TERMINATION & RELEASE AGREEMENT
                         -------------------------------

THIS TERMINATION AGREEMENT dated as of the date of execution set out below;

BETWEEN:

          ARCHANGEL DIAMOND CORPORATION,  a Corporation continued under the laws
          of the Yukon Territories, Canada;

                                                                   ("Archangel")

 AND:

          GARY E.  DAVIS,  of the City of  Littleton  in the State of  Colorado,
          U.S.A.;

                                                                       ("Davis")

 WITNESSES THAT WHEREAS:

A.   Archangel and Davis have entered into a an executive  employment  agreement
     dated January 1, 1998 (the "Employment Agreement");

B.   Archangel and Davis wish to terminate the Employment Agreement;

NOW THEREFORE in consideration  of the premises and agreements  contained herein
and other good and valuable consideration,  the receipt and sufficiency of which
is acknowledged by each of them, the parties hereto agree as follows:

1.  Archangel  and Davis  acknowledge,  confirm and agree that as of the date of
this Termination Agreement, the Employment Agreement is hereby terminated and of
no further  force or effect and both parties  hereby waive any prior or existing
breach thereunder as of the date hereof.

2. DAVIS DOES HEREBY REMISE,  RELEASE AND FOREVER DISCHARGE  Archangel including
its respective directors,  officers, employees,  servants, agents, predecessors,
successors  and  assigns,  and  each  of them  (individually  a  "Releasee"  and
collectively the "Releasees") of and from any and all actions, causes of action,
claims,  demands,  damages,   interest,  costs,  expenses  and  compensation  of
whatsoever kind and howsoever arising, whether known or unknown (collectively, a
"Claim"),  and which Davis now has or at any time  hereafter  can,  shall or may
have, in any way resulting or arising from any cause, matter or thing whatsoever
existing  up to  the  present  time  with  respect  to  the  Releasees,  and  in
particular, but without restricting the generality of the foregoing, of and from
or in connection  with any  business,  directorship  or  employment  arrangement
between or among Davis or his affiliates and any or all of the Releasees and any
remuneration obligation or settlement related thereto, SAVE AND EXCEPT for:

                                      - 2 -
<PAGE>

     (a)  any salary payable to Davis pursuant to the Employment Agreement as of
          the date of this Termination Agreement;

     (b)  any deferred salary or bonus obligations owed to Davis by Archangel as
          of the date of this Termination Agreement;

     (c)  any outstanding  stock options or other rights to purchase  granted or
          issued to Davis in any  capacity by  Archangel  up to the date of this
          Termination Agreement;

     (d)  any claim or right of  indemnity  from  Archangel  for the  benefit of
          Davis in  accordance  with Yukon  corporate  law in  connection to any
          Claim made against  Davis in his capacity as an employee or officer of
          Archangel; and

     (e)  the rights and obligations set out in this Agreement .

3. Davis hereby acknowledges and agrees that any and all rights of first refusal
and powers of attorney  granted to Davis by Archangel are cancelled,  terminated
or revoked, as the case may be, and of no further force and effect.

4. Davis acknowledges and agrees that:

     (a)  neither  Davis  nor his  affiliates  shall  make any claim or take any
          proceedings  against any other person or  corporation  who might claim
          contribution or indemnity from the Releasees or any of their officers,
          employees, servants, agents, predecessors, successors or assigns;

     (b)  the Release  herein is intended to be a general  Release in respect of
          any claim or potential  claim,  known or unknown,  that Davis may have
          against any of the Releasees;

     (c)  he has had the  opportunity  to seek  independent  legal  advice  with
          respect to the terms of  settlement as set forth herein as well as the
          effect of the Release herein and he fully understands the contents and
          the effect thereof;, and

     (d)  he has read this  Termination  Agreement and hereby confirms that this
          Agreement contains the entire agreement between the parties hereto and
          the  ten-ns of the  Release  herein  are  contractual,  and not merely
          recital.

5. This  Termination  Agreement  constitutes  the entire  agreement  between the
parties with respect to the subject matter hereof and cancels and supersedes any
prior  understandings  and  agreements  between the parties  hereto with respect
thereto.   There  are  no  representations,   warranties,   forms,   conditions,
undertakings or collateral agreements,  express implied or statutory between the
parties other than as expressly set forth in this Termination Agreement.

6. This Termination  Agreement shall enure to the benefit of and be binding upon
the heirs, executors,  administrators and legal personal  representatives of the
parties to this Termination Agreement.

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<PAGE>

7. This Termination  Agreement is governed by and interpreted in accordance with
the laws from time to time in force in Ontario and the laws of Canada applicable
herein.

IN WITNESS  WHEREOF the  parties,  intending  to be bound,  have  executed  this
Termination Agreement this 19th day of December, 2002.

ARCHANGEL DIAMOND CORPORATION
By:


/s/ Michael J.M. Farmiloe
-------------------------------------------------------
(Authorized Signatory)

Michael J.M. Farmiloe
-------------------------------------------------------
Print Name, Title

SIGNED, SEALED AND DELIVERED        )
by GARY E. DAVIS in                 )
the presence of:                    )
                                    )
/s/ Christopher Bent                )    /s/ Gary E. Davis      (Seal)
---------------------------------   )   -------------------------------
Witness                             )   GARY E. DAVIS
                                    )
Christopher Bent                    )
-----------------                   )
Print Name                          )