Document:

Exhibit 10.1

 

SECURITIES
PURCHASE AGREEMENT

 

by and among

 

HAMILTON
ACQUISITION, INC.

as Buyer,

 

STRATUM HOLDINGS,
INC.,

as Seller,

 

and

 

CYMRI, L.L.C.

 

March 11,
2008

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  	 

	
  ARTICLE 1

  	
  DEFINITIONS

  	
  1

  	 

	 
	
   

  	
   

  	
   

  
	 
	
  ARTICLE 2

  	
  PURCHASE AND SALE OF SECURITIES

  	
  7

  
	 
	
  2.1

  	
  Purchase and Sale

  	
  7

  
	 
	
  2.2

  	
  Purchase Price

  	
  7

  
	 
	
  2.3

  	
  Payment of the Purchase
  Price and Other Amounts

  	
  7

  
	 
	
  2.4

  	
  The Closing

  	
  8

  
	 
	
   

  	
   

  	
   

  
	 
	
  ARTICLE 3

  	
  REPRESENTATIONS AND WARRANTIES OF SELLER AND CYMRI

  	
  8

  
	 
	
  3.1

  	
  Organization, Power and
  Authorization

  	
  8

  
	 
	
  3.2

  	
  Binding Effect and
  Noncontravention

  	
  9

  
	 
	
  3.3

  	
  Brokers

  	
  9

  
	 
	
  3.4

  	
  Capitalization

  	
  10

  
	 
	
  3.5

  	
  Subsidiaries

  	
  10

  
	 
	
  3.6

  	
  Financial Statements

  	
  10

  
	 
	
  3.7

  	
  Subsequent Events

  	
  10

  
	 
	
  3.8

  	
  Title to Assets

  	
  12

  
	 
	
  3.9

  	
  Compliance With Laws

  	
  12

  
	 
	
  3.10

  	
  Undisclosed Liabilties

  	
  12

  
	 
	
  3.11

  	
  Tax Matters

  	
  12

  
	 
	
  3.12

  	
  Environmental Matters

  	
  13

  
	 
	
  3.13

  	
  Intellectual Property

  	
  13

  
	 
	
  3.14

  	
  Real Estate

  	
  14

  
	 
	
  3.15

  	
  Litigation

  	
  14

  
	 
	
  3.16

  	
  Employee Benefits

  	
  15

  
	 
	
  3.17

  	
  Insurance

  	
  17

  
	 
	
  3.18

  	
  Contracts

  	
  17

  
	 
	
  3.19

  	
  Employees

  	
  19

  
	 
	
  3.20

  	
  Affiliate Transactions

  	
  19

  
	 
	
  3.21

  	
  Receivables

  	
  19

  
	 
	
  3.22

  	
  Permits and Licenses

  	
  19

  
	 
	
  3.23

  	
  Tangible Assets

  	
  20

  
	 
	
  3.24

  	
  Service Warranty

  	
  20

  
	 
	
  3.25

  	
  Service Liability

  	
  20

  
	 
	
  3.26

  	
  Bank Accounts

  	
  20

  
	 
	
  3.27

  	
  Debt, Liabilities and
  Expenses

  	
  20

  
	 
	
   

  	
   

  	
   

  
	 
	
  ARTICLE 4

  	
  REPRESENTATIONS AND WARRANTIES OF BUYER

  	
  20

  
	 
	
  4.1

  	
  Organization, Power and
  Authorization

  	
  20

  
	 
	
  4.2

  	
  Binding Effect and
  Noncontravention

  	
  21

  
	 
	
  4.3

  	
  Brokers

  	
  21

  
	 
	
  4.4

  	
  Litigation

  	
  21

  
							

 

i

 

	
  4.4

  	
  Consents and Approvals

  	
  21

  
	
  4.7

  	
  Investment Intent

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  CONDITIONS TO THE CLOSING

  	
  22

  
	
  5.1

  	
  Conditions to Buyer’s
  Obligation

  	
  22

  
	
  5.2

  	
  Conditions to Seller’s
  and CYMRI’s Obligation

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  COVENANTS

  	
  25

  
	
  6.1

  	
  Further Assurances

  	
  25

  
	
  6.2

  	
  Litigation Support

  	
  25

  
	
  6.3

  	
  Release

  	
  25

  
	
  6.4

  	
  Continued
  Existence/Reserve Account

  	
  25

  
	
  6.5

  	
  Accounts Receivable
  Aging

  	
  26

  
	
  6.6

  	
  Preparation of Tax
  Returns; Payment of Taxes

  	
  26

  
	
  6.7

  	
  Cooperation with
  Respect to Tax Returns

  	
  29

  
	
  6.8

  	
  Tax Sharing Agreements

  	
  29

  
	
  6.9

  	
  Sterling Bank Account

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  SURVIVAL AND INDEMNIFICATION

  	
  29

  
	
  7.1

  	
  Survival of
  Representations and Warranties

  	
  29

  
	
  7.2

  	
  Indemnification
  Obligations of Seller

  	
  29

  
	
  7.3

  	
  Indemnification
  Obligations of Buyer

  	
  30

  
	
  7.4

  	
  Limitations on
  Indemnification

  	
  31

  
	
  7.5

  	
  Third Party Claims

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  MISCELLANEOUS

  	
  32

  
	
  8.1

  	
  Public Announcements

  	
  32

  
	
  8.2

  	
  Transaction Expenses

  	
  32

  
	
  8.3

  	
  Amendments

  	
  32

  
	
  8.4

  	
  Successors and Assigns

  	
  32

  
	
  8.5

  	
  Governing Law

  	
  32

  
	
  8.6

  	
  Notices

  	
  32

  
	
  8.7

  	
  Schedules and Exhibits

  	
  33

  
	
  8.8

  	
  Termination of Certain
  Pre-Closing Agreements

  	
  34

  
	
  8.9

  	
  Counterparts

  	
  34

  
	
  8.10

  	
  No Third Party
  Beneficiaries

  	
  34

  
	
  8.11

  	
  Headings

  	
  34

  
	
  8.12

  	
  Entire Agreement

  	
  34

  
	
  8.13

  	
  Severability

  	
  34

  
	
  8.14

  	
  Construction

  	
  34

  
	
  8.15

  	
  Cumulative Remedies

  	
  34

  

 

ii

 

EXHIBITS
AND SCHEDULES

 

	
  Exhibit A

  	
  Decca
  Non-competition Agreement

  
	
  Exhibit B

  	
  Decca Option
  Agreement

  
	
  Exhibit C

  	
  Escrow Agreement

  
	
  Exhibit D

  	
  Non-competition
  Agreement

  
	
  Exhibit E

  	
  Sublease
  Agreement

  
	
  Exhibit F

  	
  Transition
  Services Agreement

  
	
  Exhibit G

  	
  Triumph MOU

  
	
  Exhibit H

  	
  Opinion of
  Seller’s Legal Counsel

  
	
  Exhibit I

  	
  Opinion of
  Buyer’s Legal Counsel

  
	
   

  	
   

  
	
  Exhibit 2.2

  	
  Purchase Price
  Calculation

  
	
  Exhibit 5.1(e)

  	
  MSA Amendments

  
	
  Exhibit 5.1(f)

  	
  MSA Agreements

  

 

Disclosure
Schedule

 

iii

 

SECURITIES
PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of March 11,
2008, by and among Hamilton Acquisition, Inc., a Delaware corporation (“Buyer”),
Stratum Holdings, Inc., a Nevada corporation (“Seller”), and CYMRI,
L.L.C., a Nevada limited liability company (“CYMRI”).

 

BACKGROUND

 

A.                                   Seller
owns all of the issued and outstanding capital stock of Petroleum Engineers, Inc.,
a Louisiana corporation (the “Company”), which, as of the date hereof, consists
of 2,040 issued and outstanding shares of common stock (the “Securities”).

 

B.                                     The
parties desire to enter into this Agreement pursuant to which Seller agrees to
sell to Buyer, and Buyer agrees to purchase from Seller, all of the Securities.

 

NOW, THEREFORE,
the parties agree as follows:

 

ARTICLE
1

DEFINITIONS

 

For purposes of
this Agreement, the following terms have the meanings set forth below:

 

“2007 and 2008
State Income Tax Returns of PEI” has the meaning set forth in Section 6.6(b).

 

“Annual Financial Statements” has the meaning set forth in Section 3.6.

 

“Business Day” means a day, other than a Saturday, Sunday or other day
on which commercial banks in Houston, Texas are authorized or required by law
to close.

 

“Buyer” has the meaning set forth in the preamble.

 

“Cantrell” means Franklin M. Cantrell, Jr.

 

“Closing” has the meaning set forth in Section 2.4.

 

“Closing Date” has the meaning set forth in Section 2.4.

 

“COBRA” means the requirements of Part 6 of Subtitle B of Title I
of ERISA and Section 4980B of the Code and of any similar state law.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” has the meaning set forth in the background.

 

1

 

“Company Material Adverse Effect” means, as to the Company, any change,
event, effect, claim, circumstance or matter that (individually or in the
aggregate with all other changes, effects, claims, circumstances or matters)
is, or could reasonably be expected to be or to become, materially adverse to
the business, condition (financial or otherwise), operations, results of
operations, liabilities, or prospects of the business of the Company, or to the
ability of the Company to consummate the transactions contemplated by this
Agreement; provided that none of the following shall be deemed to constitute,
and none of the following shall be taken into account in determining whether
there has occurred a Company Material Adverse Effect: (i) any adverse
change or development resulting from conditions affecting the United States or
any foreign economy generally; or (ii) any change required by any
amendment to applicable accounting requirements or principles applicable to the
Company.

 

“CYMRI” has the meaning set forth in the preamble.

 

“CYMRI Merger Agreement” means the Agreement and Plan of Merger, dated May 23,
2006, by and among Seller, CYMRI, The Cymri Corporation, Larry M. Wright,
Cantrell, Robert G. Wonish and Michael W. Hopkins.

 

“Damages” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, Liens, losses, expenses, and
fees, including court costs and attorneys’ fees and expenses (without giving
effect to the Company Material Adverse Effect or other materiality qualification
or any similar qualification).

 

“Debt” means (i) indebtedness for borrowed money, (ii) indebtedness
secured by any Lien on property owned whether or not the indebtedness secured
has been assumed, (iii) indebtedness evidenced by notes, bonds, debentures
or similar instruments, (iv) capital leases, including, without
limitation, all amounts representing the capitalization of rentals in
accordance with GAAP, (v) “earnouts” and similar payment obligations, (vi) guarantees
with respect to liabilities of a type described in any of clauses (i) through
(v) above, and (vii) interest, penalties, premiums, fees and expenses
related to any of the foregoing; provided that, for the purposes of
Sections 2.2(ii), 2.3(b) and 3.27, this definition shall not include the
indebtedness represented by the PEI Insurance Finance Agreement.

 

“Decca” means Decca Consulting Ltd., an Alberta corporation.

 

“Decca Non-competition Agreement” means the Non-competition Agreement
to be entered into at the Closing by Seller, the Company, Decca and Buyer, in
substantially the form attached as Exhibit A.

 

“Decca Option Agreement” means the Option Agreement to be entered into
at the Closing by Seller, Decca and Buyer, in substantially the form attached
as Exhibit B.

 

“Deferred Compensation Plan” has the meaning set forth in Section 3.16(a).

 

2

 

“Disclosure Schedule” means the disclosure schedule prepared by Seller
attached to this Agreement, which sets forth the exceptions to the
representations and warranties contained in Articles 3 and certain other
information called for by this Agreement.

 

“Employee Benefit Plan” means any “employee benefit plan” (as such term
is defined in Section 3(3) of ERISA) and any other employee benefit
plan, program or arrangement of any kind.

 

“Environmental Laws” means all Legal Requirements concerning public
health and safety, worker health and safety, pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances,
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated byphenyls, noise, or radiation.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

 

“ERISA Affiliate” means each entity that is treated as a single
employer with the Company for purposes of Section 414 of the Code.

 

“Escrow Agent” means U.S. Bank National Association.

 

“Escrow Agreement” means the Escrow Agreement to be entered into at the
Closing by the Escrow Agent, Buyer and Seller, in substantially the form
attached as Exhibit C.

 

“Escrow Amount” means $1,600,000.

 

“Estimated Pre-Closing State Tax Liability”
has the meaning set forth in Section 2.2(v).

 

“Financial Statements” has the meaning set forth in Section 3.6.

 

“Generally Accepted Accounting Principles” or “GAAP” means generally
accepted accounting principles in effect in the United States from time to
time.

 

“Government Entity” means any (i) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (ii) federal, state, local, municipal, foreign
or other government; (iii) governmental or quasi governmental authority of
any nature; (iv) multi-national organization or body; or (v) Person
exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of
any nature.

 

“Income Tax” means any federal, state, local or foreign income and
franchise tax, including any interest, penalty, or addition thereto, whether
disputed or not.

 

3

 

“Indemnified Party” means a party who is seeking indemnification under Section 7.2
or 7.3.

 

“Indemnifying Party” means a party from whom indemnification is being
sought under Section 7.2 or 7.3.

 

“Insurance Policies” has the meaning set forth in Section 3.17.

 

“Intellectual Property” means all of the following: (i) inventions
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, and all patents, patent applications and patent
disclosures, together will all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof; (ii) trademarks,
service marks, trade dress, logos, slogans, trade names, corporate names,
Internet domain names, and brand names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith; (iii) copyrightable works, copyrights, and all
applications, registrations and renewals in connection therewith; (iv) trade
secrets, confidential information, and know-how (including customer and independent
contractor lists); (v) computer software (including all code, data,
databases and related documentation), and (vi) all other proprietary
rights.

 

“Interim Financial Statements” has the meaning set forth in Section 3.6.

 

“Latest Balance Sheet” has the meaning set forth in Section 3.6.

 

“Leased Real Property” has the meaning set forth in Section 3.14(b).

 

“Legal Requirement” means any law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, judgment, order, decree,
treaty, rule, regulation, ruling, determination, charge, direction or other
restriction of an arbitrator or Government Entity.

 

“Liability” means any liability or obligation of any kind or nature
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes.

 

“Lien” means any mortgage, pledge, lien, encumbrance, charge,
assessment, deed of trust, lease, adverse claim, levy, restriction on transfer,
any conditional sale or title retention agreement, or other security interest.

 

“Majority Shareholder” means each of Frederick A. Huttner, Larry M.
Wright, Michael W. Hopkins, Robert G. Wonish, Clarence J. Downs, and Richard A.
Piske III.

 

“Material Contracts” has the meaning set forth in Section 3.18(a).

 

4

 

“Material Customer” means a customer of the Company that is one of the
twenty largest customers based on the net revenue of the Company for either of
the fiscal years ended December 31, 2006 or December 31, 2007.

 

“Non-competition Agreement” means the Non-competition Agreement to be
entered into at the Closing by Buyer, the Company, Seller, CYMRI, the Majority
Shareholders and such employees of the Company required by Buyer in its sole
discretion in substantially the form attached as Exhibit D.

 

“PEI Insurance Finance Agreement” means the Premium Finance Agreement,
Disclosure Statement and Security Agreement made as of July 12, 2007 by
the Company in favor of AICCO, Inc.

 

“Permits” has the meaning set forth in Section 3.22.

 

“Person” means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity, an estate,
a labor union, or a Government Entity.

 

“Post-Closing Tax Period” means any Taxable
period beginning on the day after the Closing Date, and, with respect to any Taxable
period beginning before and ending after the Closing Date, means the portion of
such Taxable period commencing on the day after the Closing Date.

 

“Pre-Closing State Tax Liability” has the
meaning set forth in Section 6.6(f).

 

“Pre-Closing Tax Period” means any Taxable
period ending on or before the Closing Date, and, with respect to any Taxable
period beginning before and ending after the Closing Date, means the portion of
such Taxable Period through the end of the Closing Date.

 

“Purchase Price” has the meaning set forth in Section 2.2.

 

“Reserve Account” has the meaning set forth in Section 6.4.

 

“Reserve Tax Liabilities” has the meaning set forth in Section 6.4.

 

“Sale of CYMRI” means (i) the sale, transfer or other disposition
(including a stock sale, merger or similar transaction) by Seller of more than
fifty percent (50%) of its equity interest in CYMRI to any Person, or (ii) a
sale, lease, transfer or other disposition of all or substantially all of the
assets of CYMRI to any Person.

 

“Securities” has the meaning set forth in the background.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Seller” has the meaning set forth in the preamble.

 

5

 

“Seller Transaction Expenses” has the meaning set forth in Section 2.2(vi).

 

“Seller’s Knowledge” means the actual knowledge of the officers, directors and managers of
Seller and CYMRI after due inquiry and reasonable investigation. For purposes
of this Agreement, “due inquiry and reasonable investigation” means the
knowledge that Seller’s and CYMRI’s officers and directors would reasonably be
expected to obtain by reviewing with each key employee of Seller or the
Company, the representations and warranties set forth in this Agreement which
are applicable to the duties performed by such key employee or contractor on
behalf of Seller or the Company.

 

“Straddle Period” has the meaning set forth in Section 6.6(e).

 

“Sublease Agreement” means the Sublease Agreement to be entered into at
the Closing between the Company and Triumph in substantially the form attached
as Exhibit E.

 

“Tax” or “Taxes” means any federal, state, provincial, local or foreign
income, gross receipts, license, payroll, employment, excise (including taxes
under Section 409A of the Code), severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Section 59A of the
Code), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, goods and services, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind, including
any interest, penalty or addition thereto, whether disputed or not and including
any obligations to indemnify or otherwise assume or succeed to the Tax
liability of any other Person and any liability as a result of being a Person
required by law to withhold or collect taxes imposed on another Person.

 

“Tax Return” means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes (including any schedule or
attachment thereto, and any amendment thereof).

 

“Third Party Claim” has the meaning set forth in Section 7.5(a).

 

“Transaction Documents” means this Agreement, the Decca Non-competition
Agreement, the Decca Option Agreement, the Escrow Agreement, the
Non-competition Agreement, the Sublease Agreement, the Transition Services
Agreement and the Triumph MOU.

 

“Transition Services Agreement” means the Transition Services Agreement
to be entered into at the Closing by the Company and Seller, in substantially
the form attached as Exhibit F.

 

“Triumph” means Triumph Energy, Inc., a Louisiana corporation.

 

“Triumph MOU” means the Memorandum of Understanding to be entered into
at the Closing by the Company and Triumph, in substantially the form attached
as Exhibit G.

 

6

 

ARTICLE
2

PURCHASE
AND SALE OF SECURITIES

 

2.1                                 Purchase
and Sale.  On and subject to the
terms and conditions of this Agreement, Buyer agrees to purchase the Securities
from Seller, and Seller agrees to sell the Securities to Buyer.

 

2.2                                 Purchase
Price.  The aggregate purchase price
for the Securities (the “Purchase Price”) equals the sum of:

 

(i)                                     $15,000,000;

 

(ii)                                  minus
the amount of Debt of the Company as of the Closing, which is set forth on Exhibit 2.2;

 

(iii)                               minus the amount
of all distributions, bonus payments, and all other contractual payments due or
earned by employees of the Company (other than normal periodic compensation
payments and any incentive plans put into place by Buyer) as of, or resulting
from, the Closing, which is set forth on Exhibit 2.2;

 

(iv)                              minus
the amount of all Liabilities of the Company as of the Closing Date that are (A) outstanding
more than 60 days on the Closing Date or (B) not incurred in the ordinary
course of business, which is set forth on Exhibit 2.2;

 

(v)                                 minus
$100,000, which represents the estimated Liability of the Company for state
Income Taxes in Texas, Louisiana and Mississippi for taxable periods ending in
2007, and the pre-Closing portion of such Liability for the taxable period of
the Company ending in 2008 that has not been paid as of the Closing Date (the “Estimated
Pre-Closing State Tax Liability”); and

 

(vi)                              minus
the aggregate amount of fees and expenses owing by Seller, CYMRI or the Company
in connection with the transactions contemplated by this Agreement in the
amounts indicated on Exhibit 2.2 (the “Seller Transaction Expenses”).

 

2.3                                 Payment
of the Purchase Price and Other Amounts. 
At the Closing, subject to the satisfaction or waiver of each of the
conditions specified in Section 5:

 

(a)                                  Purchase
Price.  Buyer will pay the Purchase
Price as follows:

 

(i)                                     Escrow
Amount.  Buyer will deliver the
Escrow Amount to the Escrow Agent by wire transfer or delivery of other
immediately available funds to an account designated by the Escrow Agent to be
held in escrow pursuant to the terms of the Escrow Agreement.

 

7

 

(ii)                                  Cash
Consideration.  Buyer will deliver to
Seller an amount of cash equal to the
Purchase Price less the Escrow Amount by wire transfer or
delivery of other immediately available funds to the accounts designated by
Seller in writing to Buyer.

 

(b)                                 Debt.  On behalf of the Company, and at the
direction of Seller, Buyer shall
deliver payment to the appropriate parties in respect of the Debt of the
Company as of immediately prior to Closing, if any, pursuant to payoff letters
or invoices delivered by such parties to Seller, Buyer and the Company,
which are in form and substance
reasonably satisfactory to Buyer.

 

(c)                                  Seller
Transaction Expenses.  On behalf of
the Company and Seller, and at the direction of Seller, Buyer will deliver
payment of the Seller Transaction Expenses to the Persons identified on Exhibit 2.2
for which Buyer has received a release of Seller and the Company from such
parties (in a form acceptable to the Buyer in its sole discretion) at or prior
to the Closing, by wire transfer or delivery of other immediately available
funds to the accounts designated by Seller.

 

2.4                                 The
Closing.  The closing of the purchase
and sale of the Securities and the transactions relating thereto (the “Closing”),
will take place on the date hereof simultaneously with the execution and
delivery by the parties of this Agreement. 
The date and time of the Closing is the “Closing Date.”

 

ARTICLE
3

REPRESENTATIONS
AND WARRANTIES OF SELLER AND CYMRI

 

Except as
otherwise set forth on the Disclosure Schedule, CYMRI and Seller, jointly and
severally, represent and warrant to Buyer as follows:

 

3.1                                 Organization,
Power and Authorization.

 

(a)                                  Seller
is a corporation duly organized, validly existing and in good standing under
the laws of Nevada, and is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification is
required.  Seller has the corporate power
to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it.  Seller
has the requisite power and authority necessary to enter into, deliver and
perform its obligations pursuant to each of the Transaction Documents to which
it is a party.  Seller’s execution,
delivery and performance of each Transaction Document to which it is a party
has been duly authorized by Seller.  Upon
the consummation of the transactions contemplated by the Transaction Documents
and immediately after the Closing, Seller will be solvent and will be able to
continue to pay its Liabilities in the ordinary course of business.

 

(b)                                 CYMRI
is a limited liability company duly organized, validly existing and in good
standing under the laws of Nevada, and is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required.  CYMRI 

 

8

 

has the organizational
power to carry on the businesses in which it is engaged and to own and use the
properties owned and used by it.  CYMRI
has the requisite power and authority necessary to enter into, deliver and
perform its obligations pursuant to each of the Transaction Documents to which
it is a party.  CYMRI’s execution,
delivery and performance of each Transaction Document to which it is a party
has been duly authorized by CYMRI.

 

(c)                                  The
Company is a corporation, duly organized, validly existing and in good standing
under the laws of Louisiana.  The Company
is duly authorized to conduct business and is in good standing under the laws
of each jurisdiction where such qualification is required.  The Company has the corporate power to carry
on the businesses in which it is engaged and to own and use the properties
owned and used by it.  The Company has
the requisite power and authority necessary to enter into, deliver and perform
its obligations pursuant to each of the Transaction Documents to which it is a
party.  The Company’s execution, delivery
and performance of each Transaction Document to which it is a party has been
duly authorized by the Company.

 

3.2                                 Binding
Effect and Noncontravention.

 

(a)                                  This
Agreement has been duly executed and delivered by Seller and CYMRI and
constitutes, and each other Transaction Document to which Seller, CYMRI or the
Company is a party when executed and delivered will constitute, a valid and
binding obligation of Seller, CYMRI or the Company, as the case may be,
enforceable against Seller, CYMRI or the Company in accordance with its terms
except as such enforceability may be limited by (i) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar laws affecting
creditors’ rights generally, and (ii) applicable equitable principles
(whether considered in a proceeding at law or in equity).

 

(b)                                 The
execution, delivery and performance of the Transaction Documents by Seller,
CYMRI and the Company does not (i) violate any Legal Requirement to which
Seller, CYMRI or the Company is subject or any provision of its charter or
bylaws or equivalent organizational documents, (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Seller, CYMRI or the Company is a party or by
which Seller or the Company is bound or to which Seller’s, CYMRI’s or the
Company’s assets are subject, (iii) result in the creation of any Lien on
the Securities or the assets of the Company, or (iv) require any
authorization, consent, approval or notice by or to any Person.

 

3.3                                 Brokers.  Neither Seller nor the Company has retained
any broker in connection with the transactions contemplated by this Agreement
and neither the Company nor Buyer will have any obligation to pay any broker’s,
finder’s, investment banker’s, financial advisor’s or similar fee in connection
with this Agreement or the transactions contemplated by this Agreement by
reason of any action taken by or on behalf of Seller or the Company.

 

9

 

3.4                                 Capitalization.  Seller holds of record, owns beneficially,
and has good and marketable title to the Securities, free and clear of all
Liens.  The authorized capital stock of
the Company consists of 2,500 shares of common stock, having no par value per
share, of which 2,040 are issued and outstanding.  All of the issued and outstanding shares of
the Company’s capital stock have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by Seller.  There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock.  There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of the Company.

 

3.5                                 Subsidiaries.  The Company currently has no subsidiaries,
and the Company has not had in the past, any investment, equity, or ownership
interest (whether controlling or not) of any kind in any other Person.  The Company is not engaged in any joint
venture or partnership with any other Person.

 

3.6                                 Financial
Statements.  The Disclosure Schedule
contains the following financial statements (the “Financial Statements”):  (i) the Company’s respective stand-alone
balance sheet and related statement of income for the calendar years ended December 31,
2005 and December 31, 2006 (the “Annual Financial Statements”); (ii) the
Company’s respective interim stand-alone balance sheet and related statement of
income for the eight month period ended August 31, 2007 (the “Interim
Financial Statements”); and (iii) for each month after August 31,
2007 through January 31, 2008, the Company’s interim stand-alone balance
sheet for such month (the most recent such balance sheet being the “Latest
Balance Sheet”) along with the Company’s related statement of income for such
month and the year-to-date period.  The
Financial Statements have been prepared in accordance with GAAP applied on a
materially consistent basis for the periods covered thereby and present fairly
in all material respects the financial condition of the Company as of such
dates and the results of operations for the periods specified.

 

3.7                                 Subsequent
Events.

 

(a)                                  Since
August 31, 2007:

 

(i)                                     there
has been no event or occurrence which has had a Company Material Adverse
Effect,

 

(ii)                                  the
Company has conducted its business only in the ordinary course of business; and

 

(iii)                               the
Company has not:

 

(A)                              entered
into any agreement, contract, lease, or license either involving more than
$25,000 or outside the ordinary course of business;

 

(B)                                accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license either
involving more than $25,000 or 

 

10

 

outside the ordinary course of business (or had any other party thereto
take such action);

 

(C)                                imposed
or granted any Lien on any of its assets;

 

(D)                               made
any capital expenditures or commitments therefore either involving more than
$25,000 (in the aggregate) or outside the ordinary course of business;

 

(E)                                 made
any capital investment in, any loan to, or any acquisition of the securities or
other assets of, any Person either involving more than $25,000 (individually or
in the aggregate) or outside the ordinary course of business;

 

(F)                                 incurred
any Debt other than periodic draw downs on the Company’s credit facility with
Wells Fargo Bank, National Association in the ordinary course of business;

 

(G)                                delayed
or postponed the payment of accounts payable or other Liabilities outside the
ordinary course of business;

 

(H)                               cancelled,
compromised, waived, or released any right or claim either involving more than
$25,000 (individually or in the aggregate) or outside the ordinary course of
business;

 

(I)                                    sold,
assigned, transferred, or licensed any Intellectual Property;

 

                                                                                                (J)                                   issued,
sold or transferred any of its capital stock or other equity securities,
securities convertible into its capital stock or other equity securities or
warrants, options or other rights to acquire its capital stock or other equity
securities, or any bonds or debt securities;

 

(K)                               accelerated
or modified in any material respect the terms of any account receivable,
changed any customer’s payment terms, changed any policies related to accounts
receivable, or written off any account receivable;

 

(L)                                 experienced
any material damage, destruction or loss to its assets (whether or not covered
by insurance);

 

(M)                            made
any changes in any material employee compensation, benefits, severance or
termination agreement other than routine salary increases in the ordinary
course of business;

 

11

 

(N)                               received
any formal or actual notice from any customer with respect to any warranty
claims, termination of contracts or work orders, or disputes as to billed fees
in excess of $25,000; or

 

(O)                               agreed
to do any of the foregoing.

 

(b)                                 Since
January 31, 2008, the Company has not (i) declared or made any
payment or distribution of cash or other property to its shareholders with
respect to its capital stock; (ii) purchased or redeemed any shares of
capital stock; or (iii) made any cash payments or transfers to any
affiliate of the Company.

 

3.8                                 Title
to Assets.  The Company has good and
marketable title to, or a valid leasehold interest in, the assets used in the
conduct of its business, that are reflected on the Latest Balance Sheet, or
acquired since the date thereof, free and clear of all Liens, except assets
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet.

 

3.9                                 Compliance
With Laws.  The Company has complied
in all material respects with all applicable Legal Requirements, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced against the Company alleging any failure to
so comply.

 

3.10                           Undisclosed
Liabilities.  The Company has no
Liability except for (i) Liabilities set forth on the face of the Latest
Balance Sheet, and (ii) Liabilities which have arisen after the date
thereof in the ordinary course of business (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of contract,
breach of warranty, tort, infringement, or violation of law).

 

3.11                           Tax
Matters.

 

(a)                                  The
Company has filed all Tax Returns which it was required to file by all Legal
Requirements.  All such Tax Returns are
true, correct and complete and were prepared in compliance with all Legal
Requirements.  All Taxes due and owing by
the Company (whether or not shown on any Tax Return) have been paid.  The Company is not currently the beneficiary
of any extension of time within which to file any Tax Return.  The Company has withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
Person.

 

(b)                                 No
audits or administrative or judicial Tax proceedings are pending or being
conducted with respect to the Company. 
The Company has not received from any Government Entity any (i) notice
indicating an intent to open an audit or other review, (ii) request for
additional information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any Tax. 
The Company has not waived or extended any statute of limitations in
respect of Taxes or agreed to the extension of time with respect to a Tax
assessment or deficiency.

 

12

 

(c)                                  The
Company is not a party to any agreement, contract, arrangement or plan that has
resulted or would result, separately or in the aggregate, in the payment of (i) any
“excess parachute payment” within the meaning of Section 280G of the Code
(or any corresponding provision of state, local or foreign tax law) or (ii) any
amount that will not be fully deductible as a result of Section 162(m) of
the Code (or any corresponding provision of state, local or foreign tax
law).  The Company is not a party to or
bound by any tax allocation or sharing agreement.  The Company has not been a member of an
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was the Company).  The Company has no Liability for the Taxes of
any Person under Treasury Regulation Section §1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.

 

(d)                                 The
unpaid Taxes of the Company (i) did not, as of the Latest Balance Sheet,
exceed the reserve for Tax Liability set forth on the face of the Latest
Balance Sheet, and (ii) do not exceed that reserve as adjusted to reflect
operations thereafter in accordance with past practice.  Since the Latest Balance Sheet, the Company
has not incurred any Liability for Taxes outside the ordinary course of
business.

 

(e)                                  Every
Person who has provided service to the Company or any other Person at the
request of the Company has been properly classified by the Company as an
employee or independent contractor in compliance with all Legal Requirements.

 

3.12                           Environmental
Matters.  The Company has complied in
all material respects with all applicable Environmental Laws, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced against the Company alleging any failure to
so comply.  The Company has obtained and
is in compliance with all permits, licenses and other authorizations required
pursuant to Environmental Laws for the occupation of the Leased Real Property
and/or the operation of its business; and all such permits, licenses and other
authorization are set forth on the Disclosure Schedule.  The Company has not received any notice from
any Government Entity of any actual or alleged violations or Liabilities,
including any investigatory, remedial or corrective obligations, arising under
Environmental Laws.  The Company has not
assumed or otherwise become subject to any Liability, including any
investigatory, remedial or corrective obligations, of any other Person arising
under Environmental Laws.  The Company
has provided Buyer with all environmental audits, reports and other material
environmental documents relating to the Company’s past or current properties,
facilities and operations.

 

3.13                           Intellectual
Property.

 

(a)                                  The
Company owns or has a valid right to use all Intellectual Property that it uses
in the conduct of its business.  Each
item of Intellectual Property owned or used by the Company immediately prior to
the Closing will be owned or available for use by the Company on the same terms
and conditions immediately after the Closing. 
The Company has taken all action necessary and desirable to maintain and
protect each item of Intellectual Property that it owns or uses.

 

13

 

(b)                                 The
Company has not interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of any Person, and the
Company has not received any charge, complaint, claim, demand or notice
alleging any of the foregoing.  To Seller’s
Knowledge, no Person has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Company.

 

(c)                                  Set
forth on the Disclosure Schedule are all of the following that are owned or
used by the Company: (i) patents and patent applications; (ii) registered
trademarks and applications to register trademarks; (iii) registered
copyrights and applications to register copyrights; (iv) all Intellectual
Property owned by any other Person (and all licenses, sublicenses, grants, or
other agreements related thereto); (v) all computer software and
databases; and (vi) any other Intellectual Property that is material to
the Company’s business.

 

3.14                           Real
Estate.

 

(a)                                  The
Company does not own any real property.

 

(b)                                 Set
forth on the Disclosure Schedule is a list of all real property leased by the
Company (the “Leased Real Property”) and each lease pursuant to which the
Company leases the Leased Real Property. 
The Company has provided to Buyer a true, correct and complete copy of
each such lease.  Each such lease is a
valid and binding obligation of the parties thereto, enforceable against such
parties in accordance with its terms except as such enforceability may be
limited by (i) applicable insolvency, bankruptcy, reorganization,
moratorium or other similar laws affecting creditors’ rights generally, and (ii) applicable
equitable principles (whether considered in a proceeding at law or in
equity).  The Company is not, and, to
Seller’s Knowledge, no other Person is, in violation or breach of or default
under any such lease.  The transactions
contemplated by this Agreement do not require the consent of any party to any
such lease, will not result in a violation or breach of or default under any
such lease, and will not otherwise cause any such lease to cease to be legal,
binding, enforceable and in full force and effect on the same terms following
the Closing.

 

(c)                                  To
Seller’s Knowledge, all buildings, structures, fixtures, building systems and
equipment, and all components thereof (including the roof, foundation, walls,
and other structural elements thereof, heating, ventilation, air conditioning,
mechanical, electrical, plumbing and other building systems, environmental
control, remediation and abatement systems, sewer, storm and waste water
systems, irrigation and other water distribution systems, parking facilities,
fire protection security and surveillance systems, and telecommunications,
computer, wiring and cable installations), included in the Leased Real Property
are in good condition and repair and sufficient for the operations of the
Company’s businesses.

 

3.15                           Litigation.  The Disclosure Schedule (i) describes
all outstanding injunctions, judgments, orders, decrees, rulings, or charges
related to the Company, (ii) describes all actions, suits, proceedings,
hearings, investigations, arbitrations, and other legal or administrative proceedings
to which the Company is a party or, to Seller’s Knowledge, threatened to be
made a party, and (iii) indicates if any of such matters, if determined
adversely to the Company, could 

 

14

 

reasonably be expected
to subject the Company to Liabilities in excess of $50,000.  There is no reason to believe that any
action, suit, proceeding, hearing, investigation, arbitration, or other legal
or administrative proceeding may be brought or threatened against the Company
or that there is any reasonable basis for any of the foregoing.  The Disclosure Schedule describes all
reported incidents of which Seller has Knowledge involving the Company that
could reasonably be expected to result in any claim being made against the
Company.

 

3.16                           Employee
Benefits.

 

(a)                                  The
Disclosure Schedule lists each Employee Benefit Plan that the Company
maintains, to which the Company contributes or has any obligation to
contribute, or with respect to which the Company has any Liability.

 

(i)                                     Each
such Employee Benefit Plan (and each related trust, insurance contract, or
fund) has been maintained, funded and administered, in all material respects,
in accordance with the terms of such Employee Benefit Plan, the terms of any
applicable collective bargaining agreement and all Legal Requirements.

 

(ii)                                  All
required reports and descriptions (including annual reports (IRS Form 5500),
summary annual reports, and summary plan descriptions) have been timely filed
and/or distributed in accordance with the applicable requirements of ERISA and
the Code with respect to each such Employee Benefit Plan.  The requirements of COBRA have been met, in
all material respects, with respect to each such Employee Benefit Plan which is
an “employee welfare benefit plan” (as such term is defined in Section 3(1) of
ERISA) subject to COBRA.

 

(iii)                               All
contributions (including all employer contributions and employee salary
reduction contributions) that are due have been made within the time periods
prescribed by ERISA and the Code to each such Employee Benefit Plan that is an “employee
pension benefit plan” (as such term is defined in Section 3(2) of
ERISA) and all contributions for any period ending on or before the Closing
Date which are not yet due have been made to each such employee pension benefit
plan or funds have been reserved and set aside in an amount sufficient to
satisfy such contributions.  All premiums
or other payments for all periods ending on or before the Closing Date have
been paid with respect to each such Employee Benefit Plan that is an employee
welfare benefit plan.

 

(iv)                              Each
such Employee Benefit Plan which is intended to meet the requirements of a “qualified
plan” under Section 401(a) of the Code has received a determination
from the Internal Revenue Service that such Employee Benefit Plan is so
qualified, and nothing has occurred since the date of such determination that
could adversely affect the qualified status of any such Employee Benefit
Plan.  Each such Employee Benefit Plan
has been timely amended to reflect the provisions of any and all Legal
Requirements in effect for any period prior to or as of the Closing other than
amendments for which the remedial amendment period under Section 401(b) of
the Code (including, if applicable, any extension of the remedial amendment
period) has not 

 

15

 

expired, and there are no
plan document failures, operational failures, demographic failures or employee
eligibility failures which have not been corrected within the meaning of Rev.
Proc. 2006-27 with respect to any such Employee Benefit Plan.

 

(v)                                 There
have been no “prohibited transactions” (within the meaning of Section 406
of ERISA or Section 4975 of the Code) with respect to any such Employee
Benefit Plan.  No fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any such
Employee Benefit Plan.  No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to Seller’s Knowledge, threatened.  To Seller’s Knowledge, there is no basis for
any such action, suit, proceeding, hearing, or investigation.

 

(vi)                              The
Company has delivered to the Buyer correct and complete copies of the plan
documents and summary plan descriptions, the most recent determination letter
received from the Internal Revenue Service, the most recent annual report (IRS Form 5500,
with all applicable attachments), and all related trust agreements, insurance
contracts, service or investment agreements, most recent testing information,
list of assets and other funding arrangements which implement each such
Employee Benefit Plan.

 

(vii)                           The
Disclosure Schedule lists each such Employee Benefit Plan providing for
deferred compensation that constitutes a “nonqualified deferred compensation
plan” (as defined in Section 409A(d)(1) of the Code and applicable
regulations (including IRS Notice 2005-1)) for the Company or any ERISA
Affiliate (the “Deferred Compensation Plans”). 
Each Deferred Compensation Plan (i) complies, in all material
respects, with requirements of Section 409A of the Code and regulations
promulgated thereunder, or (ii) is exempt from compliance under the “grandfather”
provisions of applicable regulations, and has not been materially modified
since October 3, 2004, or (iii) may, without the consent of any
service provider or other Person and without any Liability to the Company or
any ERISA Affiliate other than for the payment of benefits due thereunder, the
full amount of which has been reflected on the Latest Balance Sheet, be amended
or terminated to comply with or to be exempt from, the requirements of Section 409A
of the Code and regulations promulgated thereunder.

 

(b)                                 Neither
the Company nor any ERISA Affiliate maintains, contributes to, has any
obligation to contribute to, or has (or has ever had during the six years prior
to the Closing Date) any Liability under or with respect to any “defined
benefit plan” (as defined in Section (3)(35) of ERISA) or any “multiemployer
plan” (as defined in Section (3)(37) or 4001(a)(3) of ERISA).  Neither the Company nor any ERISA Affiliate maintains
or contributes (or has ever maintained or contributed during the six years
prior to the Closing Date) or has any Liability under a plan subject to Section 412
of the Code.

 

(c)                                  The
Company does not maintain, contribute to or have any obligation to contribute
to, or has any Liability with respect to, any employee welfare benefit plan
providing 

 

16

 

medical, health,
or life insurance or other welfare-type benefits for current or future retired
or terminated directors, officers or employees of the Company (or any spouse of
other dependent thereof) other than in accordance with COBRA or a similar state
law.  Set forth on the Disclosure
Schedule is a list of all Persons who are receiving COBRA benefits through the
Company or any ERISA Affiliate and a list of all employees of the Company who
are currently on leave.

 

3.17                           Insurance.  The Disclosure Schedule contains a list of
each insurance policy, bond or other form of insurance maintained by the
Company (the “Insurance Policies”).  With
respect to each Insurance Policy:  (i) the
policy is legal, valid, binding, enforceable, and in full force and effect; (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on the same terms immediately following the consummation of
the transactions contemplated hereby; (iii) the Company nor, to Seller’s
Knowledge, any other party to the policy is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy; (iv) no party to the policy has repudiated any provision thereof;
and (v) the Company has provided to Buyer a true, correct and complete
copy of the policy.

 

3.18                           Contracts.

 

(a)                                  The
Disclosure Schedule contains a list of each of the following contracts,
agreements or other arrangements to which the Company is a party or by which
any of its assets or properties is bound (the “Material Contracts”):

 

(i)            master
services agreement with a Material Customer;

 

(ii)           consulting
agreement or work agreement that involves the performance of services for, or
delivery of goods or materials to, the Company that (A) resulted in
expenses to the Company in excess of $50,000 for the calendar year ending December 31,
2007 or (B) is reasonably expected to result in expenses to the Company in
excess of $50,000 after the Closing Date;

 

(iii)          other
than the agreements described in Section 3.18(a)(i) above, any
agreement that involves the performance of services or delivery of goods or
materials by the Company that (A) resulted in revenue to the Company in
excess of $50,000 for the calendar year ending December 31, 2007 or (B) is
reasonably expected to result in revenue to the Company in excess of $50,000
after the Closing Date;

 

(iv)          other than
the agreements described in Section 3.18(a)(ii) above, any agreement
that involves the performance of services for, or delivery of goods or
materials to, the Company that (A) resulted in expenses to the Company in
excess of $50,000 for the calendar year ending December 31, 2007 or (B) is
reasonably expected to result in expenses to the Company in excess of $50,000
after the Closing Date;

 

(v)           collective
bargaining agreement or other similar contract with any labor union;

 

17

 

(vi)                              agreement
for the employment of any Person on a full-time, part-time, consulting or other
basis (A) providing annual cash or other compensation in excess of
$100,000, or (B) providing for the payment of any cash or other
compensation or benefits upon the consummation of the transactions contemplated
hereby;

 

(vii)                           agreement, guaranty or
indenture relating to borrowed money or other Debt of the Company, or any Lien
on any asset of the Company;

 

(viii)                        agreement that restricts in any
respect the ability of the Company to engage in any line of business or compete
with any Person;

 

(ix)                                joint
venture or partnership agreement involving a sharing of profits, losses, costs
or liabilities by the Company with any other Person;

 

(x)                                   lease
or agreement under which the Company is (A) lessee of or holds or operates
any tangible personal property owned by any other Person, except for any lease
of tangible personal property under which the aggregate annual rental payments
do not exceed $25,000, or (B) lessor of or permits any other Person to
hold or operate any tangible property (real or personal) owned by the Company;

 

(xi)                                power
of attorney granted by or to the Company;

 

(xii)                             agreement with any
shareholder, director, officer, employee, agent or other affiliate of the
Company (other than the agreements described in Section 3.18(a)(ii)) and
3.18(a)(vi);

 

(xiii)                          agreement not entered into
the ordinary course of business;

 

(xiv)                         other agreement that (A) involves
the payment or potential payment, pursuant to the terms of any such contract or
agreement, to or by the Company of more than $25,000, and (B) cannot be
terminated within 90 days after giving notice of termination without resulting
in any cost or penalty to the Company; and

 

(xv)                            other
agreement that is material to the Company or its business.

 

(b)                                 Each
Material Contract and each other master service agreement to which the Company
is a party is a valid and binding obligation of the parties thereto,
enforceable against them in accordance with its terms except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally, and (ii) applicable equitable principles (whether considered in
a proceeding at law or in equity). 
Neither the Company nor, to Seller’s Knowledge, any other Person, is in
violation or breach of or default under such Material Contract or master
service agreement to which the Company is a party.  The Company has provided to Buyer a true,
correct and complete copy of each written Material Contract and a written
description of the material terms of each oral Material Contract.

 

18

 

(c)                                  The
Company has provided to Buyer a true, correct and complete copy of (i) each
Material Contract, (ii) each master service agreement to which the Company
is a party or by which it is bound, (iii) the résumé of each consultant
providing engineering services for or on behalf of the Company, and (iv) the
billing history of each consultant providing engineering services for or on
behalf of the Company for the fiscal year ended December 31, 2006 and the
eight month period ended August 31, 2007. 
To Seller’s Knowledge, no consultant that is performing or has performed
engineering services for or on behalf of the Company has a claim against or
dispute with the Company.  The Company
has a valid and binding master service agreement with each Material
Customer.  To Seller’s Knowledge, no
Material Customer or material group of independent contractors intends to cease
doing business with the Company or decrease the amount of business it does with
the Company in any material respect.

 

3.19                           Employees.  The Company has not experienced any strike or
material grievance, claim of unfair labor practices, or other collective
bargaining dispute.  To Seller’s
Knowledge, no organizational effort is presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company.  To Seller’s Knowledge, no officer or
executive manager of the Company has any plans to terminate his or her
employment or independent contractor relationship with the Company or is a
party to any agreement that materially and adversely affects the ability of
such officer or executive manager to perform his or her duties with the
Company.  There are no uninsured workers’
compensation claims pending or, to Seller’s Knowledge, threatened against the
Company.  The qualifications for
employment of each of the Company’s employees under applicable immigration laws
have been reviewed by the Company and a properly completed Form I-9 is on
file with the Company for each employee, as applicable.  The Company has complied with the U.S.
Immigration and Nationality Act, as amended from time to time, and the rules and
regulations promulgated thereunder, and to Seller’s Knowledge, there is no reasonable
basis for any claim that the Company is not in compliance with the terms
thereof.  All employees and consultants
of the Company are properly classified as such and the Company is not subject
to any Liability for misclassification of such persons.  The Disclosure Schedule contains a list of
the employees and contractors of the Company as of March 1, 2008.  None of such employees are or have been
employees of either Seller or its affiliates, other than the Company, for a
period of three months prior to Closing.

 

3.20                           Affiliate
Transactions.  None of Seller, its
affiliates, or any of the Company’s directors, officers, employees, or
affiliates (i) has been involved in any business arrangement or
relationship with the Company within the past 12 months, or (ii) owns any
asset which is used in the business of the Company.

 

3.21                           Receivables.  All notes and accounts receivable of the
Company are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims.

 

3.22                           Permits
and Licenses.  The Disclosure
Schedule contains a true and complete list of all licenses, permits,
certificates of authority, authorizations, approvals, registrations and similar
consents granted or issued by any Government Entity to the Company (the “Permits”).  All of the Permits are currently effective
and valid and they are sufficient to enable the Company to conduct its business
in compliance with all Legal Requirements. 
The execution, delivery or 

 

19

 

performance of
this Agreement by the parties will not have any effect on the continued
validity or sufficiency of the Permits, nor will any additional licenses,
permits, certificates of authority, authorizations, approvals, registrations or
similar consents be required by virtue of the execution, delivery or
performance of this Agreement by the parties hereto to enable the Company to
conduct its business.

 

3.23                           Tangible
Assets.  The Company owns or leases
all buildings, machinery, equipment, computers and related equipment,
furniture, vehicles, and other tangible assets necessary for the conduct of its
businesses.  Each such tangible asset is
in good operating condition and repair (ordinary wear and tear excepted), and
is suitable for the purposes for which it is used.

 

3.24                           Service
Warranty.  To Sellers’ Knowledge, all
services provided by the Company (or any Person for which the Company may be
responsible, including independent contractors) have been in conformity with
all applicable contractual commitments and all express and implied warranties,
and the Company has no Liability for replacement or repair thereof or other
damages in connection therewith.

 

3.25                           Service
Liability.  The Company has no
Liability arising out of any injury to individuals or property as a result of
any service provided by the Company (nor any Person for which the Company may
be responsible, including independent contractors).

 

3.26                           Bank
Accounts.  The Disclosure Schedule
contains a complete and accurate list of each deposit account or asset
maintained by or on behalf of the Company with any bank, brokerage house or
other financial institution, specifying with respect to each the name and
address of the institution, the name under which the account is maintained, the
account number, and the name and title or capacity of each Person authorized to
have access thereto.

 

                                                3.27                           Debt,
Liabilities, and Expenses.  Exhibit 2.2
sets forth, as of the Closing Date, (a) all of the Debt of the Company, (b) all
of the Liabilities of the Company that are (i) outstanding more than 60
days on the Closing Date or (ii) not incurred in the ordinary course of
business, (c) all payments and expenses described in Section 2.2(iii),
and (d) all Seller Transaction Expenses. 
Exhibit 2.2 sets forth all of the fees and expenses owing by
Seller, CYMRI or the Company in connection with the transactions contemplated
in this Agreement.

 

ARTICLE
4

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller and CYMRI as follows:

 

4.1                                 Organization,
Power and Authorization.  Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware.  Buyer is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required.  Buyer has the requisite power to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it.  Buyer has the requisite
power and authority necessary to enter into, deliver and perform its obligations
pursuant to each of the

 

20

 

Transaction Documents to
which it is a party.  Buyer’s execution,
delivery and performance of each Transaction Document to which it is a party
has been duly authorized by Buyer.

 

4.2                                 Binding
Effect and Noncontravention.

 

(a)                                  This
Agreement has been duly executed and delivered by Buyer and constitutes, and
each other Transaction Document to which Buyer is a party when executed and
delivered will constitute, a valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms except as such enforceability may be
limited by (i) applicable insolvency, bankruptcy, reorganization,
moratorium or other similar laws affecting creditors’ rights generally, and (ii) applicable
equitable principles (whether considered in a proceeding at law or in equity).

 

(b)                                 The
execution, delivery and performance by Buyer of the Transaction Documents to
which it is a party do not (i) violate any Legal Requirement to which Buyer
is subject or its charter or bylaws or equivalent organizational documents, (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which Buyer is a party or by which
Buyer is bound or to which Buyer’s assets are subject, (iii) result in the
creation of any Lien on any assets of Buyer, or (iv) require any
authorization, consent, approval or notice by or to any Person.

 

4.3                                 Brokers.  Buyer has not retained any broker in
connection with the transactions contemplated by this Agreement.  Neither Seller nor CYMRI will have any
obligation to pay any broker’s, finder’s, investment banker’s, financial
advisor’s or similar fee in connection with this Agreement or the transactions
contemplated by this Agreement by reason of any action taken by or on behalf of
Buyer.

 

4.4                                 Litigation.  Buyer (i) is not subject to any
outstanding injunction, judgment, order or decree, and (ii) is not party
to or, to Buyer’s knowledge, threatened to be made a party to, any proceeding,
hearing, investigation, claim, legal action, suit, arbitration, governmental
investigation or other legal or administrative proceeding, which would
reasonably be expected to have a material adverse effect on Buyer’s ability to
consummate the transactions contemplated by this Agreement or otherwise perform
its obligations under any Transaction Document to which it is a party.

 

4.5                                 Consents
and Approvals.  No consent,
authorization or approval of, filing or registration with, or cooperation from,
any Governmental Authority or any other Person not a party to this Agreement is
necessary in connection with the execution, delivery and performance by Buyer
of this Agreement or the consummation of the transactions contemplated hereby.

 

4.6                                 Investment
Intent.  Buyer acknowledges that the
Securities have not been registered under the Securities Act and that the
Securities may not be resold absent such registration or unless an exemption
therefrom is available.  The Buyer is
acquiring the Securities for its own account, for investment purposes only and
not with a view toward distribution

 

21

 

thereof.  The Buyer qualifies as an “accredited
investor”, as such term is defined in Rule 501(a) promulgated
pursuant to the Securities Act.

 

ARTICLE
5

CONDITIONS
TO THE CLOSING

 

5.1                                 Conditions
to Buyer’s Obligation.  Buyer’s
obligation to effect the transactions contemplated by this Agreement is subject
to the satisfaction as of the Closing of the following conditions precedent:

 

(a)                                  Representations
and Warranties.  Each representation
and warranty set forth in Article 3 must be true and correct in all
material respects at and as of the Closing as though then made; provided
that any representation or warranty that specifically addresses matters only as
of a certain date shall be true and correct in all material respects as of such
date.

 

(b)                                 Proceedings.  There must not be any action, suit, or
proceeding pending or threatened before any Government Entity wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent
or prohibit the consummation of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) adversely affect
the right of Buyer to own the Securities and to control the Company, or (iv) adversely
affect the right of the Company to own its assets and to operate its business
(and no such injunction, judgment, order, decree, ruling or charge must be in
effect).

 

(c)                                  Notices,
Consents and Approvals.  All of the
notices, consents and approvals required for the consummation of the
transactions contemplated hereby, as set forth on the Disclosure Schedule
pursuant to Section 3.2(b), must have been given or obtained.

 

(d)                                 Seller’s
and CYMRI’s Closing Documents.  The
following documents (duly executed as appropriate) must have been delivered to
Buyer:

 

(i)                                     this
Agreement;

 

(ii)                                  the
Decca Non-competition Agreement;

 

(iii)                               the
Decca Option Agreement;

 

(iv)                              the
Escrow Agreement;

 

(v)                                 the
Non-competition Agreement;

 

(vi)                              the
Sublease Agreement;

 

(vii)                           the
Transition Services Agreement;

 

(viii)                        the
Triumph MOU;

 

22

 

(ix)                                a
certificate (dated not more than 10 days prior to the Closing), as to the good
standing of the Company in its jurisdiction of incorporation;

 

(x)                                   a
certificate dated as of the Closing Date from Seller, signed by the Secretary
thereof and in form and substance reasonably satisfactory to Buyer, certifying (A) that
resolutions in the form attached to the certificate have been duly adopted by
Seller’s board of directors and shareholders, as applicable, authorizing the
execution of the Transaction Documents to which it is a party, (B) the
names and incumbency of its officers who are empowered to execute the foregoing
documents for and on behalf of Seller, and (C) the authenticity of
attached copies of the Articles of Incorporation and Bylaws (or other organizational
documents) of the Company and Seller;

 

(xi)                                a
certificate dated as of the Closing Date from CYMRI, signed by the Secretary
thereof and in form and substance reasonably satisfactory to Buyer, certifying (A) that
resolutions in the form attached to the certificate have been duly adopted by
CYMRI’s board of managers, authorizing the execution of the Transaction
Documents to which it is a party, (B) the names and incumbency of its
officers who are empowered to execute the foregoing documents for and on behalf
of CYMRI, and (C) the authenticity of attached copies of the Certificate
of Formation and operating agreement (or other organizational documents) of
CYMRI;

 

(xii)                             a
certificate dated as of the Closing Date signed by Seller in form and substance
reasonably satisfactory to the Buyer certifying that the Company’s consolidated
earnings before interest, taxes, depreciation, and amortization (after
considering certain reasonable pro forma adjustments satisfactory to Buyer, in
its discretion), for the latest 12 month period ending just prior to the
Closing Date is at least $3,000,000;

 

(xiii)                          a
certificate dated as of the Closing date signed by Seller and CYMRI in form and
substance reasonably satisfactory to the Buyer certifying (A) the accuracy
of the attached accounts receivable aging as of the Closing Date; (B) the
accuracy of the accounts payable aging as of the Closing Date; (C) the
cash balance of the Company as of the Closing Date; and (D) the balance of
the prepaid insurance of the Company as of Closing Date.

 

(xiv)                         an
opinion of the legal counsel to Seller as to the matters referred to on Exhibit H;

 

(xv)                            the
certificates representing the Securities, endorsed in blank or accompanied by
duly executed stock powers;

 

(xvi)                         the
resignations of each director and officer of the Company, effective as of the
Closing;

 

23

 

(xvii)                      an
assignment of all of Seller’s and CYMRI’s rights related to the Company under
the CYMRI Merger Agreement;

 

(xviii)                   estoppel certificates
for the Leased Real Property, in form and substance reasonably satisfactory to
Buyer; and

 

(xix)                           such
other documents, certificates, instruments or opinions as Buyer may reasonably
request, in form reasonably satisfactory to Buyer.

 

(e)                                  MSA
Amendments.  The Company and each of
the customers listed on Exhibit 5.1(e) must have entered into
an amendment to each of the respective master services agreements in form and
substance satisfactory to Buyer.

 

(f)                                    MSA
Agreements.  The Company and each of
the customers listed on Exhibit 5.1(f) must have entered into
master services agreements in form and substance satisfactory to Buyer.

 

(g)                                 Releases.  Each of the Majority Shareholders, Cantrell,
the holders of any Debt or Lien with respect to the Company and the Persons
identified on Exhibit 2.2 to whom Seller Transaction Expenses were
paid must have entered into an agreement releasing and discharging the Company
and its assets from all claims and Liens in form and substance satisfactory to
Buyer.

 

5.2                                 Conditions
to Seller’s and CYMRI’s Obligation. 
Seller’s and CYMRI’s obligation to effect the transactions contemplated
by this Agreement is subject to the satisfaction as of the Closing of the
following conditions precedent:

 

(a)                                  Representations
and Warranties.  Each representation
and warranty set forth in Article 4 must be true and correct in all
material respects at and as of the Closing as though then made.

 

(b)                                 Proceedings.  There must not be any action, suit, or
proceeding pending or threatened before any Government Entity wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent
or prohibit the consummation of the transactions contemplated by this
Agreement, or (ii) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation.

 

(c)                                  Buyer’s
Closing Documents.  The following
documents (duly executed as appropriate) must have been delivered to Seller:

 

(i)                                     this
Agreement;

 

(ii)                                  the
Escrow Agreement;

 

(iii)                               the
Transition Services Agreement;

 

24

 

(iv)                              a
certificate (dated not more than 10 days prior to the Closing), as to the good
standing of Buyer in its jurisdiction of organization or incorporation;

 

(v)                                 a
certificate dated as of the Closing Date from Buyer, signed by the Secretary
thereof and in form and substance reasonably satisfactory to Seller certifying (A) that
resolutions in the form attached to the certificate have been duly adopted by
Buyer’s board of directors authorizing the execution of this Agreement and the
other Transaction Documents to which it is a party, (B) the names and
incumbency of its officers who are empowered to execute the foregoing documents
for and on behalf of Buyer, and (C) the authenticity of attached copies of
the certificate of incorporation and bylaws of Buyer;

 

(vi)                              an
opinion of the legal counsel to Buyer as to the matters referred to on Exhibit I;
and

 

(vii)                           such
other documents, certificates, instruments or opinions as Seller may reasonably
request, in form reasonably satisfactory to Seller.

 

ARTICLE
6

COVENANTS

 

6.1                                 Further
Assurances.  Buyer, Seller and CYMRI
will take such further actions (including the execution and delivery of such
further instruments and documents) as the other party may reasonably request to
carry out the purposes of this Agreement.

 

6.2                                 Litigation
Support.  From and after the Closing,
in the event that and for so long as the Company is actively contesting or
defending against any third party action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand in connection with any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction arising on or prior to the
Closing Date involving the Company or its operations, Seller and CYMRI agree to
reasonably cooperate with Buyer and the Company.

 

6.3                                 Release.  Each of Seller and CYMRI, on behalf of itself
and any Person claiming through or under it, whether derivatively or otherwise,
releases and forever discharges the Company and its subsidiaries, shareholders,
officers, directors, employees, agents, attorneys, affiliates, successors and
assigns, and all of their respective assets, tangible and intangible, real and
personal from all actions, causes of actions, suits, debts, sums of money,
accounts, or other claims or demands whatsoever, in law, equity or otherwise,
whether fixed or contingent, known or unknown, which Seller or CYMRI ever had,
now has or hereafter may have, upon or by reason of, or arising out of, any
circumstance, agreement, event or matter occurring or existing on or prior to
the Closing Date, except for the rights, liabilities and obligations arising
out of, and the transactions contemplated by, this Agreement and the other
Transaction Documents.

 

25

 

6.4                                 Continued
Existence/Reserve Account.

 

(a)                                  On
the Closing Date, Seller will deposit $1,500,000 in a separate cash deposit
account (the “Reserve Account”).  Until
such time as all Tax Liabilities of the Company or Seller that result from the
operations up to and including the Closing Date of the Company or from the
transactions contemplated herein (the “Reserve Tax Liabilities”) have been
paid, Seller agrees (i) to maintain its corporate existence, (ii) to
maintain the Reserve Account in accordance with this Section 6.4 and to
not commingle the funds held in the Reserve Account and (iii) to ensure
that the Reserve Account and the funds held therein remain free from any Lien that
would restrict the Company from accessing any portion of such funds to satisfy
its obligations under this Section 6.4 from time to time; provided,
however, that if Seller does not consummate a Sale of CYMRI on or prior
to December 31, 2008, Seller shall be entitled to withdraw $300,000 from
the Reserve Account at any time after December 31, 2008 and utilize such
funds in any manner without restriction.

 

(b)                                 During
such times as the Reserve Tax Liabilities remain unpaid, within 15 days of the
end each month, Seller will deliver to Buyer the bank statements of the Reserve
Account and a record of the disbursements of the Reserve Account for the
previous month.  Seller will give Buyer
access to the books, records and other information of Seller and the Reserve
Account to verify the balance and the disbursements of the Reserve Account and
matters related thereto.

 

(c)                                  During
such time as the Reserve Tax Liabilities remain unpaid, the Reserve Account
will only be used to pay Reserve Tax Liabilities or indemnify Buyer for its
payment of Tax Liabilities of Seller as provided for in this Agreement.  In the event there is a positive balance
remaining in the Reserve Account after the payment of all the Reserve Tax
Liabilities, Seller may utilize the remaining funds in any manner without
restriction.

 

(d)                                 Seller
acknowledges and agrees that any payment to Buyer for the indemnification of
Tax Liabilities under this Agreement will be paid out of the Reserve Account
until such account has a zero balance prior to any payment out of the funds
escrowed pursuant to the terms of the Escrow Agreement.

 

6.5                                 Accounts
Receivable Aging.  For a period of
270 days after the Closing Date, Buyer will deliver to Seller a quarterly aging
of the accounts receivable of the Company that were outstanding as of the
Closing Date.

 

6.6                                 Preparation
of Tax Returns; Payment of Taxes.

 

(a)                                  Consolidated
or Combined Tax Returns.  Seller will
include the Company, or cause the Company to be included in, and will file or
cause to be filed (at Seller’s expense), (i) the United States
consolidated federal income Tax Returns of Seller or its affiliates for all
taxable periods of the Company ending on or prior to the Closing Date
(including, without limitation, the consolidated federal income Tax Return for
the period ending on December 31, 2007 and the short period of the Company
ending on the Closing Date) and (ii) where applicable, all other
consolidated, combined or unitary Tax Returns of Seller and its affiliates for
the taxable periods of the Company ending (or the portion of any taxable period
ending) on or prior to the Closing Date, and will pay any and all Taxes due
with respect to the returns referred to in clause

 

26

 

(i) or (ii) of
this Section 6.6(a).  Seller will
include any income, gain, loss, deduction or other tax item arising from or
attributable to the transactions contemplated by this Agreement on its federal,
state and local Income Tax Returns for the taxable period of Seller which
includes the Closing Date and will pay all Taxes attributable thereto.  Seller also will file or will cause the
Company to file (at Seller’s expense) all other Tax Returns of or which include
the Company required to be filed (taking into account any extensions) on or prior
to the Closing Date and will pay any and all Taxes due with respect to such Tax
Returns.  All Tax Returns described in
this Section 6.6(a) will be prepared in a manner consistent with
prior practice of Seller unless otherwise required by applicable Legal
Requirements.  Prior to filing the Tax
Returns described in this Section 6.6(a), Seller will, no later than 15
Business Days prior to the due date of such Tax Returns (taking into account
valid extensions of time in which to file such Tax Returns), submit copies of
such Tax Returns and all supporting work papers and schedules to Buyer for its
review and approval.  Any comments Buyer
desires to make with respect to such Tax Returns will be provided to Seller in
writing no later than five Business Days following receipt of such Tax Returns
and all supporting work papers and schedules from Seller.  Seller will provide Buyer a final copy of any
such Tax Returns.  Seller will cause such
Tax Returns to be timely filed and all Taxes shown as due thereon to be timely
and fully paid.

 

(b)                                 Certain
State, Local and Foreign Income Tax Returns.  Except for the state income and franchise Tax
Returns of the Company which are required to be filed in Texas, Louisiana and
Mississippi for the taxable period of the Company ending on December 31,
2007 and in 2008 (the “2007 and 2008 State Income Tax Returns of PEI”), Seller
will cause to be prepared (at Seller’s expense) all foreign, state and local
Income Tax Returns of the Company for periods ending on or prior to the Closing
Date which are required to be filed after the Closing Date.  Buyer will cooperate with Seller in
connection with Seller’s preparation of such Income Tax Returns, and will make
available to Seller such books, records and other information necessary for the
preparation of such Income Tax Returns. 
Such Income Tax Returns will be prepared based on and consistent with
tax accounting methods and principles used in preparing such Income Tax Returns
for prior periods unless otherwise required by applicable Legal
Requirements.  Prior to filing the Tax
Returns described in this Section 6.6(b), Seller will, no later than 15
Business Days prior to the due date of such Tax Returns (taking into account
valid extensions of time in which to file such Tax Returns), submit copies of
such Tax Returns and all supporting work papers and schedules to Buyer for its
review and approval.  Any comments Buyer
desires to make with respect to such Tax Returns will be provided to Seller in
writing no later than five Business Days following receipt of such Tax Returns
and all supporting work papers and schedules from Seller.  Seller will provide Buyer will a copy of each
such Income Tax Return within five Business Days of receipt of comments from Buyer
incorporating any such comments Seller accepts. 
Buyer will cause each such Income Tax Return to be timely filed
following receipt thereof from Sellers. 
Seller will be solely responsible for, and will pay to Buyer not later
than five (5) Business Days prior to the due date for the payment thereof,
all Taxes required to be paid with respect to such Income Tax Returns.

 

(c)                                  2007
and 2008 Tax Returns of PEI; Other Tax Returns.  Following the Closing Date, Buyer will be
responsible for preparing or causing to be prepared (i) the 2007 and 2008
State Income Tax Returns of PEI and (ii) all federal, foreign, state and
local Tax Returns required to be filed by the Company after the Closing Date
other than the Tax Returns required

 

27

 

to be prepared and/or
filed by Seller pursuant to Sections 6.7(a) and 6.7(b).  Prior to filing the 2007 and 2008 State
Income Tax Returns of PEI, Buyer will, no later than ten (10) Business
Days prior to the due date of such Tax Returns (taking into account valid
extensions of time in which to file such Tax Returns), submit copies of such
Tax Returns and all supporting work papers and schedules to Seller for its
review and approval.  Any comments Seller
desires to make with respect to such Tax Returns will be provided to Buyer in
writing no later than five (5) Business Days following receipt of such Tax
Returns and all supporting work papers and schedules from Buyer.  Prior to filing such Tax Returns, Buyer will
provide Seller a final copy of any such Tax Returns.  Buyer will cause such Tax Returns to be
timely filed and, subject to receiving the payments from Seller referred to in Section 6.6(d),
pay the Taxes shown as due thereon.

 

(d)                                 Payment
of Taxes.  Not later than five
Business Days before the due date for payment of Taxes with respect to any Tax
Returns which Buyer has the responsibility to file, Seller will pay to Buyer an
amount equal to that portion of the Taxes shown on such return for which Seller
has an obligation to indemnify Buyer pursuant to the provisions of Section 7.2(b).

 

(e)                                  Allocation
of Taxes.  For U.S. federal income
tax purposes, the taxable year of the Company for 2008 will end as of the end
of the day on the Closing Date and, with respect to all other Taxes, Seller and
Buyer will, unless prohibited by applicable law, close the taxable period of
the Company for 2008 as of the end of the day on the Closing Date.  Neither Seller nor Buyer will take any
position inconsistent with the preceding sentence on any Tax Return.  In any case where applicable law does not
permit the Company to close its taxable year on the Closing Date or in any case
in which a Tax is assessed with respect to a taxable period which includes the
Closing Date (but does not begin or end on that day) (a “Straddle Period”),
then Taxes will be allocated as follows: 
(i) in the case of a Tax that is based on net or gross income, the
amount of any Taxes of the Company for the Pre-Closing Tax Period will be
determined based on an interim closing of the books as of the close of business
on the Closing Date, (ii) in the case of a tax that is based on a specific
event or transaction, the amount of any Taxes for the Pre-Closing Tax Period or
Post-Closing Tax Period will be determined based on the actual date of such
event or transaction and (iii) the amount of other Taxes of the Company
for a Straddle Period which relate to the Pre-Closing Tax Period will be deemed
to be the amount of such Tax for the entire Taxable period multiplied by a
fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days
in such Straddle Period.  For Taxable
periods ending on or prior to the Closing Date, the entire amount of Taxes with
respect to such Taxable period (whether or not shown on the Tax Return) will be
allocable to Seller.

 

(f)                                    Pre-Closing
Tax Attributes.  All Tax refunds and
credits of the Company attributable to the pre-Closing periods will be the
property of Seller, and if received by Buyer or the Company such refunds and
credits will be promptly delivered to Seller. 
If it is determined that the Company’s Tax Liability for state Income
Taxes in Texas, Louisiana and Mississippi for the taxable period ending in 2007
and the pre-Closing portion of such Liability for the taxable period ending in
2008 (the “Pre-Closing State Tax Liability”) is less than the Estimated
Pre-Closing State Tax Liability, Buyer will pay to Seller the amount by which
Estimated Pre-Closing State Tax Liability exceeds the Pre-Closing State Tax Liability.

 

28

 

6.7                                 Cooperation
with Respect to Tax Returns.  Buyer
and Seller agree to furnish or cause to be furnished to each other, and each at
their own expense, as promptly as practicable, such information (including
access to books and records) and assistance, including making employees
available on a mutually convenient basis to provide additional information and
explanations of any material provided, relating to the Company as is reasonably
necessary for the filing of any Tax Return, for the preparation for any audit,
and for the prosecution or defense of any claim, suit or proceeding relating to
any adjustment or proposed adjustment with respect to Taxes.

 

6.8                                 Tax
Sharing Agreements.  To the extent
there are any, all Tax sharing agreements and arrangements between (i) the
Company on the one hand, and (ii) Seller or any of its affiliates on the
other hand, are terminated effective as of the Closing Date and have no further
effect for any taxable year or period (whether a past, present or future year
or period), and the Company does not have any additional payment obligations
thereunder with respect to any period (whether a past, present or future
period) in respect of the re-determination of Tax liabilities or otherwise.

 

6.9                                 Sterling
Bank Account.  Seller and CYMRI will
prompty deliver to the Company any and all checks and other payments received
by Seller or CYMRI that belong to the Company including, without limitation,
all payments for the Company received in [Sterling Bank Account No.             ]
(the “Sterling Bank Account”).  Seller
and CYMRI agree to work in good faith with Buyer and the Company to have the
funds in the Sterling Bank Account automatically transferred to an account
designated by the Company, including, without limitation, executing a letter of
direction to transfer such funds and/or transfer such account to the Company.

 

ARTICLE
7

SURVIVAL
AND INDEMNIFICATION

 

7.1                                 Survival
of Representations and Warranties. 
All of the representations and warranties contained in this Agreement
will survive the Closing and continue in full force and effect for a period of
24 months thereafter, except that (i) the representations and warranties
in Sections 3.1 (Organization, Power and Authorization), 3.2 (Binding Effect
and Noncontravention), and 3.4 (Capitalization) will survive forever, and (ii) the
representations and warranties in Sections 3.11 (Tax Matters) and 3.16
(Employee Benefits) will survive until the expiration of the applicable statute
of limitations established by law.

 

7.2                                 Indemnification
Obligations of Seller and CYMRI.

 

(a)                                  General.  Seller and CYMRI agree, on a joint and
several basis, to indemnify Buyer from and against any Damages that Buyer
incurs as a result of, without duplication, (i) the breach of any of the
representations and warranties made by Seller or CYMRI in this Agreement, (ii) the
breach of any covenant made by Seller or CYMRI in this Agreement, (iii) any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement engaged by Seller, CYMRI or the
Company, (iv) any inaccuracies in the amounts set forth in Exhibit 2.2
which, when corrected and taken together, result in a decrease in the Purchase
Price; and (v) inaccuracies taken
as a whole in the items included in the certificate delivered by Seller to
Buyer under Section 5.1(d)(xiii).

 

29

 

(b)                                 Taxes.  Seller and CYMRI agree, on a joint and
several basis, to indemnify Buyer from and against any Damages that Buyer
incurs as a result of, without duplication, (i) all Taxes (or the
non-payment thereof) of the Company for all Pre-Closing Tax Periods, (ii) all
Taxes of any member of an affiliated, consolidated, combined or unitary group
of which the Company (or any predecessor) is or was a member on or prior to the
Closing Date, including pursuant to Treasury Regulation Section 1.1502-6
or any analogous or similar Legal Requirement, and (iii) any and all Taxes
of any Person imposed on the Company as a transferee or successor, by contract
or pursuant to any Legal Requirement, which Taxes relate to an event or
transaction occurring prior to the Closing Date, provided,
however, that Seller’s and CYMRI’s obligation to indemnify Buyer
pursuant to clause (i) of this Section 7.2(b) shall be reduced by the amount by which the Estimated
Pre-Closing State Tax Liability exceeds the Pre-Closing State Tax
Liability.  Seller and CYMRI agree, on a
joint and several basis, to reimburse Buyer for any Taxes which are the
responsibility of the Seller under this Section within 30 days after
payment of such Taxes by Buyer or the Company unless otherwise required by this
Agreement to reimburse Buyer at an earlier time, in which case Seller and CYMRI
shall make such payments to Buyer at such earlier time.

 

(c)                                  Accounts
Receivable.  In the event the
accounts receivable of the Company as of the Closing Date that are not
collected in full within 270 days of the Closing Date exceeds $60,000 in the
aggregate, Seller agrees to pay the amount of such uncollected accounts
receivable to the extent they exceed $60,000 in the aggregate to Buyer by wire
transfer or delivery of other immediately available funds within ten days after
receipt from Buyer of written notice of such fact; provided, however, the
uncollected accounts receivable up to $60,000 in the aggregate for which no
indemnity payment is required pursuant to this Section 7.2(c) shall
be included in the calculation of Damages for purposes of Section 7.4(i) below.

 

(d)                                 Competition
of Cantrell.  Seller and CYMRI agree,
on a joint and several basis, to indemnify Buyer from and against any Damages
that Buyer incurs as a result of any actions of Cantrell that would be a breach
under the Non-competition Agreement had he executed such agreement as a Selling
Party (as defined in the Non-competition Agreement).

 

(e)                                  Employee
Benefits.  Seller and CYMRI agree, on
a joint and several basis, to indemnify Buyer from and against any Damages that
Buyer incurs arising out of any Employee Benefit Plan which relate to any
event, transaction, action or omission occurring on or prior to the Closing
Date, including without limitation, any liability arising out of an employee
stock ownership plan, failure of any Employee Benefit Plan to comply with Legal
Requirements, and any cost related to bringing any Employee Benefit Plan into
compliance with Legal Requirements.

 

7.3                                 Indemnification
Obligations of Buyer.  Buyer will
indemnify Seller and CYMRI from and against any Damages that Seller and CYMRI
incurs as a result of, without duplication, (a) the breach of any of the
representations and warranties made by Buyer in this Agreement, (b) the
breach of any covenant made by Buyer in this Agreement, and (c) any fees
or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement engaged by Buyer.

 

30

 

7.4                                 Limitations
on Indemnification.  Seller and CYMRI
will have no obligation to indemnify Buyer from and against any Damages
resulting from any breach of any representation or warranty made by Seller or
CYMRI in this Agreement (i) until the total of all such Damages exceeds
$200,000 in the aggregate (at which point Seller and CYMRI will be obligated to
indemnify Buyer from and against all such Damages relating back to the first
dollar), and (ii) the maximum amount of indemnification payments Buyer
will be entitled to receive from Seller and CYMRI for such Damages will be
$2,000,000 in the aggregate; provided, however, that the
foregoing limitations will not apply to (i) any breach of the
representations and warranties made by Seller or CYMRI in Sections 3.1
(Organization, Power and Authorization), 3.2 (Binding Effect and
Noncontravention), 3.4 (Capitalization) and 3.16 (Employee Benefits) or (ii) for
clarification purposes, the obligations of Seller and CYMRI under Section 7.2(a)(ii),
7.2(a)(iii), 7.2(b), 7.2(c), 7.2(d), and 7.2(e).

 

7.5                                 Third
Party Claims.

 

(a)                                  Notice.  If any third party notifies any Indemnified
Party of any matter that may give rise to a claim by such Indemnified Party for
indemnification pursuant to Section 7.2 or 7.3 (a “Third Party Claim”),
such Indemnified Party must give the Indemnifying Party from whom
indemnification is sought written notice of such Indemnified Party’s claim for
indemnification promptly after the Indemnified Party receives written notice of
such Third Party Claim; provided, however, that the failure of
any Indemnified Party to give timely notice will not affect any rights to
indemnification hereunder except to the extent that the Indemnifying Party is
prejudiced by such failure.

 

(b)                                 Control
of Defense; Settlement.  An
Indemnifying Party, at its option, may defend the Indemnified Party against any
Third Party Claim so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within 30 days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party for the Damages the Indemnified Party may
suffer as a result of such Third Party Claim, (ii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iii) the Indemnifying Party is not a party to the Third Party
Claim such that the Indemnified Party determines in good faith that joint
representation would be inappropriate, and (iv) the Indemnifying Party
diligently defends the Third Party Claim. 
If the Indemnifying Party defends against the Third Party Claim, the
Indemnified Party may participate in the defense and employ counsel of its
choice for such purpose; provided, that such employment will be at the
Indemnified Party’s own expense.  The
Indemnifying Party may not consent to the entry of any judgment or enter into
any settlement with respect to any Third Party Claim without the prior written
consent of the Indemnified Party (such consent not to be withheld
unreasonably).  If any of the conditions
in clauses (i)-(iv) above become unsatisfied, the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim and the Indemnifying Party
will be responsible for any Damages the Indemnified Party may suffer as a
result of the Third Party Claim to the extent provided in this Article 7.

 

31

 

ARTICLE
8

MISCELLANEOUS

 

8.1                                 Public
Announcements.  Seller, CYMRI and
Buyer will not issue and press release or make any public announcement relating
to the subject matter of this Agreement without the prior written consent of
the parties, which will not be unreasonably withheld.

 

8.2                                 Transaction
Expenses.  Buyer, Seller and CYMRI
will each bear their own respective costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.  In addition, Seller
will bear the Company’s costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.

 

8.3                                 Amendments.  No amendment, modification or waiver of this
Agreement will be effective unless made in writing and signed by the party to
be bound thereby.  No other course of
dealing between or among any of the parties or any delay in exercising any
rights pursuant to this Agreement shall operate as a waiver of any rights of
any party.

 

8.4                                 Successors
and Assigns.  All covenants and
agreements set forth in this Agreement will bind and inure to the benefit of
the respective successors and permitted assigns of the parties.  No party may assign this Agreement nor any of
its rights, interests or obligations hereunder without the prior written
consent of the other parties; provided, however, that Buyer may
assign any or all of its rights, interests, and obligations hereunder (i) to
one or more of its affiliates, (ii) for collateral security purposes to
any lender providing financing to Buyer, the Company or any of their affiliates
and any such lender may exercise all of the rights and remedies of Buyer
hereunder, and (iii) to any subsequent purchaser of Buyer, the Company, or
any material portion of their assets (whether such sale is structured as a sale
of equity, a sale of assets, a merger or otherwise).

 

8.5                                 Governing
Law.  This Agreement will be governed
by and construed in accordance with the laws of the State of Delaware, without
giving effect to any choice of law or conflict provision or rule (whether
of such State or any other jurisdiction) that would cause the laws of any other
jurisdiction to be applied.

 

8.6                                 Notices.  All demands, notices, communications and
reports provided for in this Agreement will be in writing and will be sent by
facsimile with confirmation to the number specified below, personally delivered
or sent by reputable overnight courier service (delivery charges prepaid) to
the address specified below, or at such address as the recipient party has
specified by prior written notice to the sending party pursuant to the
provisions of this Section.

 

If to Buyer:

 

Hamilton Acquisition, Inc.

Attention: CEO

2040 North Loop West, Suite 390

Houston, TX 77018

 

32

 

Facsimile: 713-956-0365

 

and

 

ShoreView Industries

Attention: Jeffrey A. Mudge

222 South Ninth Street, Suite 3230

Minneapolis, MN 55402

Facsimile: 612-436-0576

 

with a copy to:

 

Lindquist & Vennum
P.L.L.P.

Attention: Dennis M. O’Malley and John D. Wambold

4200 IDS Center

80 South 8th Street

Minneapolis, MN 55402

Facsimile: 612-371-3207

 

If to Seller or CYMRI:

 

c/o Stratum Holdings, Inc.

Attention: Chairman/CEO

Three Riverway, Suite 1500

Houston, TX 77056

Facsimile: 713-973-6271

 

with a copy to:

 

Haynes and Boone, LLP

Attention: Bryce Linsenmayer

1221 McKinney Street, Suite 2100

Houston, TX 77010

Facsimile: 713-236-5540

 

Any such demand, notice, communication or report will be deemed to have
been given pursuant to this Agreement when delivered personally, when confirmed
if by facsimile or on the second day after deposit with a reputable overnight
courier service, as the case may be.

 

8.7                                 Schedules
and Exhibits.  The exhibits and
schedules to this Agreement constitute a part of this Agreement and are
incorporated into this Agreement for all purposes as if fully set forth
herein.  The Disclosure Schedule includes
references to the particular Section of the Agreement that relates to each
disclosure.  Any disclosure which may be
applicable to another Section of this Agreement will be deemed to be made
with respect to such other Section if reasonably apparent from the face of
such disclosure, regardless of whether or not a specific

 

33

 

cross reference is
made thereto; provided, however, that no disclosure will be
deemed adequate to disclose an exception to a representation or warranty unless
the disclosure identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail.

 

8.8                                 Termination
of Certain Pre-Closing Agreements. 
Effective as of the Closing, the Letter of Intent dated September 11,
2007, by and among Hamilton Engineering, Inc., Seller, the Majority
Shareholders and Cantrell, will be terminated and of no further force or
effect.

 

8.9                                 Counterparts.  The parties may execute this Agreement in two
or more counterparts (no one of which need contain the signatures of all
parties), each of which will be an original and all of which together will
constitute one and the same instrument. 
Facsimile signatures shall be deemed to be and shall be treated for all
purposes as original signature pages.

 

8.10                           No
Third Party Beneficiaries.  Except as
otherwise expressly provided in this Agreement, no Person which is not a party
will have any right or obligation pursuant to this Agreement.

 

8.11                           Headings.  The headings used in this Agreement are for
the purpose of reference only and will not affect the meaning or interpretation
of any provision of this Agreement.

 

8.12                           Entire
Agreement.  This Agreement (including
the exhibits and schedules referred to herein) constitutes the entire agreement
of the parties relating to the subject matter hereof, and all prior
understandings, whether written or oral are superseded by this Agreement, and
all prior understandings, and all related agreements and understandings are
terminated.

 

8.13                           Severability.  In case any one or more of the provisions
contained in this Agreement are held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability will not
effect any other provision of this Agreement.

 

8.14                           Construction.
The parties have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed
as if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.

 

8.15                           Cumulative
Remedies.  The rights, remedies,
powers and privileges provided in this Agreement are cumulative and not
exclusive and will be in addition to any and all other rights, remedies, powers
and privileges granted by law, rule, regulation or instrument.  In addition, Buyer may set off any amount to
which it may be entitled under this Agreement, including, without limitation, Article 7,
against any amounts payable by Buyer or the Company under this Agreement or any
other Transaction Document.  The exercise
of this right by Buyer in good faith, whether or not ultimately determined to
be justified, will not constitute a default under this Agreement or any other
Transaction Document.

 

* * * * *

 

34

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase
Agreement as of the date first written above.

 

	
  BUYER:

  	
  SELLER:

  
	
   

  	
   

  
	
  HAMILTON ACQUISITION,
  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:

  
	
   

  	
   

  
	
   

  	
  CYMRI, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Kenneth L. Thomas

  
	
   

  	
  Its:

  	
   Chief
  Financial Officer

  
								

 

[Signature
Page to Securities Purchase Agreement]Exhibit 10.2

 

ESCROW AGREEMENT

 

This Escrow
Agreement (the “Agreement”) is entered into as of March 11, 2008 by and
among Hamilton Acquisition, Inc., a Delaware corporation (“Buyer”),
Stratum Holdings, Inc., a Nevada corporation (“Seller”), and U.S. Bank National
Association, a national banking association (the “Escrow Agent”).

 

BACKGROUND

 

A.            Pursuant to a
Securities Purchase Agreement (the “Purchase Agreement”) by and among Buyer,
Seller and CYMRI, L.L.C., a Nevada limited liability company (“CYMRI”) and wholly
owned subsidiary of Seller, Buyer will acquire all of the outstanding capital
stock of Petroleum Engineers, Inc., a Louisiana corporation.

 

B.            In order to partially
secure the indemnification obligations of Seller and CYMRI under the Purchase
Agreement, Buyer has deposited the sum of $1,600,000 from the amounts payable
to Seller under the Purchase Agreement with the Escrow Agent.

 

C.            Buyer and Seller desire
to appoint the Escrow Agent as the escrow agent under this Agreement, and the
Escrow Agent desires to accept such appointment and to hold, invest, reinvest,
administer and distribute the Escrow Funds in accordance with the provisions of
this Agreement.

 

NOW, THEREFORE,
the parties agree as follows:

 

1.             Appointment of the
Escrow Agent.  Buyer and Seller
hereby appoint and designate the Escrow Agent as the escrow agent for the
purposes set forth in this Agreement, and the Escrow Agent hereby accepts such
appointment under the terms and conditions set forth in this Agreement.  Notwithstanding the references in this
Agreement to the Purchase Agreement, Buyer and Seller acknowledge that the
Escrow Agent is not a party to the Purchase Agreement for any purpose or
responsible for its interpretation or enforcement.

 

2.             Receipt of Escrow
Funds.  On the date hereof, the Buyer
shall deposit, or cause to be deposited, with the Escrow Agent, the amount of
$1,600,000 by wire transfer of immediately available funds.  The Escrow Agent acknowledges receipt of such amount and
agrees to hold, invest, reinvest, administer and distribute such amount and all
interest and earnings thereon (the “Escrow Funds”) in accordance with the terms
of this Agreement.  The balance of the
Escrow Funds, which may be reduced from time to time by distributions made to
Buyer or Seller under this Agreement, is referred to as the “Escrow Fund
Balance.”

 

3.             Investment of
Escrow Funds.  The Escrow Fund
Balance, to the fullest extent possible, will promptly be invested and
reinvested as directed in writing by Buyer and Seller.  If Buyer and Seller do not provide the Escrow
Agent with written directions regarding a choice of investments, the Escrow
Agent will invest the Escrow Fund Balance in the interest-bearing 

 

 

money market account
identified on Exhibit B, which funds may be managed by an affiliate
of the Escrow Agent.  Notwithstanding
anything in the foregoing to the contrary, the Escrow Agent is authorized to
reduce any investments to cash in order to satisfy any claims against the
Escrow Fund Balance to be distributed by the Escrow Agent under this
Agreement.  The Escrow Agent shall have
no responsibility or liability for any loss which may directly result from any
investment or sale of investment made pursuant to this Agreement, except for
any such losses arising from the Escrow Agent’s gross negligence or willful
misconduct.  Buyer and Seller acknowledge
that the Escrow Agent is not providing investment supervision, recommendations,
or advice.

 

4.             Claims
Against and Release of the Escrow Fund Balance.

 

(a)           Claims Notice.  In the event Buyer proposes to make any claim
for indemnification under the Purchase Agreement, Buyer shall deliver written
notice of such claim signed by an authorized officer of Buyer, in substantially
the form of Exhibit C (a “Claims Notice”), to the Escrow Agent and
Seller, which Claims Notice will state that Buyer has claims against Seller for
which Buyer is entitled to indemnification under the Purchase Agreement, and
will specify in reasonable detail the amounts and nature of the claims.

 

(b)           Seller’s Response.  Within 30 days after receipt of the Claims
Notice, Seller will deliver a written response to Buyer and the Escrow Agent,
accepting Buyer’s claims in whole or in part, or rejecting Buyer’s claims.  Unless Seller accepts Buyer’s claims in
whole, Seller’s response will include a reasonably detailed statement of the
reasons for that portion of Buyer’s claims not being accepted by Seller.  If Seller accepts any portion of Buyer’s
claims, the Escrow Agent will promptly distribute to Buyer cash from the Escrow
Fund Balance equal to the amount of the claims accepted by Seller.  If Seller fails to deliver a written response
within such 30 day period, Seller will be deemed to have accepted Buyer’s
claims in whole, and the Escrow Agent will promptly distribute to Buyer cash
from the Escrow Fund Balance equal to the full amount of Buyer’s claims.

 

(c)           Negotiation Period.  If Seller rejects all or any portion of Buyer’s
claims in accordance with Section 4(b), upon Buyer’s receipt of such
rejection, Seller and Buyer will attempt in good faith to settle such claims
within 90 days after the date of the Claims Notice.  If Buyer and Seller agree to a settlement,
Buyer and Seller shall jointly prepare and execute a memorandum evidencing such
settlement and deliver such memorandum to the Escrow Agent.  Upon receipt of such memorandum, the Escrow
Agent will promptly distribute to Buyer cash from the Escrow Fund Balance in
accordance with the terms of such memorandum.

 

(d)           Dispute Resolution.  If Buyer and Seller fail to settle all of Buyer’s
claims within 90 days after the date of the Claims Notice, then either Buyer or
Seller may commence an action in federal or state court, or Buyer and Seller
may agree to binding arbitration, to resolve any such remaining claims.  Upon receipt of a final non-appealable
judgment of such court or an award, order or judgment issued pursuant to such
arbitration in favor of Buyer, the Escrow Agent will promptly distribute to
Buyer cash from the Escrow Fund Balance in accordance with the terms of such
judgment, award or order.

 

2

 

5.             Scheduled
Release of Escrow Fund Balance.

 

(a)           Promptly following the
24 month anniversary of the date of this Agreement (the “Release Date”), the
Escrow Agent will distribute the Escrow Fund Balance to the Seller; provided
that if there are any outstanding claims under a Claims Notice as of the
Release Date, then the Escrow Agent will retain an Escrow Fund Balance equal to
all such unsatisfied claims and the Escrow Agent will distribute only the
remaining balance to the Seller on the Release Date.  Upon the resolution of any outstanding claim
in favor of Seller after the Release Date in accordance with Sections 4(c) and
4(d), the Escrow Agent shall promptly distribute to Seller the amounts
associated with such claim.  This
Agreement will remain in effect until all outstanding claims have been resolved
in accordance with the procedures set forth in this Agreement.

 

(b)           The parties agree that
all earnings in any tax year on the Escrow Funds will be reported as allocated
to Buyer until the distribution of the Escrow Funds (or portion thereof) is
determined in accordance with this Agreement and thereafter to Buyer and Seller
in accordance with their respective interests in the Escrow Funds, consistent
with Proposed Treasury Regulation Section 1.468B-8(e).  To offset Buyer’s tax liability related to
such allocation, prior to the distribution of all or any portion of the Escrow
Fund Balance to Seller, the Escrow Agent will distribute to Buyer cash from the
Escrow Fund Balance in the amount equal to 40% of the aggregate amount of net
taxable income of the Escrow Funds allocated to Buyer.

 

6.             Provisions
Concerning the Escrow Agent.

 

(a)           Compensation.  The fees of the Escrow Agent and the
reasonable expenses and disbursements incurred by the Escrow Agent under this
Agreement as set forth on Exhibit A will be paid by Seller.  In the event that the Escrow Agent is
authorized to make distributions to any party to this Agreement pursuant to and
in accordance with the terms of this Agreement, and expenses and disbursements
are due and payable to the Escrow Agent pursuant to the terms of this Agreement
by the party receiving such disbursement, the Escrow Agent is authorized to
offset such amounts due and payable to it against such disbursement to that
party.

 

(b)           Resignation.  The Escrow Agent (and any successor
escrow agent) may resign from its duties under this Agreement at any time by
delivering the Escrow Fund Balance to any successor escrow agent jointly
designated by Buyer and Seller, or if such parties cannot agree on a successor
within 30 days after the Escrow Agent has given Buyer and Seller notice of its
resignation, to any court of competent jurisdiction, whereupon the Escrow Agent
will be discharged of and from any and all further obligations arising in
connection with this Agreement.  The
resignation of the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor escrow agent (including by a court of competent
jurisdiction) or (ii) the day that is 30 days after the date of delivery
of its written notice of resignation to Buyer and Seller.  If at that time the Escrow Agent has not
received a designation of a successor escrow agent, the Escrow Agent’s sole
responsibility after that time will be to retain and safeguard the Escrow Fund
Balance until its receipt of a designation of a successor escrow agent, a joint
written disposition instruction by Buyer and Seller, or a final non-appealable
order of a court of competent jurisdiction. 
The parties agree that any successor escrow agent (other than a court of
competent 

 

3

 

jurisdiction) will be a
banking corporation or trust company having capital and surplus in excess of
$100,000,000, and organized under the laws of the United States or of a State
of the United States.

 

(c)           Limitation on Liability.  The duties of the Escrow Agent are only those
specifically set forth in this Agreement, and the Escrow Agent will incur no
liability whatsoever for acting as the escrow agent under this Agreement except
for its own willful misconduct or gross negligence.  The Escrow Agent will have no responsibility
with respect to the Escrow Fund Balance other than to faithfully follow the
instructions set forth in this Agreement. 
The Escrow Agent may consult with counsel and will be fully protected in
any action taken in good faith in accordance with the advice of counsel.  THE ESCROW AGENT SHALL NOT BE LIABLE,
DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES ARISING
OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES
WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY RESULTED FROM THE ESCROW
AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT
LIMITATION LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF
ACTION.

 

(d)           Controversies.  If any controversy exists between or among
any of the parties to this Agreement or with any third person with respect to
the Escrow Fund Balance or the subject matter of this Agreement, the Escrow
Agent will not be required to take any action with respect thereto, but is
authorized to retain the Escrow Fund Balance until the Escrow Agent (i) receives
a final non-appealable order of a court of competent jurisdiction or a final
non appealable arbitration decision directing delivery of the Escrow Fund Balance,
(ii) receives a written agreement executed by each of the parties involved
in such disagreement or dispute directing delivery of the Escrow Fund Balance,
in which event the Escrow Agent shall be authorized to disburse the Escrow Fund
Balance in accordance with such final court order, arbitration decision, or
agreement, or (iii) files an interpleader action in any court of competent
jurisdiction, and upon the filing thereof and the deposit of the Escrow Fund
Balance with the court of competent jurisdiction, the Escrow Agent shall be
relieved of all liability as to the Escrow Fund Balance and shall be entitled
to recover attorneys’ fees, expenses and other costs incurred in commencing and
maintaining any such interpleader action. 
The Escrow Agent shall be entitled to act on any such agreement, court
order, or final arbitration decision without further question, inquiry, or
consent.  The Escrow Agent will have no responsibility for
the genuineness or validity of any document or other item deposited with it and
will be fully protected in acting in accordance with any written instructions
given to it by the parties to this Agreement and believed by the Escrow Agent
to have been signed by the proper officers or other representatives of the
parties.  The Escrow Agent will not be
required to institute any legal action or to defend any legal proceedings which
may be instituted against it in respect of the subject matter of this
Agreement.

 

(e)           Discharge of Escrow
Agent.  Buyer and Seller may, by mutual agreement at
any time, remove the Escrow Agent as escrow agent under this Agreement and
substitute a 

 

4

 

different escrow
agent.  Upon receipt of written notice
thereof and payment of any accrued but unpaid fees due under this Agreement,
the Escrow Agent will account for and deliver to such substitute escrow agent
the Escrow Fund Balance and all other amounts held by it under this Agreement,
and the Escrow Agent will be discharged from all liability under or in relation
to this Agreement.

 

(f)            Indemnification.  Seller and Buyer, jointly and severally, will
indemnify, defend and hold harmless the Escrow Agent from and against any
liability or demand which the Escrow Agent incurs in the exercise or
performance of its powers and duties under this Agreement except those
resulting from the Escrow Agent’s gross negligence or willful misconduct.  The cost of any indemnification
arising under this Section will be paid one-half by Buyer and one-half by
Seller.

 

(g)           Tax Matters.  The
Escrow Agent does not have any interest in the funds in the Escrow Fund Balance
and its possession of the Escrow Fund Balance is incident to its duties as the
Escrow Agent under this Agreement.  Any
payments of income from the Escrow Fund Balance will be subject to withholding
regulations then in force with respect to United States taxes.  The parties will provide the Escrow Agent
with appropriate Internal Revenue Service Forms W-9 for tax identification
number certification, or nonresident alien certifications.

 

(h)           No Financial
Obligation.  No provision of this
Agreement shall require the Escrow Agent to risk or advance its own funds or
otherwise incur any financial liability or potential financial liability in the
performance of its duties or the exercise of its rights hereunder.

 

7.             Miscellaneous.

 

(a)           Governing Law; Jurisdiction.  This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without giving
effect to any choice of law or conflict provision or rule (whether of such
State or any other jurisdiction) that would cause the laws of any other
jurisdiction to be applied.

 

(b)           Notices.  All notices required or permitted to be given
under this Agreement will be in writing and will be deemed given (i) when
delivered in person, (ii) three business days after being deposited in the
United States mail, postage prepaid, registered or certified mail addressed as
set forth below, (iii) on the next business day after being deposited with
a nationally recognized overnight courier service addressed as set forth below
or (iv) upon dispatch if sent by facsimile with telephonic confirmation of
receipt from the intended recipient to the facsimile number set forth below (or
to such other respective addresses as may be designated by notice given in
accordance with the provisions of this Section, except that any notice of
change of address will not be deemed given until actually received by the party
to whom directed):

 

5

 

If to Seller:

 

Stratum Holdings, Inc.

Attention:  Chairman/CEO

Three Riverway, Suite 1500

Houston, Texas 77056

Tel. No.:   713-479-7000

Fax No.:  713-973-6271

 

with a copy to:

 

Haynes and Boone, LLP

Attention:  Bryce Linsenmayer

1221 McKinney Street, Suite 2100

Houston, Texas 77010

Tel. No.:   713-547-2007

Fax No.:  713-236-5540

 

If to Buyer:

 

Hamilton Acquisition, Inc.

Attention:  Chief Executive
Officer

2040 North Loop West, Suite 390

Houston, Texas 77018

Tel. No.:  713-956-0956

Fax No.:  713-956-0365

 

and

 

ShoreView Industries

Attention:  Jeffrey A. Mudge

222 South Ninth Street, Suite 3230

Minneapolis, MN 55402

Tel. No.:  612-436-4283

Fax No.:  612-436-0576

 

with a copy to:

 

Lindquist & Vennum
P.L.L.P.

Attention:  Dennis M. O’Malley
and John D. Wambold

4200 IDS Center

80 South 8th Street

Minneapolis, MN 55402

Tel. No.:  612-371-3947

Fax No.:  612-371-3207

 

6

 

If to the Escrow
Agent:

 

U.S. Bank National Association

Attention:  Georgette Kleinbaum

EP-MN-WS3C

60 Livingston Avenue

St. Paul, Minnesota 55107

Tel. No.:  651-495-3922

Fax No.:  651-495-8096

 

with a copy to Buyer and Seller.

 

(c)           Entire Agreement.  This Agreement supersedes all prior
agreements between the parties with respect to the subject matter of this Agreement.  This Agreement constitutes a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter.

 

(d)           Amendments and
Waivers.  This Agreement may not be
amended, modified, altered or supplemented except by a written agreement
executed by the party to be bound thereby. 
No failure or delay by any party to exercise any right or remedy under
this Agreement will constitute as a waiver of such right or remedy.

 

(e)           Severability of
Invalid Provision.  If any provision
of this Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement will remain in full force
and effect.  Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.

 

(f)            Successors and
Assigns.  This Agreement is
enforceable by, and inures to the benefit of, the parties to this Agreement and
their respective successors and 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; provided, however, that Buyer may assign any or all of its
rights and interests hereunder (i) to one or more of its affiliates, (ii) for
collateral security purposes to any lender providing financing to Buyer or its
affiliates and any such lender may exercise all of the rights and remedies of
Buyer hereunder, and (iii) to any subsequent purchaser of Buyer or any
material portion of its assets (whether such sale is structured as a sale of
stock or membership interests, a sale of assets, a merger or otherwise).

 

(g)           Rules of
Construction.  Section headings
contained in this Agreement are inserted only as a matter of convenience and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any of the provisions of this Agreement.  This Agreement has been negotiated on behalf
of the parties with the advice of legal counsel and no general rule of
contract construction requiring an agreement to be more stringently construed
against the drafter or proponent of any particular provision may be applied in
the construction or interpretation of 

 

7

 

this Agreement.  Unless otherwise expressly provided, the word
“including” does not limit the preceding words or terms.

 

(h)           Counterparts.  This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.  The exchange
of copies of this Agreement and of signature pages by facsimile
transmission or e-mail of a PDF file will constitute effective execution and
delivery of this Agreement as to the parties and may be used in lieu of the
original Agreement for all purposes. 
Signatures of the parties transmitted by facsimile or e-mail of a PDF
file will be deemed to be their original signatures for all purposes.  Any party delivering an executed counterpart
of this Agreement by facsimile or e-mail of a PDF file also will deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart will not affect the validity, enforceability, and
binding effect of this Agreement.

 

(i)            Cumulative Remedies.  The powers, rights, privileges and remedies provided
in this Agreement are cumulative and not exclusive or alternative and are in
addition to any and all other powers, rights, privileges and remedies granted
by law, rule, regulation or instrument. 
Nothing in this Agreement will limit Seller’s indemnity obligations to
Buyer under the Purchase Agreement to the amount of the Escrow Fund Balance and
Seller will continue to be obligated to indemnify Buyer as provided in the
Purchase Agreements irrespective of the expiration or termination of this
Agreement.

 

(j)            Further Assurances.  Each of the parties will execute and deliver
such additional instruments and other documents and will take such further
actions as may be necessary or appropriate to effectuate, carry out and comply
with all of the terms of this Agreement.

 

(k)           Merger or
Consolidation.  Any corporation or
association into which the Escrow Agent may be converted or merged, or with
which it may be consolidated, or to which it may sell or transfer all or
substantially all of its corporate trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from any
such conversion, sale, merger, consolidation or transfer to which the Escrow
Agent is a party, shall be and become the successor escrow agent under this
Agreement and shall have and succeed to the rights, powers, duties, immunities
and privileges as its predecessor, without the execution or filing of any
instrument or paper or the performance of any further act.

 

(l)            Attachment of
Escrow Fund Balance; Compliance with Legal Orders.  In the event that any Escrow Fund Balance
shall be attached, garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined by an order of a court, or any order,
judgment or decree shall be made or entered by any court order affecting the
Escrow Fund Balance, the Escrow Agent is hereby expressly authorized, in its
sole discretion, to respond as it deems appropriate or to comply with all
writs, orders or decrees so entered or issued, or which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction.  In the event that the
Escrow Agent obeys or complies with any such writ, order or decree it shall not
be liable to any of the parties or to any other person, firm or corporation, 

 

8

 

should, by reason of such
compliance notwithstanding, such writ, order or decree be subsequently
reversed, modified, annulled, set aside or vacated.

 

(m)          Patriot Act.  To help the government fight the funding of
terrorism and money laundering activities, federal law requires all financial
institutions to obtain, verify and record information that identifies each
person who opens an account.  For a non-individual
person such as a business entity, a charity, a trust or other legal entity the
Escrow Agent requires documentation to verify such entity’s formation and
existence as a legal entity.  The Escrow
Agent may also ask to see financial statements, licenses, identification and
authorization documents from individuals claiming authority to represent the
entity or other relevant documentation.

 

(n)           Security Advice
Waiver.  The parties acknowledge that
regulations of the Comptroller of the Currency grant parties the right to
receive brokerage confirmations of security transactions as they occur.  The parties specifically waive such
notification to the extent permitted by law and acknowledge that parties will
receive periodic cash transaction statements, which will detail all investment
transactions.

 

* * * * *

 

9

 

IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto as of the day and year first above written.

 

	
  THE ESCROW AGENT:

  	
  SELLER:

  
	
   

  	
   

  
	
  U.S. BANK NATIONAL ASSOCIATION

  	
  STRATUM HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Georgette Kleinbaum

  	
   

  	
  By:

  	
   

  	
  /s/ D. Hughes
  Watler, Jr.

  
	
  Its:

  	
   

  	
  Assistant Vice President

  	
   

  	
  Its:

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  HAMILTON ACQUISITION,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Charles R. Brown II

  
	
   

  	
  Its:

  	
   

  	
  Chief Executive Officer

  
									

 

[Signature Page to Escrow
Agreement]

 

 

EXHIBIT A

 

FEES AND
EXPENSES

 

	
  I.

  	
  Acceptance Fee:

  	
  $750

  
	
   

  	
   

  	
   

  
	
   

  	
  The acceptance
  fee includes the administrative review of documents, initial set-up of the
  account, and other reasonably required services up to and including the
  closing. This is a flat one-time fee, payable at closing.

  
	
   

  	
   

  	
   

  
	
  II.

  	
  Annual Administration Fee:

  	
  $0

  
	
   

  	
   

  	
   

  
	
   

  	
  Annual
  administration fee for performance of the routine duties of the Depositary
  associated with the management of the account. Administration fees are
  payable in advance.

  
	
   

  	
   

  	
   

  
	
  III.

  	
  Out-of-Pocket Expenses:

  	
  At Cost

  
	
   

  	
   

  	
   

  
	
   

  	
  Reimbursement of expenses associated with
  the performance of our duties, including but not limited to fees and expenses
  of legal counsel, accountants and other agents, tax preparation, reporting
  and filing, publications, and filing fees.

  
	
   

  	
   

  	
   

  
	
  IV.

  	
  Extraordinary Expenses:

  	
  At Cost

  
	
   

  	
   

  	
   

  
	
   

  	
  Extraordinary services are duties or responsibilities of an unusual
  nature, including termination, but not provided for in the governing
  documents or otherwise set forth in this schedule. A reasonable charge will
  be assessed based on the nature of the service and the responsibility
  involved. At our option, these charges will be billed at a flat fee or our
  hourly rate then in effect.

  

 

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT

 

To help the government fight the funding of terrorism and money
laundering activities, Federal law requires all financial institutions to
obtain, verify and record information that identifies each person who opens an
account.

 

For a non-individual person such as a business entity, a charity, a
Trust or other legal entity we will ask for documentation to verify its
formation and existence as a legal entity. We may also ask to see financial
statements, licenses, identification and authorization documents from
individuals claiming authority to represent the entity or other relevant
documentation.

 

 

EXHIBIT B

 

U.S. BANK NATIONAL ASSOCIATION

MONEY MARKET ACCOUNT

DESCRIPTION AND TERMS

 

U.S. Bank MMkt Acct – ImoneyNet, Cusip 9AMMF05i7, DDAWAC

 

The U.S. Bank Money Market account is a U.S. Bank National Association
(“U.S. Bank”) interest-bearing money market deposit account designed to meet
the needs of U.S. Bank’s Corporate Trust Services Escrow Group and other
Corporate Trust customers of U.S. Bank.  
Selection of this investment includes authorization to place funds on
deposit with U.S. Bank.

 

U.S. Bank uses the daily balance method to calculate interest on this
account (actual/365 or 366).  This method
applies a daily periodic rate to the principal balance in the account each
day.  Interest is accrued daily and
credited monthly to the account. 
Interest rates are determined at U.S. Bank’s discretion, and may be
tiered by customer deposit amount.

 

The owner of the account is U.S. Bank as Agent for its trust customers.  U.S. Bank’s trust department performs all
account deposits and withdrawals. The deposit account is insured by the Federal
Deposit Insurance Corporation up to $100,000.

 

AUTOMATIC AUTHORIZATION

 

In the absence of specific written direction to the contrary, U.S. Bank
is hereby directed to invest and reinvest proceeds and other available moneys
in the U.S. Bank Money Market Account.

 

 

EXHIBIT C

 

FORM OF CLAIMS NOTICE

 

                        
      , 200    

 

U.S. Bank National
Association

Attention:  Georgette Kleinbaum

EP-MN-WS3C

60 Livingston
Avenue

St. Paul,
Minnesota 55107

Fax No.:  651-495-8096

 

Stratum Holdings, Inc.

Attention:  Chairman/CEO

Three Riverway, Suite 1500

Houston, Texas 77056

Fax No.:  713-973-6271

 

Ladies and Gentlemen:

 

Reference is hereby made to the Escrow
Agreement, dated as of March 11, 2008 (the “Escrow Agreement”), by and
among Hamilton Acquisition, Inc., a Delaware corporation (“Buyer”),
Stratum Holdings, Inc., a Nevada corporation (“Seller”), and U.S. Bank
National Association, a national banking association (the “Escrow Agent”).  Capitalized terms used but not defined herein
have the meanings given to them in the Escrow Agreement.

 

Pursuant to Section 4(a) of the
Escrow Agreement, this Claims Notice will serve as instructions to the Escrow
Agent to deliver $[                          ]
of the Escrow Fund Balance to the Buyer for [(i) specify
the portion of Escrow Fund Balance, which amount shall take into account any
applicable limitations set forth in the Securities Purchase Agreement, and (ii) describe
in reasonable detail the matter or matters entitling Buyer to such portion of
the Escrow Fund Balance and the aggregate dollar amount of the claims
(including the amount by which the amounts claimed hereunder exceed the limitations
set forth in the Purchase Agreement)] via wire transfer as follows:

 

[specify the Buyer wire
transfer instructions].

 

Unless the Escrow Agent and Buyer receive a
written notice from Seller rejecting Buyer’s claims in whole or in part within
30 days following the receipt of this Claims Notice, such amount must be
delivered to Buyer as promptly as possible after the expiration of such 30-day
period.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  Hamilton Acquisition, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

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