 10-Q as of August 19, 1998).
<TABLE>
<CAPTION>
==============================================================================
Name Shares of Common Stock Percentage
- -----------------------------------------------------------------------------
<S> <C> <C>
Allen Holding Inc. 11,104,107(1)(2)(3)(4) 18.37%
- -----------------------------------------------------------------------------
Allen & Company Incorporated 11,104,107(1)(2)(3) 18.37%
- ---------------------------------------------------------------------------
==============================================================================
</TABLE>
<PAGE>
<PAGE>
(1) Includes 2,578,720 shares underlying warrants to purchase shares of the
Issuer's Common Stock.
(2) Does not include certain shares owned directly by certain officers and
stockholders of ACI and AHI with respect to which ACI and AHI disclaim
beneficial ownership. Certain officers and stockholders of AHI and ACI may be
deemed to beneficially own certain shares of the Issuer's Common Stock
reported to be beneficially owned directly by ACI and AHI.
(3) Excludes shares held in ACI's market maker account.
(4) Represents shares owned by ACI, a wholly-owned subsidiary of AHI.
(b) AHI owns 100% of the outstanding stock of ACI, and so may be
deemed to beneficially own the shares which ACI owns as reported in Item 5(a)
herein.
(c) On 9/10/98, ACI purchased an aggregate of 923,000 Shares in a
privately negotiated transaction at a price of $0.76 per share. Other than
the shares purchased in connection with the transactions described herein, or
in connection with ACI's capacity as a market maker, no trades were made by
ACI or AHI for their own account in the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of Issuer
(a) Pursuant to a Warrant Certificate dated June 4, 1998, a copy of
which is attached hereto as Exhibit B, ACI purchased 975,000 warrants to
purchase shares of Common Stock. Each warrant entitles ACI to purchase one
share of Common Stock for a purchase price of $3.50 per share (subject to
customary anti-dilution protections contained in the Warrant Certificate) at
any time before November 25, 2002.
(b) Pursuant to a Subordinated Loan Agreement dated June 4, 1998, a
copy of which is attached hereto as Exhibit C, ACI and a director of the
Issuer agreed to loan $1,000,000 to the Issuer in exchange for certain
Subordinated Promissory Notes and the Warrant Certificate described in
Subsection (a) above. Such loan was made to assist the Issuer in meeting its
immediate financial needs. ACI's portion of the Subordinated Loan was fully
repaid by the Issuer on August 5, 1998.
Item 7. Material to be filed as Exhibits
Exhibit A -- Directors and Executive Offices of Allen Holding
Inc. and Allen & Company Incorporated.
Exhibit B -- Warrant Certificate
Exhibit C -- Subordinated Loan Agreement with Form of
Promissory Note<PAGE>
<PAGE>
After reasonable inquiry and to the best of our knowledge and
belief, we certify that the information set forth in this statement is true,
complete and correct.
Dated: September 25, 1998
ALLEN HOLDING INC.
By: /s/ Gaetano J. Casillo
- ----------------------------------------
Gaetano J. Casillo
Vice President
ALLEN & COMPANY INCORPORATED
By: /s/ Gaetano J. Casillo
- ----------------------------------------
Gaetano J. Casillo
Vice President
123454<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
OFFICERS AND DIRECTORS OF ALLEN & COMPANY INCORPORATED
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Herbert A. Allen x President, Managing Director,
Director, Chief Executive Officer
Herbert A. Allen III x Vice President, Director
Grace Allen x Director
Eran S. Ashany x Vice President, Director
Jonathan S. Bean x Vice President, Director
Edmund M. Bleich x Vice President
Denise Calvo-Silver x Vice President, Director
Dominick J. Cantalupo x Co-Chief Operations Officer,
Vice President
Marvyn Carton x Director - Emeritus
Gaetano J. Casillo x Chief Compliance Officer,
Vice President
Robert H. Cosgriff x Chief Administrative Officer,
Executive Vice President,
Managing Director, Director
Richard M. Crooks, Jr. x Director
Thalia V. Crooks x Vice President, Director
Mary L. Cullen x Vice President, Secretary, Director
Robert Dean x Vice President - Elect
Orin F. Devereux x Vice President, Director
Daniel Englander x Vice President - Elect<PAGE>
<PAGE>
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Howard M. Felson x Assistant Secretary, Vice President
Anthony J. Ferrante x Treasurer
Richard Fields x Executive Vice President, Managing
Director, Director
Paul A. Gould x Executive Vice President, Managing
Director, Director
John G. Hall x Vice President, Director
Daniel P. Harley x Vice President
John H. Josephson x Vice President, Director
Clarke R. Keough x Vice President, Director
Donald R. Keough x Chairman of the Board, Managing
Director, Director
Kaveh A. Khosrowshahi x Vice President, Director
Neal Kopp x Vice President
Irwin H. Kramer x Executive Vice President,
Managing Director, Director
Terry Allen Kramer x Director
Suzanne G. Kucera x Vice President, Director
Robert J. Kurz x Vice President
William F. Leimkuhler x Assistant Secretary, Vice President,
General Counsel
LeRoy Kim x Vice President - Elect
Jonathan Lipton x Vice President - Elect
Jeffrey J. Logan x Vice President - Elect<PAGE>
<PAGE>
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Dan W. Lufkin x Special Advisor to the Board of
Directors
Ellen F. Lynch x Vice President
Robert A. Mackie x Executive Vice President,
Managing Director, Director
James C. Maiden, Jr. x Vice President
Terence C. McCarthy x Co-Chief Operations Officer,
Vice President
Robert C. Miller x Vice President, Director
Terrence Morris x Vice President - Elect
Brian J. Murphy x Vice President, Director
Louis J. Mustacchio x Vice President
Walter T. O'Hara, Jr. x Executive Vice President, Managing
Director, Director
Nancy B. Peretsman x Executive Vice President, Managing
Director, Director
Patrick S. Perry x Vice President, Director
Pamela M. Plager x Vice President, Director
Eugene Protash x Vice President, Assistant Secretary
James W. Quinn x Director, Vice President, Assistant
Secretary
Philip D. Scaturro x Executive Vice President, Managing
Director, Director
John A. Schneider x Executive Vice President, Managing
Director, Director
Enrique F. Senior x Executive Vice President, Managing
Director, Director<PAGE>
<PAGE>
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Stanley S. Shuman x Executive Vice President, Managing
Director, Director
John M. Simon x Executive Vice President, Managing
Director, Director
Daniel Selmonosky x Vice President, Director
Ian G. Smith x Vice President - Elect
Dennis J. Warfield x Vice President, Chief Information
Officer
Kim M. Weiland x Executive Vice President, Managing
Director, Director, Chief Financial
Officer
Edward D. Weinberger x Vice President, Director
Harold M. Wit x Executive Vice President, Managing
Director, Director
</TABLE>
x 711 Fifth Avenue, New York, New York 10022-3194.
xx All the Executive Officers and Directors of Allen & Company
Incorporated are U.S. citizens unless otherwise indicated.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OFFICERS AND DIRECTORS
OF ALLEN HOLDING INC.
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Herbert A. Allen x President, Managing Director,
Director, Chief Executive Officer
Herbert A. Allen, III x Vice President, Director
Grace Allen x Director
Eran S. Ashany x Vice President
Jonathan S. Bean x Vice President - Elect
Robert E. Beers x Vice President - Elect
Edmund M. Bleich x Vice President
Denise Calvo-Silver x Vice President, Director
Dominick J. Cantalupo x Co-Chief Operations Officer, Vice
President
Marvyn Carton x Director - Emeritus
Gaetano J. Casillo x Chief Compliance Officer, Vice
President
Robert H. Cosgriff x Chief Administrative Officer,
Executive Vice President, Managing Director,
Director
Richard M. Crooks, Jr. x Director
Thalia V. Crooks x Vice President, Director
Mary L. Cullen x Vice President, Secretary, Director
Robert Dean x Vice President - Elect
Orin F. Devereux x Vice President, Director<PAGE>
<PAGE>
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Daniel Englander x Vice President, - Elect
Howard M. Felson x Assistant Secretary, Vice President
Anthony J. Ferrante x Treasurer
Richard L. Fields x Executive Vice President, Managing
Director, Director Executive Vice
President, Managing Director, Director
John G. Hall x Vice President - Elect, Director
Daniel P. Harley x Vice President
John H. Josephson x Vice President, Director
Donald R. Keough x Chairman, Director
Clarke R. Keough x Vice President, Director
Kaveh A. Khosrowshahi x Vice President, Director
Neal Kopp x Vice President
Irwin H. Kramer x Executive Vice President, Managing
Director, Director
Terry Allen Kramer x Director
Suzanne G. Kucera x Vice President, Director
Robert J. Kurz x Vice President
William F. Leimkuhler x Assistant Secretary, Vice President,
General Counsel
LeRoy Kim x Vice President - Elect
Jonathan Lipton x Vice President - Elect
Jeffrey J. Logan x Vice President - Elect<PAGE>
<PAGE>
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Dan W. Lufkin x Special Advisor to the Board of
Directors
Ellen F. Lynch x Vice President
Robert A. Mackie x Executive Vice President, Managing
Director, Director
James C. Maiden, Jr. x Vice President
Terence C. McCarthy x Co-Chief Operations Officer, Vice
President, Vice President - Elect,
Director
Robert C. Miller x Vice President, Director
Terrence Morris x Vice President - Elect
Brian J. Murphy x Vice President, Director
Louis J. Mustacchio x Vice President
Walter T. O'Hara x Executive Vice President, Managing
Director, Director
Nancy B. Peretsman x Executive Vice President, Managing
Director, Director
Patrick S. Perry x Vice President, Director
Pamela M. Plager x Vice President, Director
Eugene Protash x Assistant Secretary, Vice President
James W. Quinn x Vice President, Assistant Secretary,
Director
Philip D. Scaturro x Executive Vice President, Managing
Director, Director
John A. Schneider x Executive Vice President, Managing
Director, Director<PAGE>
<PAGE>
<S> <C> <C>
Principal Occupation
Business (i.e., Position with
Name xx Address Allen & Company Incorporated)
Daniel Selmonosky x Vice President, Director
Enrique F. Senior x Executive Vice President, Managing
Director, Director
Stanley S. Shuman x Executive Vice President, Managing
Director, Director
John M. Simon x Executive Vice President, Managing
Director, Director
Ian G. Smith x Vice President - Elect
Dennis J. Warfield x Vice President, Chief Information
Officer
Kim M. Weiland x Vice President, Director, Chief
Financial Officer
Edward D. Weinberger x Vice President, Director
Harold M. Wit x Executive Vice President, Managing
Director, Director
</TABLE>
x 711 Fifth Avenue, New York, New York 10022-3194.
xx All the Executive Officers and Directors of Allen Holding, Inc. are
U.S. citizens unless otherwise indicated.
<PAGE>
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE LAWS OF ANY STATE. THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
975,000 Warrants
CHAPARRAL RESOURCES, INC.
WARRANT CERTIFICATE
This warrant certificate ("Warrant Certificate") certifies that for
value received Allen & Company Incorporated or registered assigns (the
"Holder") is the owner of the number of warrants specified above, each of
which entitles the Holder thereof to purchase, at any time on or before the
Expiration Date (hereinafter defined), one fully paid and non-assessable share
of Common Stock, $.10 par value ("Common Stock"), of Chaparral Resources,
Inc., a Colorado corporation (the "Company"), for the Purchase Price (defined
in Paragraph 1 below) in lawful money of the United States of America (subject
to adjustment as hereinafter provided).
1. Warrant; Purchase Price
This Warrant shall entitle the Holder initially to purchase 975,000
shares of Common Stock of the Company, and the purchase price payable upon
exercise of the Warrant (the "Purchase Price") shall be $3.50 per share of
Common Stock. The Purchase Price and number of shares of Common Stock
issuable upon exercise of this Warrant are subject to adjustment as provided
in Article 6 hereof. The shares of Common Stock issuable upon exercise of the
Warrant (and/or other shares of common stock so issuable by reason of any
adjustments pursuant to Article 6) are sometimes referred to herein as the
"Warrant Shares".
2. Exercise; Expiration Date
2.1 The Warrant is exercisable, at the option of the Holder, in
whole or in part at any time and from time to time after the Exercisability
Date and on or before the Expiration Date, upon surrender of this Warrant
Certificate to the Company together with a duly completed Notice of Exercise,
in the form attached hereto as Exhibit A, and payment of the Purchase Price.
In the case of exercise of less than the entire Warrant represented by this
Warrant Certificate, the Company shall cancel the Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate for
the balance of such Warrant.
2.2 The term "Exercisability Date" shall mean (i) with respect to
195,000 Warrants, the date of this Warrant Certificate, and (ii) with respect
to 780,000 Warrants, the date that is 31 days after the date of this Warrant
Certificate, provided, however, that if within 30 days of the date of this
Warrant Certificate the Company has prepaid all of the outstanding principal
and interest under the loan made pursuant to that certain Subordinated Loan
Agreement dated June 4, 1998 among the Company, the initial Holder of this
<PAGE>
<PAGE>
Warrant and the other lenders party thereto, the Exercisability Date with
respect to such 780,000 Warrants shall not occur, and such Warrants shall not
become exercisable thereafter. The term "Expiration Date" shall mean 5:00
p.m. New York time on November 25, 2002, or if such day shall in the State of
New York be a holiday or a day on which banks are authorized to close, then
5:00 p.m. New York time the next following day which in the State of New York
is not a holiday or a day on which banks are authorized to close.
3. Registration and Transfer on Company Books
3.1 The Company shall maintain books for the registration and
transfer of the Warrant and the registration and transfer of the Warrant
Shares.
3.2 Prior to due presentment for registration of transfer of this
Warrant Certificate, or the Warrant Shares, the Company may deem and treat the
registered Holder as the absolute owner thereof.
4. Reservation of Shares
The Company covenants that it will at all times reserve and keep
available out of its authorized capital stock, solely for the purpose of issue
upon exercise of the Warrant, such number of shares of capital stock as shall
then be issuable upon the exercise of all outstanding Warrant. The Company
covenants that all shares of capital stock which shall be issuable upon
exercise of the Warrant shall be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, and that upon issuance such shares shall be listed on each
national securities exchange, if any, on which the other shares of such
outstanding capital stock of the Company are then listed.
5. Loss or Mutilation
Upon receipt by the Company of reasonable evidence of the ownership
of and the loss, theft, destruction or mutilation of any Warrant Certificate
and, in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Company, or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, the Company shall execute
and deliver in lieu thereof a new Warrant Certificate representing an equal
number of Warrant Shares.
6. Adjustment of Purchase Price and Number of
Shares Deliverable
6.1 The number of Warrant Shares purchasable upon the exercise of
the Warrant and the Purchase Price with respect to the Warrant Shares shall be
subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its Common Stock payable in shares of its capital stock, (ii)
subdivide its outstanding shares of Common Stock through stock split or
otherwise, (iii) combine its outstanding shares of Common Stock into a smaller
<PAGE>
<PAGE>
number of shares of Common Stock, or (iv) issue by reclassification of its of
Common Stock (including any reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation)
other securities of the Company, the number and/or nature of Warrant Shares
purchasable upon exercise of the Warrant immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind and number
of Warrant Shares or other securities of the Company which he would have owned
or have been entitled to receive after the happening of any of the events
described above, had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this paragraph (a) shall become effective
retroactively as of the record date of such event.
(b) In the event of any capital reorganization or any
reclassification of the capital stock of the Company or in case of the
consolidation or merger of the Company with another corporation (other than a
consolidation or merger in which the outstanding shares of the Company's
Common Stock are not converted into or exchanged for other rights or
interests), or in the case of any sale, transfer or other disposition to
another corporation of all or substantially all the properties and assets of
the Company, the Holder of the Warrant shall thereafter be entitled to
purchase (and it shall be a condition to the consummation of any such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition that appropriate provisions shall be made so that such
Holder shall thereafter be entitled to purchase) the kind and amount of shares
of stock and other securities and property (including cash) which the Holder
would have been entitled to receive had such Warrant been exercised
immediately prior to the effective date of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition;
and in any such case appropriate adjustments shall be made in the application
of the provisions of this Article 6 with respect to rights and interest
thereafter of the Holder of the Warrant to the end that the provisions of this
Article 6 shall thereafter be applicable, as near as reasonably may be, in
relation to any shares or other property thereafter purchasable upon the
exercise of the Warrant. The provisions of this Section 6.1(b) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.
(c) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrant is adjusted, as provided in this Section 6.1, the
Purchase Price with respect to the Warrant Shares shall be adjusted by
multiplying such Purchase Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant Shares
so purchasable immediately thereafter.
6.2 Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrant or the Purchase Price of such Warrant Shares is
adjusted, as herein provided, the Company shall mail to the Holder, at the
address of the Holder shown on the books of the Company, a notice of such
adjustment or adjustments, prepared and signed by the Chief Financial Officer
<PAGE>
<PAGE>
or Secretary of the Company, which sets forth the number of Warrant Shares
purchasable upon the exercise of the Warrant and the Purchase Price of such
Warrant Shares after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made.
6.3 In the event that at any time prior to the expiration of the
Warrant and prior to its exercise:
(a) the Company shall declare any distribution (other than a cash
dividend or a dividend payable in securities of the Company with respect to
the Common Stock); or
(b) the Company shall offer for subscription to the holders of the
Common Stock any additional shares of stock of any class or any other
securities convertible into Common Stock or any rights to subscribe thereto;
or
(c) the Company shall declare any stock split, stock dividend,
subdivision, combination, or similar distribution with respect to the Common
Stock, regardless of the effect of any such event on the outstanding number of
shares of Common Stock; or
(d) the Company shall declare a dividend, other than a dividend
payable in shares of the Company's own Common Stock; or
(e) there shall be any capital change in the Company as set forth
in Section 6.1(b); or
(f) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company (other than in connection with a
consolidation, merger, or sale of all or substantially all of its property,
assets and business as an entity);
(each such event hereinafter being referred to as a "Notification Event"), the
Company shall cause to be mailed to the Holder, not less than 20 days prior to
the record date, if any, in connection with such Notification Event (provided,
however, that if there is no record date, or if 20 days prior notice is
impracticable, as soon as practicable) written notice specifying the nature of
such event and the effective date of, or the date on which the books of the
Company shall close or a record shall be taken with respect to, such event.
Such notice shall also set forth facts indicating the effect of such action
(to the extent such effect may be known at the date of such notice) on the
Purchase Price and the kind and amount of the shares of stock or other
securities or property deliverable upon exercise of the Warrant.
7. Conversion Rights
7.1 In lieu of exercise of any portion of the Warrant as provided
in Section 2.1 hereof, the Warrant represented by this Warrant Certificate (or
any portion thereof) may, at the election of the Holder, be converted into the
nearest whole number of shares of Common Stock equal to: (1) the product of
<PAGE>
<PAGE>
(a) the number of Warrant Shares to be so converted and (b) the excess, if
any, of (i) the Market Price per share with respect to the date of conversion
over (ii) the purchase price per Warrant Share in effect on the business day
next preceding the date of conversion, divided by (2) the Market Price per
share with respect to the date of conversion.
7.2 The conversion rights provided under this Section 7 may be
exercised in whole or in part and at any time and from time to time while any
portion of the Warrant remains outstanding. In order to exercise the
conversion privilege, the Holder shall surrender to the Company, at its
offices, this Warrant Certificate accompanied by a duly completed Notice of
Conversion in the form attached hereto as Exhibit B. The Warrant (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Warrant Certificate for conversion in accordance with the
foregoing provisions. As promptly as practicable on or after the conversion
date, the Company shall issue and shall deliver to the Holder (i) a
certificate or certificates representing the number of shares of Common Stock
to which the Holder shall be entitled as a result of the conversion, and (ii)
if the Warrant Certificate is being converted in part only, a new certificate
of like tenor and date for the balance of the unconverted portion of the
Warrant Certificate.
7.3 "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
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 conversion
hereof.<PAGE>
<PAGE>
8. Voluntary Adjustment by the Company
The Company may, at its option, at any time during the term of the
Warrant, reduce the then current Purchase Price to any amount deemed
appropriate by the Board of Directors of the Company and/or extend the date of
the expiration of the Warrant.
9. Registration Rights
The Company has agreed with the Holder that the Company will
register for resale the Warrant Shares at the time the Company next files a
registration statement with the United States Securities and Exchange
Commission to register any of its securities.
Notwithstanding the foregoing, the Holder agrees that any
certificate representing Warrant Shares will have a restrictive legend thereon
stating that the Warrant Shares cannot be transferred except in compliance
with the Securities Act of 1933, as amended, and any applicable state
securities laws.
10. Governing Law
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed by its officers thereunto duly authorized and its
corporate seal to be affixed hereon, as of this 4th day of June, 1998.
CHAPARRAL RESOURCES, INC.
By:
--------------------------------
Name:
Title:
[SEAL]
Attest:
- --------------------------
Name:
Title:
123454<PAGE>
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
The undersigned hereby irrevocably elects to exercise, pursuant to
Section 2 of the Warrant Certificate accompanying this Notice of Exercise,
_______ Warrants of the total number of Warrants owned by the undersigned
pursuant to the accompanying Warrant Certificate, and herewith makes payment
of the Purchase Price of such shares in full.
----------------------------------
Name of Holder
----------------------------------
Signature
Address:
----------------------------------
----------------------------------
----------------------------------
123454<PAGE>
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert, pursuant to Section 7 of
the Warrant Certificate accompanying this Notice of Conversion, _______
Warrants of the total number of Warrants owned by the undersigned pursuant to
the accompanying Warrant Certificate into shares of the Common Stock of the
Company (the "Shares").
The number of Shares to be received by the undersigned shall be calculated in
accordance with the provisions of Section 7.1 of the accompanying Warrant
Certificate.
-------------------------------
Name of Holder
-------------------------------
Signature
Address:
--------------------------------
--------------------------------
--------------------------------
123454<PAGE>
<PAGE>
SUBORDINATED LOAN AGREEMENT
THIS SUBORDINATED LOAN AGREEMENT (this "Agreement") dated as of June
4, 1998 between Chaparral Resources, Inc., a Colorado corporation, (the
"Borrower") and Allen & Company Incorporated, a corporation organized and
existing under the laws of the State of New York (hereinafter, "Allen" and,
collectively with its successors and assigns, the "Lenders").
Preliminary Statement
The Borrower has retained Allen as its financial advisor and
placement agent in connection with one or more equity financings. Pending
completion of such financings, the Borrower has requested that the Lenders
provide the Borrower with loans in the aggregate amount of One Million Dollars
($1,000,000) for use as described herein, and the Lenders are willing to lend
up to such amount to the Borrower as a loan, subject to, and on the terms and
conditions of, this Agreement in exchange for the Company's Subordinated
Promissory Notes and Warrants of even date therewith to be issued to the
Lenders. The relationship between the parties hereto is that of debtor and
creditors, and not of fiduciaries.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
Article 1.
Subordinated Loan
1.1 Subordinated Loan.
(a) Subject to the terms and conditions contained in this
Agreement, the Lenders shall make a subordinated loan (the "Loan"), to be
funded concurrently with the execution of this Agreement, in the aggregate
principal amount of One Million Dollars ($1,000,000). The Loan shall be
evidenced by a Promissory Note in the form of Exhibit 1.1 hereto. Each Lender
shall lend to Borrower, and Borrower shall be responsible to repay such Lender
for, the principal amount set forth in Exhibit 1.1(a) hereto. Such Promissory
Notes shall be of even date herewith and shall be payable to the order of the
Lenders in full in one installment in an amount equal to all outstanding
principal and interest accrued thereon, on the earlier of (a) six months from
the date of funding of the Loan, or (b) the date on which the Borrower
receives equity investments (whether or not from or through any Lender) in an
aggregate amount of at least $10 million.
(b) Concurrent with the execution of this Agreement and the
Promissory Note and in connection with the making of the Loan hereunder, the
Lenders shall deliver to the Borrower by wire transfer, or such other method
as the Lenders and the Borrower deem appropriate, an amount equal to
$1,000,000.
<PAGE>
<PAGE>
1.2 Interest. The Loan shall bear interest from the date of funding at a
per annum rate equal to seven percent (7%). Interest shall be payable at
maturity as specified in Section 1.1(a) and shall be calculated based upon a
360 day year and actual days elapsed. Any amount not paid when due shall bear
interest until repaid at twelve percent (12%) per annum, unless the failure to
make such repayment is due to the failure of the Borrower to receive the
amount of equity investment specified in 1.1(a) above.
1.3 Prepayment. The Borrower may prepay the Loan in full or in part at
any time without penalty, with accrued interest on the principal being prepaid
to the date of such prepayment.
1.4 Repayment in Stock. Each Lender may elect to have any payment of
principal or interest made to it under the loan payable either (i) in cash or
(ii) in the form of the Common Stock, par value $.10 per share (the "Common
Stock"), of the Company, valued at the current Market Price of the Common
Stock. "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 date of conversion, or (B) if there shall have
been no such reported sale price of such stock on the business day immediately
preceding the date of conversion, the average of the last reported sale price
on such exchange or on Nasdaq on (x) the day next preceding the date of
conversion for which there was a reported sale price and (y) the day next
succeeding the date of conversion 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 date of conversion, or (B) if there shall have been
no such reported bid and asked prices for such stock on the business day
immediately preceding the date of conversion, the average of the last bid and
asked prices on (x) the day next preceding the date of conversion for which
such information is available and (y) the day next succeeding the date of
conversion 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 Borrower and the Lender requesting such
payment in stock.
<PAGE>
<PAGE>
Article 2
Representations, Warranties and Covenants
To induce the Lenders to make available to the Borrower the Loan
hereunder, the Borrower hereby make the representations, warranties, and
covenants included in this Article 2.
2.1 Payment and Performance of Obligations. The Borrower shall pay the
Loan when due and shall promptly, punctually, and faithfully perform each and
all of its obligations hereunder.
2.2 Due Organization and Corporate Authorization. The Borrower is duly
organized, validly existing as a corporation in good standing in the state
Colorado and is, and shall hereafter remain, duly qualified and in good
standing in every state in which, by reason of the nature or location of the
Borrower's assets or operation of the Borrower's business, such qualification
may be necessary and where the failure to so qualify would have a material
adverse affect on (i) the financial condition of the Borrower, and/or (ii) the
Borrower's ability to conduct its business. The execution and delivery of
this Agreement and of any other documents, instruments, and agreements
executed in connection herewith constitute representations by the individual
signing this Agreement and said instruments and by the Borrower that such
execution and delivery have received all such corporate authorization as may
be necessary to permit such execution and delivery to, and that they do, bind
the Borrower, except as such enforceability may be limited by (i) bankruptcy,
insolvency, reorganization or other similar laws and legal and equitable
principles limiting or affecting the rights of creditors generally and/or (ii)
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
2.3 No Conflicting Agreements. There is no provision in the Articles of
Incorporation or By-laws or other organizational documents of the Borrower, or
in any document by which the Borrower may be bound which prohibits or
adversely affects the execution and delivery of this Agreement, or of any
other instrument or agreement which prohibits or adversely affects the
Borrower's carrying out of the terms hereof.
2.4 Statutory Compliance. The Borrower is in compliance with, and shall
hereafter comply with and use its assets in compliance with, all statutes,
regulations and orders of every federal, state, municipal, and other
governmental authority which has or claims jurisdiction over the Borrower, any
of the Borrower's assets, or any person in any capacity for which the Borrower
would be responsible for the conduct of such person, which if the Borrower is
not so in compliance would have a material adverse effect upon the Borrower's
financial condition or its ability to conduct its business as such business is
presently conducted.
2.5 Pay Taxes. The Borrower has, and hereafter shall pay, as they become
due and payable, all taxes and unemployment contributions and other valid
charges of any kind or nature levied, assessed or claimed against the Borrower
by any person or entity whose claim could result in a lien upon the assets of
the Borrower or by any governmental authority, properly exercise any trust
responsibilities imposed upon the Borrower by reason of withholding from<PAGE>
<PAGE>
employees' pay and timely file all tax and other returns and other reports
with each governmental authority to whom the Borrower is obligated so to file.
Nothing contained herein shall prevent Borrower from challenging any tax or
charge which it in good faith believes to be improper or erroneous.
2.6 Litigation. Except as set forth on Exhibit 2.6, there is not
presently pending or, to the Borrower's best knowledge and belief after due
inquiry, threatened by or against the Borrower any suit, action, proceeding or
investigation which, if determined adversely to the Borrower, would have a
material adverse effect upon the Borrower's financial condition or ability to
conduct its business as such business is presently conducted.
2.7 Dividends or Investments. Until all amounts under the Loan shall
have been paid in full, the Borrower shall not:
(a) pay any dividend, other than a common stock dividend of the
Borrower's own capital stock;
(b) redeem, retire, purchase, or acquire any of the Borrower's
capital stock;
(c) invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity;
(d) merge or consolidate or be merged or consolidated with or into
any other corporation or other entity; or
(e) except as expressly approved by the Lenders, make any change in
the capital structure of the Borrower, whether by issuance of securities or
otherwise.
2.8 Corporate Loans; Capitalization. The Borrower shall not make any
loans or advances to any individual, firm, corporation, or other entity
including, without limitation, any affiliate, officer, employee, director,
shareholder, or salesperson of the Borrower.
2.9 Line of Business. The Borrower shall not engage in any business
other than the business in which it is currently engaged, or a business
reasonably allied thereto.
2.10 Adequacy of Disclosure. (a) Except as otherwise disclosed in
writing to the Lenders, all financial statements furnished to the Lenders by
the Borrower have been prepared in accordance with generally accepted
accounting principles (except that interim financial statements exclude
statements of cash flows and notes to financial statements) consistently
applied and fairly present the condition of the Borrower at the date(s)
thereof. There has been no change in the financial condition of the Borrower
since the date(s) of such financial statements, other than changes in the
ordinary course of business, which changes have not been materially adverse,
either singularly or in the aggregate other than those previously disclosed to
the Lenders.
<PAGE>
<PAGE>
(b) The Borrower does not have any material contingent liabilities
pursuant to the execution of guaranties or otherwise not noted in the
Borrower's financial statements furnished to the Lenders.
(c) No document, instrument, agreement, or paper given to the
Lenders by or on behalf of the Borrower in connection with its execution of
this Agreement, when taken together, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein not misleading. There is no fact which has a material
adverse effect on the financial condition of the Borrower which has not been
disclosed in writing to the Lenders.
2.11 Use of Proceeds. The Borrower confirms and warrants that all
proceeds of the Loan shall be used by it in the operating of its business.
2.12 Senior Indebtedness. Except for the indebtedness listed in Exhibit
2.12 hereto (collectively, "Senior Indebtedness"), there is no indebtedness of
the Borrower currently outstanding which would be senior to, or pari passu
with, the obligation of the Borrower to repay the Lenders any and all amounts
owed hereunder. The Borrower further covenants that for so long as any
amounts are due hereunder, no indebtedness (other than ordinary course
equipment financing) shall be incurred by the Borrower which would be senior
to, or pari passu with, that of the Lenders hereunder. The obligations of the
Lenders to fund the Loan shall be conditional upon the Company receiving the
prior written consent to the Loan of each holder of Senior Indebtedness that
may have rights thereunder to require such consent.
2.13 Other Covenants. The Borrower shall not indirectly do or cause to
be done any act which, if done directly by the Borrower, would breach any
covenant contained in this Agreement.
Article 3.
Concurrent Conditions
3.1 Concurrent with the making of the Loan hereunder, there shall be
delivered to the Lenders:
(i) this Agreement, duly executed and delivered by the Borrower;
(ii) the Promissory Note in the amount of the Loan duly executed and
delivered by the Borrower;
(iii) a favorable opinion of counsel for the Borrower addressed to
the Lenders and dated the date of the making of the Loan hereunder, in the
form attached as Exhibit 3.1(iii) hereof; and
(iv) a certificate of an authorized officer or representative of the
Borrower in the form and substance acceptable to the Lenders.
<PAGE>
<PAGE>
Article 4.
Default
Upon the occurrence of any one or more of the following events
(herein, "Events of Default"), the Loan and any and all other amounts due to
the Lenders hereunder shall become immediately due and payable, at the option
of the Lenders and without notice or demand.
4.1 Failure to Pay Loan. The failure by the Borrower to pay any amount
when due in connection with the Loan made hereunder or the failure by the
Borrower to pay when due any other amount due to the Lenders under this
Agreement.
4.2 Business Failure. Any act by, against, or relating to the Borrower,
or its property or assets, which act constitutes the application for, consent
to, or sufferance of the appointment of a receiver, trustee or other person,
pursuant to court action or otherwise, over all, or any part of the Borrower's
property; the occurrence of any voluntary or involuntary liquidation or
extension of debt agreement for the Borrower; the entry of an order for relief
or similar order with respect to the Borrower in any proceeding pursuant to
any federal bankruptcy law; the filing of any complaint, application, or
petition by or against the Borrower initiating any matter in which the
Borrower is or may be granted any relief from the debts of the Borrower
pursuant to any federal or state bankruptcy or insolvency statute or
procedure; or the initiation of any other judicial or non-judicial proceeding
or agreement by, against or including the Borrower which seeks or intends to
accomplish a reorganization or arrangement with creditors.
4.3 Change in Ownership. Any change in the identity, authority, or
responsibilities of any person having management and policy authority with
respect to the Borrower and/or any direct or indirect change (including any
change in beneficial ownership) of more than 20% in the ownership of the
issued and outstanding capital stock of the Borrower on the date of the
execution of this Agreement.
Article 5.
Subordination
5.1 Each of the Borrower hereby warrants and agrees with the Lenders
that all obligations and indebtedness of the Borrower of every kind and
description, whether now or hereafter existing, (the "Subordinated Debt")
shall, for so long as any amounts are due hereunder, be subordinated to the
indebtedness of the Borrower due to the Lenders hereunder in such manner that
no payment or security shall be paid by the Borrower for or on account of the
Subordinated Debt, other than trade claims and equipment loans and leases
payable in the ordinary course, until the indebtedness owed to the Lenders
hereunder has been paid in full and the Loan has been terminated or until the
Borrower have obtained the specific written consent of the Lenders.
<PAGE>
<PAGE>
Article 6.
General
6.1 Set-Off. Any and all deposits or other sums at any time due to the
Borrower at any time in the possession of any of the Lenders or any of its
affiliates, whether held on behalf of the Borrower or otherwise, or in the
possession of any third party acting on any of the Lender's behalf (regardless
of the reason the such Lender may have received the same), including, but not
limited to, any and all amounts held, on behalf of the Borrower by any of the
Lenders, shall at all times constitute security for any and all amounts due
hereunder and may be applied or set-off by the Lenders against any and all
such amounts at any time, whether or not any or all such amounts are then due
or whether alternative sources of payment are available to the Lenders.
6.2 Notices. All notices and other correspondence to the Borrower by the
Lenders in connection with this Agreement shall be deemed effective upon
mailing to the Borrower's address provided to the Lenders, which address may
be changed on seven (7) days written notice given to the Lenders by the
Borrower. All notices and other correspondence to the Lenders by the Borrower
in connection with this Agreement shall be deemed effective upon receipt by
the Lenders at the Lender's principal offices, or elsewhere as the Lenders may
specify from time to time, and shall be sent by certified mail, return receipt
requested.
6.3 Severability. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal or unenforceable in any respect
in any instance shall not affect the validity, legality or enforceability of
such provision in any other instance, or the validity, legality or
enforceability of any other provision of this Agreement.
6.4 Amendments. No modification, amendment or waiver of any provision of
this Agreement or of any provision of any other agreement between the Borrower
and the Lenders is effective unless executed in writing by the party to be
charged with such modification, amendment and waiver, and if such party be the
Lenders, then by a duly authorized officer thereof. No failure by the Lenders
to give notice to the Borrower of the Borrower's having failed to observe and
comply with any warranty or covenant included herein shall constitute a waiver
of such warranty or covenant or the amendment of the within Agreement.
Notwithstanding any other provision of this Agreement, however, Allen may
assign any portion of the Loan to one or more additional lenders, each of
which shall, upon execution of an agreement assuming the rights and
obligations set forth herein, shall be deemed a Lender pursuant to this
Agreement.
6.5 Costs and Expenses of this Agreement. The Borrower shall pay all
expenses (including reasonable fees and expenses to counsel to the Lenders)
incurred by the Lenders in connection with the preparation, negotiation and
consummation of the agreements contemplated by the Loan, up to an aggregate
amount of $15,000.
<PAGE>
<PAGE>
6.6 Governing Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity and performance, shall
be governed by the laws of the State of New York. The Borrower submits itself
to the jurisdiction of the Courts of the State of New York for all purposes
with respect to this Agreement and the Borrower's relationship with the
Lenders.
6.7 Indemnification. Except for claims brought or threatened against the
Lenders by shareholders of the Lenders, the Borrower shall indemnify, defend,
and hold the Lenders harmless of and from any claim brought or threatened
against the Lenders by the Borrower, or any other person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
Lenders' loan relationship with the Borrower (each of which may be defended,
compromised, settled or pursued by the Lenders with counsel of Lenders'
selection, but at the expense of the Borrower). The within indemnification
shall survive payment of the Loan and/or any termination, release or discharge
executed by the Lenders in favor of the Borrower.
6.8 Counterparts. This Agreement may be executed by the parties hereto
in several counterparts and by different parties in separate counterparts,
each of which shall be deemed to be an original and all of which shall
constitute together but one and the same Agreement.
6.9 Cooperation. The Borrower agrees to use its best efforts to co-
operate with the Lenders to take such steps as are reasonably necessary to
give effect to the transactions contemplated hereby, including without
limitation, promptly duly executing and delivering such financing statements
as may be necessary to perfect the security interests contemplated hereby.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused to be executed this
Agreement as of the date first shown above and agrees to be bound by this
Agreement.
CHAPARRAL RESOURCES, INC.
By:
-------------------------------
Name:
Title:
ALLEN & COMPANY INCORPORATED
By:
---------------------------------
Name:
Title:
---------------------------------
Howard Karren
123454<PAGE>
<PAGE>
SUBORDINATED PROMISSORY NOTE
$1,000,000 New York, New York
June 4, 1998
FOR VALUE RECEIVED, Chaparral Resources, Inc., a Colorado
corporation (the "Borrower"), hereby promises to pay to the order of Allen &
Company Incorporated and its successors or assigns (collectively, the
"Lenders"), in lawful money of the United States of America in freely
transferable U.S. Dollars in immediately available funds, for the account of
the Lenders as the Lenders may direct, in writing, the principal sum of One
Million Dollars ($1,000,000), with interest calculated thereon from the date
hereof until maturity at a rate equal to seven percent (7%) per annum (except
as otherwise provided the Loan Agreement described below), payable in one
installment on the earlier of (a) the Fourth (4th) of December, 1998 or (b)
the date on which the Borrower receives equity investments (whether or not
from or through any Lender) in an aggregate amount of at least $10 million.
Interest shall be calculated on the basis of a 360 day year.
This Promissory Note is the Promissory Note referred to in the Loan
Agreement of even date herewith by and among the Borrower and the Lenders (the
"Loan Agreement"), and the holders hereof are entitled to the benefits
thereof. In the event of the occurrence of an Event of Default under the Loan
Agreement, the holders hereof may, at their option, without notice or demand,
declare this Promissory Note immediately due and payable. After the maturity
of this Promissory Note, whether by acceleration or otherwise, it shall bear
interest as provided in the Loan Agreement.
If default be made in the payment of any of the indebtedness
evidenced hereby and this Promissory Note be placed with attorneys for
collection, the parties hereto agree to pay, in addition to all unpaid
principal and interest, all costs of collection hereof, including reasonable
attorney's fees. The word "parties" or "any party hereto" shall include
makers, endorsers, sureties, guarantors and assignors.
The Borrower hereby waives demand, presentment for payment, protest
and notice of protest and of non-payment.
This Promissory Note is subject to voluntary prepayment in part or
in full, without premium or penalty. At the election of the holders hereof,
this Promissory Note may be paid by the issuance of Common Stock of the
Borrower as provided in the Loan Agreement.
In the event any one or more of the provisions of this Promissory
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of
the provisions of this Promissory Note operate or would prospectively operate
to invalidate this Promissory Note, then and in either of those events, such
provision or provisions only shall be deemed null and void and shall not<PAGE>
<PAGE>
effect any other provision of this Promissory Note and the remaining
provisions of this Promissory Note shall remain operative and in full force
and effect and shall in no way be affected, prejudiced or disturbed thereby.
All rights, benefits and privileges arising hereunder shall be
governed and construed according to the laws of the State of New York
applicable to the agreement made and fully performed thereon. Any legal
action or proceeding arising out of or relating to this Promissory Note may be
instituted in the courts of the State of New York, and the Borrower hereby
irrevocably submits to the jurisdiction of such court. In any such action or
proceeding, the foregoing shall not limit the Lenders' right to bring any
legal action or proceeding in any other appropriate jurisdiction.
The Borrower hereby consents to service of process by certified or
registered mail at Borrower's address as set forth below.
THE BORROWER HEREBY WAIVES TRIAL BY JURY.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused to be executed this
Promissory Note as of the date first shown above and agrees to be bound
hereby.
CHAPARRAL RESOURCES, INC. Address for Notices:
2211 Norfolk
Suite 1150
Houston, Texas 77098
By:
----------------------------------
Name:
Title:
123454<PAGE>
<PAGE>
EXHIBIT 1.1(A)
Lenders
Name/Address Principal Amount
Allen & Company Incorporated $1,000,000
711 Fifth Avenue
New York, New York 10022
TOTAL: $1,000,000
<PAGE>
<PAGE>
EXHIBIT 2.6
Litigation
On November 14, 1997, Heartland, Inc. of Wichita and Collins & Mcllhenny,
Inc. ("Plaintiffs") filed a lawsuit against Chaparral Resources, Inc.
("Chaparral"), Howard Karren, the CEO of Chaparral, Whittier Trust Company and
James A. Jeffs in the District Court of Harris County, Texas. The Plaintiffs
claim that Chaparral and Mr. Karren breached an alleged agreement with them
whereby Plaintiffs were to raise capital for Chaparral through a private
placement of Chaparral's securities, and that Chaparral and Mr. Karren made
false representations in connection with the alleged contract and that
Whittier Trust Company and James A. Jeffs interfered with Chaparral's
performance of the alleged contract.
Plaintiffs' motion for summary judgment was denied by the court and the
lawsuit is proceeding through the discovery phase.<PAGE>
<PAGE>
EXHIBIT 2.12
Senior Indebtedness
Challenger Oil Service, PLC ("Challenger") has entered into a drilling
contract dated April 7, 1998 ("Drilling Contract") with Karakuduk Munay, Inc.
("KKM"), a joint stock company organized under the laws of the Republic of
Kazakstan whereby Challenger will drill certain wells for KKM in the Karakuduk
Oil Field in Kazakstan ("Karakuduk"). Chaparral Resources Inc. ("CRI") has a
fifty percent (50%) interest in KKM through its wholly owned subsidiary,
Central Asian Petroleum (Guernsey) Limited, in order to assist Challenger in
arranging financing from a commercial bank (the "Bank Loan") in order to
enable it to winterize the drilling rig and to provide an inventory of tools
and spare parts.
In the event of a default by Challenger or by KKM in the payment of the
day rates under the Drilling Contract, CRI agreed to be liable for and to
reimburse Whittier Trust Company ("Whittier") for any amounts Whittier is
required to pay under a Letter of Credit that it has agreed to issue to the
commercial bank as a credit enhancement for the Bank Loan. Challenger has
also granted Whittier a security interest in the drilling rig as additional
collateral for the Letter of Credit.<PAGE>
<PAGE> EXHIBIT 3.1(iii)
Form of Opinion of
Borrower's Counsel
(a) The Borrower is duly organized, validly existing and in good
standing under the laws of the State of Colorado and has the requisite
corporate power and corporate authority to own, lease and operate its
properties and to carry on its business.
(b) The Borrower is duly qualified and in good standing in every
state in which, by reason of the nature or location of its assets or operation
of its business, such qualification may be necessary and where the failure to
so qualify would have a material adverse affect on (i) the financial condition
of the Borrower, and/or (ii) the Borrower's ability to conduct its business.
(c) The Borrower has the requisite corporate power and corporate
authority to execute and deliver, and to perform its obligations under the
Loan Agreement dated June ____, 1998 by and among the Borrower and the Lenders
(the "Agreement") and all agreements, documents or instruments executed in
connection therewith (collectively, the "Documents"). The execution and
delivery of the Documents and the performance by the Borrower of its
obligations thereunder, has been duly authorized by all necessary corporate
action of the Borrower, and the Documents have been duly executed and
delivered by an authorized officer of the Borrower and constitute the valid
and binding obligation of the Borrower, enforceable against the Borrower in
accordance with their terms, except to the extent that enforceability of the
Borrower' obligations under the Documents is subject to and affected by
applicable bankruptcy, insolvency, reorganization, arrangement or other laws
affecting the enforcement of creditors' rights and general principles of
equity (whether enforcement is considered in a proceeding in equity or at
law).
(d) The execution, delivery, performance and compliance by the
Borrower with the terms of the Documents do not violate (i) to the best
knowledge of counsel after due inquiry, any provision of any judgment, writ,
decree or order binding upon the Borrower, the violation of which would have a
material adverse effect on the Borrower, or (ii) any provision of the
Borrower's Articles of Incorporation or By-Laws. The execution, delivery,
performance and compliance by the Borrower with the terms of the Agreement do
not conflict with or constitute a default under the provisions of any material
agreement, document or instrument to which the Borrower is a party or by which
it is bound and the violation of which would have a material adverse effect on
the Borrower.
(e) Except as set forth in Section 2.6, no action, proceeding or
investigation is pending or, to the best of knowledge of counsel after due
inquiry, threatened against the Borrower which questions the validity of the
Agreement, or which might result, either individually or in the aggregate, in
any material adverse change in the assets, condition, affairs or prospects of
the Borrower.
(f) To the best knowledge of counsel after due inquiry, the
Borrower is not in violation of any provisions of its Articles of
Incorporation or Bylaws.
