APPENDIX B

                            CHAPARRAL RESOURCES, INC.

                  1997 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN

Article I. Purpose of the Plan

The Chaparral  Resources,  Inc., 1997  Nonemployee  Directors' Stock Option Plan
("Plan") is  intended to promote the  interests  of  Chaparral  Resources,  Inc.
("Company"),   and  its   stockholders   by   helping   to  reward   and  retain
highly-qualified  independent directors, and allowing them to develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company. Accordingly, the Company shall grant to directors of the Company
who are not  employees of the Company or any of its  subsidiaries  ("Nonemployee
Directors")  the option to  purchase  shares of the common  stock of the Company
("Stock"),  as  hereinafter  set  forth.  For  purposes  of the  Plan,  the term
Nonemployee   Directors  shall  include  any  director  who  is  an  independent
contractor for the Company,  has a consulting  agreement with the Company and/or
does not receive regular wages subject to tax withholding at the time the option
to such director is granted.

Article 2. Option Agreements

Each Option shall be evidenced  by a written  agreement in the form  attached to
the Plan.

Article 3. Eligibility of Optionee

Options may be granted only to individuals who are Nonemployee  Directors of the
Company. As of the date of the annual meeting of the stockholders of the Company
in each year that the Plan is in effect as provided in Paragraph 6 hereof,  each
Nonemployee  Director then in office or elected to the Board of Directors of the
Company (the  "Board") on such date shall  receive,  without the exercise of the
discretion of any person or persons,  a ten year Option  exercisable  for 25,000
shares (subject to adjustment in the manner hereinafter provided). If, as of any
date  that the Plan is in  effect,  there  are not  sufficient  shares  of Stock
available,  each  Nonemployee  Director  shall  receive an Option for his or her
pro-rata share of the total number of shares of Stock then  available  under the
Plan.  All Options  granted  shall be at the price set forth herein and shall be
subject to adjustment as hereinafter provided.

Article 4. Shares Subject to Plan

The aggregate  number of shares which may be issued under Options  granted under
the Plan shall not, on the date of the grant of any Option hereunder,  exceed an
amount equal to five percent  (5%) of the number of then  outstanding  shares of
Stock.  Such shares may consist of  authorized  but unissued  shares of Stock or
previously issued shares of Stock reacquired by the Company.  Any of such shares
which remain  unissued and which are not subject to  outstanding  Options at the
termination  of the Plan  shall  cease to be  subject  to the Plan,  but,  until

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termination  of the Plan,  the  Company  shall at all  times  make  available  a
sufficient  number of shares to meet the  requirements  of the Plan.  Should any
Option  hereunder  expire or terminate prior to its exercise in full, the shares
theretofore  subject to such  Option  may again be subject to an Option  granted
under the Plan.

Article 5. Option Price

The purchase price of the Stock issued under the Option shall be the fair market
value of the Stock as of the date the Option is granted.  For all purposes under
the Plan,  the fair market value of a share of Stock on a particular  date shall
be equal to the mean of the high and low sales  prices of the Stock (I) reported
by the  National  Market  System or Small Cap Market of NASDAQ on that date,  or
(ii) if the stock is listed on a national stock exchange,  reported on the stock
exchange  composite  tape on that  date;  or, in either  case,  if no prices are
reported on that date,  on the last  preceding  date on which such prices of the
Stock are so  reported.  If the Stock is traded  over the  counter at the time a
determination  of its fair market  value is required to be made  hereunder,  its
fair  market  value  shall be  deemed  to be equal to the  average  between  the
reported high and low prices of Stock on the most recent date on which Stock was
publicly  traded.  In the  event  Stock  is not  publicly  traded  at the time a
determination of its value is required to be made hereunder,  the  determination
of its fair  market  value shall be made by the Board in such manner as it deems
appropriate.

Article 6. Effective Date and Term of Plan

The Plan shall be effective on the date the Plan is approved by the stockholders
of the Company.  Except with respect to Options then outstanding,  if not sooner
terminated  under the provisions of Article 8 hereof,  the Plan shall  terminate
upon and no further  Options shall be granted  after the  expiration of ten (10)
years from the date the Plan is approved by the stockholders of the Company.

Article 7. Recapitalization or Reorganization

7.1 The existence of the Plan and the Options granted hereunder shall not affect
in any way the right or power of the Board or the stockholders of the Company to
make or authorize  any  adjustment,  recapitalization,  reorganization  or other
change  in the  Company's  capital  structure  or its  business,  any  merger or
consolidation  of the  Company,  any  issue of debt or  equity  securities,  the
dissolution or liquidation of the Company or any sale, lease,  exchange or other
disposition of all or any part of its assets or business or any other  corporate
act or proceeding.

7.2 The shares with respect to which  Options may be granted are shares of Stock
as presently  constituted,  but if, and whenever,  prior to the expiration of an
Option  theretofore   granted,   the  Company  shall  effect  a  subdivision  or
consolidation  of shares of Stock or the  payment of a stock  dividend  on Stock
without receipt of consideration  by the Company,  the number of shares of Stock
with respect to which such Option may  thereafter  be exercised (I) in the event
of an increase in the number of outstanding shares shall be proportionately

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increased,  and the purchase price per share shall be  proportionately  reduced,
and (ii) in the event of a reduction in the number of  outstanding  shares shall
be  proportionately   reduced,  and  the  purchase  price  per  share  shall  be
proportionately increased.

7.3 If the Company  recapitalizes,  reclassifies its capital stock, or otherwise
changes its capital  structure (a  "recapitalization"),  the number and class of
shares of Stock  covered by an Option  theretofore  granted shall be adjusted so
that such Option shall  thereafter cover the number and class of shares of stock
and  securities to which the optionee  would have been entitled  pursuant to the
terms of the recapitalization if, immediately prior to the recapitalization, the
optionee  had been the  holder of record of the  number of shares of Stock  then
covered by such Option.

7.4 Any  adjustment  provided for in Articles 7.2 and 7.3 above shall be subject
to any required stockholder action.

7.5 Except as expressly  provided herein,  the issuance by the Company of shares
of stock of any  class or  securities  convertible  into  shares of stock of any
class,  for cash,  property,  labor or  services,  upon  direct  sale,  upon the
exercise of rights or warrants to  subscribe  therefor,  or upon  conversion  of
shares or  obligations  of the  Company  convertible  into such  shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no  adjustment  by reason  thereof  shall be made with respect to, the number of
shares of Stock subject to Options theretofore granted or the purchase price per
share.

Article 8. Amendment or Termination of the Plan

The Board in its  discretion  may terminate the Plan at any time with respect to
any shares for which Options have not previously  been granted.  The Board shall
have the right to alter or amend the Plan or any part thereof from time to time;
provided,  that no change in any  Option  previously  granted  may be made which
would  impair the rights of the optionee  without the consent of such  optionee;
and provided,  further,  that the Board may not make any alteration or amendment
which would materially  increase the benefits accruing to participants under the
Plan,  increase the aggregate  number of shares which may be issued  pursuant to
the provisions of the Plan,  change the class of individuals n registered  under
the Securities  Act of 1933 as amended,  and various state  securities  laws the
Company deems  applicable  and, in the opinion of legal counsel for the Company,
there is no exemption from the registration  requirements of such laws, rules or
regulations available for the offering and sale of such shares.

9.2 It is  intended  that the Plan and any grant of an  Option  made to a person
subject  to  Section  16 of the  Securities  Exchange  Act of 1934,  as  amended
("Securities Act"), meet all of the requirements of Rule 16b-3 promulgated under
the  Securities  Act,  as such rule is  currently  in  effect or as  hereinafter
modified or amended  ("Rule  16b-3").  If any  provision of the Plan or any such
Option would  disqualify  the Plan or such Option under,  or would not otherwise
comply with,  Rule 16b-3,  such provision or Option shall be construed or deemed
amended to conform to Rule 16b-3.

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