AMENDED
AND RESTATED




EMPLOYMENT
AGREEMENT








This Amended and Restated Employment
Agreement (the “Agreement”) is made and entered into by and between Eternal
Energy Corp. (the “Company”) and Craig H. Phelps (“Executive”), on the 10th
day of October, 2008.  For purposes of this Agreement the term
Effective Date will mean the 1st day of
August, 2007.  In consideration of the mutual promises, covenants and
conditions hereinafter set forth and other good and valuable consideration, the
receipt and sufficiency of which the parties acknowledge, the parties agree as
follows:





1.           Amendment
and Restatement of Employment Agreement.  This Amended and
Restated Employment Agreement amends, restates, supersedes and replaces that
certain Employment Agreement between the Company and Executive which was entered
into as of the Effective Date.





2.           Employment
and Duties.  The Company shall employ Executive in the position
of Vice President of Engineering (or such other senior executive position as may
be assigned to him by the Company’s President).  Executive shall
report directly to the Company’s Chief Executive Officer and shall perform all
duties and obligations of Vice President of Engineering (or such other senior
executive duties assigned to Executive from time to time by the Company’s Chief
Executive Officer).  In addition, Executive shall perform such
services for Ryland Oil Corporation, Roadrunner Oil and Gas, Inc. and their
parents and subsidiaries as the Company shall direct from time to
time.  Executive shall devote his full time, attention and energy
exclusively to the business and interests of the Company and to the performance
of his duties and obligations under this Agreement, unless otherwise provided by
this Agreement.





3.           Term of
Agreement.  The term of this Agreement shall commence on the
Effective Date and shall continue through and including July 31, 2009, 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.





4.           Compensation
and Other Benefits.  The Company shall provide the following
compensation and other benefits to Executive during the Term in consideration of
Executive’s performance of all of his obligations under this
Agreement:





4.1           Base
Salary.  Subject to the provisions of the Section in this
Agreement entitled “Termination or Expiration of
Agreement,” during the Term the Company shall, commencing on October 1,
2008, pay Executive an annual base salary of One Hundred Forty Four Thousand and
No/100s US Dollars ($144,000.00 USD), payable in arrears on the last day of each
calendar month, in gross monthly installments of Twelve Thousand Hundred and
No/100s US Dollars ($12,000.00 USD).  The base salary to be paid to
Executive hereunder, as changed by the parties from time to time, may be
referred to herein as “Base Salary.”





4.2           Discretionary
Bonus.  Executive shall be entitled to such discretionary
bonuses as the Company’s Board of Directors shall determine appropriate in the
exercise its sole discretion.  Notwithstanding the foregoing, however,
Executive’s total annual discretionary bonuses for any calendar year during the
term of this Agreement shall not exceed Executive’s Base Salary for such
period.









4.3           Stock
Options.  The Company grants Executive, as of the date of this
Agreement, the option to purchase One Million (1,000,000) shares of the
Company’s common stock at a per share exercise price of Twenty-Four US Cents
($0.24 USD), subject to all of the terms set forth below and in the Stock Option
Agreement memorializing the grant of this option (“Stock Option”).  A
condition to the grant of this Stock Option will be that the parties memorialize
the grant of this Stock Option in a written stock option agreement (“Stock
Option Agreement”) containing the customary terms and conditions which the
Company includes in stock options granted to members of its Board of Directors
and other employees and containing the other terms and conditions set forth in
this Paragraph.  The Stock Option will vest and be exercisable as to
twenty-five percent (25%) of the optioned shares every six (6) months over a
period of two years, with the first twenty-five percent (25%) becoming
exercisable six (6) months from the Effective Date.  If the Company
terminates Executive’s employment without “Cause,” defined below, Executive’s
severance benefits (including vesting of the Stock Options) will be governed by
the Sub-section of this Agreement entitled “Termination Without
Cause.”  If the Company terminates Executive’s employment for “Cause,”
then all of Executive’s un-vested Stock Options shall expire and become
un-exercisable as of the date of such termination “for
Cause.”  The Stock Option Agreement will provide that the vested Stock
Options shall be exercisable, in whole or in part, for a period of five years
from the Effective Date, expiring on July 31, 2012, subject to earlier
termination in accordance with the provisions of this Agreement and the Stock
Option Agreement.  In addition, the Stock Option Agreement will
provide that the Stock Options shall expire ninety (90) days after termination
of Executive's employment.  The Stock Option Agreement will also
provide that the purchase price for the shares to be purchased upon the exercise
of the Stock Option must be paid in cash at the time of the exercise of the
Stock Option.





4.4           Fringe
Benefits.  As additional consideration for Executive’s
performance of services under this Agreement, Executive shall be entitled to
receive the following benefits (the “Fringe Benefits”):





4.4.1           Employee
Benefit Plans.  During the Term, the Company will pay the
premiums incurred to provide group medical insurance coverage for Executive and
his dependents. During the Term, the Company will also allow Executive to
participate in such other group health, pension, welfare, and insurance plans
(together with the group medical insurance plan, the “Employee Benefit Plans”)
maintained by the Company from time to time for the general benefit of its
executive employees, as such Employee Benefit Plans may be modified from time to
time in the Company’s sole and absolute discretion.





4.4.2           Other
Benefits.  The Company shall provide Executive with all other
benefits and perquisites as are made generally available to the Company’s
executive employees under the Company’s Employee Handbook, as such Employee
Handbook may be modified from time to time in the Company’s sole and absolute
discretion.





4.4.3           Vacation,
Sick Leave and Holidays.  Executive shall be entitled to four
(4) weeks of paid vacation per year, which will be earned ratably during the
year, and to such sick leave and paid holidays as are generally made available
to the Company’s executive employees under the Company’s Employee Handbook, as
such Employee Handbook may be modified from time to time in the Company’s sole
and absolute discretion.





4.4.4           Reimbursement
of Business Expenses.  Subject to the prior approval of the
Company, the Company shall reimburse Executive for all reasonable travel,
entertainment and other expenses incurred by Executive in connection with the
performance of his duties under this Agreement, upon submission by Executive to
Company of reasonable documentation pertaining to such expenses.




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4.5           Deferred
Compensation.  Any deferred compensation (within the meaning of
Section 409A of the Internal Revenue Code) payable under this Agreement on
account of Executive’s separation from service shall not commence prior to six
months following such separation if Executive is a key employee (within the
meaning of Section 409A).  Provided, that in determining whether
Executive is a key employee, any compensation realized on account of the
exercise of a stock option or a disqualifying disposition of stock acquired
through exercise of an incentive stock option shall be disregarded.





4.6           Withholding.  All
customary withholding taxes and other employment taxes which the Company is
required by law to withhold and pay with respect to compensation paid by an
employer to an employee shall be subtracted and withheld from all compensation
paid by the Company to Executive for services rendered by Executive to the
Company.





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 Subsections 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.





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
receive the following additional benefits:  (i) a severance payment in
an amount equal to Thirty Thousand and No/100s US Dollars ($30,000.00 USD), less
applicable withholdings; and (ii) immediate vesting in full of any unvested
Stock Options issued to Executive pursuant to the Stock Option Agreement
referred to in the Subsection of this Agreement entitled “Stock
Options.”




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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) Executive’s 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 receive the following additional
benefits:  (i) 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; and (ii) immediate vesting in full of any unvested Stock Options
issued to Executive pursuant to the Stock Option Agreement referred to in the
Subsection of this Agreement entitled “Stock Options.”





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 receive the following
additional benefits:  (i) 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;
and (ii) immediate vesting in full of any unvested Stock Options issued to
Executive pursuant to the Stock Option Agreement referred to in the Subsection
of this Agreement entitled “Stock Options.”





C.           For
purposes of this Section, the term “Change in Control” shall have the meaning
given that term in the Stock Option Agreement referred to in the Subsection of
this Agreement entitled “Stock Options.”





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 committed 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 a 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 or her 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 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 by the Company 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; or (iii) a
reduction by the Company of Executive’s annual Base Salary.





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.  In addition, as of the date of the termination of
Executive’s employment pursuant to this Subsection, Executive shall be
immediately vested in full as to any unvested Stock Options issued to Executive
pursuant to the Stock Option Agreement referred to in the Subsection of this
Agreement entitled “Stock Options.”  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.





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 below),
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.




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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.  Executive shall be entitled to exercise all vested Stock
Options held by Executive as of the date of the expiration of the Term pursuant
to the terms of the Subsection of this Agreement entitled “Stock Options” and
the Stock Option Agreement.  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 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.





6.
            Non-competition;
      Secrecy.





6.1           Assistance
to Competitors.  During the Term, Executive shall not, except
as provided below, own a material interest in (other than up to two percent of
the voting securities of a publicly traded corporation), render financial
assistance to, or offer personal services to (whether for payment or otherwise),
any entity or individual that competes with the Company in the Company
Business.  “Company Business” shall mean the Company’s oil and gas
business as it is conducted or proposed to be conducted during the
Term.





6.2           Confidential
Information.  Executive acknowledges and agrees that the
Company is engaged in business activities in which it is or may be crucial to
develop and retain proprietary, trade secret, or confidential information for
the benefit of the Company (collectively, “Confidential
Information”).  Accordingly, Executive shall not at any time during or
after the Term, either directly or indirectly:  (i) divulge or convey
any Confidential Information to any entity or individual, except as may be
expressly authorized in writing by the Company or as required in the course of
Executive’s performance of his duties hereunder; or (ii) use any Confidential
Information for Executive’s own benefit or the benefit of any entity or
individual except the Company.  The Confidential Information to which
Executive may have access may include, but is not limited to, matters of a
technical or intellectual nature such as inventions, designs, improvements,
processes of discovery, techniques, methods, ideas, discoveries, developments,
know-how, formulae, compounds, compositions, specifications, trade secrets,
specialized knowledge, or matters of a business nature such as information about
costs and profits, records, customer lists, customer data or sales
data.





6.3           Ownership
of Ideas.  The Company shall own, and Executive hereby
transfers and assigns to the Company, all rights, of every kind and character
throughout the world, in perpetuity, in and to any material or ideas, and all
results and proceeds of the performance of Executive’s services hereunder,
conceived of or produced during the Term by Executive in the performance of his
services hereunder.  The parties acknowledge and agree, however, that
such transfer and assignment shall not apply to, or attach in and to, any
material or ideas which were not conceived or produced in the performance of
Executive’s services hereunder.  Executive shall execute and deliver
to the Company such assignments, certificates of authorship, or other
instruments as the Company may require from time to time to evidence ownership
of such material, ideas, the results and proceeds of the performance of
Executive’s services under this Agreement.  Executive’s agreement to
assign to the Company any of his rights as set forth in this Subsection shall
not apply to any invention for which no equipment, supplies, facility or trade
secret information of the Company was used and that was developed entirely upon
Executive’s own time and that does not result from any work performed by
Executive for the Company.




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6.4           Company
Property.  All records, papers, documents, materials, and
electronically stored data kept, made, or received by Executive while employed
by the Company, or generated for, in the course of, or in connection with the
business of the Company, whether or not containing Confidential Information,
shall be and remain the exclusive property of the Company (collectively referred
to as “Company Property”) at all times during and after Executive’s employment
with the Company, without regard to how Executive came into possession of any
Company Property or whether Executive played any role in creating any Company
Property.  Executive shall not destroy any Company Property or remove
any Company Property from the Company’s premises, whether during or after
employment at the Company, except as expressly directed for the purpose of
performing services on behalf of the Company.  Upon the termination of
Executive’s employment with the Company at any time and for any reason, or upon
the Company’s request at any time and for any reason, Executive shall promptly
return all Company Property to the Company, without keeping a copy of any such
Company Property for himself or any other entity or
individual.  Executive will, upon request by Company, certify his
compliance with the terms of this Subsection.





6.5           Interference
with Employees and Clients.





6.5.1           Not Hire
Away.  For so long as Executive is employed by the Company, and
for a three-year period thereafter, Executive shall not, directly or indirectly,
whether for his own benefit or for the benefit of any other entity or
individual:  (i) solicit, encourage, or in any way influence any
person employed by, or engaged to render services on behalf of, the Company, to
cease performing services for the Company, or to engage in any activity contrary
to or conflicting with the interests of the Company; (ii) hire away any person
employed by, or engaged to render services on behalf of, the Company; or (iii)
otherwise interfere to the Company’s detriment in any way in the Company’s
relationship with any person who is employed by, or engaged to render services
on behalf of, the Company.





6.5.2           Non-Solicitation.  For
so long as Executive is employed by the Company, and for a three-year period
thereafter, Executive shall not, whether for his own benefit or for the benefit
of any other entity or individual, take any action which would cause any
customer or client of the Company or any party with whom the Company conducts
business:  (i) who became known to Executive by virtue of Executive’s
employment with the Company during the Term; or (ii) whose status as a client or
customer of the Company or party with whom it conducts business during the Term
can be determined by reference to records maintained by the Company, to curtail,
limit, or terminate its business relationship with the Company.





6.6           Injunctive
Relief.  Executive and the Company acknowledge and agree
that:  (i) Executive’s breach of his obligations under this Section
would cause the Company irreparable harm and that monetary damages alone would
not be an adequate remedy for any such breach and, therefore; (ii) if Executive
breaches this Section (“Non-competition;
Secrecy”), the Company shall be entitled to obtain injunctive relief (and
any other form of equitable relief), as well as any other remedies (including
monetary damages) to which the Company is entitled as a consequence of such
breach or otherwise.




7





7.           Representation
and Warranties.  Executive represents and warrants to the
Company that Executive is under no contractual or other restriction or
obligation that is materially inconsistent with the execution of this Agreement,
the performance of his duties hereunder, or the rights of the Company hereunder,
including, without limitation, any development agreement, non-competition
agreement or confidentiality agreement previously entered into by
Executive.





8.           Miscellaneous.





8.1           Severability.  In
the event that any provision of this Agreement should be held to be void,
voidable, unlawful or for any reason unenforceable, the remaining provisions or
portions of this Agreement shall remain in full force and effect.





8.2           Amendment
and Waiver.  No provision of this Agreement can be modified,
amended, supplemented or waived in any manner except by an instrument in writing
signed by both Executive and the Company.  The waiver by either party
of compliance with any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any other provision of this Agreement, or
of any subsequent breach by such party of any provision of this
Agreement.





8.3.           Applicable
Law.  This Agreement, Executive’s employment relationship with
the Company, and any and all matters or claims arising out of or related to this
Agreement or Executive’s employment relationship with the Company, shall be
governed by, and construed in accordance with, the laws of the State of
Colorado, regardless of choice of law provisions of any
jurisdiction.





8.4.           Venue.  The
parties agree that the District Court of the County of Arapahoe, State of
Colorado, shall have exclusive jurisdiction, including in personam jurisdiction, and
shall be the exclusive venue for any and all controversies and claims arising
out of or relating to this Agreement or a breach thereof, except as otherwise
unanimously agreed upon by the parties.





8.5.           Entire
Agreement.  This Agreement constitutes the entire agreement
between the parties relating to the subject matter of this Agreement and
supersedes all prior and contemporaneous negotiations, understandings, or
agreements between the parties, whether oral or written, expressed or
implied.





8.6           Counterparts.  This
Agreement may be executed by the parties in counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.





8.7           Headings.  The
headings of sections and subsections of this Agreement are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.




8





8.8           Notices.  All
notices, demands or other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered to and received personally by the
recipient, (b) when sent to and received by the recipient by facsimile (receipt
electronically confirmed by sender’s facsimile machine) if during normal
business hours of the recipient, otherwise on the next business day, (c) one
business days after the date when sent to the recipient by overnight delivery by
reputable express courier service (charges prepaid) and delivery confirmed, or
(d) three business days after the date when mailed to the recipient by certified
or registered mail, return receipt requested and postage prepaid and such
receipt is confirmed.  Such notices, demands and other communications
shall be sent to parties at the addresses indicated below or to such other
address as a party may direct on written notice given pursuant to the terms of
this Sub-paragraph:




If
      to Executive:
              Craig
      Phelps17
      Wood SorrellLittleton,
      CO 80127If
      to the Company:
              Eternal
      Energy Corp.2549
      West Main Street, Suite 202Littleton,
      CO 80120





8.9           Attorneys’
Fees.  If any party shall commence any action or proceeding
against another party in order to enforce the provisions hereof, or to recover
damages as the result of alleged breach of any of the provisions hereof, the
prevailing party therein shall be entitled to recover all reasonable costs
incurred in connection therewith, including, but not limited to, reasonable
attorney' fees.





8.10         Independent
Legal Advice.  Executive
acknowledges that he has been advised to obtain independent legal advice with
respect to this Agreement and that he has had the opportunity to do
so.





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




Executive:
              
              Eternal
      Energy Corp./s/ Craig H.
      Phelps
              
              By:
              /s/ Bradley M.
      ColbyCraig
      H. Phelps
              
              
              Its:
      Chief Executive Officer




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