Document:

Exhibit 10.3

 

OPTION AGREEMENT

 

This Option Agreement (the “Agreement”) is entered into as of March 11,
2008 by and between Stratum Holdings, Inc., a Nevada corporation (“Seller”),
Decca Consulting Ltd., an Alberta corporation (“Decca”), and Hamilton Acquisition, Inc.,
a Delaware corporation (“Buyer”).

 

RECITALS

 

A.            Pursuant to a
Securities Purchase Agreement dated the date hereof by and among Buyer, Seller
and CYMRI, L.L.C. (the “PEI Purchase Agreement”), Buyer will acquire all of the
issued and outstanding capital stock of PEI from Seller on the terms and
conditions and for the consideration set forth in the PEI Purchase Agreement.

 

B.            Seller
owns all of the issued and outstanding capital stock of Decca, which consists
of [200 common shares] (the “Decca Shares”) and Seller desires to grant Buyer
an option to purchase the Decca Shares.

 

C.            It
is a condition to the consummation of the transactions contemplated by the PEI
Purchase Agreement that Seller enter into this Agreement.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Defined
Terms.  Capitalized terms used in
this Agreement, unless otherwise defined in this Agreement, have the meanings
assigned to them in the PEI Purchase Agreement.

 

2.             Grant
of Option.  Seller hereby grants to
Buyer an option to purchase the Decca Shares (the “Decca Option”), which Buyer
may exercise at any time during the 90 day period commencing on the date hereof
and ending at 5:00 p.m., Central time, on June 9, 2008 (the “Decca
Option Period”).  Buyer shall evidence
its intent to exercise the Decca Option by providing written notice (the “Exercise
Notice”) thereof to Seller at any time prior to the end of the Decca Option
Period.  Commencing on the date Seller
receives the Exercise Notice, Buyer and Seller shall each make a good faith
effort to (i) negotiate the terms and conditions of Seller’s sale to Buyer
of the Decca Shares (as reflected in a written agreement between Seller and
Buyer) on the terms set forth in Section 3 of this Agreement and (ii) consummate
such transaction no more than 30 days after such date.

 

3.             Terms
of Purchase.  The terms of the
purchase and sale of the Decca Shares pursuant to the Decca Option shall be set
forth in a purchase agreement (the “Decca Purchase Agreement”) which will be
substantially similar to the terms for the purchase of the Decca Shares set
forth in the Securities Purchase Agreement included in the FORM DEFM14A
filed by Seller with the Securities and Exchange Commission on February 11,
2008 (the “Draft Agreement”); provided, that (i) the “$19,250,000”
set forth in Section 2.2(i) of the Draft  Agreement will be “$4,250,000”, (ii) the
Escrow Agreement will be amended to include any 

 

 

claim made by Buyer pursuant to the Decca Purchase Agreement and the
PEI Purchase Agreement, (iii) the threshold and cap for breaches of
certain representations and warranties set forth in Section 7.4 of the Draft
Agreement will apply to both the Decca Purchase Agreement and the PEI Purchase
Agreement on an aggregate basis, and (iv) the Decca Purchase Agreement
would appropriately take into account any outstanding lawsuits or claims
against Decca to the satisfaction Buyer in its sole discretion.

 

4.             No
Shop.  From and after the date of
this Agreement and continuing through the consummation of the purchase of the
Decca Shares by Buyer or termination of this Agreement, Seller and Decca shall
not, nor shall they authorize or permit any officer, director, employee or
affiliate of Seller or Decca or any investment banker, attorney, accountant or
other representative retained by Seller or Decca or the shareholders of Seller,
to initiate, solicit or knowingly encourage, directly or indirectly, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal
(as defined below), or enter into or continue any discussions or negotiations
with any person or entity in the furtherance of such inquiries or to obtain an
Acquisition Proposal, or agree to or endorse any Acquisition Proposal, or
authorize any of the officers, directors, employees or affiliates of Seller or
Decca or the shareholders of Seller, or any investment banker, financial
advisor, attorney, accountant or other representative retained by Seller or
Decca or the shareholders of Seller  to
take any such action.  As used in this
Agreement, “Acquisition Proposal” shall mean (a) any sale of stock,
merger, consolidation, share exchange, business combination, stock redemption,
recapitalization, or similar transaction involving the Decca (other than the
transaction contemplated by this Agreement); or (b) any sale, lease,
exchange, mortgage, pledge or disposition of any of the assets of the Decca
other than in the ordinary course of business. 
In the event Seller or its affiliates receive an Acquisition Proposal,
Seller will notify Buyer promptly of Acquisition Proposal and the terms of the Acquisition
Proposal.

 

5.             Issuance
of Stock.  From and after the date of
this Agreement and continuing through the consummation of the purchase of the
Decca Shares by Buyer or termination of this Agreement, Seller will not permit
Decca to issue any shares of capital stock of Decca or grant or agree to grant
any options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require Decca to
issue, sell, or otherwise cause to become outstanding any of its capital stock

 

6.             Operation
of Decca.  From and after the date of
this Agreement and continuing through the consummation of the purchase of the
Decca Shares by Buyer or termination of this Agreement, the Seller and Decca
will (i) conduct the business and operations of Decca in the ordinary
course and in substantially the same manner as such business and operations
have been conducted prior to the date of this Agreement; (ii) use their
best efforts to preserve the current business organization of Decca, keep
available the services of Decca’s current officers, independent contractors and
agents, and maintain the relations and good will with all suppliers, customers,
distributors, landlords, creditors, independent contractors, agents and other
Persons having business relationships with Decca; (iii) report
periodically to Buyer concerning the status of (a) the business, operations
and finances of Decca and (b) any claims filed against Decca, including,
without limitation, Golden Eagle Exploration, LLC, vs. Weatherford U.S., L.P.
and  Decca, Civil No. 0707-119 filed
in the Seventh Judicial District Court, Grand County, Utah and 

 

2

 

(iv) not permit Decca to pay any dividends or make any
distributions to Seller other than necessary to satisfy intercompany advances.

 

7.             Termination.  This Agreement will terminate upon the
expiration of the Decca Option Period, however, in the event Buyer exercises
the Option, all rights and obligations under this Agreement will continue until
through the consummation of the purchase of the Decca Shares.

 

8.             Miscellaneous.

 

(a)           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 will operate as a waiver of any rights of any
party.

 

(b)           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 their rights, interests, and obligations hereunder (i) to
one or more of their affiliates, (ii) for collateral security purposes to
any lender providing financing to Buyer or any of 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 equity, a sale of assets, a merger or
otherwise).

 

(c)           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.

 

(d)           Notices.  All demands, notices, communications and
reports provided for in this Agreement will be given in accordance with Section 8.6
of the Purchase Agreement.

 

(e)           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.

 

(f)            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.

 

(g)           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.

 

3

 

(h)           Entire Agreement.  This Agreement 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.

 

(i)            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.

 

(j)            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.

 

(k)           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.

 

(l)            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.

 

[The balance of
this page is intentionally left blank.]

 

4

 

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

 

	
   

  	
  STRATUM
  HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ D. Hughes
  Watler, Jr.

  
	
   

  	
     Its:

  	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DECCA CONSULTING
  LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ D. Hughes
  Watler, Jr.

  
	
   

  	
     Its:

  	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HAMILTON
  ACQUISITION, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Charles R.
  Brown II

  
	
   

  	
     Its:

  	
   

  	
  Chief Executive
  Officer

  

 

Signature page to Option
AgreementExhibit 10.4

 

TRANSITION
SERVICES AGREEMENT

 

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

 

BACKGROUND

 

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

 

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

 

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

 

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

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                       Transition Services.

 

(a)                                  For purposes of this Agreement:

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

3.                                       Confidentiality.

 

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

 

2

 

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

 

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

 

4.                                       Duration and Termination.

 

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

 

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

 

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

 

(iii)                               the mutual written consent of the
parties;

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

* * * * *

 

5

 

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

 

	
  PEI:

  	
  STRATUM
  PARTIES:

  
	
   

  	
   

  
	
  PETROLEUM
  ENGINEERS, INC.

  	
  STRATUM
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
  /s/
  Charles R. Brown II

  	
   

  	
  By:

  	
   

  	
  /s/
  D. Hughes Watler, Jr.

  
	
  Its:

  	
   

  	
  Chief
  Executive Officer

  	
   

  	
  Its:

  	
   

  	
  Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CYMRI,
  L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  Kenneth L. Thomas

  
	
   

  	
  Its:

  	
   

  	
  Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TRIUMPH
  ENERGY, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/
  Kenneth L. Thomas

  
	
   

  	
  Its:

  	
   

  	
  Chief
  Financial Officer

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}]]