Unassociated Document


    TERMINATION AGREEMENT

     

    
      (Canadian
Prospect Acquisition Agreement)

    

     

    THIS AGREEMENT dated as of May
11, 2010

     

    AMONG:

     

    ETERNAL ENERGY CORP., a body
corporate having offices in the City of Littleton, in the State of Colorado
(“Eternal”)

     

    - and
-

     

    FAIRWAY EXPLORATION LLC., a
body corporate having offices in the City of Littleton, in the State of Colorado
(“Fairway”)

     

    - and
-

     

    PROSPECTOR OIL, INC., a body
corporate having offices in the City of Billings, in the State of Montana
(“Prospector”)

     

    - and
-

     

    PEBBLE PETROLEUM INC., a body
corporate having offices in the City of Vancouver, in the Province of
British Columbia (“Pebble”)

    - and
-

    


    STEVEN SWANSON, an individual
residing in the City of Littleton, in the State of Colorado (“Swanson”)

    


    - and
-

    


    RICHARD L. FINDLEY, an
individual residing in the City of Billings, in the State of Montana (“Findley”)

    


    - and
-

     

    THOMAS G. LANTZ, an individual
residing in the City of Littleton, in the State of Colorado (“Lantz”)

    


    - and
-

    


    RYLAND OIL CORPORATION, a body
corporate having offices in the City of Vancouver, in the Province of
British Columbia (“Ryland”)

    


    WHEREAS Eternal, Fairway,
Prospector and Pebble (as the successor by name change to 0770890 B.C. Ltd.) are
parties to the Canadian Prospect Acquisition Agreement;

     

    
      
         

      

      
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    AND WHEREAS Findley is the
President and principal shareholder of Prospector and Swanson is the President
and principal shareholder of Fairway;

     

    AND WHEREAS Fairway and
Prospector have  been providing geological consulting services to
Pebble from time to time under the Canadian Prospect  Acquisition
Agreement and in the course thereof have produced the Work Product;

     

    AND WHEREAS Eternal, Fairway,
Prospector and Pebble executed a Termination Agreement effective as of April 29,
2010 which terminated the Canadian Prospect Acquisition Agreement as between
Eternal and Pebble;

     

    AND WHEREAS the parties have
subsequently determined that the Canadian Prospect Acquisition Agreement should
be terminated in its entirety;

     

    AND WHEREAS Ryland is the
parent corporation of Pebble;

     

    NOW THEREFORE in consideration
of the premises hereto, the covenants and agreements hereinafter set forth and
contained and other good and valuable consideration (the receipt and sufficiency
of which is hereby acknowledged), the parties agree as follows:

     

    ARTICLE 1

    INTERPRETATION

     

    
      	
              1.1

            	
              Definitions

            


    

     

    Each
capitalized word or phrase used in this Agreement, including the recitals and
this Section, shall have the meaning ascribed thereto below:

     

    
      	
               
      

            	
              (a)

            	
              “Agreement” means this
      agreement and any schedule attached
hereto;

            


    

     

    
      	
               
      

            	
              (b)

            	
              “Canadian AMI” means the
      area of mutual interest created pursuant to the Canadian Prospect
      Acquisition Agreement;

            


    

     

    
      	
               
      

            	
              (c)

            	
              “Canadian Prospect Acquisition
      Agreement” means that certain Letter Acquisition Agreement dated
      October 15, 2006 among Eternal, Fairway, Prospector and 0770890 B.C. Ltd.
      (now known as Pebble);

            


    

     

    
      	
               
      

            	
              (d)

            	
              “Effective Date” means
      May 1, 2010;

            


    

     

    
      	
               
      

            	
              (e)

            	
              “Maps” means collectively
      the three maps attached to this Agreement and marked as Schedule
      “A”;

            


    

     

    
      	
               
      

            	
              (f)

            	
              “Prospect” has the
      meaning ascribed to such term in the Canadian Prospect Acquisition
      Agreement;

            


    

     

    
      	
               
      

            	
              (g)

            	
              “Royalty Purchase
      Agreement” means the Purchase of Royalty letter agreement between
      Ryland and Fairway dated November 23, 2009 as amended by an Amending
      Agreement dated
May 11, 2010;

            


    

     

    
      	
               
      

            	
              (h)

            	
              “Work Product” means any
      and all geological data, methodologies, intellectual property and other
      work produced by Swanson and/or Fairway and Findley and/or Prospector in
      respect of the Prospect, including without limitation the Maps;
      and

            


    

     

    
      
         

      

      
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              (i)

            	
              “2010 Farmout Lands”
      means all petroleum substances within the Bakken Formation underlying the
      following lands:

            


    

     

    Twp. 1,
Rge. 14 W2M: Sections 1, 2 and 3.

     

    ARTICLE 2

    TERMINATION

     

    
      	
              2.1

            	
              Termination

            


    

     

    The
Canadian Prospect Acquisition Agreement is terminated as of the Effective Date
as to any go-forward rights and obligations thereunder as among the parties. For
greater certainty, the parties acknowledge and agree that: (a) Eternal, Fairway
and Prospector shall not be entitled to any royalty interest in respect of any
Prospect acreage acquired from and after the Effective Date, (b) Fairway and
Prospector shall not be entitled to any acreage fees in respect of any Prospect
acreage acquired from and after the Effective Date;  (c) any
consulting arrangements between Pebble and  Fairway and Prospector are
hereby terminated; (d) Fairway, Prospector and Eternal shall have the right to
acquire and develop mineral rights in and to the Canadian Prospect from and
after the Effective Date without any obligation to offer Pebble any
participation or other right in relation thereto and vice versa.

     

    
      	
              2.2

            	
              Accrued
      Rights and Obligations

            


    

     

    The
termination of the Canadian Prospect Acquisition Agreement as provided above
will not affect any rights and obligations which were fully accrued as of the
Effective Date except as otherwise provided in Section 2.1 and Section 2.3
hereof.  Accordingly, Ryland and Pebble acknowledge that:

     

    
      	
               
      

            	
              (a)

            	
              Pebble
      shall continue to be obligated to pay Fairway, Findley and Lantz
      overriding royalties pursuant to their respective overriding royalty
      agreements which continue in full force and effect, except with respect to
      that portion of the Fairway Royalties (as defined in the Royalty Purchase
      Agreement) which were acquired by Ryland pursuant to the Royalty Purchase
      Agreement; and

            


    

     

    
      	
               
      

            	
              (b)

            	
              The
      2010 Farmout Lands acquired by Pebble are subject to payment by Pebble of
      the overriding royalties payable pursuant to the Overriding Royalty
      Agreements between Pebble and each of Fairway/Lantz and Prospector/Findley
      dated September 4, 2008 and further, Fairway shall be entitled to issue an
      invoice to Pebble for $9,600 (Cdn.), being the acquisition fee payable by
      Pebble for the 2010 Farmout Lands as required pursuant to the Canadian
      Prospect Acquisition Agreement.

            


    

     

    
      	
              2.3

            	
              Work
      Product

            


    

     

    Fairway
and Prospector shall own and shall be entitled to retain and utilize copies of
the Work Product, including the Maps, as they see fit. Pebble shall also own and
shall be entitled to retain and utilize copies of the Work Product, including
the Maps, as it sees fit and further, Ryland and Pebble acknowledge that they
expressly gave consent to Fairway and Prospector to use the Work Product from
and after November 1, 2009.

     

    
      
         

      

      
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    ARTICLE
3

    RELEASES
AND INDEMNITIES

     

    3.1 Release of Other Parties by Ryland
and Pebble

     

    Ryland
and Pebble (the “Ryland
Parties”) do hereby jointly and severally remise, release and forever
discharge each of Fairway, Prospector, Eternal, Swanson, Lantz and Findley (the
“Fairway Parties”) and
all of their respective directors, officers, employees, predecessors,
successors, assigns, executors, administrators and insurers (“Representatives”) of and from
any and all actions, causes of action, claims, demands, damages, costs or
expenses, whatsoever existing up to the present time, known or unknown, which
the Ryland Parties or any of their Representatives ever had, now have or can,
shall or may hereafter have, in respect of any matter arising from or related to
the Canadian Prospect Acquisition Agreement and use of the Work Product, up to
and including the Effective Date.

     

    3.2
Indemnification of Other Parties by Ryland and Pebble

     

    The
Ryland Parties agree to jointly and severally indemnify and save harmless each
of the Fairway Parties and their Representatives from and against any and all
claims, actions, suits, proceedings, and hearings of any nature and kind in any
court of law or equity or before any arbitrator or other body, board or
tribunal, losses, damages, personal and bodily injuries, property damage,
claims, counterclaims, complaints, disputes, demands, causes of action,
liabilities, obligations, legal fees on a solicitor and his own client basis,
costs, expenses, and disbursements (including disbursements as between solicitor
and own client) of any nature or kind, whatsoever and howsoever arising, whether
known or unknown, whether in law or in equity or pursuant to statute, and
whether in any court of law or equity or before any arbitrator or other body,
board or tribunal which arise out of or result from any matter arising from or
related to the Canadian Prospect Acquisition Agreement and use of the Work
Product, up to and including the Effective Date.

     

    3.3 Release of Ryland and Pebble by Other
Parties

     

    The
Fairway Parties do hereby jointly and severally remise, release and forever
discharge each of the Ryland Parties and their Representatives of and from any
and all actions, causes of action, claims, demands, damages, costs or expenses,
whatsoever existing up to the present time, known or unknown, which the Fairway
Parties or any of their Representatives ever had, now have or can, shall or may
hereafter have, in respect of any matter arising from or related to the Canadian
Prospect Acquisition Agreement and use of the Work Product, up to and including
the Effective Date.

     

    ARTICLE
4

    MISCELLANEOUS

     

    4.1
Headings

     

    The
headings of clauses herein are inserted for convenience of reference only and
shall not affect the construction of the provisions hereof.

     

    
      
         

      

      
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    4.2
Supercedes Previous Agreements

     

    This
Agreement supercedes any other agreements, documents, writings and verbal
understandings between the parties relating to the subject matter of this
Agreement, and expresses all of the terms and conditions agreed upon by the
parties with respect thereto.  In the event of a conflict between this
Agreement and any other agreement or document relating to the subject matter
hereof, including without limitation, the provisions of the Royalty Purchase
Agreement, the provisions of this Agreement shall prevail.

     

    4.3
Governing Laws/Courts

     

    
      	
               
      

            	
              (a)

            	
              Governing
      Laws:  This Agreement and the Canadian Prospect
      Acquisition Agreement shall, in all respects, be subject to, interpreted,
      construed and enforced in accordance with and under the laws of the
      Province of British Columbia and the laws of Canada applicable
      therein and shall, in every regard, be treated as contracts made in the
      Province of British Columbia.  To the extent that the
      location of the Prospect in the Province of Saskatchewan requires the
      application of the laws in force in the Province of Saskatchewan, such
      laws shall be adduced as evidence in the British Columbia courts
      having jurisdiction in respect of a dispute arising
    hereunder.

            


    

     

    
      	
               
      

            	
              (b)

            	
              Courts:  The
      parties irrevocably attorn and submit to the exclusive jurisdiction of the
      courts of the Province of British Columbia and courts of appeal
      therefrom in respect of all matters arising out of this
      Agreement.

            


    

     

    4.4
Severability

     

    If any
covenant or condition contained in this Agreement is determined to be, in whole
or in part, invalid or unenforceable by reason of any rule of law or public
policy, such invalidity or unenforceability will not affect the validity or
enforceability of any other covenant or provision, such partial invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of such covenant or provision and such invalid or unenforceable
covenant or provision or portion thereof, as the case may be, shall be severable
from the remainder of this Agreement.

     

    4.5
Further Assurances

     

    Each
party, without further consideration, shall in a timely fashion do or perform or
cause to be done or performed all such further and other acts and things,
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered all such further and other instruments, deeds and other writings and
generally shall take or cause to be taken all such further and other actions as
may be reasonably necessary or desirable to carry out its obligations hereunder
or to ensure and give full force and effect to the provisions and intent,
purpose and meaning of this Agreement.

     

    4.6
Enurement

     

    This
Agreement shall be binding upon and shall enure to the benefit of the parties
and (as applicable) their respective heirs, executors, administrators, personal
representatives, successors, receivers, receiver-managers, trustees and
permitted assigns.

     

    
      
         

      

      
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    4.7
Counterparts and Delivery

     

    This
Agreement may be executed in counterparts and delivered by electronic or other
means, which shall constitute effective execution and delivery.

     

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

     

    
      
        	      
                ETERNAL
      ENERGY CORP.

              	 	      
                FAIRWAY
      EXPLORATION LLC

              
	
                 

              	 	 	
                 

              	 
	
                      
                  Per:

                

              	      
                /s/
      Bradley M. Colby

              	 	
                      
                  Per:

                

              	      
                /s/
      Steve Swanson

              
	
                 

              	      
                Bradley
      M. Colby

                Chief
      Executive Officer

              	 	
                 

              	      
                Steve
      Swanson

                Manager

              
	 	 	 	 	 
	 	 	 	 	 
	      
                PROSPECTOR
      OIL, INC.

              	 	      
                PEBBLE
      PETROLEUM INC.

              
	 	 	 	 	 
	      
                Per:

              	      
                /s/
      Richard L. Findley

              	 	      
                Per:

              	      
                /s/
      Gerald J. Shields

              
	 	      
                Richard
      L. Findley

                President

              	 	 	      
                Gerald
      J. Shields

                President

              
	 	 	 	 	 
	 	 	 	 	 
	      
                /s/
      Richard L. Findley

              	 	      
                /s/
      Sue Larson

              
	      
                RICHARD
      L. FINDLEY

              	 	      
                Witness

              
	 	 	 	 	 
	 	 	 	 	 
	      
                /s/
      Thomas G. Lantz

              	 	      
                /s/
      Glenna Swanson

              
	      
                THOMAS
      G. LANTZ

              	 	      
                Witness

              
	 	 	 	 	 
	 	 	 	 	 
	      
                /s/
      Steven Swanson

              	 	      
                /s/
      Glenna Swanson

              
	      
                STEVEN
      SWANSON

              	 	      
                Witness

              
	 	 	 	 	 
	 	 	 	 	 
	      
                RYLAND
      OIL CORPORATION

              	 	 	 
	 	 	 	 	 
	      
                Per:

              	      
                /s/
      Gerald J. Shields

              	 	 	 
	 	      
                Gerald
      J. Shields

                President

              	 	 	 


      

    

     

    
      
         

      

      
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    SCHEDULE
“A” ATTACHED TO A TERMINATION AGREEMENT AMONG ETERNAL ENERGY CORP., FAIRWAY
EXPLORATION LLC, PROSPECTOR OIL, INC., STEVEN SWANSON, RICHARD L. FINDLEY,
THOMAS G. LANTZ, PEBBLE PETROLEUM INC. AND RYLAND OIL CORPORATION RESPECTING THE
CANADIAN PROSPECT ACQUISITION AGREEMENT


     

    


    MAPS

     

    (See
attached)

     

    
      
         

      

      
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