ALLEN & COMPANY
 Incorporated



                                 March 31, 1998
                        effective as of November 4, 1997





Chaparral Resources, Inc.
2211 Norfolk, Suite 1150
Houston, Texas 77090

Gentlemen:

     We  are  pleased  to  reaffirm  our  mutual  understanding  concerning  the
retention by Chaparral Resources,  Inc., a Colorado corporation (the "Company"),
of Allen & Company  Incorporated  ("Allen") to act as a  nonexclusive  financial
advisor to the Company on the terms set forth herein.

     1. Scope of Engagement. During the term of this engagement, Allen shall use
its best  efforts to assist  the  Company  in  consummating,  though one or more
offerings of the Company's  securities,  on terms  acceptable to the Company and
such  investors as shall be identified to the  satisfaction  of the Company,  an
aggregate of $22.5 million of its securities (the "Securities"). Such offers and
sales of the Securities or other financing  transactions as to which Allen shall
assist the Company are hereinafter referred to collectively as the "Offerings."

     2. Appointment of Allen. Allen is hereby appointed a nonexclusive financial
advisor to the Company  during the Offering  Period (as defined  herein) for the
purpose of  assisting  the  Company  with the sale of  Securities  to  qualified
investors or other alternative financings.  The "Offering Period" shall commence
on the date hereof and shall continue until November 25, 1999, unless terminated
in  accordance  with the terms  hereof or extended for an  additional  period by
written  agreement  between you and Allen.  Allen hereby accepts such engagement
and  agrees  to  assist  the  Company  with  sales of such  Securities  or other
alternative  financings on a "best efforts"  basis.  Except as  contemplated  by
Section  13  hereof,  Allen's  agency  hereunder  may not be  terminated  by the
Company.  It is  understood  that  the  Offerings  of the  Securities  or  other
financings  are  intended  by all  parties  to be exempt  from the  registration
requirements  of the Act  pursuant  to Section  4(2)  thereof  and the rules and
regulations of the Securities and Exchange Commission thereunder (the "Rules and
Regulations").

     3. Company  Disclosure.  The Company has prepared and will deliver to Allen
from time to time a reasonable  number of copies of certain  documents  filed by
the Company with the Securities and Exchange Commission, including the Company's
Annual  Reports on Form 10-K and  Quarterly  Reports  on Form  10-Q,  as well as
certain  supplemental  documents  referred to therein or requested by Allen.  In
addition,  the Company  shall make  available to Allen access to such members of

 

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Chaparral Resources, Inc.
Page 2


its management as necessary or appropriate for Allen to conduct its periodic due
diligence  reviews of the  Company.  Such  documents  (including  all  documents
delivered in connection therewith) and the information presented by such members
of the  Company's  management,  in each case as amended or  supplemented  by the
Company from time to time, are  collectively  referred to herein as the "Company
Disclosure."

     4. Closing; Delivery; Placement Fees.

          (a) It is  anticipated  that one or more  closings of the purchase and
sale of Securities or other financings with which Allen shall assist the Company
(each,  a  "Closing")  shall  take  place  at the  offices  of  Allen &  Company
Incorporated,  711 Fifth Avenue,  New York, New York 10022 at such date or dates
as may be agreed to by the Company and Allen.

          (b) At each Closing  there shall be delivered by the Company  executed
copies of an applicable Purchase Agreement to be entered into by the Company and
the applicable purchasers of the Securities  substantially in the form delivered
to Allen (the  "Purchase  Agreement").  In addition,  at each  Closing,  (i) the
Purchaser  shall deliver the full  purchase  price of the  Securities  which the
Purchaser is to purchase at such  Closing,  and (ii) the Company will deliver to
the Purchaser certificates or other appropriate  documentation  representing the
Securities  purchased by it and other  documents as set forth in the  applicable
Purchase Agreement.

          (c) The  Company  has issued to Allen a retainer  for  services  to be
rendered  hereunder in the form of a warrant (the "Warrant") to purchase 900,000
shares of the Company's  common stock,  par value $.10 per share, at an exercise
price of $.01 per share. Such Warrant may be immediately exercised by Allen only
with  respect to such  proportion  of the Warrant as funds  raised in  Offerings
bears to $22.5 million;  thus, the Warrant can be exercised as to 200,000 shares
of such common  stock in  consideration  for the sale by the Company (as part of
any Offering that is consummated  in a Closing) of $5 million of Securities.  At
the time of each subsequent  Closing,  the Warrant shall become exercisable with
respect to one additional  share of Common Stock for each $25 of Securities sold
(or other financing  obtained) at such Closing.  Any portion of the Warrant that
does  not  become  exercisable  pursuant  to  this  Section  4(c)  prior  to the
termination  of the  Offering  Period  shall  expire upon such  termination.  In
addition,   at  each  Closing,   the  Company  shall  reimburse  Allen  for  its
out-of-pocket   expenses  as  provided  in  Section  6(d)  hereof,  against  the
presentation of bills therefor.

     5.  Representations  and  Warranties  of the  Company.  The Company  hereby
represents  and warrants that this letter  agreement  has been duly  authorized,
executed  and  delivered  on behalf of the Company and  constitutes  a valid and
binding  agreement of the Company,  enforceable  in  accordance  with its terms,
except as rights to  indemnity  or  contribution  hereunder  may be  limited  by
Federal or state securities laws. The Company is aware of no facts which lead it
to believe  that the  Company  Disclosure  contains  or will  contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements therein not misleading.



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Chaparral Resources, Inc.
Page 3



     6.  Covenants of the Company.  The Company  covenants and agrees with Allen
that:

          (a) The Company  will  notify  Allen of any event of which it is aware
and as a result  of  which  the  Company  Disclosure  would  include  an  untrue
statement  of a material  fact or omit to state any material  fact  necessary to
make the statements therein not misleading; and it will not use any amendment or
supplement to the Company  Disclosure until Allen have given its consent to such
amendment or  supplement.  The Company  will conduct the Offering in  compliance
with Section 4(2) of the Act and the Rules and  Regulations  and all  applicable
state securities laws and regulations.

          (b) The Company will use its best efforts (i) to coordinate with Allen
to qualify the  Securities for offer and sale under the "Blue Sky" or securities
laws of such  jurisdictions  as Allen may  designate  and (ii) to continue  such
qualifications  in effect for so long as may be  required  for  purposes  of the
private  placements  of the  Securities,  except that the  Company  shall not be
required  in  connection  therewith  or as a  condition  thereof to qualify as a
foreign corporation or to execute a general consent to service of process in any
state.

          (c) The Company covenants for the benefit of each applicable purchaser
of securities (including, but not limited to, Exeter) to use its best efforts to
file promptly  after the applicable  Closing and cause to become  effective with
the Securities and Exchange Commission a registration  statement registering (i)
the Exeter Shares and (ii) any other Securities upon which the Company and Allen
shall agree, for resale by such purchasers from time to time.

          (d) The Company  covenants and agrees with Allen that the Company will
pay all expenses,  fees and taxes in connection  with (i) the preparation of the
Company Disclosure and all other documents  delivered to prospective  investors,
(ii) the  furnishing  of closing  documents and (iii) the  qualification  of the
Securities for offer or sale under the securities laws of such  jurisdictions as
Allen may reasonably  designate.  The Company also agrees that it will reimburse
Allen at each  Closing for its  out-of-pocket  expenses in  connection  with the
Offering, and will pay the reasonable fees and expenses of counsel to Allen.

          (e) The Company  agrees to  cooperate  with Allen and counsel to Allen
with respect to their due diligence investigation.

     7.  Representations,  Warranties and Covenants of Allen.  Allen represents,
warrants and covenants as follows:

          (a) This  Agreement  has been duly executed and delivered by Allen and
constitutes a valid and binding obligation of Allen,  enforceable  against it in
accordance  with its  terms,  except  as  rights to  indemnity  or  contribution
hereunder may be limited by Federal or state securities laws.

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Chaparral Resources, Inc.
Page 4



          (b) Allen will not make an offer of  Securities by any form of general
solicitation or general advertising in violation of Rule 502(c) of Regulation D.

          (c) Allen shall not deliver to any offeree  without the consent of the
Company  any  information   concerning  the  Offering  other  than  the  Company
Disclosure contemplated to be delivered hereby.

     8.  Conditions  of  Allen's  Performance.  The  purchase  and  sale  of the
Securities and the  obligations of Allen as provided  herein shall be subject to
the  accuracy in all material  respects,  as of the date hereof and each Closing
Date (as if made on and as of such Closing  Date),  of the  representations  and
warranties of the Company herein, to the performance in all material respects by
the  Company  of its  obligations  hereunder,  and to the  following  additional
conditions:

          (a) Upon request of Allen,  Allen shall have  received a  certificate,
dated such Closing Date, of the President of the Company to the effect that:

          (i)  The  representations  and  warranties  of  the  Company  in  this
     Agreement  are true and correct in all material  respects as if made on and
     as of such  Closing  Date;  and  the  Company  has  complied  with  all the
     agreements and satisfied all the conditions in all material respects on its
     part to be performed or satisfied at or prior to such Closing Date; and

          (ii)  Except  as  set  forth  in  the  Company  Disclosure  or in  the
     applicable Purchase Agreement and subsequent to the date of the most recent
     financial  statements included with the Company  Disclosure,  there has not
     been any material adverse change in the condition (financial or otherwise),
     business or results of operations of the Company and its subsidiaries taken
     as a whole.

          (b) The Company shall have  furnished to Allen such  certificates,  in
addition to those  specifically  mentioned  herein,  as Allen or its counsel may
have reasonably  requested,  as to the accuracy and completeness at such Closing
Date (and as of the date of any Purchase  Agreements  subsequent  to the Closing
Date) of any  statement  in the Company  Disclosure,  as to the accuracy at such
Closing Date of the  representations and warranties of the Company herein, as to
the  performance  by the  Company of its  obligations  hereunder,  and as to the
fulfillment  of the conditions  concurrent  and precedent to the  obligations of
Allen hereunder.

     9. Indemnification. The Company will indemnify and hold harmless Allen, the
directors  and  officers of Allen and each person,  if any,  who controls  Allen
within  the  meaning  of  the  Act  against  any  losses,   claims,  damages  or
liabilities, joint or several, to which Allen or any such directors, officers or
controlling persons may become subject,  under the Act or otherwise,  insofar as
such losses,  claims,  damages or  liabilities  (or actions in respect  thereof)

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Chaparral Resources, Inc.
Page 5


arise  out of or are based  upon (i) any  untrue  statement  or  alleged  untrue
statement of any material fact contained in the Company Disclosure, or arise out
of or are  based  upon the  omission  or  alleged  omission  to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein not misleading; or (ii) the Company's engagement of Allen or any service
Allen  performs  for the Company or on its behalf  pursuant  to this  Agreement,
except to the extent that any such loss, claim,  damage or liability is found by
a court of competent  jurisdiction  in a judgment that has become final (in that
it is no longer  subject  to appeal or  review) to have  resulted  directly  and
primarily from such indemnified  party's gross negligence or willful misconduct.
Subject to subsection (c) below,  the Company will  reimburse  Allen or any such
directors,  officers  or  controlling  persons  for any legal or other  expenses
reasonably  incurred by Allen or any such  directors,  officers  or  controlling
persons in connection  with  investigating  or defending  any such loss,  claim,
damage,  liability or action;  provided,  however,  that the Company will not be
liable in any case to the extent that any such loss, claim, damage, liability or
action  arises out of or is based  upon an untrue  statement  or alleged  untrue
statement or omission or alleged omission made in the Company Disclosure in
reliance upon and in conformity with written  information  furnished by and with
respect to Allen  specifically for use in the preparation  thereof.  The Company
shall not be  required to  indemnify  Allen or any such  directors,  officers or
controlling  persons for any payment made to any claimant in  settlement  of any
suit or claim  unless such payment is approved by the  Company,  which  approval
shall not be unreasonably  withheld or delayed. This indemnity agreement will be
in addition to any  liability  which the Company may otherwise  have,  but in no
event shall an indemnified party receive more than the amount of its claim.

          (b) Allen will  indemnify and hold harmless the Company,  its officers
and  directors  and each person,  if any,  who  controls the Company  within the
meaning of the Act against any losses, claims, damages or liabilities,  joint or
several,  to which the Company,  or any such directors,  officers or controlling
persons may be or become  subject,  under the Act or otherwise,  insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material fact  contained in the Company  Disclosure or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent,  but only to the extent,  that such untrue statement
or alleged  untrue  statement  or omission or alleged  omission  was made in the
Company  Disclosure in reliance upon and in conformity with written  information
furnished by and with respect to Allen  specifically  for use in the preparation
thereof; and (subject to subsection (c) below) will reimburse the Company or any
such directors,  officers or controlling persons for any legal or other expenses
reasonably incurred by the Company or any such director,  officer or controlling
person in  connection  with  investigating  or defending  any such loss,  claim,
damage,  liability  or actions.  Allen shall not be  required to  indemnify  the
Company or any such directors,  officers or controlling  persons for any payment
made to any  claimant  in  settlement  of any suit or claim  unless  payment  is
approved by Allen, which approval shall not be unreasonably withheld or delayed.
This  indemnity  agreement  will  be in  addition  to any  liability  Allen  may
otherwise have, but in no event shall an indemnified party receive more than the
amount of its claim.


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Chaparral Resources, Inc.
Page 6


          (c) Promptly after receipt by an indemnified party under subparagraphs
9(a) or (b) of  notice of the  commencement  of any  action or other  proceeding
(including  governmental  investigations)  in respect of which  indemnity may be
sought, such indemnified party will, if a claim in respect thereof is to be made
against the  indemnifying  party under such  subparagraphs,  promptly notify the
indemnifying party in writing of the commencement  thereof;  but the omission to
so notify the indemnifying party will not relieve it from any liability which it
may have to any  indemnified  party otherwise than under such  subparagraph.  In
case any such action shall be brought against any
indemnified  party, and it shall promptly notify the  indemnifying  party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, assume and control the defense thereof with
counsel  chosen  by it and  after  notice  from the  indemnifying  party to such
indemnified  party of its  election so to assume and control  such  defense with
counsel  chosen by it, it shall  bear all  expenses  of such  defense.  Any such
indemnified  party shall have the right to employ  separate  counsel in any such
action and to participate in the defense  thereof,  but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless:

          (i) the  indemnifying  party has agreed to pay such fees and expenses;
     or

          (ii) the indemnifying party shall have failed to assume the defense of
     such action or proceeding and employ  counsel  reasonably  satisfactory  to
     such indemnified party in any such action or proceeding; or

          (iii) the named  parties to any such action or  proceeding  (including
     any  impleaded  parties)  include  both  such  indemnified  party  and  the
     indemnifying  party, and such indemnified  party shall have been advised by
     counsel  that there may be one or more  legal  defenses  available  to such
     party which are  different  from or  additional  to those  available to the
     indemnifying  party (in which case, if such indemnified  party notifies the
     indemnifying  party in writing that it elects to employ separate counsel at
     the expense of the indemnifying  party,  the  indemnifying  party shall not
     have the right to assume the defense of such action or proceeding on behalf
     of such indemnified party).

          The  indemnifying  party  shall not, in  connection  with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or  circumstances,  be liable for the reasonable  fees and expenses of more than
one separate firm of attorneys at any time for the indemnified party, which firm
shall be designated in writing by the indemnified party.

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Chaparral Resources, Inc.
Page 7


     10. Contribution.  In order to provide for contribution in circumstances in
which the indemnification provided for in Section 9(a) or 9(b) hereof is for any
reason held to be  unavailable  to any party  entitled to such  indemnification,
each  indemnifying  party shall contribute to the amount paid or payable by such
indemnified party as a result of losses,  claims, damages and liabilities of the
nature   contemplated  by  such   indemnification   provisions   (including  any
investigation, legal and other expenses incurred in connection with, and amounts
paid in settlement of, any action, suit or proceeding or any claims asserted) to
which the Company and Allen may be subject, in such proportions so that Allen is
responsible for that portion in each case represented by the percentage that the
respective  placement fee appearing in Section 4(c) of this  Agreement  bears to
the offering price of the  Securities,  and the Company is  responsible  for the
remaining  portion;  provided,  however,  that no person  guilty  of  fraudulent
misrepresentation  shall be entitled to contribution from any person who was not
guilty of such  fraudulent  misrepresentation.  For purposes of this Section 10,
each person,  if any, who controls Allen within the meaning of Section 15 of the
Act shall have the same rights to  contribution  as Allen,  and each person,  if
any, who controls the Company  within the meaning of Section 15 of the Act, each
officer of the  Company and each  director  of the  Company  shall have the same
right  to  contribution  as the  Company,  subject  in each  case  to the  prior
sentence.  Any party entitled to  contribution  will,  promptly after receipt of
notice of commencement of any action,  suit or proceeding  against such party in
respect of which claim for contribution may be sought, promptly notify the other
party or parties in writing of the commencement  thereof, but the omission to so
notify such party or parties  shall not  relieve the party or parties  from whom
contribution  may be  sought  from  any  other  obligation  it or they  may have
hereunder or otherwise  than under this Section 10. No party shall be liable for
contribution with respect to any action or claim settled without its consent.

     11.    Representations   and   Agreements   to   Survive   Delivery.    All
representations,  warranties  or agreements of the Company or of Allen herein or
in certificates  delivered  pursuant  hereto shall remain  operative and in full
force and effect regardless of any  investigation  made by or on behalf of Allen
or any controlling  person,  the Company,  or any of its officers,  directors or
controlling persons, and shall survive delivery of the Securities.

     12.  Publicity  and  Disclosure.  Except  as may  be  required  by  federal
securities laws, no press release or public disclosure,  either written or oral,
of the  Offering or any matter  related to the  Offering  shall be made  without
Allen's prior approval.

     13.  Termination.  Allen's  obligation to proceed  hereunder is conditioned
upon its  continuing  judgment that market  conditions  in general,  and as they
relate to the  Company's  securities in  particular,  are such as to continue to
make  appropriate the offering and sale of the Securities in the manner provided
for herein.  Notwithstanding  the foregoing,  Allen may, in its sole discretion,
terminate this Agreement if the initial  Closing of the sale of over  $5,000,000
of the Securities does not take place before April,  1998, or such other date as
the parties  hereto may agree in  writing.  Upon any such  termination,  (i) the
Company  shall  reimburse  Allen  for  its  out-of-pocket  expenses  and pay the
reasonable  fees and  expenses of counsel to Allen,  in each case as provided in
Section  6(d)  hereof,  and (ii) the  obligations  of the  parties  set forth in
Sections 9 and 10 shall survive termination of this Agreement.

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Chaparral Resources, Inc.
Page 8


     14.  Notice.  All  notices or  communications  hereunder,  except as herein
otherwise specifically provided,  shall be in writing and if sent to Allen shall
be  mailed,   delivered  or  telegraphed  and  confirmed,  at  Allen  &  Company
Incorporated,  711 Fifth Avenue, New York, New York 10022, Attn: Kim M. Wieland,
Managing  Director  and  Chief  Financial  Officer,  with a  copy  to  Werbel  &
Carnelutti,  a Professional  Corporation,  711 Fifth Avenue,  New York, New York
10022, Attn: Guy N. Molinari, Esq., or, if sent to the Company, at 2211 Norfolk,
Suite  1150,  Houston,  Texas  77090,  Attn:  President,  with a copy  to  Smith
McCullough Ferguson, P.C., 4643 South Ulster Street, Suite 900, Denver, Colorado
80237, Attn: Thomas S. Smith, Esq.

     15. Benefits of the Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and Allen and their  respective  successors  and
assigns.  This  agreement  shall  supersede  and replace that certain  Placement
Agency Agreement dated November 4, 1997 between the Company and Allen.

     16.  Applicable  Law. This  Agreement  shall be governed by,  construed and
enforced in accordance  with the laws of the State of New York without regard to
the conflicts of law provisions thereof.

     17.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of  which  shall be  deemed  an  original,  and all of which
together shall constitute one and the same instrument.




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Chaparral Resources, Inc.
Page 9

     If you are in agreement with the foregoing  please execute where  indicated
below and return a copy to us for files.

                                         Very truly yours,

                                         ALLEN & COMPANY INCORPORATED


                                         By: /s/  Kim M. Wieland
                                            ------------------------------------
                                            Name:  Kim M. Wieland
                                            Title:  Managing Director
                                                    and Chief Financial Officer



CHAPARRAL RESOURCES, INC.


By:
   ---------------------------
   Name:
   Title: