ex10-4.htm


    EXHIBIT
10.4

    


    LETTER AGREEMENT
DATED OCTOBER 9, 2008

    BY
AND BETWEEN STANDARD DRILLING, INC.,

    PBT
CAPITAL PARTNERS, LLC AND PRENTIS B. TOMLINSON, JR.

    


    


    PBT
Capital Partners, LLC

    1667 K
Street, NW, Suite 1230

    Washington,
DC   20006

    


    October
9, 1008

    


    Standard
Drilling, Inc.

    Attention:  Mr.
David Rector

    1640
Terrace Way

    Walnut
Creek, CA 94597

    


    
      	
              Re:

            	
              That
      certain Asset Purchase Agreement dated September 24, 2007 between PBT
      Capital Partners, LLC, and Standard Drilling, Inc. (the
      “Agreement”)

            


    

    


    Gentlemen:

    


    This
letter agreement is by and among PBT Capital Partners, LLC, (“Buyer”), Prentis.
B. Tomlinson, Jr. and Standard Drilling, Inc. (“Seller”).  Buyer and
Seller have agreed as follows:

    


    
      	
               
      

            	
              1.

            	
              Upon
      Closing, Buyer will place $233,425 in an escrow account pursuant to terms
      and conditions, and with an escrow agent, mutually and reasonably
      acceptable to Buyer and Seller, which terms and conditions shall be
      generally as follows:

            


    

    


    
      	
              (a)

            	
              The
      escrowed funds shall be applied to the payment of any failure to drill
      penalties which were accrued as of the date of the Agreement pursuant to
      the Daniels Lease referenced in Section 2.4 of the Agreement, if (and only
      if) and to the extent a valid claim therefor is made against the Seller by
      Paul R. Daniels and/or wife, Marcia B. Daniels and Marcia B. Daniels,
      Trustee (collectively, the “Daniels”), prior to the expiration of the
      Escrow Term.

            
	 
      	 
      
	
              (b)

            	
              The
      “Escrow Term” shall begin on the date of the establishment of the escrow
      account and shall expire immediately upon the first of the following to
      occur:

            


    

    


    


    
      	
              (i)

            	
              Eighteen
      months after the date of this Agreement, or

            
	 
      	 
      
	
              (ii)

            	
              The
      direct or indirect disclosure by Seller, its affiliates, or any of their
      respective representatives, employees, officers or directors, of the
      existence of the escrow arrangement contemplated herein, or any of its
      terms, either:

            


    

    


    


    
      	
              (1)

            	
              to
      the public, whether pursuant to governmental filings or otherwise,
      or

            
	
               
      

            	 
      
	
              (2)

            	
              to
      any of the Daniels.

            


    

    


    


    
      	
              (c)

            	
              Upon
      the expiration of the Escrow Term pursuant to Section 1(b)(i), the amounts
      held in the escrow account which are not subject to a valid claim
      submitted by the Daniels shall be paid to PBT.  Upon the
      expiration of the Escrow Term pursuant to Section 1(b)(ii), the amounts
      held in the escrow account shall be paid to PBT whether or not subject to
      a valid claim submitted by the
Daniels.

            


    

    


    
      	
               
      

            	
              2.

            	
              Buyer
      hereby represents that any and all liability, contingent or otherwise, of
      the Seller for failure to drill penalties pursuant to the Norton Prospect
      Leases referenced in Section 1.2(c) of the Agreement has been extinguished
      and/or released.  Upon the execution and delivery of this
      letter, Buyer shall deliver to Seller copies of documents evidencing such
      release.

            


    

    


    
      	
               
      

            	
              3.

            	
              In
      consideration for the foregoing, Seller shall and does hereby cancel and
      extinguish the liability of Buyer and Prentis Tomlinson pursuant to that
      certain promissory note payable by Buyer to the order of Seller in the
      original principal amount of $600,000.00 which is referenced in Section
      1.3 of the Agreement (the “Note”).  Seller shall return to Buyer
      the original Note, marked
“Cancelled.”

            


    

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              4.

            	
              If
      any matter relating to the subject matter of this letter agreement is
      subject to dispute by either Seller or Buyer, the matter shall be referred
      either by the Seller or the buyer (in either case, the “Claimant”) to
      arbitration by one arbitrator pursuant to the Rules of Commercial
      Arbitration (the “Rules”).  The Claimant shall file a request
      for arbitration with the American Arbitration Association (“AAA”) and
      notify the other party (the “Respondent”) in writing of the nature of the
      dispute.  The arbitrator shall be appointed by the AAA in
      accordance with the Rules.  Following the selection of the
      arbitrator as set forth above, the arbitration shall be conducted promptly
      and expeditiously so as to enable the arbitrator to render a decision
      within 30 days.  Subject to the foregoing and except to the
      extent the parties shall agree to the contrary, the arbitrator haring the
      dispute shall apply and follow the Federal Rules of Civil Procedure and
      the Federal rules of Evidence.

            


    

    


    The Buyer
and Seller agree to waive any of the Rules, and also any Federal Rules of Civil
Procedure and the Federal Rules of Evidence, to the extent necessary to enable
the arbitrator to render a decision within 30 days of this
appointment.  The Buyer and Seller agree that the need for prompt
resolution of any dispute is paramount and outweighs any possible detriment that
may result from expedited discovery procedures or otherwise from expedited
proceedings.  If there is any conflict between the Rules and this
Section 4, this Section 4 shall govern.  The arbitration shall be held
in Houston, Texas.  The parties acknowledge that the arbitrator shall
have the authority to grant equitable remedies, if appropriate.

    


    Arbitration
under this Section 4 shall be the exclusive means for a party to seek resolution
of any dispute arising out of, or any breach or alleged breach of, this letter
agreement, except that any party may bring an action before a competent court
for the adoption of provisional or protective measures or equitable
relief.  The award of the arbitrator shall be final and binding on the
parties.  Each of the claimant and the Respondent shall bear (i) in
equal proportions to the cost and expenses of the arbitration proceeding
assessed by the AAA, and (ii) their respective expenses in prosecuting or
defending the arbitration.

    


    Judgment
on the arbitral award rendered may be entered in any court having jurisdiction
or application may be made to such for a judicial acceptance of the award and an
order of enforcement, as the case may.  The parties acknowledge and
agree that any party may seek before any court of competent jurisdiction,
provisional, protective or equitable relief.

    


    
      	
               
      

            	
              5.

            	
              Buyer
      shall pay on behalf of Standard Drilling, Inc. the property tax lien
      126-5534-01142 due to Johnson County in the amount of $185,574.39 and
      shall furnish to the Seller at closing a duly executed copy of the release
      of lien.

            


    

    


    
      	
               
      

            	
              6.

            	
              If
      (and only if) and to the extent a valid claim is made against the Seller
      by Daniels as referenced in Paragraph 1 above then Prentis B. Tomlinson,
      Jr. shall immediately pay on behalf of Standard Drilling, Inc. the sum of
      $223,425.61.

            


    

    


    
      	
               
      

            	
              7.

            	
              Further
      the Buyer hereby represents that any and all liabilities, contingent or
      otherwise, of the Seller in respect of employees listed in Sections 1.2(e)
      through 1.2(g) of the Agreement has been extinguished and/or
      released.  Upon execution and delivery of this letter, Buyer
      shall deliver to the Seller copies of documents evidencing such
      extinguishment or release.

            


    

    


    
      	
               
      

            	
              8.

            	
              Buyer
      agrees to promptly pay IHS Energy in the amount of $4,378.57 for services
      rendered prior to closing date of the Agreement.  Buyer further
      represents and warrants that it is and will be fully responsible for any
      and all liabilities, contingent or otherwise, of the Seller referred to in
      section 1.2 of the Agreement and shall promptly pay or settle such
      liabilities.

            


    

    


    
      	
               
      

            	
              9.

            	
              The
      final execution, fulfillment and delivery of all terms and conditions as
      outlined in this letter agreement are to be completed no later than
      Friday, December 31, 2008.

            


    

    


    If the foregoing sets forth the terms
of our binding agreement, please execute this letter where indicated
below.

    


    
      
        
          
            
              
                	 
      	
                        Sincerely,

                      
	 
      	 
      
	 
      	
                        PBT
      Capital Partners, LLC

                      
	 
      	 
      
	 
      	
                        By:  /s/
      Prentis B. Tomlinson,
      Jr.                       
      

                      
	 
      	
                        Print
      Name:  Prentis B. Tomlinson,
      Jr.              

                      
	 
      	
                        Title:  President                                                   
      

                      
	 
      	 
      
	 
      	
                        Prentis
      B. Tomlinson, Jr.

                      
	 
      	
                              
                          By:  /s/
      Prentis B. Tomlinson,
      Jr.                       
      

                        

                      
	 
      	
                              
                          Print
      Name:  Prentis B. Tomlinson,
      Jr.              

                        

                      


              

            

          

        

      

    

    


    ACCEPTED
AND AGREED TO:

    


    STANDARD
DRILLING, INC.

    


    By:  /s/ David S.
Rector                                                                

    Print
Name:  David
S.
Rector                                                                           

    Title:  President/CEO