SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 8)
CHAPARRAL RESOURCES, INC.
(Name of Issuer)
Common Stock, Par Value, $.0001 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)
February 10, 2000
(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 SS. 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 1 of 16 Pages
<PAGE>
SCHEDULE 13D
CUSIP No. 159420207 Page 2 of 16 Pages
=========================================================================
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
186,286 (includes 44,196 shares underlying warrants to purchase shares of the
Issuer's Common Stock.)
- -------------------------------------------------------------------------------
8 SHARED VOTING POWER
0
- -------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
186,286 (includes 44,196 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
186,286 (includes 44,196 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)
18.1%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
HC
*Excludes approximately 4,200,000 shares issuable at $1.86 per share upon
conversion of promissory notes having a face amount of $7.8 million. The
convertibility of such promissory notes is subject to stockholder approval.
<PAGE>
SCHEDULE 13D
CUSIP No. 159420207 Page 3 of 16 Pages
==============================================================================
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
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
New York
- -------------------------------------------------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
- -------------------------------------------------------------------------------
7 SOLE VOTING POWER
186,286 (includes 44,196 shares underlying warrants to purchase shares of the
Issuer's Common Stock.)
- -------------------------------------------------------------------------------
8 SHARED VOTING POWER
0
- -------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
186,286 (includes 44,196 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
186,286 (includes 44,196 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)
18.1%
- -------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO, BD
*Excludes approximately 4,200,000 shares of common stock issuable at $1.86 per
share upon conversion of promissory notes having an approximate face amount of
$7.8 million. The convertibility of such promissory notes is subject to
stockholder approval.
<PAGE>
Page 4 or 16 Pages
AMENDMENT NO. 8
TO THE
SCHEDULE 13D
The Reporting Persons hereby amend their Schedule 13D relating
to the common stock, par value $.0001 per share (the "Common Stock"), of
Chaparral Resources, Inc. (the "Issuer"), to report additional loans of
$1,250,000 and $750,000 made by Allen & Company Incorporated ("Allen") to the
Issuer, as more fully explained in Item 6 below.
The percentage of the Issuer's outstanding Common Stock
owned by the Reporting Persons, which is reflected herein is based upon
information provided by the Issuer in its Form 10-K for the year ended December
31, 1999.
Item 5. Interest in Securities of the Issuer
(c) Other than the trades effected by Allen in its capacity as a market
maker, no trades involving Issuer's Common Stock were made by Reporting Persons
for their own accounts in the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of Issuer.
On January 27, 2000, Allen loaned the Issuer $750,000 against
delivery of the Issuer's 8% Non-Negotiable Convertible Promissory Note dated
January 27, 2000 (the "8% Note"). Subsequently, on February 10, 2000, Allen
loaned the Issuer an additional $1,250,000 on the same terms as the 8% Note. The
form of the Note issued to Allen by the Issuer on January 27th and February 10th
is attached hereto as Exhibit E. The notes issued to Allen by the Issuer on
January 27, 2000 and February 10, 2000 and all previous notes issued to Allen by
the Issuer are (i) upon Issuer stockholder approval, convertible into shares of
the Issuer's common stock at $1.86 per share and (ii) are subordinate to
obligations of the Issuer to (a) a Subordination Agreement dated as of January
28, 2000 among the Issuer, Allen and Shell Capital Services Limited and (b)
certain related agreements among the Issuer and certain third parties. In
addition, in connection with the execution and delivery of the Issuer's
Supplemental Agreement with Shell Capital Services Limited, Allen undertook
to provide additional support for the Company's financial efforts in certain
circumstances, as set forth in that letter agreement dated February 9, 2000
attached as an Exhibit F hereto and incorporated herein by this reference.
<PAGE>
Page 5 of 16 Pages
Item 7. Material to be Filed as Exhibits.
Exhibit E: Form of 8% Non-Negotiable Convertible Subordinate Promissory Note
Exhibit F: Letter Agreement dated February 9, 2000 between Allen and Shell
Capital Services Limited
<PAGE>
Page 6 of 16 Pages
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: April 20, 2000
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
271314
<PAGE>
Page 7 of 16 Pages
EXHIBIT E
February 9, 2000
Shell Capital Services Limited
Shell Centre
London SE1 7NA
UNITED KINGDOM
Attention: Mark Turner
Re: Chaparral Resources, Inc. (the "Company")
Dear Mr. Turner:
We understand the Company proposes a rights offering of $6 million of its Common
Stock (the "Rights Offering"), which is anticipated to be completed by June 30.
This letter will confirm to you that Allen & Company Incorporated ("Allen") will
exercise fully its rights as a stockholder of the Company to subscribe for
additional shares of Common Stock in the Rights Offering. Specifically, Allen
will subscribe for that portion of the Rights Offering which is equal to Allen's
proportionate ownership of the Common Stock of the Company, treating Allen's
holdings of promissory notes of the Company on an "as-converted" basis. Allen
understands that the promissory notes issued by the Company to Allen will be
converted at the price of the Common Stock offered in the Rights Offering,
expected to be $1.86 per share, and that Allen's obligation to subscribe in the
Rights Offering gives effect to such conversion. Allen further understands that
the foregoing commitment to subscribe for its proportionate share of the Rights
Offering is required to establish the Company's ability to meet the Company's
equity funding obligation under the Company's loan facility with Shell Capital
Limited (the "Loan Agreement") and certain other parties, which is a condition
of the Company's ability to borrow under such Loan Agreement. Allen further
understands the Company's ability to borrow under such loan facility is
absolutely critical to the development of the Company's business.
If the Rights Offering is not completed before June 30, 2000, Allen hereby
confirms to you that it will purchase from the Company $2.0 million of the
Common Stock of the Company on June 30, 2000, or, if for any reason Allen is not
able to purchase such Common Stock from the Company, it will lend the Company
US$2 million on June 30, 2000. Payment for such Common Stock will be made or the
amount of such loan will be paid directly into the CRI Receipts Account (as
defined in the Loan Agreement). For the avoidance of doubt, such amount will be
subordinated and subject in right of payment and in liquidation to the prior
payment in full of all sums due to the lenders under the Loan Agreement pursuant
to the Subordination Agreement dated January 28, 2000 between Allen, the Company
and the Facility Agent (as such terms are defined therein).
Allen further agrees to vote all voting securities held by it in favor of Shell
Capital Services Limited's director nominee to the Board of Directors of the
Company as contemplated by the Loan Agreement dated November 1, 1999, by and
among the Company, Central Asian Petroleum (Guernsey) Limited, Central Asian
Petroleum, Inc., Closed Type JSC Karakudukmunay, Shell Capital Services Limited,
Shell and various banks, financial institutions and other persons named therein,
until such Loan Agreement is terminated.
<PAGE>
Page 8 of 18 Pages
This letter shall be governed by New York law, without regard to any principles
of conflicts of laws that would require the application of the laws of any other
jurisdiction.
Very truly yours,
ALLEN & COMPANY INCORPORATED
By: ______________________________
Name: Kim M. Wieland
Title: Managing Director and
Chief Financial Officer
ACKNOWLEDGED
For and on behalf of Shell Capital Services Limited
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT F
Page 9 of 16 Pages
FORM OF 8.0% NON-NEGOTIABLE CONVERTIBLE
SUBORDINATED PROMISSORY NOTE
Date: $[__________]
FOR VALUE RECEIVED, CHAPARRAL RESOURCES, INC., a Delaware corporation ("Maker"),
promises to pay to the order of Allen & Company Incorporated, a corporation
organized under the laws of New York ("Payee"), in lawful money of the United
States of America, the principal amount (the "Principal Amount") of [ ]
(US$_____________), together with interest in arrears on the unpaid principal
balance at an annual rate equal to eight percent per annum, (8.0%), in the
manner and subject to adjustment as provided below. Interest shall be calculated
on the basis of a year of 365 or 366 days, as applicable, and charged for the
actual number of days elapsed.
The following additional terms shall govern this Note:
1. PRINCIPAL AND INTEREST
The entire Principal Amount of this Note together with accrued and unpaid
interest thereon shall be due and payable in the manner provided in Paragraph 2.
2. MANNER OF PAYMENT
(a) Except as provided in Paragraph 2,2(b), the Principal Amount and accrued and
unpaid interest thereon shall be made in shares of the Maker's common stock,
$0.0001 par value ("Common Stock"), not later than the tenth (10th) business
day following the approval by the shareholders of the Maker, at a general
meeting or special meeting called in whole or in part for such purpose, of the
terms of this Paragraph 2.2(a). The number of shares of Maker Common Stock to
be issued pursuant to this Paragraph 2.2(b) shall be equal to the product of the
Principal Amount together with accrued and unpaid interest thereon divided by
$1.86 (the "Conversion Price"). Payment shall be made by delivering such shares
to Payee at 711 Fifth Avenue, New York, NY 10022, or at such other place as
Payee shall designate to Maker in writing. Delivery of such stock certificates
shall be made by registered mail, return receipt requested, or by a recognized
overnight delivery service.
(b) In the event that a majority of the shareholders of the Maker fail to
approve the manner of payment provided in Paragraph 1.2(a), (1) the interest
rate of this Note shall automatically, without any action required to be taken
by Maker or Payee, be increased to the lesser of twenty five percent (25%) per
annum or the maximum note allowed by the laws of the State of Texas and (ii) the
Principal Amount, together with all accrued and unpaid interest shall be due and
payable on October 31., 2001.
<PAGE>
Page 10 of 16 Pages
3. REPRESENTATIONS OF MAKER
The Maker hereby represents and warrants to the Payee as follows:
(a) The Maker is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power and
authority to own and lease its properties and to conduct its business as
presently conducted.
(b) This Note has been duly authorized by all necessary corporate action on the
part of the Maker. This Note has been duly executed and delivered by Maker arid
constitutes the valid and binding agreement of Maker, enforceable against Maker
in accordance with its terms, except as the enforceability hereof may be subject
to applicable bankruptcy, insolvency, reorganization, or other similar laws
affecting creditors' rights generally and to general principles of equity.
(c) When approved by a majority of the shareholders of Maker, the issuance of
the Maker's shares as provided in Paragraph 2(a) will have been duly authorized
and, upon the, issuance thereof will be validly issued, fully paid and
non-assessable.
(d) The execution and delivery of this Note will not (i) except for filings that
may be made under the securities laws and with NASDAQ, as contemplated by this
Note or where the absence would not have a material adverse effect on the Maker,
require consent, approval, waiver or authorization from or registration or
filing with any party, including but not limited to any party to any material
agreement to which the Maker is a party or by which it is bound or by any
regulatory or governmental agency, body or entity or (ii) violate any statute,
law, rule, regulation or ordinance, or any judgment, decree, order, regulation
or rule of any court, tribunal, administrative or governmental agency, body or
entity to which the, Maker or its properties are subject.
4. REPRESENTATIONS OF PAYEE
(a) Payee is an "accredited investor" as that term is defined in Rule 501 of
Regulation D promulgated by the SEC under the Securities Act of 1933 as amended
(the "Act"). Payee further represents that Payee considers itself to be a
sophisticated investor in companies similarly situated to the Maker, and Payee
has substantial knowledge and experience in financial and business matters
(including knowledge of finance, securities and investments, generally, and
experience and skill in '.investments based on actual participation) such that
Payee is capable of evaluating the merits and risks of this Note,
(b) Payee has been advised and acknowledges that any shares issued by the Maker
pursuant to the Note, have not been registered under the Act, in reliance upon
the exemption(s) from registration promulgated thereunder. Payee also
acknowledges that the issuance of any shares have not be registered under the
securities laws of any state. Consequently, Payee agrees that pursuant to this
Note, such shares cannot be resold, unless they are registered under the Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
(c) Any shares acquired by Payee pursuant to this Note are solely for Payee's
own account and not as nominee for, representative of, or otherwise on behalf
of, any other person. Payee is acquiring any such shares with the intention of
holding such shares for investment, with no present intention of participating,
directly or indirectly, in a subsequent public distribution of the shares,
unless registered under the Act and applicable state securities laws, or unless
an exemption from such registration requirements is available. Payee shall not
make any sale, transfer or other disposition
<PAGE>
Page 11 of 16 Pages
of any of the shares in violation of any state or federal law.
(d) Payee has been advised and agrees that there will be placed on any
certificates representing any shares issued pursuant to this Note, a legend
stating in substance the following (and including any restrictions or conditions
that may be required by any applicable state law), and Payee has been advised
and further agrees that the Maker will refuse to permit the transfer of the
shares out of Payee's name in the absence of compliance with the terms of such
legend:
"The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or under any state securities laws and
may not be sold, pledged, transferred, assigned or otherwise disposed of except
in accordance with such Act and the rules and regulations thereunder and in
accordance with applicable state securities laws. The Maker will transfer such
securities only upon receipt of evidence satisfactory to the Maker, which may
include an opinion of counsel, that the registration provisions of such Act have
been compiled with or that such registration is not required and that such
transfer will not violate any applicable state securities laws.
5. REGISTRATION RIGHTS
(a) Definitions. For purposes of this Paragraph 5 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 the holder of
any shares issued pursuant to this Note.
(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 "Registrable Stock" means (a) the shares issued pursuant to this
Note; provided, however, that shares of Registrable Stock will 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 public transfer by virtue of federal or state
securities laws; and provided further that Registrable Stock will cease to be
Registrable Stock if the holder could sell or transfer all such Shares held by
him/her 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 state the
intended method of disposition by such Initiating Holders and shall request that
the Maker effect the registration of all or part of the Registrable Stock under
the Securities Act, the Maker shall promptly give written notice-of such
requested registration to all other holders, if any, of Registrable Stock. If,
after the expiration of 30 days from the giving of such notice to the holders of
Registrable Stock, the Maker 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 Maker
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
<PAGE>
Page 12 of 16 Pages
reasonably acceptable to the Maker. 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 Maker shall only be required to effect two registrations pursuant
to this Paragraph 5(b).
(ii) The Maker shall not be required to effect any registration under this
Paragraph 5(b) within nine months after the completion of any Registered
offering of its securities pursuant.
(iii) The Maker shall have the right to include in any registration statement or
post-effective amendment filed pursuant to this Paragraph 5(b), other securities
of the Maker then proposed to be distributed, except that, to the extent
consistent with the rights of other holders of the Maker's securities, if and to
the extent that the underwriter or underwriters acting with respect of such
registered 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 5(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 Maker,
then the Maker agrees to maintain the effectiveness of such registration
statement for a period of six months after its initial effective date.
(c) Incidental or Piggyback Registration
(i) If the Maker 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 account or for the account of any other person holding registration
rights with respect to the securities of the Maker, then the Maker shall give
written notice of such proposed filing to the holders of Registrable Stock at
least ten 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 Maker by the
anticipated filing date of written requests from Participating Holders for the
Maker to register their Registrable Stock, the Maker shall permit, or in the
event of an underwritten ' offering, shall use its reasonable best efforts to
cause the managing underwriter or underwriters of such proposed underwritten
offering to permit, the
Participating Holders to include such Registrable Stock in such offering on the
same terms and conditions as any similar securities of the Maker included
therein; provided, however, that if in the opinion of the managing underwriter
or underwriters of such offering, the inclusion of the total amount Registrable
Stock which it or the Maker, 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 Maker's securities 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 Maker and each
holder of Maker Securities (including without limitation Registrable Stock) or
securities convertible into or exercisable for Maker securities 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 Paragraph, "value" shall mean
principal amount with respect to debt securities and the
<PAGE>
Page 13 of 16 Pages
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 securities and prior to the effectiveness of the
registration statement filed in connection with such registration, the Maker
determines for any reason either not to effect such registration or to delay
such registration, the Maker 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) The Maker 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 Maker, in accordance with generally accepted
practices, in connection with such proposed distribution.
(d) Covenants of the Maker with Respect to Registration. In connection with any
registration under this Paragraph 5, the Maker will, as expeditiously as is
reasonably practicable:
(i) Prepare and file with the Commission a registration statement with respect
to such Participating Holders and, subject to the last sentence of Paragraph
5(c)(i) hereof, use its reasonable 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 Maker 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 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.
(e) The Maker shall pay all costs, fees and expenses in connection with all
registration statements ' filed under this
<PAGE>
Page 14 of 16 Pages
Paragraph 5 including, without limitation, the Maker's legal and accounting
fees, printing expenses and blue sky fees and expenses, but not including (i)
the fees and expenses of counsel for the Participating Holders in connection
with such registration; and (ii) the underwriting discounts and commissions and
underwriters' expenses allocable to the Registrable Stock being registered or
state transfer taxes.
6. SALE OF ADDITIONAL SHARES BELOW CONVERSION PRICE
(a) If at any time or from time to time within a period of three hundred and
sixty-five (365) days after the date of this Note, the Maker issues or sells
Additional Shares of Common Stock (as hereinafter defined), other than as a
dividend or other distribution on any class of stock for an Effective Price per
share (as hereinafter defined) that is less than the Conversion Price, then and
in each such case, the Payee shall be entitled to an additional number of shares
of Common Stock (the "Adjusted Shares") which when added to the number of shares
acquired pursuant to Paragraph 2(a) and divided by the Conversion Price shall be
equal to the Effective Price per share.
(b) For purposes of the foregoing paragraph, the consideration received by the
Maker for any issuance or sale of Common Stock shall (1) to the extent it
consists of cash be computed at the net amount of cash received by the Maker
after deduction of any expenses payable by the Maker and any underwriting or
similar commissions, compensation, or concessions paid or allowed by the Maker
in connection with such issuance or sale, and (ii) to the extent it consists of
property other than cash:, be computed at the fair value of that property as
reasonably determined in good faith by the Maker's Board of Directors.
(c) "Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Maker after the date of this Note other than (i) shares of Common
stock or options or warrants to acquire Common Stock issued to management,
directors or employees of, or consultants to, the Maker or any Subsidiary, (ii)
shares of Common Stock issued upon exercise of convertible securities, (iii)
shares of Common Stock issued to Allen & Company, Whittier Trust or any other
current holders of any debt of the Maker, (iv) shares of Common Stock issued
pursuant to any rights offering to current shareholders and (iii) shares of
Common Stock or options or warrants to acquire Common Stock issued in connection
with investment banking, financial advisory or legal services provided to the
Maker,
(d) The "Effective Price" of Additional Shares of Common Stock shall mean the
quotient determined by dividing the total number of Additional Shares of Common
Stock issued or sold, into the aggregate consideration received, or deemed to
have been received by the Maker for the issuance of such Additional Shares of
Common Stock.
7. EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect to Maker
shall constitute an event of default hereunder ("Event of Default"):
(a) If pursuant to, or within the meaning of, the United States Bankruptcy Code
or any other federal or state law relating to insolvency or relief of debtors (a
"Bankruptcy Law"), Maker shall (i) commence a voluntary case or proceeding; (ii)
consent to the entry of an order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver, assignee, liquidator or
similar official; (iv) make an assignment for the benefit of its creditors; or
(v) admit in writing its inability to pay its debts as they become due.
(b) If a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (i) is for relief against Maker in an involuntary case, (ii)
appoints a trustee, receiver, assignee, liquidator or similar official for Maker
or substantially all of Maker's properties; or (iii) orders the liquidation of
Maker, and in each case the order or decree is not dismissed within one hundred
and twenty (120) days.
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(c) Upon the occurrence of an Event of Default hereunder (unless all Events of
Default have been cured or waived by Payee), Payee may, at its option (i) by
written notice to Maker, declare the entire unpaid principal balance of this
Note, together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from Maker all sums due under this Note. Maker shall pay
all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
8. SUBORDINATION
Payee agrees to subordinate this Note on such terms and conditions as may be
requested by Shell Capital Service Limited ("Shell") in connection with the
contemplated Loan Agreement among Maker, Shell, Central Asia Petroleum, Inc.,
Karakuduk-Munay, Inc. and certain other facilities agents and lenders. If
requested by Shell, Payee agrees to execute and deliver to Shell a subordinate
agreement relating to this Note.
9. PREPAYMENT
From and after the date of this Note, the outstanding Principal Amount may be
prepaid by Maker, in whole or in part, on written notice given by Maker to
Payee. On the prepayment date, Maker shall pay to Payee in the manner specified
in Paragraph 2(b), the Principal Amount to be prepaid plus accrued interest
thereon to and including the date of prepayment and Payee shall return this Note
to the Maker.
10. MISCELLANEOUS
(a) If any provision in this Note is held invalid or unenforceable by any court
of competent jurisdiction, the
other provisions of this Note will remain in full force and effect. Any
provision of this Note held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
(b) This Note will be governed by the laws of the State of Texas without regard
to conflicts of laws principles.
(c) This Note shall bind Maker and its successors and assigns. This Note shall
not be assigned or transferred by Payee without the express prior written
consent of Maker.
(d) The headings of Paragraphs in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs
of this Note unless otherwise specified.
(e) All words used in this Note will be construed to be of such gender or number
as the circumstances require. Unless otherwise expressly provided, the words
"hereof' and "hereunder" and similar references refer to this Note in its
entirety and not to any specific Paragraph or subparagraph hereof
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Page 16 of 16 Pages
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of the date
first stated above.
CHAPPARAL RESOURCES, INC.
By: _________________________
