PLEDGE AGREEMENT

     This PLEDGE AGREEMENT (this "Agreement"), dated as of September 21, 2000,
is between CAPCO RESOURCES LTD. (the "Pledgor") and CHAPARRAL RESOURCES, INC.
(the "Company").

                                    RECITALS:

     WHEREAS, reference is made to the letter agreement, dated as of September
21, 2000 (the "Letter Agreement") between Pledgor and the Company;

     WHEREAS, Pledgor has agreed to execute and deliver this Agreement as
security for its obligations to the Company under the Letter Agreement; and

     WHEREAS, capitalized terms used and not defined herein are used with the
meanings assigned to such terms in the Letter Agreement.

                                   AGREEMENT:

     Pledgor and the Company (and each of their respective successors or
assigns), hereby agree as follows:

     SECTION 1. Pledge. As security for the payment and performance, as the case
may be, in full of the obligations of Pledgor under the Letter Agreement (the
"Obligations"), Pledgor hereby hypothecates, pledges, assigns as security and
delivers unto the Company, its successors and assigns, and hereby grants to the
Company, its successors and assigns, a security interest in all of Pledgor's
right, title and interest in, to and under (a) 400,000 shares of common stock,
no par value, of Greka Energy Corporation ("Greka") owned by Pledgor and any
shares of capital stock of any subsidiary obtained in the future by Pledgor and
the certificates representing all such shares (collectively, the "Pledged
Stock"), and (b) payments of dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed, in respect of,
in exchange for or upon the conversion of the Pledged Stock, and (c) all
proceeds of any of the foregoing (the items referred to in clauses (a) and (b)
above being collectively referred to as the "Collateral"). Upon delivery to the
Company, (a) any stock certificates, notes or other securities now or hereafter
included in the Collateral (the "Pledged Securities") shall be accompanied by
stock or bond powers duly executed in blank or other indorsement or other
instruments of transfer reasonably satisfactory to the Company with, if the
Company so requests, signature guaranteed, and by such other indorsement,
instruments and documents as the Company may reasonably request and (b) all
other property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by Pledgor and such other indorsement,
instruments or documents as the Company may reasonably request. Each delivery of
Pledged Securities shall be accompanied by a schedule describing the securities
theretofore and then being pledged hereunder, which schedule shall be attached
hereto made a part hereof. Each schedule so delivered shall supersede any prior
schedules so delivered. Notwithstanding anything to the contrary set forth
herein, upon the written request of Pledgor (which must be acceptable to the
Company in its sole discretion), some or all of the Pledged Stock may be
released from this Agreement and the security interest granted hereby if Pledgor
has arranged (a) a cash sale of the released Pledged Stock to a third party or
(b) a loan to Pledgor and the released Pledged Stock will be pledged as
collateral for such loan; provided, however, Pledgor agrees that the cash
proceeds of such sale or loan must be paid directly to the Company and applied
to the Obligations.

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     TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Company, its successors and assigns, subject to the terms, covenants
and conditions hereinafter set forth.

     SECTION 2. Delivery of the Collateral. Pledgor agrees promptly to deliver
or cause to be delivered to the Company any and all Pledged Securities, and any
and all certificates or other indorsement, instruments or documents representing
the Collateral.

     SECTION 3. Representations, Warranties and Covenants. Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Company that:

     (a) the Pledged Stock represents duly authorized, issued and outstanding
shares of common stock, no par value, of Greka;

     (b) except for the security interest granted hereunder, Pledgor (i) is and
will at all times continue to be the direct owner, beneficially and of record,
of the Pledged Securities, (ii) holds the same free and clear of all security
interest and encumbrances, (iii) will make no assignment, pledge, hypothecation
or transfer of, or create or permit to exist any security interest in or other
encumbrances on, the Collateral, other than pursuant hereto, and (iv) subject to
Section 5, will cause any and all Collateral, whether for value paid by Pledgor
or otherwise, to be forthwith deposited with the Company and pledged or assigned
hereunder;

     (c) Pledgor (i) has the power and authority to pledge the Collateral in the
manner hereby done or contemplated and (ii) will defend its title or interest
thereto or therein against any and all security interests and other
encumbrances, however arising, of all persons whomsoever;

     (d) no consent of any other person (including stockholders or creditors of
Pledgor) and no consent or approval of any governmental authority or any
securities exchange was or is necessary to the validity of the pledge effected
hereby;

     (e) by virtue of the execution and delivery by Pledgor of this Agreement,
when the Pledged Securities, certificates or other documents representing or
evidencing the Collateral are delivered to the Company in accordance with this
Agreement or, if a security interest in any of such Collateral may not under
applicable law be perfected by possession, then upon the filing of appropriate
financing statements, the Company will obtain a valid and perfected first lien
upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations;

     (f) the pledge effected hereby is effective to vest in the Company, the
rights in the Collateral as set forth herein;

     (g) all of the Pledged Stock has been duly authorized and validly issued,
is fully paid and nonassessable and is in certificated form;

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     (h) all information set forth herein relating to the Pledged Stock is
accurate and complete in all material respects as of the date hereof;

     (i) the pledge of the Pledged Stock pursuant to this Agreement does not
violate Regulation U or X of the Federal Reserve Board or any successor thereto
as of the date hereof; and

     (j) the Collateral shall not be represented by any certificates, notes,
securities, documents or other instruments other than those delivered hereunder.

     SECTION 4. Notices and Communications; Denominations. Pledgor will promptly
give to the Company copies of any material notices or other communications
received by it with respect to Pledged Securities registered in the name of
Pledgor. The Company shall at all times have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.

     SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and until
Pledgor fails to timely satisfy any Obligation an "Event of Default" shall have
occurred and be continuing:

          (i) Pledgor shall be entitled to exercise any and all voting and/or
other consensual rights and powers inuring to an owner of Pledged Securities or
any part thereof for any purpose consistent with the terms of this Agreement and
the Letter Agreement; provided, however, that Pledgor will not be entitled to
exercise any such right if the purpose thereof is to interfere with the exercise
of the rights and remedies of the Company under this Agreement or the Letter
Agreement.

          (ii) The Company shall execute and deliver to Pledgor, or cause to be
executed and delivered to Pledgor, all such proxies, powers of attorney and
other indorsements or instruments as Pledgor may reasonably request for the
purpose of enabling Pledgor to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i) above and to
receive the cash dividends and other payments it is entitled to receive pursuant
to subparagraph (iii) below.

          (iii) Pledgor shall be entitled to receive and retain any and all cash
dividends, distributions, interest and principal paid on the Pledged Securities
to the extent and only to the extent that such cash dividends, distributions,
interest and principal are permitted by, and otherwise paid, in accordance with
applicable laws. All noncash dividends, distributions, interest and principal,
and all dividends, distributions, interest and principal paid or payable in cash
or otherwise in connection with a partial or total liquidation or dissolution,
return of capital, capital surplus or paid-in surplus, and all other
distributions (other than distributions referred to in the preceding sentence)
made on or in respect of the Pledged Securities, whether paid or payable in cash
or otherwise, whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the Greka or received in
exchange for Pledged Securities or any part thereof, or in redemption thereof,
or as a result of any merger, consolidation, acquisition or other exchange of
assets to which such Greka may be a party or otherwise, shall be and become part
of the Collateral, and, if received by Pledgor, shall not be commingled by
Pledgor with any of its other funds or property but shall be held separate and
apart therefrom, shall be held in trust for the benefit of the Company and shall
be forthwith delivered to the Company in the same form as so received (with any
necessary endorsement).

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<PAGE>


     (b) Upon the occurrence and during the continuance of an Event of Default,
all rights of Pledgor to dividends, distributions, interest or principal that
Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall
cease, and all such rights shall thereupon become vested in the Company, which
shall have the sole and exclusive right and authority to receive and retain such
dividends, distributions, interest or principal. All dividends, distributions,
interest or principal received by Pledgor contrary to the provisions of this
Section 5 shall be held in trust for the benefit of the Company, shall be
segregated from other property or funds of Pledgor and shall be forthwith
delivered to the Company upon demand in the same form as so received (with any
necessary endorsement). Any and all money and other property paid over to or
received by the Company pursuant to the provisions of this paragraph (b) shall
be retained by the Company and applied in accordance with the provisions of
Section 7.

     (c) Upon the occurrence and during the continuance of an Event of Default,
all rights of Pledgor to exercise the voting and consensual rights and powers it
is entitled to exercise pursuant to paragraph (a)(i) of this Section 5, and the
obligations of the Company under paragraph (a)(ii) of this Section 5, shall
cease, and all such rights shall thereupon become vested in the Company, which
shall have the sole and exclusive right and authority to exercise such voting
and consensual rights and powers. After all Events of Default have been cured or
waived, Pledgor will have the right to exercise the voting and consensual rights
and powers that it would otherwise be entitled to exercise pursuant to the terms
of paragraph (a)(i) above.

     SECTION 6. Remedies upon Default.

     (a) Upon the occurrence and during the continuance of an Event of Default,
subject to applicable regulatory and legal requirements, the Company may sell
the Collateral, or any part thereof, at public or private sale or at any
broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Company shall deem appropriate. The Company shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof or to impose other restrictions
necessary in its judgment to ensure compliance with applicable securities laws,
as more fully set forth in Section 11, and upon consummation of any such sale
the Company shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of Pledgor, and, to the extent permitted by applicable law,
Pledgor hereby waives all rights of redemption, stay, valuation and appraisal
Pledgor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.

     (b) The Company shall give a Pledgor 10 days' prior written notice (which
Pledgor agrees is reasonable notice within the meaning of Section 9-504(3) of
the Uniform Commercial Code as in effect in the State of Texas or its equivalent
in other jurisdictions) of the Company's intention to make any sale of Pledgor's
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to

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<PAGE>


be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Company may fix and state in the notice of such sale. At any such sale,
the Collateral, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Company may (in its sole and absolute
discretion) determine. The Company shall not be obligated to make any sale of
any Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of such Collateral shall have been given. The Company may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by the Company until the sale price is paid in full by
the purchaser or purchasers thereof, but the Company shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted by
applicable law, private) sale made pursuant to this Section 6, Greka or any
other person may bid for or purchase on terms and conditions acceptable to the
Company, free from any right of redemption, stay or appraisal on the part of
Pledgor (all said rights being also hereby waived and released), the Collateral
or any part thereof offered for sale and may make payment on account thereof by
using any claim then due and payable to it from Pledgor as a credit against the
purchase price, and it may, upon compliance with the terms of sale, hold, retain
and dispose of such property without further accountability to Pledgor therefor.
For purposes hereof, (i) a written agreement to purchase the Collateral or any
portion thereof shall be treated as a sale thereof, (ii) the Company shall be
free to carry out such sale pursuant to such agreement and (iii) Pledgor shall
not be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Company shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full. As an alternative to exercising the power of sale
herein conferred upon it, the Company may proceed by a suit or suits at law or
in equity to foreclose upon the Collateral and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section 6 shall be deemed
to conform to the commercially reasonable standards as provided in Section
9-504(3) of the Uniform Commercial Code as in effect in the State of Texas or
its equivalent in other jurisdictions.

     SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied by the Company as follows:

          FIRST, to the payment of all costs and expenses incurred by the
     Company in connection with such sale or otherwise in connection with this
     Agreement or the Letter Agreement, including all court costs and the
     reasonable fees and expenses of its agents and legal counsel, the repayment
     of all advances made by the Company hereunder or under the Letter Agreement
     on behalf of Pledgor and any other costs or expenses incurred in connection
     with the exercise of any right or remedy hereunder or under the Letter
     Agreement;

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<PAGE>


          SECOND, to the payment in full of the Obligations; and

          THIRD, to Pledgor, its successors or assigns, or as a court of
     competent jurisdiction may otherwise direct.

     The Company may suspend application of any cash or proceeds to the extent
such suspension is advisable in the Company's good faith judgment in order to
protect its rights or interests. Upon any sale of the Collateral by the Company
(including pursuant to a power of sale granted by statute or under a judicial
proceeding), the receipt of the purchase money by the Company or of the officer
making the sale shall be a sufficient discharge to the purchaser or purchasers
of the Collateral so sold and such purchaser or purchasers shall not be
obligated to see to the application of any part of the purchase money paid over
to the Company or such officer or be answerable in any way for the
misapplication thereof.

     SECTION 8. Reimbursement of Agent. (a) Pledgor agrees to pay upon demand to
the Company the amount of any and all reasonable expenses, including the
reasonable fees, other charges and disbursements of its counsel and of any
experts or agents, that the Company may incur in connection with (i) the
administration of this Agreement or the Letter Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral or (iii) the exercise or enforcement of any of the rights of
the Company hereunder.

     (b) Pledgor agrees to indemnify the Company, each affiliate of the Company,
any of the foregoing Persons and each of their respective directors, officers,
employees, agents, counsel, accountants and controlling persons (each an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees, other charges and disbursements, incurred by or asserted against
any Indemnitee arising out of, in any way connected with, or as a result of (i)
the execution or delivery of this Agreement, the Letter Agreement or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations thereunder or the consummation of
the transactions contemplated hereby and thereby or (ii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee. In connection with any
claim, litigation, investigation or proceeding referred to in the preceding
sentence, the Indemnitees will endeavor to avoid duplication of effort and
expense by employing common counsel (including special or local counsel, where
required), which shall be nominated by the Company, it being understood that an
Indemnitee will in any event be entitled to separate counsel (i) if such
Indemnitee may have defenses available to it that are different from or
potentially inconsistent with defenses that may be asserted by other
Indemnitees, (ii) if the representation by a single counsel of such Indemnitee
and other Indemnitees would otherwise be inappropriate due to actual or
potential differences in the interests of the Indemnitees or (iii) if Pledgor
shall agree to the retention of separate counsel.

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<PAGE>


     (c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby. The provisions of this Section 8 shall remain
operative and in full force and effect regardless of the termination of this
Agreement or the Letter Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or the Letter
Agreement or any investigation made by or on behalf of the Company. All amounts
due under this Section 8 shall be payable on written demand therefor and shall
bear interest from the date which is five Business Days after such demand until
paid at the rate of 10% per annum.

     SECTION 9. Agent Appointed Attorney-in-Fact. Pledgor hereby appoints the
Company as the attorney-in-fact of Pledgor for the purpose of carrying out the
provisions of this Agreement and taking any action and executing any instrument
that the Company may deem necessary or advisable to accomplish the purposes
hereof, which appointment is irrevocable and coupled with an interest. Without
limiting the generality of the foregoing, the Company shall have the right, upon
the occurrence and during the continuance of an Event of Default, with full
power of substitution either in the Company's name or in the name of Pledgor, to
ask for, demand, sue for, collect, receive and give acquittance for any and all
moneys due or to become due under and by virtue of any Collateral, to endorse
checks, drafts, orders and other instruments for the payment of money payable to
Pledgor representing any interest or dividend or other distribution payable in
respect of the Collateral or any part thereof or on account thereof and to give
full discharge for the same, to settle, compromise, prosecute or defend any
action, claim or proceeding with respect thereto, and to sell, assign, endorse,
pledge, transfer and to make any agreement respecting, or otherwise deal with,
the same; provided that (i) if no Event of Default has occurred and is
continuing, the Company shall only exercise its rights under this Section 9 to
take actions that Pledgor are required to perform under this Agreement and have
not performed within three Business Days after receipt by the Borrower of notice
from the Company requesting that any such actions be taken and (ii) nothing
herein contained shall be construed as requiring or obligating the Company to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Company, or to present or file any claim or notice,
or to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby.
The Company shall be accountable only for amounts actually received as a result
of the exercise of the powers granted to them herein, and neither they nor their
officers, directors, employees, counsel, accountants or agents shall be
responsible to Pledgor for any act or failure to act hereunder, except for their
own gross negligence or willful misconduct.

     SECTION 10. Waivers; Remedies; Amendment. (a) No failure or delay of the
Company in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. Subject to applicable laws, the rights and remedies of the
Company hereunder are exclusive of any rights or remedies that the Company would
otherwise have. No waiver of any provisions of this Agreement or consent to any
departure by Pledgor therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice or demand on Pledgor in any case shall entitle Pledgor to any other or
further notice or demand in similar or other circumstances.

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     (b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into between the
Company and Pledgor.

     SECTION 11. Securities Act, etc. In view of the position of Pledgor in
relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Pledgor understands
that compliance with the Federal Securities Laws might very strictly limit the
course of conduct of the Company if the Company were to attempt to dispose of
all or any part of the Pledged Securities, and might also limit the extent to
which or the manner in which any subsequent transferee of any Pledged Securities
could dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Company in any attempt to dispose of all or part of
the Pledged Securities under applicable "Blue Sky" or other state securities
laws or similar laws analogous in purpose or effect. Pledgor recognizes that in
light of such restrictions and limitations the Company may, with respect to any
sale of the Pledged Securities, limit the purchasers to those who will agree,
among other things, to acquire such Pledged Securities for their own account,
for investment, and not with a view to the distribution or resale thereof.
Pledgor acknowledges and agrees that in light of such restrictions and
limitations, the Company, in its sole and absolute discretion, (a) may proceed
to make such a sale whether or not a registration statement for the purpose of
registering such Pledged Securities or part thereof shall have been filed under
the Federal Securities Laws and (b) may approach and negotiate with a single
potential purchaser to effect such sale. Pledgor acknowledges and agrees that
any such sale might result in prices and other terms less favorable to the
seller than if such sale were a public sale without such restrictions. In the
event of any such sale, the Company shall incur no responsibility or liability
for selling all or any part of the Pledged Securities at a price that the
Company, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were approached.
The provisions of this Section 11 will apply notwithstanding the existence of a
public or private market upon which the quotations or sales prices may exceed
substantially the price at which the Company sells.

     SECTION 12. Security Interest Absolute. All rights of the Company
hereunder, the grant of a security interest in the Collateral and all
obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Letter
Agreement or any other agreement with respect to the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Letter Agreement or any other agreement or instrument relating to any of the
foregoing, (c) any exchange, release or nonperfection of any other collateral,
or any release or amendment or waiver of or consent to or departure from any
guaranty, for the Obligations or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Pledgor in respect of the
Obligations or in respect of this Agreement or the Letter Agreement (other than
the indefeasible payment in full of all the Obligations).

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     SECTION 13. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been
indefeasibly paid in full.

     (b) In connection with any termination or release pursuant to paragraph (a)
above, the Company shall execute and deliver to Pledgor, at Pledgor's expense,
all documents that Pledgor shall reasonably request to evidence such termination
or release. Any execution and delivery of documents pursuant to this Section 13
shall be without recourse to or warranty by the Company other than that the
Collateral (other than any Collateral that shall have been sold in accordance
with Section 6) is not subject to any interest granted by the Company in favor
of any other person.

     SECTION 14. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 8 of the Letter Agreement.

     SECTION 15. Further Assurances. Pledgor agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements, indorsements and instruments, as the Company may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Company its rights and remedies hereunder.

     SECTION 16. Binding Effect; Several Agreement; Assignments. This Agreement
and any or all rights and obligations hereunder may be assigned at any time by
the Company without the consent of or notification to Pledgor. Neither this
Agreement nor any rights or obligations hereunder may be assigned by Pledgor.
This Agreement shall become effective as to Pledgor when a counterpart hereof
executed on behalf of Pledgor shall have been delivered to the Company and a
counterpart hereof shall have been executed on behalf of the Company, and
thereafter shall be binding upon Pledgor and the Company, and their respective
successors and assigns, enforceable by Pledgor against the Company and by the
Company against Pledgor, and their respective successors and assigns, and shall
inure to the benefit of Pledgor and the Company, and their respective successors
and assigns, except that no Pledgor shall have the right to assign its rights
hereunder or any interest herein or in the Collateral (and any such attempted
assignment shall be void).

     SECTION 17. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or the Letter Agreement shall be considered to have
been relied upon by the Company, regardless of any investigation made by the
Company or on its behalf, and shall continue in full force and effect until
terminated in accordance with Section 13.

     (b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

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<PAGE>


     SECTION 18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.

     SECTION 19. Submission to Jurisdiction. EACH OF THE PARTIES SUBMITS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN HOUSTON, TEXAS IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES
THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT. EACH PARTY ALSO AGREES NOT TO BRING ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY OTHER COURT. EACH
OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF
ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY, OR OTHER
SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT THERETO. EITHER
PARTY MAY MAKE SERVICE ON THE OTHER PARTY BY SENDING OR DELIVERING A COPY OF THE
PROCESS TO THE PARTY TO BE SERVED IN THE MANNER PROVIDED FOR THE GIVING OF
NOTICES IN SECTION 14. EACH PARTY AGREES THAT A FINAL JUDGMENT IN ANY ACTION OR
PROCEEDING SO BROUGHT SHALL BE CONCLUSIVE AND MAY BE ENFORCED BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW OR AT EQUITY.

     SECTION 20. Waiver Of Jury Trial. TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, THE COMPANY AND PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVES ANY RIGHT WHICH IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT, THE LETTER AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY.

     SECTION 21. Rules of Interpretation. Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting
this Agreement.

     SECTION 22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 16. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.

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<PAGE>


     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written. CAPCO RESOURCES LTD.


                                             By: /s/ Gene E. Hays
                                             -----------------------------------
                                             Name: Gene E. Hays
                                             -----------------------------------
                                             Title: Corporate Secretary
                                             -----------------------------------


                                             CHAPARRAL RESOURCES, INC.


                                             By: /s/ Michael B. Young
                                             -----------------------------------
                                             Name: Michael B. Young
                                             -----------------------------------
                                             Title: Treasurer
                                             -----------------------------------



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