Unassociated Document


    
      


      FIRST AMENDMENT TO
THE

      AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

      (“Craig
Phelps)

      


      This
First Amendment (this “Amendment”) to the Amended and Restated Employment
Agreement dated effective as of the 1st day of
August, 2007, “the “Employment Agreement”) is effective as of the 31st day of
July, 2009, (the “Effective Date”).  This Amendment is by and between
Eternal Energy Corp. (the “Company”) and Craig H. Phelps
(“Executive”).  The Company and Executive are all of the parties to
the Employment Agreement.  This Amendment is made pursuant to the
terms of the Section entitled “Amendment and Waiver” of the Paragraph in the
Employment Agreement entitled “Miscellaneous.”  Capitalized
terms not defined in this Amendment shall have the meaning given such terms in
the Employment Agreement.

       

      1.           The
parties hereby delete the text of the Paragraph entitled “3. Term of Agreement” of
the Employment Agreement in its entirety and substitute the following in its
place:

      


      “3.           Term of
Agreement.  The term of this Agreement shall commence on the
Effective Date and shall continue through and including July 31, 2011, subject
to the provisions of the Section in this Agreement entitled “Termination or Expiration of
Agreement,” (the “Term)”.  Notwithstanding the foregoing, the
provisions of the Sections in this Agreement entitled “Non-competition;
Secrecy,” “Representations and
Warranties” and “Miscellaneous” shall
survive, and continue in full force and effect, after any termination or
expiration of this Agreement, irrespective of the reason for the termination or
any claim that the termination was wrongful or illegal.”

      


      2.           The
parties hereby delete the text of the Section entitled “4.3 Stock Options” of the
Paragraph of the Employment Agreement entitled “Compensation and Other
Benefits” in its entirety and substitute the following in its
place:

      


      “4.3           Stock
Options.  Not used.”

      


      3.           The
parties hereby delete the text of the Paragraph entitled “5.  Termination or Expiration of
Agreement” of the Employment Agreement in its entirety and substitute the
following in its place:

      


      “5.           Termination
or Expiration of Agreement.

      


      5.1           Termination
at Company’s Election.  The Company may terminate Executive’s
employment at any time during the Term, for any reason or no reason, with or
without Cause (as hereinafter defined), and with or without notice, subject to
provisions of the Sub-sections of this Section entitled “Termination for
Cause,” “Termination Without
Cause” and “Severance Following a Change
in Control.”

      


      5.1.1           Termination
for Cause.  If Executive’s employment is terminated for Cause
“defined below), Executive shall be entitled to receive only the
following:  (i) payment of Executive’s Base Salary through and
including the date of termination; (ii) payment for all accrued and unused
vacation time as of the date of termination, which will be paid at a rate
calculated in accordance with Executive’s Base Salary at the time of
termination; and (iii) reimbursement of business expenses incurred prior to the
date of termination.  Except as expressly set forth in this
Subsection, Executive shall not be entitled to receive any Base Salary, Fringe
Benefits or severance benefits in the event Executive’s employment is terminated
for Cause, except that Executive may continue to participate in the Employee
Benefit Plans to the extent permitted by and in accordance with the terms of
those plans or as otherwise required by law.

      


      
        
           

        

        
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      5.1.2           Termination
Without Cause.  If Executive’s employment by the Company is
terminated by the Company without Cause or if Executive’s employment is
terminated for Good Reason (defined below), Executive shall
receive:  (i) payment of Executive’s Base Salary through and including
the date of termination; (ii) payment for all accrued and unused vacation time
existing as of the date of termination, which will be paid at a rate calculated
in accordance with Executive’s Base Salary at the time of termination; and (iii)
reimbursement of business expenses incurred prior to the date of
termination.  In addition, if the severance of Executive’s employment
falls within the terms of this Subsection and if the terms of the Subsection of
this Section entitled “Severance Following a Change
in Control” does not apply to the severance of Executive’s employment
with the Company, then, subject to the condition that Executive sign a general
release of all claims in a form approved by the Company in the exercise of its
sole discretion, Executive shall also receive a severance payment in an amount
equal to Thirty Thousand and No/100s US Dollars ($30,000.00 USD), less
applicable withholdings.

      


      5.1.3           Severance
Following a Change in Control.

      


      A.           If,
immediately prior to or within twelve months following a Change in Control
(defined below): (i) Executive’s employment is terminated by the Company without
Cause; or (ii) Executives’ employment is terminated for Good Reason (defined
below), Executive shall receive:  (x) payment of Executive’s Base
Salary through and including the date of termination; (y) payment for all
accrued and unused vacation time existing as of the date of termination, which
will be paid at a rate calculated in accordance with Executive’s Base Salary at
the time of termination; and (z) reimbursement of business expenses incurred
prior to the date of termination.  In addition, if the severance of
Executive’s employment falls within the terms of this Subsection, then, subject
to the condition that Executive sign a general release of all claims in a form
approved by the Company in the exercise of its sole discretion, Executive shall
also receive a severance payment in an amount equal to the product of two times
Executive’s annual Base Salary as the same may have been changed through the
date of the severance of Executive’s employment, less applicable
withholdings.

      


      
        
           

        

        
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      B.           If
Executive severs employment with the Company within sixty (60) days of a Change
in Control (defined below) for any reason other than Good Reason (defined
below), Executive shall receive:  (x) payment of Executive’s Base
Salary through and including the date of termination; (y) payment for all
accrued and unused vacation time existing as of the date of termination, which
will be paid at a rate calculated in accordance with Executive’s Base Salary at
the time of termination; and (z) reimbursement of business expenses incurred
prior to the date of termination.  In addition, if Executive severs
employment with the Company within sixty (60) days of a Change in Control for
any reason other than Good Reason, then, subject to the condition that Executive
sign a general release of all claims in a form approved by the Company in the
exercise of its sole discretion, Executive shall also a severance payment in an
amount equal to Executive’s annual Base Salary as the same may have been changed
through the date of the severance of Executive’s employment, less applicable
withholdings.

      


      C.           For
purposes of this Agreement, the term “Change in Control” shall mean the
occurrence of any of the following events:  (i) the consummation of
any transaction after the Effective Date in which any person or entity or group
of related persons and/or entities becomes the beneficial owner, directly or
indirectly, of securities representing more than twenty percent (20%) of the
combined voting power of the Company’s outstanding voting securities, (ii) three
or more directors, whose election or nomination for election is not approved by
a majority of the members of the Company’s Board of Directors on the Effective
Date, are elected within any twelve month period to serve on its Board of
Directors, or (iii) any merger (other than a merger in which the Company is the
survivor and there is no change of control pursuant to (i) or (ii) of this
sentence), reorganization, consolidation, liquidation, winding up or dissolution
of the Company or the sale of all or substantially all of its
assets.

      


      5.1.4           “Cause.”  As used in this
Agreement, “Cause” shall be defined as:

      


      A.           Criminal
Conduct.  If Executive is convicted of a criminal offense
punishable as a felony, has been convicted of any offense involving moral
turpitude, dishonesty or immoral conduct, or is subject to
incarceration.  For purposes of this provision, incarceration will
mean any incarceration which causes the Employee to be unable to provide
services to the Company for the period of incarceration;

      


      B.           Neglect or Other
Misconduct.  If Executive engages in any conduct, or fails to
take any action which (1) materially and adversely effects the business or
reputation of the Company; or (2) renders his continued service in employment of
the Company detrimental to the ordinary, continued, or successful operation of
its business, or is substantially detrimental to or materially interferes with
his ability to perform his duties for the Company; or (3) constitutes the
misappropriation, misuse, or misdirection of its funds or property; or (4)
substantially interferes with or impairs the ordinary operation of its business;
or (5) involves moral turpitude that is reasonable likely to cause material
damage to the business or reputation of the Company;

      


      
        
           

        

        
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      C.           Absence.  If
a Executive is absent from the active performance of his duties in the operation
of the business on more than an occasional basis, other than with respect to
approved medical or personal leave, or a disability beyond Executive's
control;

      


      D.           Violation of the Company’s
Rules.  If Executive violates the Company’s material specific
written rules, policies or procedures (which do not conflict with the terms of
this Agreement), which in the Company’s discretion, renders his continued
employment detrimental to the best interests of the Company; or

      


      E.           Failure to Perform
Duties.  If Executive fails or refuses to perform the duties
reasonably required of him pursuant to the terms of this Agreement after notice
and not less than fifteen (15) days opportunity to cure such failure or refusal,
or if Executive takes actions reasonably calculated to cause his termination of
employment, after notice and not less than fifteen (15) days opportunity to cure
cease or otherwise such actions.

      


      5.1.5           “Good
Reason.”  As used in this
Agreement, “Good Reason” means the occurrence of any of the following without
Executive’s prior written consent and in the absence of any circumstance that
constitutes Cause: (i) the regular assignment to Executive of duties materially
inconsistent with the position and status of Executive; (ii) a material
reduction in the nature, status or prestige of Executive’s responsibilities or a
materially detrimental change in Executive’s title or reporting level, excluding
for this purpose an isolated, insubstantial or inadvertent action by the Company
which is remedied by the Company promptly after the Company’s receipt of written
notice from Executive; (iii) a reduction by the Company of Executive’s annual
Base Salary; or (iv) if Executive shall be required to perform his duties for
the Company at a physical location which is more than twenty miles from 2549
West Main Street, Littleton, CO  80120 or if the Company’s principal
office is moved to a location which is more than twenty miles from 2549 West
Main Street, Littleton, CO  80120.

      


      5.2           Termination
upon Death or Permanent Disability.  This Agreement will
terminate automatically on Executive’s death or if Executive becomes Permanently
Disabled (as defined below) and the Base Salary, Fringe Benefits and other
payments and benefits which Executive, or Executive’s beneficiaries or estate,
shall be entitled to receive shall be determined exclusively  by
operation of this Subsection.  In the event of such termination,
Executive, or Executive’s beneficiaries or estate, shall be entitled to receive
such amounts of the Base Salary and Fringe Benefits as would have been payable
to Executive under a termination without Cause under the Subsection of this
Section entitled “Termination Without Cause” as of the date of death or on which
the Company determines in its reasonable discretion that Executive has become
Permanently Disabled.  As used in this Agreement, “Permanently
Disabled” shall mean the incapacity of Executive due to illness, accident, or
any other reason to perform his duties for a period of ninety (90) days, whether
or not consecutive, during any twelve month period of the Term, all as
determined by the Company in its reasonable discretion.  All
determinations as to the date and extent of incapacity of Executive shall be
made by the Company’s Board of Directors, upon the basis of such evidence,
including independent medical reports and data, as the Board of Directors in its
discretion deems necessary and desirable.  All such determinations of
the Board of Directors shall be final.

      


      
        
           

        

        
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      5.3           Termination
at Executive=s
Election.  Executive may resign from employment with the
Company prior to the expiration of the Term for any reason by providing written
notice to the Company at least thirty (30) days prior to the date selected for
resignation.  If Executive resigns from employment before expiration
of the Term under any circumstances other than:  (i) for Good Reason
(defined above), or (ii) within sixty (60) days of a Change in Control (defined
above) for any reason other than Good Reason (defined above), then Executive
shall be entitled to receive only the following: (i) payment of Executive’s Base
Salary through and including the date of resignation; (ii) payment for all
accrued and unused vacation time existing as of the date of resignation, which
will be paid at a rate calculated in accordance with Executive’s Base Salary at
the time of resignation; and (iii) reimbursement of business expenses incurred
prior to the date of resignation.  Except as expressly set forth in
this Subsection, Executive shall not be entitled to receive any Base Salary,
Fringe Benefits or severance benefits in the event Executive resigns from
employment before expiration of the Term, except that Executive may continue to
participate in the Employee Benefit Plans to the extent permitted by and in
accordance with the terms thereof or as otherwise required by law and except as
otherwise provided by this Agreement.

      


      5.4           Termination
on Expiration of Term.  If this Agreement is terminated on the
expiration of the Term in accordance with the Section in this Agreement entitled
“Term of
Agreement,” Executive shall receive:  (i) payment of
Executive=s Base
Salary through and including the date of termination; (ii) payment for all
accrued and unused vacation time existing as of the date of termination, which
will be paid at a rate calculated in accordance with Executive=s Base
Salary at the time of expiration of the Term; and (iii) reimbursement of
business expenses incurred prior to the date of the expiration of the
Term.  Except as expressly set forth in Subsection, Executive shall
not be entitled to receive any Base Salary, Fringe Benefits or severance
benefits in the event that this Agreement is terminated on the expiration of the
Term in accordance with the Section in this Agreement entitled “Term of Agreement,”
except that Executive may continue to participate in the Employee Benefit Plans
to the extent permitted by and in accordance with the terms thereof or as
otherwise required by law and except as otherwise provided by this
Agreement.

      


      
        
           

        

        
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      4.           The
parties hereby incorporate the text of the Paragraph of the Employment Agreement
entitled AMiscellaneous@ into this
Amendment by this reference.

      


      5.           Except
as amended by this First Amendment, the parties reconfirm the Employment
Agreement.

      


      6.           For
the convenience of the parties, any number of counterparts of this Amendment may
be executed by any one or more parties hereto, and each such executed
counterpart shall be, and shall be deemed to be, an original, but all of which
shall constitute, and shall be deemed to constitute, in the aggregate but one
and the same instrument.  The Amendment may be circulated for
signature through facsimile transmission and all signatures so obtained and
transmitted shall be deemed for all purposes under this Amendment to be original
signatures until such time as original counterparts are exchanged by the
parties.

      


      IN
WITNESS WHEREOF, the parties agree that this Amendment shall be effective as of
and from and after the Effective Date.

       

    

    
      
        
          	 Executive:	 	Eternal
      Energy Corp.	 
	 	 	 	 	 
	
                  /s/
      Craig H. Phelps

                	 	
                  By:
      

                	/s/ Brad
      Colby	 
	      
                        
                    Craig
      H. Phelps

                  

                	 	 	Brad
      Colby, Chief Executive Officer	 
	 	 	 	 	 
	 	 	 	 	 


        

      

       

       

      
        
           

        

        
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