Document:

Termination Agreement

TERMINATION
AGREEMENT

        THIS
TERMINATION AGREEMENT is effective as of the 7th day of November, 2000, and
is by and among PEASE OIL AND GAS COMPANY, a Nevada corporation
(“Pease”), its to-be-formed wholly-owned Delaware subsidiary CPI
ACQUISITION CORP. (“Acquisition Corp.”), CARPATSKY PETROLEUM
INC., a corporation organized under the laws of the Province of Alberta,
Canada (“Carpatsky”) and BELLWETHER EXPLORATION COMPANY, a
Delaware corporation (“Bellwether”), and is made with reference to the
following agreed facts: 

        1.
Pease, Acquisition Corp. and Carpatsky entered into an Agreement and Plan of
Merger, dated August 31, 1999 ("Merger Agreement"); 

        2.
Pease, Acquisition Corp. and Carpatsky entered into the First Amendment to
Merger Agreement, dated January 3, 2000 ("First Amendment"); 

        3.
Pease, Acquisition Corp. and Carpatsky negotiated but did not finalize an
Amended and Restated Agreement and Plan of Merger, to be dated as of August 11,
2000 ("Amended Merger Agreement"); and 

        4.
Pease, Acquisition Corp., Carpatsky and Bellwether have decided to terminate the
Merger Agreement and the First Amendment and to abandon and not finalize the
Amended Merger Agreement, to terminate and release the obligations of the
parties under the Merger Agreement, the First Amendment and the Amended Merger
Agreement (all of which are collectively referred to as the “Merger
Agreements”), including any obligations or liabilities of ay party hereto
which may be deemed to have arisen under the Merger Agreements, in accordance
with the terms and agreements set forth below. 

        NOW,
THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confirmed, the
parties hereto agree as follows: 

        1.
Termination of Agreements. The Merger Agreement, the First Amendment and
the Amended Merger Agreement shall each be terminated, and such terminations
shall be deemed to be terminations by mutual consent of the parties. Subject to
the signature and completion of this agreement, no party shall have any right
against any of the other parties to the Merger Agreements or Bellwether as a
result of the termination of the Merger Agreements, including any obligations or
liabilities of any party which may be deemed to have arisen under the Merger
Agreements. Each party shall bear its own costs incurred through the date
hereof. 

        2.
Release. Pease, Acquisition Corp., Carpatsky and Bellwether, hereby
release, acquit and forever discharge each other, including their officers,
directors, employees, agents, successors, predecessors, assigns, parents,
subsidiaries, affiliates, servants, shareholders, partners, attorneys, insurers,
past or present, and all persons or entities, natural or corporate, in privity
with them or any of them, from any and all obligations, liabilities, claims or
causes of action of any kind whatsoever, at common law, statutory or otherwise,
known or unknown, past or present, that Pease, Acquisition Corp., Carpatsky and
Bellwether have or might have against each other arising from or relating to the
Merger Agreements, including but not limited to, claims for misrepresentation,
whether negligent or intentional, failure to disclose any material fact, and
breach of any representation, warranty, or covenant. Pease, Acquisition Corp.,
Carpatsky and Bellwether hereby acknowledge and agree that Bellwether is a party
to and included in this release, notwithstanding the fact that Bellwether is not
a party to any of the Merger Agreements. 

        3.
Payments and Transfers by Carpatsky to Pease. Upon acceptance and
signature of this agreement by the parties, and as additional consideration to
Pease for the matters described in this agreement, effective on the date that
this agreement is signed by the parties, Carpatsky shall pay and deliver to
Pease the following: 

	 	        (1)
Cash Payments. Carpatsky shall pay $80,000 to Pease in full satisfaction
of the obligations of Carpatsky to Pease for bookkeeping and accounting services
provided by Pease for Carpatsky through the date of this agreement. Upon receipt
of such amount, that certain Agreement, dated October 1, 1999 shall be
deemed to be terminated and Carpatsky and Pease shall be deemed to have each
released the other from and against any and all obligations thereunder. The cash
payment shall be delivered to Pease within ten days from the effective date of
this agreement. 

	 	        (2)
Carpatsky Shares. Carpatsky shall issue, subject to (i) approval by the
Canadian Venture Exchange and (ii) the revocation of the cease trading order
issued by the Alberta Securities Commission which Carpatsky will use its
commercially reasonable best efforts to acquire, 1.5 million shares of
Carpatsky’s common stock, registered to Pease and restricted from transfer
by Pease, except in compliance with applicable rules of the Canadian Venture
Exchange, the Alberta Securities Commission and United States federal and
applicable state securities laws. The shares issued to Pease shall have the same
registration rights granted to Bellwether under the Registration Rights
Agreement dated October 7, 1999, as amended on December 30, 1999. The
Carpatsky common stock shall be issued and delivered to Pease no later than
January 31, 2001. Should Carpatsky be unable to obtain approval from the
Canadian Venture Exchange to issue the shares, or if for any reason that the
shares are not issue then Pease and Carpatsky will attempt in good faith to
negotiate another form of consideration of approximately equal value which shall
be satisfactory to both parties. 

        4.
Authority. This agreement has been duly authorized and approved by each
of Pease, Carpatsky and Bellwether. Pease confirms that Acquisition Corp. has
never been formed as a corporation.

        5.
Acknowledgment.Pease, Acquisition Corp., Carpatsky and Bellwether
acknowledge that this agreement has been carefully read, understood and
considered prior to execution. Each party hereto acknowledges that it has had
opportunity to discuss this agreement with counsel of its own choosing prior to
execution. Each party further acknowledges that this agreement constitutes the
full and complete agreement between the parties, and that in executing this
agreement, no party is relying on any representation, statement or warranty not
specifically set forth herein. Pease, Acquisition Corp., Carpatsky and
Bellwether further agree that the terms of this agreement bind the parties
hereto, their successors and assigns. 

        IT
WITNESS WHEREOF, this Termination Agreement was accepted and signed as of
the date first above written. 

            
             
             
              
             
       PEASE OIL AND GAS COMPANY

     
              
          
             
             
        
        By   /s/ Patrick J. Duncan        
                     
                  
           

             
             
             
              
             
              Patrick
J. Duncan, President

            
             
             
              
             
       CPI ACQUISITION CORP.

            
             
             
              
             
       (a corporation to be formed)

            
             
             
              
             
       By:  Pease Oil and Gas Company

     
              
          
             
             
        
        By   /s/ Patrick J. Duncan        
                     
                  
           

             
             
             
              
             
             
 Patrick J. Duncan, President

            
             
             
              
             
       CARPATSKY PETROLEUM, INC.

     
              
          
             
             
        
        By   /s/ Cliff M. West         
                     
                  
           

             
             
             
              
             
             
 Cliff M. West, Jr., Vice President

            
             
             
              
             
       BELLWETHER EXPLORATION COMPANY

     
              
          
             
             
        
        By   /s/ Douglas G. Manner        
                     
                  
           

             
             
             
              
             
             
 Douglas G. Manner, President and CEOCertificate of Designation

CERTIFICATE
OF DESIGNATION

of

SERIES C
REDEEMABLE 5% CUMULATIVE PREFERRED STOCK

of

PEASE OIL
AND GAS COMPANY

Pursuant to
Section 78.1955 of the General Corporation Law of

the State of Nevada

        Pease
Oil and Gas Company, a Nevada corporation (the “Company”), certifies
that pursuant to the authority contained in its Articles of Incorporation, as
amended, and in accordance with the provisions of Section 78.1955 of the General
Corporation Law of the State of Nevada, its Board of Directors (the “Board
of Directors”) has adopted the following resolution creating a series of
Preferred Stock, par value $0.01 per share, designated as Series C Redeemable
5% Cumulative Preferred Stock: 

        RESOLVED,
that a series of the class of authorized Preferred Stock, par value $0.01
per share, of the Company be hereby created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows: 

      
  1.  Designation and Amounts. 

        The
shares of such series shall be designated as the “Series C Redeemable 5%
Cumulative Preferred Stock” (the “Series C Preferred Stock”) and
the number of shares initially constituting such series shall be 99,503, which
number may be decreased (but not increased) by the Board of Directors without a
vote of the stockholders; provided, however, that such number may not be
decreased below the number of then currently outstanding shares of Series C
Preferred Stock. The Series C Preferred Stock shall rank senior to the $0.10 par
value common stock (“Common Stock”) of the Company with respect to
both the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up. 

        2.
Dividends. 

        (a)
The holders of the Series C Preferred Stock shall be entitled to receive, out of
any assets legally available therefor, cumulative dividends at the rate of $2.50
per share per annum, commencing April 1, 2001, and payable quarterly in arrears
beginning on June 30, 2001 and on each succeeding September 30, December 31,
March 31 and June 30 of each year, when and as declared by the Board of
Directors, in preference and priority to any payment of any dividend on the
Common Stock or any other class or series of stock of the Corporation while any
of the Series C Preferred Stock is outstanding. Such dividends shall accrue on
any given share from April 1, 2001 and shall accrue from day to day thereafter
whether or not earned or declared. If at any time dividends on the outstanding
Series C Preferred Stock, at the rate set forth above, shall not have been paid
or declared and set apart for payment with respect to all preceding periods, the
amount of the deficiency shall be fully paid or declared and set apart for
payment, but without interest, before any distribution, whether by way of
dividend or otherwise, shall be declared or paid upon or set apart for the
shares of any other class or series of stock of the Corporation. Redemption of
the Series C Preferred Stock shall not effect any holder’s right to
receive any accrued but unpaid dividends on the Series C Preferred Stock.

        3.
Liquidation Preference.

        (a)
In the event of any liquidation, dissolution or winding up of the Corporation,
either voluntary or involuntary, the holders of the Series C Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
assets of the Corporation to the holders of any other class or series of shares,
the amount of $50 per share plus any accrued but unpaid dividends (the
“Liquidation Preference”). 

        (b)
A consolidation or merger of the Corporation with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of the
Corporation, shall not be deemed a liquidation, dissolution or winding up within
the meaning of this Section 3 unless, following the consolidation or merger, or
the sale of all or substantially all of the assets of the Corporation, the
holders of the Series C Preferred Stock are no longer entitled to the
Liquidation Preference. 

        4.
Conversion.The holders of the Series C Preferred Stock shall have
no right to convert the Series C Preferred Stock into any other right or
security.

        5.
Mandatory Redemption.

        (a)
On December 31, 2005 (the “Mandatory Redemption Date”), the
Corporation shall redeem all of the outstanding shares of the Series C Preferred
Stock at a redemption price equal to the Liquidation Preference (the
“Mandatory Redemption Price”). 

        (b)
At least 30 days prior to the Mandatory Redemption Date, written notice (the
“Mandatory Redemption Notice”) shall be mailed, first class postage
prepaid, by the Corporation to each holder of record of the Series C Preferred
Stock, at the address last shown on the records of the Corporation for such
holder, notifying such holder of the redemption which is to be effected, the
Mandatory Redemption Date, the Mandatory Redemption Price, the place at which
payment may be obtained and calling upon each such holder to surrender to the
Corporation, in the manner and at the place designated, a certificate or
certificates representing the total number of shares of Series C Preferred Stock
held by such holder. On or after the Mandatory Redemption Date, each holder of
Series C Preferred Stock shall surrender to the Corporation the certificate or
certificates representing the shares of Series C Preferred Stock owned by such
holder as of the Mandatory Redemption Date, in the manner and at the place
designated in the Mandatory Redemption Notice, and thereupon the Mandatory
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be cancelled. 

        (c)
>From and after the Mandatory Redemption Date, unless there shall have been a
default in payment of the Mandatory Redemption Price, all rights of the holders
of shares which have been redeemed (except the right to receive the Mandatory
Redemption Price without interest upon surrender of the certificate or
certificates representing such shares) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever. 

        6.
Optional Redemption by Corporation.

        (a)
At any time from and after the date of issuance of the Series C Preferred Stock
until December 31, 2003, the Corporation may at its sole election redeem some or
all of the Series C Preferred Stock at a redemption price equal to two-thirds of
the Liquidation Preference ($33.33 per share, hereafter the
“Corporation’s Optional Redemption Price”). If the Corporation
elects to redeem less than all of the Series C Preferred Stock, each such
redemption shall be made pro rata from the holders of all outstanding Series C
Preferred Stock. 

        (b)
At least 30 days prior to the date on which the Corporation intends to redeem
the Series C Preferred Stock pursuant to this Section (the
“Corporation’s Optional Redemption Date”), written notice (the
“Corporation’s Optional Redemption Notice”) shall be mailed,
first class postage prepaid, by the Corporation to each holder of record of the
Series C Preferred Stock, at the address last shown on the records of the
Corporation for such holder, notifying such holder of the redemption which is to
be effected, whether some or all shares will be redeemed, the Corporation’s
Optional Redemption Date, the Corporation’s Optional Redemption Price, the
place at which payment may be obtained and calling upon each such holder to
surrender to the Corporation, in the manner and at the place designated, a
certificate or certificates representing the total number of shares of Series C
Preferred Stock held by such holder. On or after the Corporation’s Optional
Redemption Date, each holder of Series C Preferred Stock shall surrender to the
Corporation the certificate or certificates representing the shares of Series C
Preferred Stock owned by such holder as of the Corporation’s Optional
Redemption Date, in the manner and at the place designated in the
Corporation’s Optional Redemption Notice, and thereupon the
Corporation’s Optional Redemption Price of such shares shall be payable to
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be canceled. If
fewer than all shares are to be redeemed, the Corporation shall, as of the date
of the redemption, issue and deliver to the appropriate holder, certificates
representing the shares of Series C Preferred Stock not redeemed. 

        (c)
>From and after the Corporation’s Optional Redemption Date, unless there
shall have been a default in payment of the Corporation’s Optional
Redemption Price, all rights of the holders of the shares which have been
redeemed (except the right to receive the Corporation’s Optional Redemption
Price without interest upon surrender of the certificate or certificates
representing such shares) shall cease with respect to such shares, and the
shares redeemed shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever. 

        (d)
Notwithstanding any other terms or provisions applying to the Series C Preferred
Stock, the Corporation and any holder of Series C Preferred Stock ( a
“Consenting Holder”) may, without consent of any other holder, agree
to redemption or conversion of the Series C Preferred Stock held by the
Consenting Holder by the Corporation on such terms as they may agree, provided
that the other holders of outstanding Series C Preferred Stock are not adversely
affected. 

        7.
Other Provisions. For all purposes of this Designation, the term
"date of issuance" shall mean the day on which shares of the Series C Preferred
Stock are first issued by the Corporation. Any provision herein which conflicts
with or violates any applicable usury law shall be deemed modified to the extent
necessary to avoid such conflict or violation.

        8.
Restrictions and Limitations. The Corporation shall
not undertake the following actions without the consent of the holders of a
majority of the Series C Preferred Stock outstanding: (i) modify its
Certificate of Designation or Bylaws so as to amend or change any of the rights,
preferences, or privileges of the Series C Preferred Stock, (ii) authorize or
issue any other preferred equity security senior to or on a parity with the
Series C Preferred Stock, or (iii) purchase or otherwise acquire for value any
Common Stock or other equity security of the Corporation either junior or senior
to or on a parity with the Series C Preferred Stock while there exists any
arrearage in the payment of cumulative dividends hereunder. 

        9.
Voting Rights. Except as provided herein or as provided for by
law, the Series C Preferred Stock shall have no voting rights.

        10.
Attorneys' Fees.Any holder of Series C Preferred Stock shall be
entitled to recover from the Corporation the reasonable attorneys' fees and
expenses incurred by such holder in connection with enforcement by such holder
of any obligation of the Corporation hereunder. 

        IN
WITNESS WHEREOF, the Company has caused this Certificate of Designation of
Series C Redeemable 5% Cumulative Preferred Stock to be duly executed by its
President and attested to by its Secretary and has caused its corporate seal to
be affixed hereto, this 3rd day of November, 2000. 

            
             
             
              
             
       PEASE OIL AND GAS COMPANY

S E A L

     
              
          
             
             
        
        By: /s/ Patrick J. Duncan     

             
             
             
              
             
             Patrick J.
Duncan, President

ATTESTED:

By: /s/ Marilyn L.
Adams            
      

             Marilyn L. Adams, Secretary

STATE OF
COLORADO          
         )

             
             
        
             
             ) ss.

COUNTY OF MESA           
            
  )

        Subscribed,
acknowledged and sworn to before me this 3rd day of November, 2000, by
Patrick J. Duncan.

        Witness
 my hand and official seal.

        My
commission expires: 2/16/2003

S E A L

     
              
          
             
             
        
        By   /s/ Laura Sue Bray        
                     
                  
           

             
             
             
              
             
             
 Notary Public

STATE
OF COLORADO          
         )

             
             
        
             
             ) ss.

COUNTY OF MESA           
            
  )

        Subscribed,
acknowledged and sworn to before me this 3rd day of November, 2000, by
Marilyn L. Adams.

        Witness
 my hand and official seal.

        My
commission expires: 2/16/2003

S E A L

     
              
          
             
             
        
        By   /s/ Laura Sue Bray        
                     
                  
           

             
             
             
              
             
             
 Notary Public

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