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CHAPARRAL
CHAPARRAL RESOURCES, INC.
Notice and Proxy Statement
September 10, 2003
Dear Stockholder:
We are pleased to invite you to the Annual Meeting of Stockholders of
Chaparral Resources, Inc. The meeting will be held on October 16, 2003 at 10:00
a.m., Eastern Standard Time, at The Inter-Continental Hotel, 111 East 48th
Street, New York, New York 10017.
At the meeting, you and the other stockholders will be asked to vote on the
following:
1. the election of six directors to the Board of Directors of Chaparral;
and
2. the ratification of the appointment of Ernst & Young as the
independent auditors of Chaparral for fiscal year 2003.
You will also hear an overview of Chaparral's current and prior year
operations from senior management to be followed by a question and answer
session open to all stockholders. Our Annual Report, which is enclosed with this
Proxy Statement, contains other detailed information about Chaparral, including
its audited financial statements for the year ended December 31, 2002.
Stockholders are urged to carefully read this Proxy Statement in its
entirety before voting on the proposals. This Proxy Statement and the enclosed
proxy card are being mailed to stockholders on or about September 10, 2003.
We hope you can join us on October 16, 2003. Regardless of whether you
expect to attend the meeting in person, please read the Proxy Statement. When
you have done so, please mark your votes on the enclosed proxy card, sign and
date it, and return it to us in the enclosed postage-paid envelope. It is
important that your shares be represented, and your promptness will assist us in
making necessary preparations for the meeting.
Sincerely,
/s/ Ian Connor
--------------
Ian Connor
Chairman of the Board
CHAPARRAL
CHAPARRAL RESOURCES, INC.
Notice of Annual Meeting of Stockholders
To be held October 16, 2003
Chaparral Resources, Inc. will hold its Annual Meeting of Stockholders on
October 16, 2003 at 10:00 a.m., Eastern Standard Time, at:
The Inter-Continental Hotel
111 East 48th Street
New York, New York 10017
We are holding this meeting to consider and act upon the following matters
that are more fully described in the accompanying Proxy Statement, including
proposals to:
1. elect six directors to the Board of Directors of Chaparral;
2. ratify the appointment of Ernst & Young as the independent auditors of
Chaparral for fiscal year 2003; and
3. consider such other business as may properly come before the meeting
or any adjournment of the meeting.
The Board of Directors has selected September 3, 2003 as the record date
for determining stockholders entitled to notice of and to vote at the meeting
and any adjournment of the meeting. A list of stockholders as of the record date
will be available for inspection at the corporate headquarters of Chaparral for
ten days before the meeting.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE, SIGN,
AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
A copy of Chaparral's 2002 Annual Report is enclosed. Please read the
Annual Report in its entirety.
By Order of the Board of Directors,
/s/ Alan D. Berlin
------------------
Alan D. Berlin
Secretary
Houston, Texas
September 10, 2003
CHAPARRAL
CHAPARRAL RESOURCES, INC.
Annual Meeting of Stockholders
To Be Held October 16, 2003
This Proxy Statement is furnished to stockholders of Chaparral for use at
the Annual Meeting of Stockholders to be held at 10:00 a.m., Eastern Standard
Time, on October 16, 2003, at The Inter-Continental Hotel, 111 East 48th Street,
New York, New York 10017, or at any postponements or adjournments of the meeting
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The approximate date on which this Proxy Statement and the
enclosed proxy card are first being sent to stockholders is September 10, 2003.
TABLE OF CONTENTS
Page
General Information..........................................................3
Proposal One: Election of Directors..........................................5
Nominees 5
Remuneration of Directors...........................................6
Recommendation of the Board.........................................6
Certain Relationships and Related Transactions...............................7
Meetings of the Board and its Committees.....................................7
Report of the Audit Committee of the Board of Directors......................8
Beneficial Ownership of Certain Stockholders, Directors, Nominees and
Executive Officers.......................................................9
Section 16(a) Beneficial Ownership Reporting Compliance......................10
Executive Compensation.......................................................10
Summary Compensation Table..........................................11
Aggregated Option/SAR Exercises and Year-End Option/SAR Value
Table...........................................................11
Director Interlocks.................................................11
Stock Performance Graph......................................................12
Insider Participation in Compensation Decisions and Compensation Committee
Report on Executive Compensation........................................12
Compensation Philosophy.............................................13
Compensation Structure..............................................13
Compensation of the Chief Executive Officer.........................13
Executive Compensation Deductibility................................14
Compensation Committee Interlocks and Insider Participation.........14
Proposal Two: Ratification of Independent Auditors...........................15
Recommendation of the Board.........................................15
Other Business...............................................................15
Appendix A - Audit Committee Charter.........................................A-1
Appendix B - Corporate Governance Committee Charter..........................B-1
2
GENERAL INFORMATION
Q: Who is soliciting my proxy?
A: We, the Board of Directors of Chaparral (the "Board"), are sending you this
Proxy Statement in connection with our solicitation of proxies for use at
Chaparral's Annual Meeting of Stockholders. Specified directors, officers,
and employees of Chaparral may also solicit proxies on our behalf by mail,
phone, fax, or in person.
Q: Who is paying for this solicitation?
A: Chaparral will pay for the solicitation of proxies, including the cost of
preparing, assembling, and mailing this Proxy Statement, the proxy card,
the Annual Report and all other materials which may be sent to stockholders
in connection with this solicitation.
Q: On what am I voting?
A: You will have the chance to vote on, specifically:
o the election of Askar Alshinbayev, Ian Connor, Peter G. Dilling, John
Duthie, Alan D. Berlin, and Nikolai D. Klinchev, to the Board; and
o the ratification of the appointment of Ernst & Young as Chaparral's
independent auditors for fiscal year 2003.
Q: Who can vote?
A: Only holders of Chaparral's Common Stock at the close of business on
September 3, 2003, the record date for the Annual Meeting, can vote. If you
beneficially owned any Common Stock on the record date, you have one vote
per share of Common Stock.
Q: How do I vote?
A: You may vote your shares either in person or by proxy. To vote by proxy,
you should mark, date, sign, and mail the enclosed proxy card in the
postage-paid envelope. Granting a proxy will not affect your right to vote
your shares if you attend the Annual Meeting and want to vote in person; by
voting in person you will revoke your proxy. You may also revoke your proxy
at any time before the vote at the meeting by providing Chaparral's
Secretary written notice of your revocation or by submitting a later-dated
proxy. If you return your proxy but do not mark your voting preferences,
Natalie S. Hairston and Miguel C. Soto, the proxy holders, will vote your
shares as follows:
o FOR the election of each of the nominees for director; and
o FOR the ratification of the appointment of the independent auditors.
Q: What constitutes a quorum?
A: On the record date, Chaparral had 38,209,502 shares of Common Stock issued
and outstanding. In order for the Annual Meeting to be properly held, a
majority of the outstanding shares (a quorum) must be present at the
meeting or represented by proxy.
Q: What vote is required to approve each proposal?
A: For the election of directors, the affirmative vote of a plurality of the
votes cast at the meeting is required for the election of directors. A
properly executed proxy card marked WITHHOLD AUTHORITY with respect to the
election of one or more directors will not be voted with respect to the
director or directors indicated, although it will be counted for purposes
of determining whether there is a quorum. For all matters other than the
election of directors, the affirmative vote of a majority of the votes cast
by person or by proxy at the Annual Meeting is required for approval of
such matter. A properly executed proxy marked ABSTAIN with respect to any
other matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, if there are any other
items on which the stockholders vote at the Annual Meeting, an abstention
will have the effect of a negative vote on such other item.
3
Q: What if my shares are held in "street name?"
A: If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may only exercise voting discretion with respect to
matters deemed routine by NASD, such as the election of directors and the
selection of independent auditors. On a non-routine matter, a broker or
other nominee cannot cast a vote (a so-called "broker non-vote"). Broker
non-votes will not be treated as votes cast, and therefore, will not affect
the outcome of the matters referred to above.
Q: Can I vote on other matters?
A: The matters presented at an annual meeting are limited to those properly
presented by the Board and those properly presented by stockholders. We
have not received notice from any stockholder as to any matter to come
before the Annual Meeting other than as set forth herein. If any other
matter is presented at the Annual Meeting, your signed proxy gives Ms.
Hairston and Mr. Soto, the proxy holders, authority to vote your shares.
Q: How does the Board recommend I vote on the proposals?
A: Unless you give other instructions on your proxy card, Ms. Hairston and Mr.
Soto, the proxy holders, will vote in accordance with the recommendations
of the Board. The Board recommends a vote FOR:
o the election of the nominated slate of directors (see page 5); and
o the ratification of the appointment of the independent auditors (see
page 15).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board, or if no
recommendation is given, in their own discretion.
Q: What is the deadline for stockholder proposals for next year's Annual
Meeting?
A: Stockholders may submit proposals on matters appropriate for stockholder
action at future annual meetings by following the rules of the Securities
and Exchange Commission. If we do not receive notice of any other matter
that a stockholder wishes to raise at our 2004 Annual Meeting by May 14,
2004 and a matter is raised at that meeting, the proxies will have
discretionary authority to vote on the matter. All proposals and
notifications should be addressed to Chaparral's Secretary: Chaparral
Resources, Inc., 16945 Northchase Drive, Suite 1620, Houston, Texas 77060.
Q: How do I get copies of the exhibits filed with Chaparral's Form 10-K?
A: A copy of Chaparral's Annual Report for 2002, which contains Chaparral's
Form 10-K and consolidated financial statements, was delivered to you with
this Proxy Statement. Chaparral will provide to any stockholder as of the
record date, who so specifically requests in writing, copies of the
exhibits filed with Chaparral's Form 10-K for a reasonable fee. Requests
for such copies should be directed to Assistant Secretary, Chaparral
Resources, Inc., 16945 Northchase Drive, Suite 1620, Houston, Texas 77060.
In addition, copies of all exhibits filed electronically by Chaparral may
be reviewed and printed from the SEC's website at: WWW.SEC.GOV.
4
PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees.
At the Annual Meeting, you and the other stockholders will elect six
individuals to serve as directors until the next annual meeting of stockholders
to be held in 2004, until their successors are duly elected or appointed or
until their death, resignation, or removal. Each of the nominees is currently a
member of the Board.
The individuals named as proxies will vote the enclosed proxy for the
election of all nominees, unless you direct them to withhold your votes. If any
nominee becomes unable to serve as a director before the Annual Meeting, an
event that is not presently anticipated, discretionary authority may be
exercised by the persons named as proxies to vote for substitute nominees
proposed by the Board.
The nominees for director, each of whom has consented to serve, if elected,
are as follows:
Name of Nominee Director Since Age Principal Occupation During the Last 5 Years
--------------- -------------- --- --------------------------------------------
Ian Connor 2002 37 Mr. Connor has served as the Chairman of the Board of
Chaparral since November 2002. Since April 2001, Mr. Connor
has served as a Managing Director of Open Joint Stock
Company Kazkommertsbank, a commercial bank incorporated in
Kazakhstan. Prior to joining Kazkommertsbank, Mr. Connor
held several senior executive positions, including Chief
Executive Officer at Global Menkul Degerler A.S., an
Istanbul-based brokerage and investment house, from May 1997
to March 2001.
Nikolai D. Klinchev 2002 45 Mr. Klinchev has been the Chief Executive Officer of
Chaparral since November 2002. From June 2002 to November
2002, he served as Vice President - Business Development of
Chaparral. Mr. Klinchev has served as the General Director
and as a board member of Closed Joint Stock Company
Karakudukmunai since 1996. Mr. Klinchev graduated from the
Institute of Energy in Almaty, Kazakhstan, as a power
engineer in 1980 and studied production management in St.
Petersburg (formerly Leningrad), Russia, graduating in 1988.
Askar Alshinbayev 2002 38 Mr. Alshinbayev has served as Managing Director and Chief
Executive Officer of Central Asian Industrial Holdings, N.V.
since May 2002. Since 1998, Mr. Alshinbayev has served as a
Managing Director of Open Joint Stock Company
Kazkommertsbank, a commercial bank incorporated in
Kazakhstan. From 1994 to 1998, he served as Deputy Chairman
of the Management Board of Kazkommertsbank. Mr. Alshinbayev
also serves on the Board of Directors of PetroKazakhstan Inc.
(formerly Hurricane Hydrocarbons Ltd.) and Nelson Resources, Ltd.
5
Name of Nominee Director Since Age Principal Occupation During the Last 5 Years
--------------- -------------- --- --------------------------------------------
Peter G. Dilling 2002 54 From 1995 to 1997, Mr. Dilling held various positions with
Chaparral, including Vice Chairman of the Board. Since
1999, Mr. Dilling has served as President and Chief
Executive Officer of Trinidad Exploration and Development,
Ltd., an oil and gas exploration company. He has served as
President and Chief Executive Officer, and as a Director of
Anglo-African Energy, Inc., an exploration and production
company, since 1999. Prior to joining Anglo-African, Mr.
Dilling was President and a director of M-D International
Petroleum, Inc., an exploration and production company, from
1994 to 1997. Mr. Dilling also serves on the Board of
Directors of Trinidad Exploration and Development, Ltd.
John Duthie 2002 60 Since December 2002, Mr. Duthie has owned and operated
Bowler Hat Ltd., a H.K. based company active in Turkey and
the Black Sea region. He also serves as an advisor to PDF, a
corporate finance house, and provides financial and
investment advice to various Turkish and international
corporations and institutions. Prior to Bowler Hat, he
served as General Manager for Westdeutsche Landesbank
Turkey, a commercial bank headquartered in Germany, since
1994. He previously held various positions with Merrill
Lynch & Co., a stock brokerage house and investment bank,
and Deutsche Bank, a commercial bank and financial
institution.
Alan D. Berlin 2002 63 Since 1995, Mr. Berlin has been a partner of the law firm
Aitken Irvin Berlin & Vrooman, LLP. He was engaged in the
private practice of law for over five years prior to joining
Aitken Irvin. Mr. Berlin served as a Director of Chaparral
in 1997 and was the Secretary of Chaparral from January 1996
to August 1997. Since June 1998, he has served the Company
in the same position. From 1985 to 1987, Mr. Berlin was the
President of the International Division of Belco Petroleum
Corp. and held various other positions with Belco Petroleum
Corp. and Belco Oil and Gas Corp. from 1977 to 2001. Mr.
Berlin has been appointed an Honorary Associate of the
Centre for Petroleum and Mineral Law and Policy at the
University of Dundee, Scotland, and is a member of the
Association of International Petroleum Negotiators.
Remuneration of Directors.
During the fiscal year ended December 31, 2002, Chaparral implemented a
standard compensation arrangement for its directors, including providing (i)
$700 in compensation to each director for each board or committee meeting
attended via teleconference, (ii) $1,000 in compensation to each director for
each board or committee meeting attended in person, (iii) $2,000 in compensation
per day while traveling on Chaparral related business, including board meetings,
and (iv) $2,500 in quarterly compensation for serving on Chaparral's Board.
Recommendation of the Board.
The Board recommends that stockholders vote FOR each of the nominees to
serve as directors of Chaparral.
6
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 2002, Chaparral received a total equity and debt capital infusion of
$45 million, which was used to repay a substantial portion of a loan with Shell
Capital, Inc. and finance additional working capital requirements. Chaparral
received a total investment of $12 million from Central Asian Industrial
Holdings, N.V. ("CAIH"), including $8 million in exchange for 22,925,701 shares,
or 60%, of Chaparral's outstanding common stock, and $4 million in exchange for
a three year note bearing interest at 12% per annum (the "CAIH Note"). Along
with the CAIH Note, CAIH received a warrant to purchase 3,076,923 shares of
Chaparral's common stock at $1.30 per share. Additionally, JSC Kazkommertsbank
("Kazkommertsbank"), an affiliate of CAIH, provided Chaparral's 60% own
subsidiary Closed Type JSC Karakudukmunay ("KKM") with a credit facility
totaling $33 million (the "KKM Credit Facility") bearing interest at 14% per
annum. The terms and conditions of the CAIH Note and the KKM Credit Facility are
more fully described in Note 11 to Chaparral's consolidated financial statements
included as part of the 2002 Annual Report.
MEETINGS OF THE BOARD AND ITS COMMITTEES
During the fiscal year 2002, Chaparral held seven Board meetings. The Board
had several committees, including the Compensation Committee, the Audit
Committee, the Nominations Committee, and the Corporate Governance Committee.
The following discussion details the composition and role of each committee.
The Compensation Committee recommends cash and non-cash compensation for
Chaparral's executives to the full Board and reviews and recommends to the full
Board stock plans for adoption by Chaparral for its directors, officers,
employees, and consultants. The Compensation Committee is also responsible for
developing Chaparral's executive compensation program. The Compensation
Committee monitors and grants awards according to Chaparral's executive
compensation program and administers Chaparral's 2001 Stock Incentive Plan.
During fiscal year 2002, members of the Compensation Committee, which met on one
occasion, included Messrs. Jeffs, Grant and Dahl. Messrs. Grant and Dahl
resigned effective May 10, 2002 and Mr. Jeffs resigned effective October 28,
2002. Messrs. Alshinbayev, Connor, and Klinchev replaced the departing directors
on the Compensation Committee, effective November 5, 2002.
The Audit Committee oversees Chaparral's financial reporting process on
behalf of the Board. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal controls.
The Audit Committee operates pursuant to a written charter (see Appendix A).
Chaparral's independent accountants, Ernst & Young, are responsible for
expressing an opinion on the conformity of Chaparral's audited financial
statements to accounting principles generally accepted in the United States.
During fiscal year 2002, members of the Audit Committee included Messrs. Grant
and Collins and Judge Burton B. Roberts, all of whom qualified as "independent
directors" as defined by NASD Rule 4200(a)(15). Judge Roberts resigned effective
January 18, 2002 and was not replaced. Messrs. Grant and Collins resigned
effective May 10, 2002 and have been replaced by Messrs. Duthie, Dilling and
Berlin, effective November 5, 2002.
The Nominations Committee has oversight for recruiting and recommending
candidates for election to the Board and for evaluating director independence
and performance. During fiscal year 2002, the Nominations Committee, consisting
of Messrs. Jeffs, Grant and McMillian, met on two occasions. Messrs. Grant and
McMillian resigned effective May 10, 2002 and have not been replaced. Mr. Jeffs
resigned effective October 28, 2002 and was not replaced. On December 10, 2002,
the Board combined the duties and responsibilities of the Nominations Committee
into the newly created Corporate Governance Committee. The Nominations Committee
was subsequently dissolved.
7
On December 10, 2002, the Board established the Corporate Governance
Committee to provide oversight on the broad range of issues surrounding the
composition and operation of the Board, including identifying individuals
qualified to become board members, recommending to the Board director nominees
for the next Annual Meeting, and recommending to the Board and overseeing the
implementation of corporate governance guidelines. The Corporate Governance
Committee also provides assistance to the Board in the areas of committee
membership selection, evaluation of the effectiveness of the Board and
management, and ongoing consideration of developments in corporate governance
practices. The Corporate Governance Committee operates pursuant to a written
charter (see Appendix B). The Corporate Governance Committee's goal is to assure
that the composition, practices, and operation of the Board contribute to value
creation for and effective representation of Chaparral's shareholders. During
fiscal year 2002, the Corporate Governance Committee, consisting of Messrs.
Berlin, Alshinbayev, Klinchev, and Duthie, met on one occasion.
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
In fulfilling its oversight responsibilities, the Audit Committee reviewed
and discussed the audited financial statements in Chaparral's 2002 Annual Report
with management, including a discussion of the quality, and not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements. The Audit
Committee met with the independent accountants, with and without management
present, to discuss the scope and plans for the audit, results of their
examinations, their evaluations of Chaparral's internal controls, and the
overall quality of Chaparral's financial reporting. The Audit Committee reviewed
with the independent accountants the acceptability of Chaparral's accounting
principles and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards, including those described
in the Statement on Auditing Standards No. 61, as amended, "Communication with
Audit Committees." In addition, during fiscal year 2002, the Audit Committee
discussed with the independent auditors the auditors' independence from
management and Chaparral, and received the written disclosures required by the
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees." The Audit Committee held three meetings during fiscal year
2002.
Fees paid to Ernst & Young during fiscal year 2002 amounted to $227,138,
composed of the following:
o Audit Fees. Fees for the audit and quarterly reports for the fiscal
year ended December 31, 2002 totaled $170,000;
o Financial Information Systems Design and Implementation. No fees were
incurred during the fiscal year ended December 31, 2002 for financial
information systems design and implementation; and
o All Other Fees. All other fees paid to our independent auditors during
the fiscal year ended December 31, 2002 totaled $57,138. All non-audit
services were compatible with maintaining Ernst & Young's
independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board, and the Board approved, that the audited
financial statements be included in the Annual Report on Form 10-K for the year
ended December 31, 2002, for filing with the Securities and Exchange Commission.
Audit Committee of the Board of Directors,
John Duthie, Chairman
Peter G. Dilling
Alan D. Berlin
8
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS, DIRECTORS, NOMINEES,
AND EXECUTIVE OFFICERS
The following table sets forth information as of September 3, 2003, with
respect to directors, nominees, named executive officers of Chaparral and each
person who is known by Chaparral to own beneficially more than 5% of our Common
Stock, and with respect to shares owned beneficially by all directors, nominees,
and executive officers of Chaparral as a group. The address for all directors
and executive officers of Chaparral is 16945 Northchase Drive, Suite 1620,
Houston, Texas 77060.
Amount and Nature of Percent of
Beneficial Ownership Common
Name of Beneficial Owner Position (1) Stock (1)
------------------------ -------- --- ---------
Central Asian Industrial Holdings, -- 26,002,624(2) 62.98%
N.V.
81 Scharlooweg
Curacao, Netherlands Antilles
Allen & Company Incorporated -- 5,697,707(3) 14.91%
711 Fifth Avenue
New York, New York 10022
Whittier Ventures, LLC -- 4,109,866(4) 10.76%
1600 Huntington Drive
South Pasadena, California 91030
Ian Connor Chairman of the Board -- *
Nikolai D. Klinchev Director and Chief Executive 1,000,084(5) 2.62%
Officer
Askar Alshinbayev Director 26,002,624(6) 62.98%
Peter G. Dilling Director -- *
John Duthie Director -- *
Alan D. Berlin Director and Corporate Secretary 167(7) *
James A. Jeffs Former Chairman and CEO 10,329(8) *
John G. McMillian Former Co-Chairman and CEO --(9) *
David A. Dahl Former Director --(10) *
Ted Collins, Jr. Former Director --(10) *
Richard L. Grant Former Director --(10) *
Judge Burton B. Roberts Former Director --(11) *
Richard J. Moore Vice President - Finance and -- *
Chief Financial Officer
Miguel C. Soto Treasurer and Controller -- *
Michael B. Young Former VP - Finance, Treasurer, 1,835(12) *
and Chief Financial Officer
All current directors, nominees, and -- 27,002,875 65.40%
executive officers as a group (eight
persons)
9
----------
* Represents less than 1% of the shares of Common Stock outstanding.
(1) Beneficial ownership of Common Stock has been determined for this
purpose in accordance with Rule 13d-3 under the Exchange Act, under
which a person is deemed to be the beneficial owner of securities if
such person has or shares voting power or investment power with
respect to such securities, has the right to acquire beneficial
ownership within 60 days or acquires such securities with the purpose
or effect of changing or influencing the control of Chaparral.
(2) In accordance with Rule 13d-3(d)(1)(i)(A), includes 3,076,923 shares
underlying warrants to purchase shares of Common Stock. Does not
include shares owned directly by officers and stockholders of CAIH
with respect to which CAIH disclaim beneficial ownership. Officers and
stockholders of CAIH may be deemed to beneficially own shares of the
Common Stock reported to be beneficially owned directly by CAIH.
(3) Does not include shares owned directly by officers and stockholders of
Allen Holding and Allen & Company with respect to which Allen Holding
and Allen & Company disclaim beneficial ownership. Officers and
stockholders of Allen Holding and Allen & Company may be deemed to
beneficially own shares of the Common Stock reported to be
beneficially owned directly by Allen Holding and Allen & Company.
(4) In accordance with Rule 13d-3(d)(1)(i)(A), includes 334 shares
underlying warrants currently exercisable.
(5) In accordance with Rule 13d-3(d)(1)(i)(A), includes 1,000,000 shares
beneficially owned by NK Cayman Limited. Mr. Klinchev has a pecuniary
interest in the shares beneficially owned by NK Cayman and has voting
power and investment power over such shares and, thus, may be deemed
to beneficially own such shares.
(6) In accordance with Rule 13d-3(d)(1)(i)(A), includes 3,076,923 shares
underlying warrants to purchase shares of Common Stock. Mr.
Alshinbayev has a pecuniary interest in the shares beneficially owned
by CAIH and has voting power and investment power over such shares
and, thus, may be deemed to beneficially own such shares.
(7) Includes 167 shares owned by Mr. Berlin.
(8) Mr. Jeffs resigned as the Chairman and Chief Executive Officer of
Chaparral effective October 28, 2002.
(9) Mr. McMillian resigned as the Co-Chairman and Chief Executive Officer
of Chaparral effective May 10, 2002.
(10) Resigned as a director of Chaparral effective May 10, 2002.
(11) Judge Roberts resigned as a director of Chaparral effective January
18, 2002.
(12) Includes 668 shares owned by Mr. Young and 1,167 shares underlying
currently exercisable options. Mr. Young's employment with Chaparral
was terminated effective December 15, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under U.S. securities laws, directors, executive officers and persons
holding more than 10% of Common Stock must report their initial ownership of
Common Stock and any changes in that ownership to the SEC. The SEC has
designated specific due dates for such reports and Chaparral must identify in
this Proxy Statement those persons who did not file such reports when due.
Based solely upon a review of Forms 3 and 4 and any amendments furnished to
Chaparral during our fiscal year ended December 31, 2002, and Form 5 and any
amendments furnished to Chaparral with respect to the same fiscal year, we
believe that our directors, officers, and greater than 10% beneficial owners
complied with all applicable Section 16 filing requirements, except that
Whittier Ventures did not file one report representing three transactions.
EXECUTIVE COMPENSATION
The following table shows the compensation paid by Chaparral for services
rendered by Mr. McMillian, who was the Chief Executive Officer and Co-Chairman
of the Board, Mr. Jeffs who was the Chairman of the Board and Chief Executive
Officer of Chaparral, Mr. Young, who was the Vice President - Finance,
Treasurer, and Chief Financial Officer of Chaparral, Mr. Klinchev, who is
currently the Chief Executive Officer of Chaparral, Mr. Moore, who is currently
the Vice President - Finance and Chief Financial Officer of Chaparral, and Mr.
Soto, who is currently the Treasurer and Controller of Chaparral. There were no
other executive officers of Chaparral whose annual salary and bonus exceeded
$100,000 during the fiscal year 2002.
10
Summary Compensation Table.
Annual Compensation Long-Term Compensation
----------------------------------- ------------------------------------------------
Awards Payouts
---------------------------------- -----------
Other Securities
Name and Annual Restricted Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Stock Awards ($) Options/SARs (#) Payouts ($) Compensation
------------------ ---- ------ ----- ------------ ---------------- ---------------- ----------- ------------
Nikolai D. Klinchev 2002 $164,500(1) -- -- -- -- -- --
Chief Executive
Officer (11/02 to
Present)
Richard J. Moore 2002 $164,500(2) $90,000(2) -- -- -- -- --
VP-Finance and
Chief Financial
Officer (11/02 to
Present)
Miguel C. Soto 2002 $116,933(3) $35,000(3) -- -- -- -- --
Treasurer and
Controller (11/02
to present)
John G. McMillian 2002 $58,500 -- -- -- -- -- --
Chief Executive 2001 $162,000(4) -- -- -- -- -- --
Officer (1/99 to 2000 $137,500 -- -- -- -- -- --
5/02)
James A. Jeffs 2002 $130,250 -- -- -- -- -- --
Co-Chairman and 2001 $162,000(5) -- -- -- -- -- --
Chief Executive
Officer
(1/99 to 10/02)
Michael B. Young 2002 $162,000 $21,000 -- -- -- -- $81,000(6)
VP-Finance and 2001 $162,000 -- -- -- -- -- --
Chief Financial 2000 $150,000 -- -- -- -- -- --
Officer (6/02 to
11/02)
----------
1. Represents compensation paid to Mr. Klinchev from June 2002 to
December 31, 2002.
2. Represents compensation paid to Mr. Moore from June 2002 to December
31, 2002. In addition, Mr. Moore received a $90,000 cash bonus during
2002.
3. Represents compensation paid to Mr. Soto for the year ended December
31, 2002. In addition, Mr. Soto received a $35,000 cash bonus during
2002.
4. Mr. McMillian received cash compensation of $114,750 in December 31,
2001. The remaining $47,250 was paid during 2002.
5. Mr. Jeffs' did not receive any cash compensation during the year 2001.
The outstanding balance of $162,000 was paid during 2002.
6. Under the terms of his employment agreement, Mr. Young received
$81,000 in connection with the termination of his employment with
Chaparral.
Aggregated Option/SAR Exercises and Year-End Option/SAR Value Table.
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at Options/SARs at
December 31, 2002 December 31, 2002
------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Michael B. Young 1,167 -- -- --
No options were exercised in fiscal year 2002.
Director Interlocks.
During our last fiscal year, Messrs. Jeffs, who was the Co-Chairman of the
Board, and David A. Dahl, a former director, served on the Compensation
Committee of the Board and acted as officers or directors to Whittier Ventures
or one of its affiliates. Mr. Jeffs is a Vice President of Whittier Ventures and
a Director of Whittier Energy Company. Mr. Dahl is President of both Whittier
Ventures and Whittier Energy Company. Whittier Ventures currently owns
approximately 10.89% of the outstanding common stock. Messrs. Dahl and Jeffs
resigned effective May 10, 2002 and October 28, 2002, respectively.
11
Messrs. Connor, currently serving as Chaparral's Chairman, and Alshinbayev,
serve as directors of Chaparral and each act as an officer or director of CAIH
or one of its affiliates. Messrs. Alshinbayev and Connor are managing directors
of Kazkommertsbank, an affiliate of CAIH, and serve on the Compensation
Committee of the Board. CAIH beneficially owns approximately 63% of Chaparral's
outstanding Common Stock. Mr. Klinchev, Chaparral's current Chief Executive
Officer, has acted as a Director of KKM since 1996.
STOCK PERFORMANCE GRAPH
Comparison of Five Year Cumulative Total Return
The following line graph compares the total returns (assuming reinvestment
of dividends) of our Common Stock, the Nasdaq Market Index and the SIC Code
Index for the five year period ending December 31, 2002.
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
CHAPARRAL RESOURCES, INC. 100.00 13.75 5.25 2.42 1.01 0.67
SIC CODE INDEX 100.00 80.10 97.85 124.30 114.05 121.59
NASDAQ MARKET INDEX 100.00 141.04 248.76 156.35 124.64 86.94
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board determined the compensation of the
executive officers named in the Summary Compensation Table on page 11 for the
years in question. The Compensation Committee has furnished the following report
on executive compensation in connection with the Annual Meeting:
12
Compensation Philosophy.
As members of the Compensation Committee, it is our duty to administer the
executive compensation program for Chaparral. The Compensation Committee is
responsible for establishing appropriate compensation goals for the executive
officers of Chaparral, evaluating the performance of such executive officers in
meeting such goals and making recommendations to the Board with regard to
executive compensation. Chaparral's compensation philosophy is to ensure that
executive compensation be directly linked to continuous improvements in
corporate performance, achievement of specific operation, financial and
strategic objectives, and increases in shareholder value. The Compensation
Committee regularly reviews the compensation packages of Chaparral's executive
officers, taking into account factors which it considers relevant, such as
business conditions within and outside the industry, Chaparral's financial
performance, the market composition for executives of similar background and
experience, and the performance of the executive officer under consideration.
The particular elements of Chaparral's compensation programs for executive
officers are described below.
Compensation Structure.
The base compensation for the executive officers of Chaparral named in the
Summary Compensation Table is intended to be competitive with that paid in
comparable situated industries, taking into account the scope of
responsibilities. The goals of the Compensation Committee in establishing
Chaparral's executive compensation program are:
o to compensate the executive officers of Chaparral fairly for their
contributions to Chaparral's short, medium and long-term performance;
and
o to allow Chaparral to attract, motivate and retain the management
personnel necessary to Chaparral's success by providing an executive
compensation program comparable to that offered by companies with
which Chaparral competes for management personnel.
The elements of Chaparral's executive compensation program are annual base
salaries, annual bonuses and equity incentives. The Compensation Committee bases
its decisions on the scope of the executive's responsibilities, a subjective
evaluation of the executive's performance and the length of time the executive
has been in the position.
In June 2001, Chaparral's stockholders approved the 2001 Stock Incentive
Plan, which sets aside 2.14 million shares of Chaparral's common stock for
issuance to Chaparral's officers, directors, employees, and consultants.
Chaparral has not made any grants under the 2001 Stock Incentive Plan as of
December 31, 2002.
Compensation of the Chief Executive Officer.
During fiscal year 2002, Mr. Klinchev served as Chief Executive Officer of
Chaparral. In establishing Mr. Klinchev's base salary, the Compensation
Committee considered the factors set forth above, including the level of CEO
compensation in other publicly owned/similar sized exploration and production
companies in the oil and gas industry and Mr. Klinchev's level of involvement in
the day-to-day operations of Chaparral.
13
Executive Compensation Deductibility.
Chaparral intends that amounts paid under Chaparral's compensation plans
generally will be deductible compensation expenses. The Compensation Committee
does not currently anticipate that the amount of compensation paid to executive
officers will exceed the amounts specified as deductible according to Section
162(m) of the Internal Revenue Code of 1986.
Compensation Committee Interlocks and Insider Participation.
No executive officer or director of Chaparral serves as an executive
officer, director, or member of a compensation committee of any other entity,
for which an executive officer, director, or member of such entity is a member
of the Board or the Compensation Committee of the Board. There are no other
interlocks.
Compensation Committee of the Board of Directors,
Ian Connor, Chairman
Askar Alshinbayev
Nikolai D. Klinchev
14
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
The Board has appointed Ernst & Young, certified public accountants, as
auditors to examine the consolidated financial statements of Chaparral for the
fiscal years ending December 31, 2002 and 2003, and to perform other appropriate
audit and advisory services and is requesting ratification of such appointment
by the stockholders. In the event that the stockholders do not ratify the
appointment of Ernst & Young, the adverse vote will be considered as a direction
to the Board to select other auditors for the next fiscal year. However, because
of the difficulty and expense of making any substitution of auditors after the
beginning of the current fiscal year, it is contemplated that the appointment
for the fiscal year ending December 31, 2003 will be permitted to stand, unless
the Board finds other reasons for making a change. It is understood that even if
the selection of Ernst & Young is ratified, the Board, in its discretion, may
direct the appointment of a new independent accounting firm at any time during
the year if the Board feels that such a change would be in the best interests of
Chaparral and its stockholders.
Representatives of Ernst & Young will be present at the Annual Meeting,
will have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions. This proposal will be approved if
it receives the affirmative vote of holders of a majority of the shares of
Common Stock voted or represented and entitled to vote at the Annual Meeting.
Recommendation of the Board.
The Board recommends that stockholders vote FOR the proposal to ratify the
appointment of Ernst & Young as Chaparral's independent auditors for fiscal year
2003.
OTHER BUSINESS
Management knows of no other business to be presented for action at the
meeting. If other matters properly come before the meeting or any adjournment of
the meeting, the persons named as proxies will vote upon them in accordance with
their best judgment.
By Order of the Board of Directors,
/s/ Alan D. Berlin
------------------
Alan D. Berlin
Secretary
Houston, Texas
September 10, 2003
15
Appendix A
CHAPARRAL RESOURCES, INC.
AUDIT COMMITTEE CHARTER
(Approved as of March 27, 2003)
I. PURPOSE
To assist the board of directors in fulfilling its oversight
responsibilities for (1) the integrity of the Company's financial statements,
(2) the Company's compliance with legal and regulatory requirements, (3) the
independent auditor's qualifications and independence, and (4) the performance
of the Company's internal audit function and independent auditors. The audit
committee will also prepare the report that SEC rules require be included in the
Company's annual proxy statement.
II. AUTHORITY
The audit committee has authority to conduct or authorize investigations
into any matters within its scope of responsibility. It is empowered to:
1. Appoint, compensate, and oversee the work of the public accounting firm
employed by the organization to conduct the annual audit. This firm will
report directly to the audit committee.
2. Resolve any disagreements between management and the auditor regarding
financial reporting.
3. Pre-approve all auditing and permitted non-audit services performed by the
Company's external audit firm.
4. Retain independent counsel, accountants, or others to advise the committee
or assist in the conduct of an investigation.
5. Seek any information it requires from employees - all of whom are directed
to cooperate with the committee's requests - or external parties.
6. Meet with company officers, external auditors, or outside counsel, as
necessary.
7. The committee may delegate authority to subcommittees, including the
authority to preapprove all auditing and permitted non-audit services,
providing that such decisions are presented to the full committee at its
next scheduled meeting.
III. COMPOSITION
The audit committee will consist of at least three and no more than six
members of the board of directors. The board nominating committee will appoint
committee members and the committee chair.
Each committee member will be both independent and financially literate. At
least one member shall be designated as the "financial expert," as defined by
applicable legislation and regulation. No committee member shall simultaneously
serve on the audit committees of more than two other public companies.
IV. MEETINGS
The committee will meet at least four times a year, with authority to
convene additional meetings, as circumstances require. All committee members are
expected to attend each meeting, in person or via tele- or video-conference. The
committee will invite members of management, auditors or others to attend
meetings and provide pertinent information, as necessary. It will meet
separately, periodically, with management, with internal auditors and with
external auditors. It will also meet periodically in executive session. Meeting
agendas will be prepared and provided in advance to members, along with
appropriate briefing materials. Minutes will be prepared.
A-1
V. RESPONSIBILITIES
The committee will carry out the following responsibilities:
Financial Statements
1. Review significant accounting and reporting issues and understand their
impact on the financial statements. These issues include:
o Complex or unusual transactions and highly judgmental areas.
o Major issues regarding accounting principles and financial statement
presentations, including any significant changes in the Company's
selection or application of accounting principles.
o The effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements of the
Company.
2. Review analyses prepared by management and/or the independent auditor
setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the financial
statements.
3. Review with management and the external auditors the results of the audit,
including any difficulties encountered. This review will include any
restrictions on the scope of the independent auditor's activities or on
access to requested information, and any significant disagreements with
management.
4. Discuss the annual audited financial statements and quarterly financial
statements with management and the external auditors, including the
Company's disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
5. Review disclosures made by CEO and CFO during the Forms 10-K and 10-Q
certification process about significant deficiencies in the design or
operation of internal controls or any fraud that involves management or
other employees who have a significant role in the Company's internal
controls.
6. Discuss earnings press releases (particularly use of "proforma," or
"adjusted" non-GAAP, information), as well as financial information and
earnings guidance provided to analysts and rating agencies. This review may
be general (i.e., the types of information to be disclosed and the type of
presentations to be made). The audit committee does not need to discuss
each release in advance.
Internal Control
1. Consider the effectiveness of the Company's internal control system,
including information technology security and control.
A-2
2. Understand the scope of internal and external auditors' review of internal
control over financial reporting, and obtain reports on significant
findings and recommendations, together with management's responses.
Internal Audit
1. Review with management and the chief audit executive the charter, plans,
activities, staffing, and organizational structure of the internal audit
function.
2. Ensure there are no unjustified restrictions or limitations, and review and
concur in the appointment, replacement, or dismissal of the chief audit
executive.
3. Review the effectiveness of the internal audit function, including
compliance with The Institute of Internal Auditors' Standards for the
Professional Practice of Internal Auditing.
4. On a regular basis, meet separately with the chief audit executive to
discuss any matters that the committee or internal audit believes should be
discussed privately.
External Audit
1. Review the external auditors' proposed audit scope and approach, including
coordination of audit effort with internal audit.
2. Review the performance of the external auditors, and exercise final
approval on the appointment or discharge of the auditors.
In performing this review, the committee will:
o At least annually, obtain and review a report by the independent
auditor describing the firm's internal quality-control procedures; any
material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues; and (to assess the auditor's independence) all relationships
between the independent auditor and the Company.
o Take into account the opinions of management and internal audit.
o Review and evaluate the lead partner of the independent auditor.
o Present its conclusions with respect to the external auditor to the
Board.
3. Ensure the rotation of the lead audit partner every five years and other
audit partners every seven years, and consider whether there should be
regular rotation of the audit firm itself.
4. Present its conclusions with respect to the independent auditor to the full
board.
5. Set clear hiring policies for employees or former employees of the
independent auditors.
6. On a regular basis, meet separately with the external auditors to discuss
any matters that the committee or auditors believe should be discussed
privately.
A-3
Compliance
1. Review the effectiveness of the system for monitoring compliance with laws
and regulations and the results of management's investigation and follow-up
(including disciplinary action) of any instances of noncompliance.
2. Establish procedures for: (i) The receipt, retention, and treatment of
complaints received by the listed issuer regarding accounting, internal
accounting controls, or auditing matters; and (ii) The confidential,
anonymous submission by employees of the listed issuer of concerns
regarding questionable accounting or auditing matters.
3. Review the findings of any examinations by regulatory agencies, and any
auditor observations.
4. Review the process for communicating the code of conduct to company
personnel, and for monitoring compliance therewith.
5. Obtain regular updates from management and company legal counsel regarding
compliance matters.
Reporting Responsibilities
1. Regularly report to the board of directors about committee activities and
issues that arise with respect to the quality or integrity of the Company's
financial statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's independent
auditors, and the performance of the internal audit function.
2. Provide an open avenue of communication between internal audit, the
external auditors, and the board of directors.
3. Report annually to the shareholders, describing the committee's
composition, responsibilities and how they were discharged, and any other
information required by rule, including approval of non-audit services.
4. Review any other reports the Company issues that relate to committee
responsibilities.
Other Responsibilities
1. Discuss with management the Company's major policies with respect to risk
assessment and risk management.
2. Perform other activities related to this charter as requested by the board
of directors.
3. Institute and oversee special investigations as needed.
4. Review and assess the adequacy of the committee charter annually,
requesting board approval for proposed changes, and ensure appropriate
disclosure as may be required by law or regulation.
5. Confirm annually that all responsibilities outlined in this charter have
been carried out.
6. Evaluate the committee's and individual members' performance at least
annually.
A-4
Appendix B
CHAPARRAL RESOURCES, INC.
CORPORATE GOVERNANCE COMMITTEE CHARTER
(Approved as of August 11, 2003)
I. Purpose
The Corporate Governance Committee (the "Committee") is responsible for
providing oversight on the broad range of issues surrounding the composition and
operation of the Board of Directors (the "Board"), including identifying
individuals qualified to become board members, recommending to the Board
director nominees for the next annual meeting of shareholders, and recommending
to the Board and overseeing the implementation of corporate governance
guidelines. The Committee also provides assistance to the Board in the areas of
committee membership selection, evaluation of the effectiveness of the Board and
management, and ongoing consideration of developments in corporate governance
practices. The committee's goal is to assure that the composition, practices,
and operation of the Board contribute to value creation for and effective
representation of the Company's shareholders.
II. Composition
The Committee shall consist of at least three directors, appointed by the
Board at its annual meeting or at interim meetings when necessary to fill a
vacancy or add a member in the Board's judgment. At least two Committee members
shall, in the opinion of the Board, meet the independence and experience
requirements of the American Stock Exchange (the "AMEX"), the Sarbanes-Oxley Act
of 2002 ("SOX"), the rules of the Securities and Exchange Commission (the "SEC")
and other applicable laws, rules and regulations as in effect from time to time.
The Board shall appoint one or more members of the Committee as chair(s). He or
she shall be responsible for leadership of the Committee assignments and
reporting to the Board. The Committee may delegate such matters to
subcommittees, as it deems appropriate. A Committee member (including the chair)
may be removed at any time, with or without cause, by the Board. The Board may
designate one or more directors as alternate members of the Committee, who may
replace any absent or disqualified member or members at any meetings of the
Committee.
III. Meeting Requirements
The Committee shall meet at least once each year or more frequently as it
determines appropriate. The Committee shall meet at the call of its chair,
preferably in conjunction with regular Board meetings or at the request of any
Committee member. Any notice of meeting shall contain a proposed agenda of the
matters to be considered by the Committee. The Committee may meet by telephone
conference call or by any other means permitted by law or the Company's bylaws.
A majority of members of the Committee shall constitute a quorum. The Committee
shall act on the affirmative vote of a majority of members present at a meeting
at which a quorum is present. The Committee may act without a meeting by
unanimous written consent of all members. The Committee shall determine its own
rules and procedures, including designation of a chair pro tempore, in absence
of chair(s), and designation of a secretary. The secretary need not be a member
of the Committee and shall attend Committee meetings and take and prepare the
minutes thereof. The Committee shall keep written minutes of its meetings, which
shall be recorded or filed with the books and records of the Company. Any member
of the Board shall be provided with copies of such Committee minutes if
requested.
The Committee, as it may determine to be appropriate, may meet in separate
executive sessions or in confidence with other directors, the Chief Executive
Officer of the Company and other employees of the Company, agents or
representatives invited by the Committee.
B-1
The Committee may ask members of the Company's management or others whose
advice and counsel are relevant to the issues then being considered by the
Committee to attend any meetings and to provide such pertinent information as
the Committee may request.
IV. Committee Responsibilities
In carrying out its oversight responsibilities, the Committee's policies
and procedures should remain flexible to enable the Committee to react to
changes in circumstances and conditions so as to ensure the Company remains in
compliance with applicable legal and regulatory requirements. The Committee
shall have the following responsibilities in addition to matters that may be
referred to it by the Board or which the Committee raises on its own initiative.
Board Candidates and Nominees
(a) Develop criteria for the selection of directors and oversee the process
of screening and interviewing candidates for Board positions, including those
recommended by shareholders and management; and
(b) Subject to the terms of any shareholders (or similar) agreement to
which the Company and/or its shareholders may be party to from time to time
affecting the composition of the Board, propose to the Board nominees for
election by the shareholders at the annual meeting of shareholders and
prospective director candidates in the event of the resignation, death, removal
or retirement of directors or a change in Board composition requirements.
Board and Committees
(a) Establish and review policies pertaining to size, composition and
procedures of the Board and the roles and responsibilities of directors;
(b) Determine and monitor whether or not each director and prospective
director is an "independent director" within the meaning of the AMEX listing
standards, SOX and any other laws, rules or regulations in effect from time to
time and applicable to the Company and whether the Board and all committees meet
the criteria for independent composition imposed by the AMEX listing standards
or any other applicable laws, rules or regulations in effect from time to time;
(c) Review and consider possible conflicts of interest that may arise
between the Company and any director or officer; and
(e) Review periodically the Board's committee structure and functioning and
recommend to the Board the establishment of committees and directors to serve as
members of each committee.
Management Evaluation and Development
(a) Consider the recommendations of the Chief Executive Officer for the
appointment of executive officers;
(b) Review, and develop where appropriate, the Company's management
succession plans to help assure proper management planning; and
(c) (i) Establish a procedure for evaluating the Chief Executive Officer's
performance, (ii) annually evaluate such performance, and (iii) have the
Committee chair review, after completion of the annual evaluation, with the
Chief Executive Officer the results of the Committee's evaluation and to
coordinate with the Compensation Committee of the Board regarding that
evaluation for purposes of establishing the annual compensation of the Chief
Executive Officer.
B-2
Corporate Governance
(a) Develop and recommend to the Board corporate governance guidelines,
review the guidelines periodically (not less than annually, on a timetable to
established by the Committee), and recommend changes as necessary in light of
the Board's experience evolving corporate practices and regulatory requirements;
and
(b) Develop and recommend to the Board codes of conduct, business ethics
and business practices, to reflect best practices and the requirements of AMEX
listing standards, SOX and any other laws, rules or regulations in effect from
time to time and applicable to the Company's experience, changes to the AMEX
listing standards or any other applicable laws, rules or regulations in effect
from time to time and evolving corporate practices.
Reporting and Evaluation
(a) Report the Committee's actions and recommendations to the Board after
each Committee meeting; and
(b) Evaluate its performance at least annually on a timetable to be
established by the Committee and review at least annually the adequacy of this
Charter and recommend any proposed changes to the Board for approval.
V. Investigations and Studies
The Committee may conduct or authorize investigations into or studies of
matters within the scope of the Committee's responsibilities as described above,
and may retain, at the expense of the Company, independent counsel or other
consultants necessary to assist the Committee in any such investigations or
studies. In this regard, the Committee has the authority to direct the Chief
Executive Officer to provide such information regarding the Company's affairs
and such assistance of the Company's staff and access to the Company's resources
(including funding) as the Committee shall determine necessary to the
accomplishment of its assigned responsibilities. The Committee shall have sole
authority to retain and terminate any search firm to be used to identify
director candidates, including the sole authority to negotiate and approve the
fees and retention terms of such search firm.
VI. Miscellaneous
Nothing contained in this Charter is intended to expand applicable
standards liability under statutory or regulatory requirements for the directors
of the Company or members of the Committee. Nothing in this Charter is intended
to prelude or impair the protection provided in Section 141(e) or any other
section of the General Corporation Laws of the State of Delaware for good faith
reliance by members of the Committee on reports or other information provided by
others. The purposes and responsibilities outlined in this Charter are meant to
serve as guidelines rather than as inflexible rules and the Committee is
encouraged to adopt such additional procedures and standards as it deems
necessary from time to time to fulfill it responsibilities.
B-3
CHAPARRAL
CHAPARRAL RESOURCES, INC.
PROXY CARD
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Natalie S. Hairston and Miguel C. Soto,
either of them, jointly and severally, with power of substitution, to represent
and to vote as designated all shares of Common Stock which the undersigned would
be entitled to vote at the Annual Meeting of Stockholders of Chaparral
Resources, Inc., to be held October 16, 2003 at The Inter-Continental Hotel, 111
East 48th Street, New York, New York 10017, at 10:00 a.m., Eastern Daylight
Time, or any adjournment thereof.
1. Election of directors.
a. Askar Alshinbayev d. Peter G. Dilling
b. Alan D. Berlin e. John Duthie
c. Ian Connor f. Nikolai D. Klinchev
|_| FOR |_| AGAINST |_| ABSTAIN
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH OR OTHERWISE STRIKE THE NOMINEE'S NAME.
2. Ratification of the selection of Ernst & Young as Chaparral's independent
auditors for the fiscal year ending December 31, 2003.
|_| FOR |_| AGAINST |_| ABSTAIN
|_| If you plan to attend the Annual Meeting, please check here.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES TO CHAPARRAL'S BOARD OF DIRECTORS AND FOR THE
RATIFICATION OF ERNST & YOUNG AS CHAPARRAL'S INDEPENDENT AUDITORS.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement.
Please sign exactly as name appears hereon and date. If the shares are jointly
held, each holder should sign. When signing as an attorney, executor,
administrator, trustee, or as an officer signing for a corporation, please give
full title under signature.
____________________________________ Date: _______________
____________________________________ Date: _______________
Signatures of Stockholder(s)
(PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE)