Document:

EMPLOYMENT
      AGREEMENT

     

    This
      Employment Agreement (the “Agreement”) is entered into by and between Eternal
      Energy Corp., a Nevada corporation (the “Company”), and Bradley M. Colby
      (“Executive”), effective as of November 7, 2005. The parties hereto agree as
      follows:

     

    1.  Employment
      and Duties.
      The
      Company shall employ Executive in the position of President, Chief Executive
      Officer (“CEO”), Treasurer, Chief Financial Officer (“CFO”) and Secretary of the
      Company (or such other senior executive position as may be assigned to him
      by
      the Company’s Board of Directors). Executive shall report directly to the board
      of directors (the “Board”) of the Company (or such other persons designated by
      the Board) and shall perform all duties and obligations of President, CEO,
      Treasurer, CFO and Secretary (or such other senior executive duties assigned
      to
      Executive from time to time by the Board). Executive shall devote at least
      fifty
      percent (50%), on average, of each normal forty hour work week 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. However, on or before May 7th,
      2006,
      the parties agree to meet and by mutual agreement determine if the time
      Executive is required to devote to the business interests of the Company and
      to
      the performance of his duties and obligations under this Agreement is adequate
      to discharge his duties hereunder in an appropriate manner and, if not, to
      re-determine, by mutual agreement, the amount of time Executive shall thereafter
      be required on average to devote exclusively to the performance of services
      for
      and on behalf of the Company.

     

    2.  Term
      of Agreement.
      The
      term of this Agreement shall commence on November 7, 2005 and shall continue
      through and including November 6, 2007 (the “Term”), subject to the provisions
      of Section 5. Notwithstanding the foregoing, the provisions of Sections 6 and
      11
      of the Agreement 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.

     

    3.  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:

     

    3.1  Base
      Salary.
      Subject
      to the provisions of Section 5, the Company shall pay to Executive an annual
      base salary (the “Base Salary”) of $60,000.00, less applicable withholdings,
      during the Term of this Agreement. Notwithstanding the foregoing, however,
      if
      the parties mutually agree to increase the amount of time Executive shall be
      required on average to devote exclusively to the performance of services for
      and
      on behalf of the Company pursuant to the terms of Section 1 above, the parties
      agree to increase Executive’s Base Salary to a level appropriate to adequately
      compensate him for the additional services to be rendered by him, as they shall
      mutually agree upon. The Base Salary shall be payable in accordance with the
      Company’s ordinary payroll practices in effect during the Term.

     

    3.2  Signing
      Bonus.
      Upon
      execution of this Agreement by both parties, Executive shall be paid, directly
      or on his behalf, a signing bonus of $165,000, less applicable withholdings
      (the
“Signing Bonus”). 

     

    
      
         

      

      
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    3.3  Stock
      Options.
      On the
      first day of the Term, the Board of Directors or Compensation Committee will
      grant to Executive an initial stock option grant (“Stock Options”) to purchase
      1,443,800 shares of the Company’s common stock at a per share exercise price of
      $1.00. The Stock Options will vest as set forth in a Stock Option Agreement,
      which will provide that the options become exercisable in an equal amount every
      six (6) months over a period of three years, with the first one-sixth (1/6)
      becoming exercisable six (6) months from the effective date of this Agreement.
      If the Company terminates Executive’s employment without Cause, Executive’s
      severance benefits (including vesting of options) will be governed by Section
      5.1.2 of this Agreement. If the Company terminates Executive’s employment for
“Cause” as defined in Section 5.1.1, then all of Executive’s unvested options
      shall expire and become unexercisable as of the date of such “for Cause”
termination.

     

    3.4  Fringe
      Benefits.
      As
      additional compensation under this Agreement, Executive shall be entitled to
      receive the following benefits (the “Fringe Benefits”):

     

    3.4.1  Employee
      Benefit Plans.
      During
      the Term, the Company shall allow Executive to participate in such group
      medical, health, pension, welfare, and insurance plans (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.

     

    3.4.2  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.

     

    3.4.3  Vacation;
      Sick Leave and Holidays.
      Executive shall be entitled to such vacation time, 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.

     

    3.4.4  Reimbursement
      of Business Expenses.
      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. 

     

    3.4.5  Rent.
      The
      Company shall pay Westport Petroleum, Inc. (“Westport”) the sum of one thousand
      dollars ($1,000.00) per month as rent for using a portion of Westport’s leased
      space for the conduct of Company Business (as defined in Section 6.1 below)
      for
      so long as the Company occupies Westport’s facilities.

     

    3.5  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.

     

    
      
         

      

      
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    4.  Repurchase
      Right of the Company;
      Transfer Limitations.

     

    4.1  Repurchase
      Right.
      In the
      event Executive’s employment is terminated for any reason other than reasons
      described in Sections 5.1.2 and 5.2 below or as a result of the expiration
      of
      the Term, the Company shall, upon the date of such termination, have an
      irrevocable, exclusive right to repurchase (the “Repurchase Right”) any of the
      3,250,000 shares of common stock (the “Restricted Shares”), including 2,500,000
      shares held of record by Executive (the “Executive Shares”) and 750,000 shares
      held of record by Executive’s immediate family and beneficially by Executive
      (the “Family Shares”), which have not yet been released from the Repurchase
      Right, at a price per share equal to the lesser of (x) the fair market value
      of
      the shares at the time the Repurchase Right is exercised, as determined by
      the
      Company’s board of directors, and (y) the original purchase price of the
      Restricted Shares, which original purchase price was $75,000. Twenty-five
      percent of the Executive Shares shall be released from the Repurchase Right
      on
      the date that is six months from the effective date of this Agreement, and
      an
      additional twenty-five percent shall be released at the end of each successive
      six months from the first release date, such that all 2,500,000 shares shall
      be
      released from the Repurchase Right on the two-year anniversary of this
      Agreement. One hundred percent of the Family Shares shall be released from
      the
      Repurchase Right on the date that is the one-year anniversary of the effective
      date of this Agreement. Once Executive Shares and Family Shares have been
      released from the Repurchase Right as provided by this Subsection, such shares
      shall not thereafter be subject to the Repurchase Right set forth herein or
      be
      subject to forfeiture under the terms of this Agreement.

     

    4.2  Transfer
      Limitations.
      In
      addition to any restrictions of transfer imposed on the Restricted Shares by
      applicable federal and state securities laws, the parties hereto hereby agree
      to
      the following limitations with respect to the sale and transfer of the
      Restricted Shares: (i) Executive (and his beneficiaries or assigns, as
      applicable) shall not sell any of the Executive Shares during the first year
      of
      this Agreement; and (ii) during each three-month period beginning on the
      one-year anniversary of this Agreement, Executive (and his beneficiaries or
      assigns, as applicable) may sell only that number of shares that is equal to
      twenty-five percent of the total number of the Executive Shares if such number
      has been released from the Repurchase Right at the beginning of each such
      three-month period. For purposes of clause (ii) above, the twenty-five percent
      limitation shall apply separately to the Family Shares, for which Executive
      shall not sell or cause a sale except as in accordance with the limitation
      described in clause (ii). At the two-year anniversary of the effective date
      of
      this Agreement, the foregoing limitation shall terminate.

     

    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 Sections 5.1.1 and
      5.1.2.

     

    
      
         

      

      
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    5.1.1  Termination
      for Cause.
      If
      Executive’s employment is terminated for Cause (as 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; and (iii)
      reimbursement of business expenses incurred prior to the date of termination.
      Except as expressly set forth in this Section 5.1.1, Executive shall not be
      entitled to receive any Base Salary or Fringe 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. As
      used in this Agreement, Cause shall be defined as: (a) a material breach by
      Executive of any term of this Agreement; (b) an intentional refusal or failure
      to follow the lawful and reasonable instructions of the Board of Directors
      or an
      individual to whom Executive reports (as appropriate); (c) a willful or habitual
      neglect of duties; (d) misconduct on the part of Executive that is materially
      injurious to the Company, including without limitation misappropriation of
      trade
      secrets, fraud, or embezzlement; or (e) Executive’s conviction for fraud, theft
      or a felony involving moral turpitude; and, in the case of clauses (a) through
      (c), Executive fails to cure such breach within thirty (30) days of Executive’s
      receipt of written notice from the Company.

     

    5.1.2  Termination
      Without Cause.
      If
      Executive is terminated by the Company without Cause or if Executive’s
      employment is terminated for “good reason” (as 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; and (iii) reimbursement of business expenses
      incurred prior to the date of termination. In addition, Executive shall be
      eligible to receive the following additional benefits if Executive’s employment
      is terminated under this Section 5.1.2 on the condition that Executive signs
      a
      general release of all claims in a form approved by the Company: (iv) a
      severance payment in an amount equal to one (1) year of Executive’s Base Salary,
      less applicable withholdings; (v) immediate vesting in full of any unvested
      options issued to Executive; and (vi) the immediate termination of the
      Repurchase Right. 

     

    For
      purposes of this Agreement, “good reason” means without Executive’s prior
      written consent and in the absence of any circumstance that constitutes Cause:
      (a) the regular assignment to Executive of duties materially inconsistent with
      the position and status of Executive; (b) 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 (c) a reduction by the Company of Executive’s annual Base Salary
      as of the date of this Agreement or as the same may be increased from time
      to
      time.

     

    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). In the event of such
      termination, Executive, or his beneficiary 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 Section 5.1.2
      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 Section
      5.2, Executive shall be immediately vested in full as to any unvested options
      issued to Executive. 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 90 days, whether or not consecutive,
      during any 12-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 30 days
      prior
      to the date selected for resignation. If Executive resigns from employment
      before expiration of the Term under any circumstances, other than for “good
      reason” as defined above, 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 Section 5.3, Executive shall not be
      entitled to receive any Base Salary or Fringe 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.

     

    5.5  Termination
      on Expiration of Term. If
      this
      Agreement is terminated on the expiration of the Term in accordance with Section
      2 above, 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; and (iii) reimbursement
      of
      business expenses and payment to Westport of rent pursuant to Section 3.4.5
      incurred prior to the date of termination. Executive shall be entitled to
      exercise all vested options held by Executive as of the date of termination
      pursuant to the terms of the Executive’s agreement(s) with the
      Company.

     

    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 or any entity or individual that the Company
      has reviewed as a business or investment opportunity in any given three-month
      period. “Company
      Business” shall
      mean the Company’s oil and gas business as it is conducted or proposed to be
      conducted on the effective date of this Agreement. Notwithstanding anything
      to
      the contrary set forth in this Agreement, Executive shall have the right to
      own
      a material interest in, render financial assistance to and/or offer personal
      services to any entity or individual in connection with a project or opportunity
      in which: (i) such entity or individual produces, or proposes to produce,
      hydrocarbons through surface or subsurface gas/water separation and disposal;
      or
      (ii) the Company has failed or declined to exercise its right of first refusal
      described below. Executive agrees that he will, in writing, offer the Company
      a
      right of first refusal to pursue all opportunities which he desires to pursue
      involving the exploration, development and production of hydrocarbons which
      do
      not involve, or are proposed to involve, surface or subsurface gas/water
      separation and disposal. The parties acknowledge and agree that Executive has
      no
      obligation to offer opportunities to the Company which involve, or which are
      proposed to involve, surface or subsurface gas/water separation and disposal.
      This right of first refusal shall include such information in Executive’s
      possession as shall be reasonably necessary to evaluate the economic viability
      and risks of pursuing each such opportunity. Company shall exercise its right
      of
      first refusal to pursue such an opportunity by giving Executive written notice
      of its exercise within ten business days of its receipt of Executive’s written
      offer. 

     

    
      
         

      

      
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    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 Section 6.3 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 (i) that does not result from any work performed by
      Executive for the Company or (ii) that relates to the exploitation of commercial
      oil and gas opportunities which Executive is permitted to pursue pursuant to
      Section 6.1 above. 

     

    6.4  Company
      Property.
      All
      records, papers, documents, materials, and electronically stored data kept,
      made, or received by Executive in the performance of his duties while employed
      by the Company, or generated for, in the course of, or in connection with the
      business of the Company (other than opportunities which Executive is permitted
      to pursue pursuant to Section 6.1 above), 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.

     

    
      
         

      

      
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    6.5  Interference
      with Employees and Clients.

     

    6.5.1  Not
      Hire Away.
      For so
      long as Executive is employed by the Company in an executive role, and for
      a
      one-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
      of Clients.
      For so
      long as Executive is employed by the Company in an executive role, and for
      a
      one-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 (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 during the Term can be determined
      by reference to records maintained by the Company to curtail 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 6 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 6, 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.  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.

     

    
      
         

      

      
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    8.  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.

     

    9.  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
      Board
      of Directors of 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.

     

    10.  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 the choice
      of
      law provisions of any other jurisdiction.

     

    11.  Arbitration.

     

    11.1  Exclusive
      Remedy.
      Except
      as set forth in Section 11.3, arbitration shall be the sole and exclusive remedy
      for any dispute, claim, or controversy of any kind or nature (a “Claim”) arising
      out of, related to, or connected with this Agreement, Executive’s employment
      relationship with the Company, or the termination of Executive’s employment
      relationship with the Company, including any Claim against any parent,
      subsidiary, or affiliated entity of the Company, or any director, officer,
      employee, or agent of the Company or of any such parent, subsidiary, or
      affiliated entity. It also includes any claim against the Executive by the
      Company, or any parent, subsidiary or affiliated entity of the
      Company.

     

    11.2  Claims
      Subject to Arbitration.
      Excepting only claims excluded in Section 11.3 below, this Agreement
      specifically includes (without limitation) all claims under or relating to
      any
      federal, state or local law or regulation prohibiting discrimination, harassment
      or retaliation based on race, color, religion, national origin, sex, age,
      disability or any other condition or characteristic protected by law; demotion,
      discipline, termination or other adverse action in violation of any contract,
      law or public policy; entitlement to wages or other economic compensation;
      any
      Claim for personal, emotional, physical, economic or other injury; and any
      Claim
      for business torts or misappropriation of confidential information or trade
      secrets.

     

    11.3  Claims
      Not Subject to Arbitration.
      This
      Section 11 does not preclude either party from making an application to a court
      of competent jurisdiction for provisional remedies (e.g., temporary restraining
      order or preliminary injunction), subject to Colorado Revised Statutes. This
      Agreement also does not apply to any claims by Executive: (i) for workers’
compensation benefits; (ii) for unemployment insurance benefits; (iii) under
      a
      benefit plan where the plan specifies a separate arbitration procedure; (iv)
      filed with an administrative agency which are not legally subject to arbitration
      under this Agreement; or (v) which are otherwise expressly prohibited by law
      from being subject to arbitration under this Agreement. 

     

    
      
         

      

      
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    11.4  Procedure.
      The
      arbitration shall be conducted in the City and County of Denver. Any Claim
      submitted to arbitration shall be decided by a single, neutral arbitrator (the
      “Arbitrator”). The parties to the arbitration shall mutually select the
      Arbitrator not later than 45 days after service of the demand for arbitration.
      If the parties for any reason do not mutually select the Arbitrator within
      the
      45 day period, then any party may apply to any court of competent jurisdiction
      to appoint a retired judge as the Arbitrator. The arbitration shall be conducted
      in accordance with the Colorado Revised Statutes, except as modified by this
      Agreement. The Arbitrator shall apply the substantive federal, state, or local
      law and statute of limitations governing any Claim submitted to arbitration.
      In
      ruling on any Claim submitted to arbitration, the Arbitrator shall have the
      authority to award only such remedies or forms of relief as are provided for
      under the substantive law governing such Claim. The Arbitrator shall issue
      a
      written decision revealing the essential findings and conclusions on which
      the
      decision is based. Judgment on the Arbitrator’s decision may be entered in any
      court of competent jurisdiction.

     

    11.5  Costs.
      The
      parties shall be responsible for their own attorneys’ fees and costs, except
      that the Arbitrator shall have the authority to award attorneys’ fees and costs
      to the prevailing party in accordance with the applicable law governing the
      dispute.

     

    11.6  Interpretation
      of Arbitrability.
      The
      Arbitrator, and not any federal or state court, shall have the exclusive
      authority to resolve any issue relating to the interpretation, formation or
      enforceability of this Section 11, or any issue relating to whether a Claim
      is
      subject to arbitration under this Section 11, except that any party may bring
      an
      action in any court of competent jurisdiction to compel arbitration in
      accordance with the terms of this Section 11.

     

    12.  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.

     

    13.  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.

     

    14.  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.

     

    15.  Notices.
      Any
      notice required or permitted to be given under this Agreement shall be
      sufficient if in writing, and if sent by certified or registered mail or
      personally delivered to Executive at 26 Wedge Way, Littleton, Colorado 80123
      or
      to the Company at 2120 West Littleton Blvd., Suite 300, Littleton, Colorado
      80120.

     

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	
              BRADLEY
                M. COLBY

               

            	
              ETERNAL
                ENERGY CORP.

               

            
	
              /s/
                Bradley M. Colby

               

            	
              By:/s/
                John Anderson

               

              Its:Director

               

            

    

    

    
      
         

      

      
        10Unassociated Document

    EXHIBIT
      10.1

    Note:
      Portions of this exhibit indicated by [*] are subject to a confidential
      treatment request, and have been omitted from this exhibit. Complete, unredacted
      copies of this exhibit have been filed with the Securities and Exchange
      Commission as part of the Company’s confidential treatment
      request. 

    

    MEMORANDUM
      OF UNDERSTANDINGS

    

    

    THIS
      MEMORANDUM OF UNDERSTANDINGS (hereinafter called, “THIS MEMORANDUM”) made as of
      23rd
      June,
      2006, by and between YOZAN INC. (hereinafter called, “YZN”) of the city of
      Tokyo, Japan and Airspan Communications Ltd. (hereinafter called, “ACL”) of the
      city of Uxbridge, U.K., sets forth the mutual understandings of the both parties
      regarding PURCHASE CONTRACT (YZN/ACL-A14) dated 14th
      April,
      2005, between the both parties (hereinafter called, “1st
      P/C”)
      and 2nd
      PURCHASE
      CONTRACT (YZN/ACL-S13) dated 13th
      September, 2005, between the both parties (hereinafter called, “2nd
      P/C”)
      and the MOUs/Amendments/Supplement/Minutes related to 1st
      P/C
      and/or 2nd
      P/C
      (hereinafter collectively called, “The Existing Agreements”), which were made
      for YZN’s Broadband Wireless Access Service by WiMAX (hereinafter called, “YZN’s
      WiMAX Project”). The mutual understandings of the both parties herein confirmed
      are as follows:

    

    
      	
              1.

            	
              The
                immediate scale down of YZN’s WiMAX Project shall be from “3,000 units of
                MicroMAX + 30,000 units of ST” to “2,000 units of MicroMAX + the quantity
                of ST which was shipped by 23rd
                June, 2006, inclusive” (the exact quantities of Products including the
                auxiliary items purchased by YZN and delivered by ACL shall be changed
                accordingly). The payment by YZN to ACL for the amount of the Products
                delivered as above but which exceeds the agreed amount of 16.8 Million
                Dollars below mentioned in the item 2 shall be paid subject to the
                successful performance of the guarantee under network optimization
                work
                mentioned in the below item 6. Notwithstanding the above scale down
                of
                YZN’s WiMAX Project, the quantities of purchase/sales under The Existing
                Agreements remain unchanged and the shipment of the Products exceeding
                the
                said quantity after the scale down shall be concluded and decided
                through
                the mutual consent by the end of September this
                year.

            

    

    

    
      	
              2.

            	
              As
                the result of the scale down mentioned above, the amount of the Down
                Payment already received by ACL, but corresponding to the amount
                of the
                excess beyond the one for the quantity after the said scale down
                of YZN’s
                WiMAX Project shall be deemed paid by YZN to ACL as the payments
                after
                shipment for Products shipped but not yet fully paid by YZN to ACL.
                Through this shift of payment, the corresponding part of the pending
                payments for the Products shipped shall be settled, but the total
                amount
                paid shall be all amount already paid by YZN to ACL for Products
                under The
                Existing Agreements including Down Payment (hereinafter called, “The Total
                Paid Amount”), which is about US$16.8
                Million.

            

    

    

    
      	
              3.

            	
              The
                payment by YZN to ACL beyond The Total Paid Amount shall be made
                by the
                below item 5.

            

    

    

    
      	
              4.

            	
              Products
                delivered and paid according to the above item 2 shall be deemed
                as
                accepted by YZN as of the date hereof, and the both parties shall
                immediately perform the transactions according to The Minutes of
                The
                Meetings dated 1st
                April, 2006, by the both parties.

            

    

    

    
      	
              5.

            	
              The
                payments for Products shipped by June, 2006, but not paid because
                it is
                beyond The Total Paid Amount and the payment for Products shipped
                in July,
                2006, or later shall be in 45 days after acceptance or upon the
                confirmation of Products performance and reliability mentioned in
                the
                below item 6, whichever later.

            

    

    

    
      	
              6.

            	
              ACL
                will perform the work of “Network Optimization” proposed by ACL to YZN on
                21st
                June, 2006, through the month of July, 2006. For this purpose, ACL
                will
                dispatch its engineers and specialists at its own account, and render
                its
                engineering support more deeply involved in YZN’s work as a telecomm
                carrier and fully cooperate with YZN for assurance of operation/service
                of
                equipment, system and network. Further, ACL guarantees that ACL system
                shall work with a carrier grade quality, as defined by the mutual
                consent
                in acceptance criteria in the first week of July, 2006, in YZN’s network
                as of 1st
                August, 2006.

            

    

    

    
      	
              7.

            	
              The
                both parties confirmed that any claim of Liquidated Damage, Penalty
                and
                Interest of Delayed Payment under The Existing Agreements, so far
                if any,
                shall not be made.

            

    

    

    
      	
              8.

            	
              The
                both parties shall enter into the discussions as soon as possible
                to
                prepare for and secure the work mentioned in the above items 4 and
                6.

            

    

    

    
      	
              9.

            	
              The
                both parties confirmed the below
                cooperation:

            

    

    

    
      	 	
              -

            	
              [*].

            

    

    

    
      	 	
              -

            	
              [*]

            

    

    

    
      	 	
              -

            	
              [*]

            

    

    

    
      	
              10.

            	
              This
                Memorandum is made in two copies and each party has one of these
                two.

            

    

    

    

    THIS
      MEMORANDUM is made as of the date hereinabove by:

     

    
      	 YOZAN
              INC.	 	 	 Airspan
              Communications, Ltd.
	/s/ Sunao
              Takatori	 	 	/s/ Eric
              Stonestrom
	
              

            	 	 	
              

            
	Sunao
              Takatori
President and CEO	 	 	Eric
              Stonestrom
CEO

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