TERMINATION AGREEMENT

 

 

THIS AGREEMENT dated as of May 11, 2010

 

 

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;

 

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:

 

 

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

 

(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.

 

 

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.

 

 

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.

 

 

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.

 

 

 

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

 

 

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.

 

 

(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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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