EXECUTIVE EMPLOYMENT AGREEMENT


     This Employment Agreement (this "Agreement") is made effective the 11th day
of January 1999 by and between CHAPARRAL RESOURCES, INC., a Colorado corporation
(the "Employer"),  and DR. JACK A. KRUG, an individual  resident in the State of
Colorado (the "Executive").


                                    RECITALS:

     WHEREAS,  Employer  desires to employ  Executive and to have the benefit of
his expertise, skills and services; and

     WHEREAS, Executive desires to be employed by Employer.


                                   AGREEMENT:

     NOW,  THEREFORE,  in  consideration  of the premises,  mutual covenants and
agreements herein after contained, the parties agree as follows:


                                    ARTICLE 1
                                   DEFINITIONS

     For the purposes of this  Agreement,  the following terms have the meanings
specified or referred to in this Article 1:

     "Agreement"--this  Employment  Agreement,  as may be  amended  from time to
time.

     "Affiliate"--means any entity that, directly or indirectly,  through one or
more  intermediaries,  Controls or is Controlled  by, or is under common Control
with the Employer.

     "Benefits"--as defined in Section 3.1(d).

     "Board of Directors"--the board of directors of the Employer.

     "Bonus"--as defined in Section 3.1(b).

     "Compensation"--means Salary, Bonus, Benefits, and stock awards.

     "Confidential  Information"--any  and all (i) trade secrets  concerning the
business and affairs of the Employer,  product  specifications,  data, know-how,
formulae,  compositions,  processes,  designs,  sketches,  photographs,  graphs,
drawings, samples, inventions and ideas, past, current, and planned research and
development,  current  and planned  manufacturing  or  distribution  methods and

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processes, customer lists, price lists, market studies, business plans, computer
software and programs (including object code and source code), computer software
and database technologies,  systems,  structures, and architectures (and related
formulae, compositions,  processes, improvements, devices, know-how, inventions,
discoveries,  concepts, ideas, designs, methods and information),  and any other
information,  however  documented,  that is a trade secret under the laws of the
State of Colorado and other  applicable  laws, (ii)  information  concerning the
business  and  affairs of the  Employer  (which  includes  historical  financial
statements,  financial projections and budgets,  historical and projected sales,
capital  spending budgets and plans, the names and backgrounds of key personnel,
personnel  training and  techniques  and  materials,  and related  information),
however documented, and (iii) notes, analysis, compilations, studies, summaries,
and other material prepared by or for the Employer containing or based, in whole
or in part, on any  information  included in the  foregoing.  This  Confidential
Information  excludes  information  previously  known  or held by  Executive  or
information in the public domain.

     "Control"  or  "Controlled"--means  ownership  of  fifty  percent  (50%) or
greater of the voting stock of an entity.

     "Disability"--as defined in Section 6.2.

     "Effective Date--means January 11, 1999.

     "Employment  Period"--the  term of the  Executive's  employment  under this
Agreement.

     "Fiscal  Year"--the  Employer's  fiscal year, as it exists on the Effective
Date or as may be changed from time to time.

     "For cause"--as defined in Section 6.3.

     "Person"--any    individual,    corporation   (including   any   non-profit
corporation),  general or limited partnership,  limited liability company, joint
venture, estate, trust, association, organization, or governmental body.

     "Plan"--means  Employer's  1998  Incentive and Non  Statutory  Stock Option
Plan.

     "Proprietary Items"--as defined in Section 7.2(a)(iv).

     "Salary"--as defined in Section 3.1(a).

     "USD" - means lawful currency of the United States of America.


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                                    ARTICLE 2
                           EMPLOYMENT TERMS AND DUTIES

2.1  Employment.  The Employer  hereby employs the Executive,  and the Executive
hereby  accepts  employment by the Employer,  upon the terms and  conditions set
forth in this Agreement.

2.2 Term.  Subject to the  provisions of Article 6, the term of the  Executive's
employment  under  this  Agreement  will be three (3) years,  commencing  on the
Effective Date and ending on the same date in the year 2002; provided,  however,
this Agreement will be automatically  extended for successive one (1) year terms
thereafter,   unless  either  the  Employer  or  the  Executive  elects  not  to
automatically  extend the term of this Agreement by giving written notice to the
other party at least sixty (60) days prior to the expiration of the then current
term.  Any  extension  of this  Agreement  shall be under  the  same  terms  and
conditions hereof, unless otherwise agreed to in writing by the Employer and the
Executive.

2.3 Duties.  The Executive will have such duties as are assigned or delegated to
the  Executive  by the  Board  of  Directors,  and will  initially  serve as the
President and Chief Operating Officer of the Employer. The Executive will devote
his entire business time,  attention,  skill,  and energy to the business of the
Employer,  will use his  best  faith  efforts  to  promote  the  success  of the
Employer's business, and will cooperate fully with the Board of Directors in the
advancement  of the best  interests of the  Employer.  The  Executive  will make
regular oral and written reports to the Board of Directors regarding activities,
as requested by the Board of  Directors.  The  Executive  will not be prohibited
from engaging in additional  activities in connection with personal investments,
community affairs,  or being a member of a board of directors of another company
or  companies  that are not  inconsistent  or in conflict  with the  Executive's
duties under this  Agreement.  If the  Executive is elected as a director of the
Employer or as a director  or officer of any of its  Affiliates,  the  Executive
will  fulfill  his  duties  as  such  director  or  officer  without  additional
compensation, unless otherwise agreed to by the parties.


                                    ARTICLE 3
                                  COMPENSATION

3.1 Compensation. The Executive's Compensation shall be as follows:

     (a)  Salary.  The Executive will be paid an annual salary of USD$250,000.00
          (the "Salary"),  which will be payable in equal periodic  installments
          according to the Employer's  customary payroll practices,  but no less
          frequently than monthly.

     (b)  Bonus.  An annual bonus may be awarded at the sole  discretion  of the
          Board of Directors.

     (c)  Stock awards. The Employer hereby grants to Executive stock awards for
          200,000  shares of stock for each year of  Executive's  service  under
          this  Agreement  for a period of five years,  in  accordance  with the
          terms and  conditions  set forth  herein.  The  first  stock  award is
          granted on January  15,  1999;  the date of  approval  by the Board of
          Directors of the stock awards.  The remaining  stock awards are hereby



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          granted and vest 200,000  shares per year on the  anniversary  date of
          the grant of such  awards  being  January 15. The  Executive  shall be
          entitled to all the rights,  benefits and privileges  consistent  with
          the company  including but not limited to the right of registration of
          the stock awarded  herein.  If this  Agreement is  terminated  for any
          reason,   the  stock  award  shall  be  prorated  for  each  month  of
          Executive's  service for the applicable year. The stock awards granted
          hereunder are outside the scope of the Plan.

     (d)  Benefits.  The  Executive  will,  during  the  Employment  Period,  be
          permitted  to  participate  in such life  insurance,  hospitalization,
          major  medical,  disability  and other  employee  benefit plans of the
          Employer  that may be in effect  from time to time,  to the extent the
          Executive  is eligible  under the terms of those plans  (collectively,
          the "Benefits").


                                    ARTICLE 4
                                    EXPENSES

4.1 Reimbursement.  Employer will reimburse Executive's necessary and reasonable
expenses incurred in the conduct of Employer's business upon Executive's monthly
presentation  of an  itemized  account  of such  expenses  with  proof that such
expenses were incurred.


                                    ARTICLE 5
                             PERFORMANCE EVALUATIONS

Evaluations.  Performance evaluations of the Executive may occur or may be given
from time to time by the Employer.  Employer may conduct both a written and oral
performance  evaluation yearly.  Performance  criteria will include, in the sole
discretion of the Employer, the following:

     (a)  financial success of Employer; and

     (b)  fulfillment of the terms of this Employment Agreement.


                                    ARTICLE 6
                                   TERMINATION

6.1 Events of Termination.  The Employment Period, the Executive's  Compensation
and any and all other rights of the Executive  under this Agreement or otherwise
as an employee of the Employer will terminate (unless provided otherwise in this
Article 6):

     (a)  upon the death of the Executive;

     (b)  upon the  Disability  of the  Executive  (as  defined in Section  6.2)
          immediately upon notice from either party to the other; or

     (c)  For cause (as defined in Section  6.3),  immediately  upon notice from
          the  Employer to the  Executive,  or at such later time as such notice
          may specify.

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6.2 Definition of Disability. For purposes of Section 6.1, the Executive will be
deemed to have a "Disability" if, for physical or mental reasons,  the Executive
is unable to perform the  essential  functions of the  Executive's  duties under
this Agreement for one hundred eighty (180)  consecutive  days, as determined in
accordance  with this Section  6.2.  The  Disability  of the  Executive  will be
determined by a medical doctor selected by written agreement of the Employer and
the  Executive  upon the request of either party by notice to the other.  If the
Employer and the Executive  cannot agree on the  selection of a medical  doctor,
each of them will  select a medical  doctor  and the two  medical  doctors  will
select a third  medical  doctor who will  determine  whether the Executive has a
Disability.  The determination of the medical doctor selected under this Section
6.2 will be binding on both parties.  The Executive  must submit to a reasonable
number of  examinations  by the  medical  doctor  making  the  determination  of
Disability  under this Section  6.2, and the  Executive  hereby  authorizes  the
disclosure and release to the Employer of such  determination and all supporting
medical  records.  If the Executive is not legally  competent,  the  Executive's
legal guardian or duly authorized  attorney-in-fact  will act in the Executive's
stead,  under this Section 6.2, for the purposes of submitting  the Executive to
the examinations, and providing the authorization of disclosure,  required under
this Section 6.2.  This  provision  shall not conflict with or be required to be
consistent  with,  and should be separate  from,  any and all issues  related to
requirements for disability insurance coverage or statutory benefits.

6.3  Definition  of "For  Cause".  For  purposes of Section 6.1, the phrase "For
Cause" means:

     (a)  the Executive's material breach of this Agreement;

     (b)  the  misappropriation  or  attempted   misappropriation  of  funds  or
          property of Employer;

     (c)  any act or action taken by Executive to usurp,  or attempt to usurp, a
          corporate  advantage or  opportunity  to or for  Executive's  benefit,
          either  directly or indirectly,  without the prior written  consent of
          Employer and then only after full disclosure;

     (d)  disclosure of confidential,  secret, or proprietary information in any
          form  (including but not limited to patents or trade secrets) to third
          parties whether competitors of Employer or not unless required for the
          conduct of  business  and only after  confidentiality  agreements  are
          completed to protect the interest of Employer;

     (e)  the conviction of a felony;

     (f)  any  participation  in activities  which are  prejudicial  to the best
          interests  of  Employer  which  may or may not  result  in a felony or
          misdemeanor conviction.

6.4 Accrual of Benefits.  The Executive's  accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the  termination
of this  Agreement,  and the  Executive  will be  entitled  to accrued  Benefits
pursuant to such plans only as provided in such plans.

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<PAGE>


6.5  Disability  Pay. In the event that  Executive  is unable,  for  physical or
mental reasons,  to perform the essential  functions of Executive's duties under
this Agreement  Executive  shall be paid all  Compensation  under this Agreement
until such time as Employer's short-term disability policy becomes effective. If
Employer does not have a short term disability  policy,  then Employer shall pay
Executive's  Compensation  for a period of one hundred eighty (180)  consecutive
days beginning on the first day of the event  described in the first sentence of
this Section 6.5. Thereafter,  Employer will not be obligated to pay Executive's
Compensation for that period beginning after  Employer's  short-term  disability
policy becomes  effective or the conclusion of the one hundred eighty (180) days
through that period whereby  Executive is either  terminated in accordance  with
Section 6.1(b) or returns to active employment.


                                    ARTICLE 7
                  NON-DISCLOSURE COVENANT; EMPLOYEE INVENTIONS

7.1 Acknowledgments by the Executive. The Executive acknowledges the following:

     (a)  during  the  Employment  Period and as a part of his  employment,  the
          Executive will be afforded access to Confidential Information;

     (b)  public  disclosure  of such  Confidential  Information  could  have an
          adverse effect on the Employer and its business; and

     (c)  the  provisions  of this  Article 7 are  reasonable  and  necessary to
          prevent the improper use or disclosure of Confidential Information.

7.2  Agreements of the  Executive.  In  consideration  of the  compensation  and
benefits to be paid or  provided to the  Executive  by the  Employer  under this
Agreement, the Executive covenants as follows:

          (i)  During and following the  Employment  Period,  the Executive will
               hold in  confidence  the  Confidential  Information  and will not
               disclose it to any Person except with the specific  prior written
               consent  of  the  Employer  or  except  as  otherwise   expressly
               permitted by the terms of this Agreement.

          (ii) Any trade  secrets of the Employer will be entitled to all of the
               protections and benefits of the laws of the State of Colorado and
               any other  applicable law. If any  information  that the Employer
               deems to be a trade  secret  is  found  by a court  of  competent
               jurisdiction  not to be a  trade  secret  for  purposes  of  this
               Agreement,  such information  will,  nevertheless,  be considered
               Confidential  Information  for  purposes of this  Agreement.  The
               Executive  hereby waives any requirement that the Employer submit
               proof of the economic value of any trade secret or post a bond or
               other security.

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<PAGE>


          (iii)None of the foregoing  obligations  and  restrictions  applies to
               any  part of the  Confidential  Information  that  the  Executive
               demonstrates  was or became  generally  available  to the  public
               other than as a result of a disclosure by the Executive.

          (iv) The  Executive  will  not  remove  from the  Employer's  premises
               (except  to  the  extent  such  removal  is for  purposes  of the
               performance of the Executive's duties at home or while traveling,
               or except as otherwise  specifically  authorized by the Employer)
               any document,  record, notebook, plan, model, component,  device,
               or computer  software or code,  whether  embodied in a disk or in
               any other  form  (collectively,  the  "Proprietary  Items").  The
               Executive  recognizes  that,  as  between  the  Employer  and the
               Executive, all of the Proprietary Items, whether or not developed
               by the  Executive,  are the  exclusive  property of the Employer.
               Upon  termination of this Agreement by either party the Executive
               will return to the Employer all of the  Proprietary  Items in the
               Executive's possession or subject to the Executive's control, and
               the Executive shall not retain any copies,  abstracts,  sketches,
               or other physical embodiment of any of the Proprietary Items.

7.3 Disputes or Controversies. The Executive recognizes that should a dispute or
controversy  arising  from  or  relating  to this  Agreement  be  submitted  for
adjudication  to any  court,  arbitration  panel,  or  other  third  party,  the
preservation of the secrecy of Confidential Information may be jeopardized.  All
pleadings,  documents,  testimony, and records relating to any such adjudication
will be  maintained  in secrecy  and will be  available  for  inspection  by the
Employer,  the Executive,  and their respective  attorneys and experts, who will
agree, in advance and in writing,  to receive and maintain all such  information
in secrecy, except as may be limited by them in writing.


                                    ARTICLE 8
                               GENERAL PROVISIONS

8.1 Injunctive Relief and Additional Remedy. The Executive acknowledges that the
injury  that would be  suffered  by the  Employer as a result of a breach of the
provisions of this Agreement (including any provision of Articles 7 and 8) would
be irreparable and that an award of monetary  damages to the Employer for such a
breach would be an inadequate remedy.  Consequently,  the Employer will have the
right, in addition to any other rights it may have, to obtain  injunctive relief
to restrain any breach or threatened breach or otherwise to specifically enforce
any provision of this Agreement,  and the Employer will not be obligated to post
bond or other security in seeking such relief.

8.2  Covenants  of  Article  8 are  Essential  and  Independent  Covenants.  The
covenants  by  the  Executive  in  Article  7 are  essential  elements  of  this
Agreement,  and without the Executive's  agreement to comply with such covenants
the Employer would not have entered into this Agreement or employed or continued
the  employment  of  the   Executive.   The  Employer  and  the  Executive  have



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<PAGE>

independently  consulted their  respective  counsel and have been advised in all
respects  concerning the  reasonableness  and propriety of such covenants,  with
specific  regard to the nature of the business  conducted by the  Employer.  The
Executive's  covenants in Articles 7 are independent covenants and the existence
of any claim by the  Executive  against the Employer  under this  Agreement,  or
otherwise,  will not excuse the Executive's breach of any covenant in Article 7.
If the Executive's employment hereunder expires or is terminated, this Agreement
will continue in full force and effect as is necessary or appropriate to enforce
the covenants and agreement of the Executive in Article 7.

8.3  Representations and Warranties by the Executive.  The Executive  represents
and warrants to the Employer that the execution and delivery by the Executive of
this Agreement do not, and the  performance by the Executive of the  Executive's
obligations  hereunder  will not,  with or  without  the giving of notice or the
passage of time, or both (a) violate any judgment, writ, injunction, or order of
any court, arbitrator, or governmental agency applicable to the Executive or (b)
conflict with,  result in the breach of any provisions of or the termination of,
or constitute a default  under,  any agreement to which the Executive is a party
or by which the Executive is or may be bound.

8.4  Waiver.  The rights and  remedies  of the  parties  to this  Agreement  are
cumulative  and not  alternative.  Neither  the  failure nor any delay by either
party in exercising  any right,  power,  or privilege  under this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial
exercise of any such right,  power,  or  privilege  will  preclude  any other or
further exercise of such right, power, or privilege or the exercise of any other
right,  power, or privilege.  To the maximum extent permitted by applicable law,
(a) no claim or right  arising out of this  Agreement  can be  discharged by one
party,  in whole or in part, by a waiver or  renunciation  of the claim or right
unless in writing signed by the other party,  (b) no waiver that may be given by
a party  will be  applicable  except in the  specific  instance  for which it is
given, and (c) no notice to or demand on one party will be deemed to be a waiver
of any  obligation of such party or of the right of the party giving such notice
or demand to take further  action  without  notice or demand as provided in this
Agreement.

8.5 Binding Effect; Delegation of Duties Prohibited.  This Agreement shall inure
to the  benefit  of, and shall be binding  upon,  the  parties  hereto and their
respective successors, assigns, heirs, and legal representatives,  including any
entity  with  which the  Employer  may merge or  consolidate  or to which all or
substantially all of its assets may be transferred.  The duties and covenants of
the Executive under this Agreement, being personal, may not be delegated.

8.6 Notices. All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt),  (b) sent by facsimile
(with  written  confirmation  of  receipt),  provided  that a copy is  mailed by
registered  mail,  return  receipt  requested,  or  (c)  when  received  by  the
addressee,  if  sent  by a  nationally  recognized  overnight  delivery  service
(receipt requested),  in each case to the appropriate  addresses and fax numbers
set forth  below (or to such  other  addresses  and fax  numbers  as a party may
designate by notice to the other parties):

         If to Employer:                    If to Executive:
         Attn:    Mr. John McMillian        Attn:      Dr. Jack A. Krug
                                            Attn:      MaryBeth Sobel, Esq.
         Fax No.: 305-860-9988              Fax No.:   303-308-5977

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8.7 Entire Agreement;  Amendments. This Agreement, contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral or written, between the parties hereto
with respect to the subject  matter  hereof.  This  Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.

8.8 Governing  Law. This  Agreement will be governed by the laws of the State of
Colorado without regard to conflicts of laws principles.

8.9  Arbitration.  Any dispute  arising  out of or  relating to this  Agreement,
including without  limitation,  any dispute between Employer and Executive shall
be submitted to final and binding arbitration in Denver, Colorado, in accordance
with the rules of the  American  Arbitration  Association  then in  effect.  Any
arbitration award may be fully enforced pursuant to applicable law.

8.10 Section  Headings;  Construction.  The headings of Articles and Sections in
this  Agreement  are  provided  for  convenience  only and will not  affect  its
construction  or  interpretation.   All  references  to  "Article,"  "Articles,"
"Section" or "Sections" refer to the  corresponding  Section or Sections of this
Agreement unless otherwise  specified.  All words used in this Agreement will be
construed to be of such gender or number as the  circumstances  require.  Unless
otherwise expressly provided,  the word "including" does not limit the preceding
words or terms.

8.11  Severability.  If any  provision  of this  Agreement  is held  invalid  or
unenforceable  by any court of competent  jurisdiction,  the other provisions of
this  Agreement  will remain in full force and  effect.  Any  provision  of this
Agreement  held invalid or  unenforceable  only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

8.12  Counterparts.  This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which,  when  taken  together,  will be  deemed to  constitute  one and the same
agreement.



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<PAGE>



IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.

                                      CHAPARRAL RESOURCES, INC.

                                      By:  /s/ John G. McMillian

                                      Name:John G. McMillian

                                      Title: Chairman & Chief Executive Officer


                                      DR. JACK A. KRUG

                                      /s/ Dr. Jack A. Krug


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