C H A P A R R A L
Chaparral Resources, Inc.
September 21, 2000
Xx. Xxxxxx Xxxxx
Capco Resources Ltd.
000 0xx Xxxxxx XX
Xxxxx 0000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X0X0 403-9000
Re: Purchase of Common Stock
Dear Xxxxxx:
This letter agreement (this "Letter") summarizes the terms and conditions
of the agreement by Capco Resources Ltd., a Canadian corporation ("Capco"), to
acquire 1,612,903 shares of common stock, par value $.0001 per share (the
"Shares"), of Chaparral Resources, Inc. ("Chaparral") for an aggregate purchase
price of $3.0 million. In this Letter, (a) Capco and Chaparral are hereinafter
referred to individually as a "Party" and collectively as the "Parties" and (b)
Capco's acquisition of the Shares is hereinafter referred to as the "Share
Purchase."
1. BASIC TRANSACTION
(a) Capco agrees to purchase the Shares in two tranches as follows:
(i) the first tranche of 537,634 Shares on or before September
29, 2000 by delivery to Chaparral the sum of $1.0 million, in
cash, by wire transfer of immediately available funds and (ii)
the second tranche of 1,075,269 Shares on the earlier of (a)
October 30, 2000 or (b) consummation of the transactions
contemplated pursuant to Section 3 of that certain Agreement and
Release, dated August 25, 2000, by and among Greka Energy Corp.
("Greka"), Xxxxxxx X. Xxxxxx, Capco, Capco Energy, Inc. and Xxxxx
Xxxxxxxxx by delivery to Chaparral the sum of $2.0 million, in
cash, by wire transfer of immediately available funds.
(b) As security for its obligation hereunder, Capco will pledge to
Chaparral 400,000 shares of common stock of Greka held by Capco
Energy (the "Greka Stock") as collateral for Capco's obligation
Xx. Xxxxxx Xxxxx
September 21, 2000
Page 2
under the Shares Purchase. In addition to any other remedy
available to Chaparral, if Capco defaults on its obligation to
timely consummate the Share Purchase, Chaparral will have the
right to sell the Greka Stock (subject to applicable securities
laws) to attempt to satisfy Capco's obligation, together with all
reasonable commission, fees, costs and expenses (including
reasonable legal and expert fees, costs and expenses) incurred by
Chaparral in connection with any such sale and the principal
amount of the Shares will be adjusted accordingly so that an
amount equal to the proceeds of any such sales less all
commissions, fees, costs and expenses incurred by Chaparral in
making such sales shall be applied to the outstanding Share
Purchase obligation of Capco; provided, however, after full
satisfaction of Capco's Share Purchase obligation hereunder (i.e.
when the total principal amount of the Shares purchased by Capco
equals $3,000,000), any excess Greka Stock or the proceeds from
the sale thereof, if any, will be returned to Capco. Upon the
request of Capco (which must be acceptable to Chaparral in its
sole discretion), some or all the Greka Stock may be released
from the pledge to Chaparral for sale to a third party or to be
pledged as collateral for a loan to Capco if the proceeds of such
sale or loan are paid directly to Chaparral to satisfy Capco's
Share Purchase obligation.
(c) Capco agrees to deliver to Chaparral documentation customarily
requested by an issuer in an offering pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended, and the
placement of an appropriate restrictive legend on the Shares
acquired by Capco pursuant to this Letter.
2. DISCLOSURE
Except as and to the extent required by applicable law, without the prior
written consent of Chaparral, Capco will not, and will direct its
representatives not to make, directly or indirectly, any public comment,
statement, or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of discussions regarding the Share
Purchase or any of the terms, conditions, or other aspects of the transaction
proposed in this Letter.
3. COSTS
Capco and Chaparral will be responsible for and bear all of their own costs
and expenses (including any broker's or finder's fees and the expenses of its
representatives) incurred at any time in connection with the Share Purchase.
4. ENTIRE AGREEMENT
This Letter constitutes the entire agreement between the Parties, and
supersede all prior oral or written agreements, understandings, representations
and warranties, and courses of conduct and dealing between the Parties on the
subject matter hereof. Except as otherwise provided herein, this Letter may be
amended or modified only by a writing executed by the Parties.
Xx. Xxxxxx Xxxxx
September 21, 2000
Page 3
5. EXPRESSION OF INTENT
The Parties acknowledge and agree that this Letter is a legal obligation of
the Parties.
6. GOVERNING LAW
THIS LETTER WILL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE
OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
7. JURISDICTION; SERVICE OF PROCESS
ANY ACTION OR PROCEEDING SEEKING TO ENFORCE ANY PROVISION OF, OR BASED ON
ANY RIGHT ARISING OUT OF, THIS LETTER MAY BE BROUGHT AGAINST ANY OF THE PARTIES
IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF XXXXXX, OR, IF IT HAS OR CAN
ACQUIRE JURISDICTION, IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF TEXAS, AND EACH OF THE PARTIES CONSENTS TO THE JURISDICTION OF SUCH
COURTS (AND OF THE APPROPRIATE APPELLATE COURTS) IN ANY SUCH ACTION OR
PROCEEDING AND WAIVES ANY OBJECTION TO VENUE LAID THEREIN. PROCESS IN ANY ACTION
OR PROCEEDING REFERRED TO IN THE PRECEDING SENTENCE.
8. COUNTERPARTS
This Letter may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Letter and all of which, when taken
together, will be deemed to constitute one and the same agreement.
Remainder of page intentionally blank.
Xx. Xxxxxx Xxxxx
September 21, 2000
Page 4
If you are in agreement with the foregoing, please sign and return one copy
of this Letter, which thereupon will constitute our agreement with respect to
its subject matter.
Very truly yours,
/s/ Xxxxx X. Xxxxx /s/ Xxxx X. XxXxxxxxx
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Xxxxx X. Xxxxx Xxxx X. XxXxxxxxx
Duly acknowledged and agreed this 21st day of September 2000.
CAPCO RESOURCES LTD.
/s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
