Exhibit 10.4


 


TRANSITION
SERVICES AGREEMENT


 


THIS TRANSITION SERVICES AGREEMENT (this “Agreement”)
is entered into as of March 11, 2008, by and among Petroleum Engineers, Inc.,
a Louisiana corporation (“PEI”), Stratum Holdings, Inc., a Nevada
corporation (“Stratum”), CYMRI, L.L.C., a Nevada limited liability company (“CYMRI”),
and Triumph Energy, Inc., a Louisiana corporation (“Triumph”).  Stratum, CYMRI and Triumph are referred to as
the “Stratum Parties”.


 


BACKGROUND


 


A.                                   Pursuant to a Securities Purchase Agreement
dated the date hereof (the “Purchase Agreement”), by and among Hamilton
Acquisition, Inc., a Delaware corporation (“HAI”), Stratum and CYMRI, HAI
will acquire all the issued and outstanding capital stock of PEI from
Stratum.  CYMRI and Triumph are direct or
indirect wholly-owned subsidiaries of Stratum.


 


B.                                     The parties to the Purchase Agreement
recognize that it is advisable for the Stratum Parties to provide to PEI: (i) the
administrative, accounting support and other services for a transitional period
described on Annex A to this Agreement (the “Stratum General Services”); (ii) the
information technology services for a transitional period described on Annex B
to this Agreement (the “Stratum IT Services”); and (iii) the certain
services related to the transfer of property, files and other information
described on Annex C to this Agreement (the “Stratum Transfer Services” and
together with the Stratum General Services and the Stratum IT Services, the “Stratum
Services”).


 


C.                                     The parties to the Purchase Agreement
also recognize that it is advisable for PEI to provide to the Stratum Parties: (i) the
administrative, accounting support and other services for a transitional period
described on Annex A to this Agreement (the “PEI General Services”); and (ii) the
information technology services for a transitional period described on Annex B
to this Agreement (the “PEI IT Services” and together with the PEI General
Services, the “PEI Services”).


 


D.                                    The execution of this Agreement is a
condition to the consummation of the transactions contemplated by the Purchase
Agreement.


 


NOW, THEREFORE, the parties agree as follows:


 


1.                                       Transition Services.


 


(a)                                  For purposes of this Agreement:


 


(i)                                     “Recipient” means PEI with respect to the
Stratum Services and the Stratum Parties with respect to the PEI Services.


 

















 


(ii)                                  “Service Provider” means the Stratum
Parties with respect to the Stratum Services and PEI with respect to the PEI
Services.


 


(iii)                               “Services” means the Stratum Services or
the PEI Services, as applicable.


 


(b)                                 In consideration of the consummation of
the transactions contemplated by the Purchase Agreement, the Service Provider
will provide the Services to the Recipient for a term commencing on the date of
this Agreement and ending at the time specified with respect to each such
Service indicated as applicable on Annex A, Annex B and Annex C (and with
respect to each such Service, at a cost indicated as applicable on Annex A,
Annex B and Annex C); provided, however, the Stratum Parties and
PEI each acknowledge and agree that the aggregate cost of all of the Stratum
General Services on Annex A (other than the “Stratum office space” indicated in
Annex A at a cost of $1,500 pro rated rent per month) and the aggregate cost of
all of the PEI General Services on Annex A are intended to be offset and result
in no (i.e., zero) net cost to either PEI or the Stratum Parties.  Each respective Recipient is under no
obligation to continue to use any of such Services and may terminate any or all
of such Services upon written notice to the Service Provider.


 


(c)                                  For any applicable Stratum IT Services or
PEI IT Services indicated on Annex B, the Service Provider will periodically,
but not more frequently than semi-monthly, submit to the Recipient statements
of amounts due (based on actual hours and the applicable rates) in accordance
with Annex B; provided, further, that all amounts billed and payable in
accordance with Annex B will be paid within 30 days after receipt of each such
statement hereunder.


 


(d)                                 For the rent payable by PEI to the
Stratum Parties (as indicated under “Stratum office space” in Annex A), the
Stratum Parties shall prepare a statement of amount due (based on a pro rated
calculation for the number of days occupied and the applicable $1,500 rent cost
per month) and submit such statement to PEI upon vacating the applicable
premises and PEI shall pay such invoiced amount within 15 days after receipt of
such statement hereunder.


 


2.                                       Responsibility. 
The Service Provider will use those efforts and degree of care in
providing the Services that are comparable to those used by the Service
Provider for its own account in providing services, activities and work similar
in nature to the Services.  To the extent
reasonably possible, the Services will be substantially similar in nature and
quality to the services provided or otherwise made available by the Service
Provider to the Recipient immediately prior to the date of this Agreement.


 


3.                                       Confidentiality.


 


(a)                                  The Service Provider acknowledges that in
connection with the performance of the Services it may have access to
confidential information of the Recipient, including, without limitation,
financial and operating results, internal accounting reports and systems,
customer lists, consultant lists, vendor names, and employee information (the “Confidential
Information”).  The Service Provider must
keep all Confidential Information in 


 


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strict confidence and,
except as may be necessary to perform the Services or as may be otherwise
required by applicable law, must not use any Confidential Information for any
purpose other than for the Recipient’s exclusive benefit or disclose any
portion of any Confidential Information to any third party without the prior
written consent of the Recipient.  The
Service Provider must use the same degree of care to protect the Confidential
Information as it uses to protect its own confidential information, but, in no
event, may the Service Provider use less than a commercially reasonable degree
of care to protect the Confidential Information.  Information will not constitute Confidential
Information which (i) is in or enters the public domain through no fault
or wrongful action of the Service Provider, or (ii) after the termination
of this Agreement, is independently developed by the Service Provider or is
received by the Service Provider from a third party which, to the knowledge of
the Service Provider, is not subject to any legal restriction on its right to
use and disclose such information.


 


(b)                                 The Service Provider acknowledges that
any unauthorized disclosure or use of any Confidential Information would cause
irreparable harm and significant injury, the degree of which may be difficult
to ascertain, to the Recipient. 
Accordingly, the Service Provider agrees that the Recipient will have
the right to injunctive relief from a court of competent jurisdiction, as well
as the right to pursue any and all other rights and remedies available at law
or in equity for such a breach.


 


4.                                       Duration and Termination.


 


(a)                                  This Agreement is effective as of the
date hereof and will continue until the expiration or termination of this
Agreement upon the earliest to occur of the following:


 


(i)                                     the latest expiration date for the
provision of all the Services by the Service Provider set forth in Annex A,
Annex B or Annex C;


 


(ii)                                  each Recipient notifies the Service
Provider that it terminates all of the Services that have not been previously
terminated in accordance with Section 1;


 


(iii)                               the mutual written consent of the
parties;


 


(iv)                              either the Stratum Parties (as a group)
or PEI provides written notice of termination to the other party, in the event
that the other party commences a case as debtor under Title 11 of the United
States Code or any similar proceeding for the relief of debtors, or has any
such case or proceeding commenced against it which is not vacated within 60
days of such commencement, or otherwise ceases to function as a going concern;
and


 


(v)                                 either the Stratum Parties (as a group)
or PEI provides written notice of termination to the other party, in the event
that the other party defaults in the performance of its obligations under this
Agreement in any material respect and such default continues for 10 days
following written notice to the other party specifying such default in
reasonable detail.


 


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(b)                                 Upon the expiration or termination of
this Agreement pursuant to this Section 4, the rights and obligations of
the parties will terminate, except for the rights and obligations of the
parties under Section 3, which will survive such expiration or termination
without limitation; provided, however, that the termination of this Agreement
will not relieve any party of its payment obligations for Services provided
under this Agreement.  Upon such
expiration or termination, the Stratum Parties and PEI will cease to have any
obligation to provide any Services, and each party will promptly deliver to the
other all data, programs, software materials, and other properties owned by the
other and held by it in connection with the performance of its obligations
under this Agreement.  Each party will
assist the other at such other party’s reasonable request and expense in
effecting an orderly termination of this Agreement.


 


5.                                       Relationship of Parties. 
No Service Provider will act or represent or hold itself out as having
authority to act as an agent or partner of the Recipient, or in any way bind or
commit the Recipient to any obligations. 
Nothing contained in this Agreement will be construed as creating a
partnership, joint venture, agency, trust or other association of any kind,
each party being individually responsible only for its obligations as set forth
in this Agreement.  The employees (or
contractors) performing the services contemplated by this Agreement will remain
employees (or contractors) of each respective Service Provider.


 


6.                                       Successors and Assigns. 
This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.  Neither this Agreement nor any right,
interest or obligation under this Agreement may be assigned by any party to
this Agreement without the prior written consent of the other parties hereto
and any attempt to do so will be void.


 


7.                                       Governing Law. 
This Agreement will be governed by and construed and enforced in
accordance with the laws of the State of Delaware without giving effect to its
conflict of laws principles.


 


8.                                       Entire Agreement. 
This Agreement and the Annexes attached hereto contain the entire
understanding of the parties hereto with respect to the subject matter
contained herein.  There are no
restrictions, promises, warranties, covenants, or undertakings, other than
those expressly provided for herein. 
This Agreement and the Annexes supersede all prior agreements and
undertakings between the parties with respect to such subject matter.


 


9.                                       Severability. 
If any one or more covenants or agreements provided in this Agreement
should be contrary to law, then such covenants or agreements will be null and
void and will in no way affect the validity of the other provisions of this
Agreement, which will otherwise be fully effective and enforceable.


 


10.                                 Further Assurances. 
Each party will cooperate and take such action as may be reasonably
requested by the other party to carry out the provisions and purpose of this
Agreement and the transaction contemplated hereby.


 


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11.                                 Amendment and Waiver. 
No waiver, modification, amendment of any provision of this Agreement,
or any consent will be effective unless specifically made in writing and duly
signed by the party to be bound thereby. 
No waiver of any term or condition of this Agreement, in any one or more
instances, will constitute a waiver of the same term or condition of this
Agreement on any future occasion.


 


12.                                 Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which will be deemed an original and all of which together will constitute one
and the same agreement.


 


* * * * *


 


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IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed effective as of the date first written above.


 


	
  PEI:

  	
  STRATUM
  PARTIES:

  
	
   

  	
   

  
	
  PETROLEUM
  ENGINEERS, INC.

  	
  STRATUM
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/
  Charles R. Brown II

  	
   

  	
  By:

  	
   

  	
  /s/
  D. Hughes Watler, Jr.

  
	
  Its:

  	
   

  	
  Chief
  Executive Officer

  	
   

  	
  Its:

  	
   

  	
  Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CYMRI,
  L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  Kenneth L. Thomas

  
	
   

  	
  Its:

  	
   

  	
  Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TRIUMPH
  ENERGY, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  Kenneth L. Thomas

  
	
   

  	
  Its:

  	
   

  	
  Chief
  Financial Officer