AGREEMENT
Exhibit
99.1
This
agreement between Consolidation Services Inc. (“CSI”), a Delaware Corporation;
Xxxxx Xxxxx Xxxxxxx (“Xxxxx”) an individual; Xxx X. Xxxxxxxx (“Xxx”), an
individual and LEECO DEVELOPMENT LLC (“LeeCo”) a Kentucky Limited Liability
Company; is entered into effective June 19, 2008 (the “Agreement”).
WITNESSETH:
WHEREAS,
LeeCo is actively engaged in leasing coal rights for the purpose of permitting
and subleasing the mineral rights to third parties for mining.
WHEREAS,
LeeCo currently leases coal on approximately 650 acres with an estimated 860,000
tons of surface mineable Blue Gem coal, of which 60-90% is estimated to be
recoverable and Owners estimate there are 4.5 million tons of deep
coal.
WHEREAS,
LeeCo management believes it can obtain coal leases on substantially more acres;
and LeeCo management believes it can also lease the oil/natural gas rights on
many of the acres under consideration.
WHEREAS,
Xxxxx and Xxx own 100% of LeeCo as equal partners, the “Owners”.
WHEREAS,
the Owners each desire to sell a portion of their equity and the owners desire
to fund LeeCo through a capital contribution by a third party and Owners on a
prorated ownership basis.
WHEREAS,
CSI desires to purchase equity from each of the Owners and CSI desires to fund
LeeCo on a prorated basis.
WHEREAS,
CSI desires to acquire the development rights to all oil/natural gas rights
which LeeCo has or obtains in the future.
NOW,
THEREFORE, in consideration of the mutual understandings contained herein, the
parties agree as follows:
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1)
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Owners
agree to sell to CSI and CSI agrees to purchase a fifty percent (50%)
interest in LeeCo, by purchasing equity equally from the two owners;
twenty five percent (25%) from each Owner. Owners will each retain twenty
five percent (25%).
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2)
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CSI
agrees to purchase a fifty percent ownership in LeeCo and obtain certain
development rights to LeeCo oil/natural gas (see paragraph 3 below), by
paying a total of $500,000 compensation to Owners, payable as
follows.
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a)
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Payment
of $50,000 compensation in dollars to Owners; $25,000 payable to Xxxxx and
$25,000 payable to Xxx. Said dollars to be paid within four (4) days of
the Closing date. The Closing date shall be the date CSI is able to file
an 8-K as required incorporating LeeCo financial information with CSI’s
financial information. Owners shall provide CSI all required financial
information and CSI shall oversee an Audit and proforma calculations as
appropriate, with a goal toward closing before June 30,
2008.
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b)
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Payment
of $450,000 through the issuance of 225,000 shares (the “Shares”) of
non-registered common stock of CSI within four days of Closing. The shares
shall be issued in two certificates; 112,500 shares in the name of Xxx
Xxxxxxxx Enterprises Inc. and 112,500 shares in the name of Xxxxx Xxxxx
Xxxxxxx. All entities taking title to the Shares shall collectively and
individually be legally obligated to abide by the lock up/leak out terms
specified in subsequent paragraphs of this
agreement.
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3)
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LeeCo,
Owners and CSI hereby agree that all oil/natural gas rights obtained by
LeeCo (current and future) shall be assigned to CSI under the following
terms and conditions. CSI shall be assigned rights obtained by LeeCo or
preferably receive the rights directly by contract from the owner; except
for one percent (1%), which shall be divided equally between the Owners.
For example, if a party leasing to LeeCo owns all the oil/natural gas
rights and the owner retains 12.5% ownership, then Xxx would be assigned
0.5%; Xxxxx would be assigned 0.5% and CSI would be assigned 86.5%. CSI
would have sole responsibility and authority to make all oil/natural gas
decisions. CSI shall prepare an oil/gas lease contract for LeeCo
representatives to present to owners of mineral rights while negotiating
coal rights. Said contract will have blanks for negotiable items, such as
initial lease fees, maintenance fees, renewal fees and owner royalty
percentage. The standard contract will include language
specifying the half percent royalty for each of the two Owners. Owners
will not have any responsibility or obligation for any expenses associated
with the oil and gas lease; including but not limited to cost for
permitting, drilling, equipping, maintenance or operations. In the event
the LeeCo representative can not reach agreement on the oil and gas lease
negotiations within CSI approved guidelines; CSI shall assume said oil/gas
negotiations as CSI deems appropriate in its sole judgment. The
Owners half percent royalty shall still be payable on the CSI oil/gas
leases obtained on properties signed by
LeeCo.
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2
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4)
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Owners
and CSI agree to deposit a total of $100,000 capital contribution into the
LeeCo checking account for working capital pro rata as follows: Xxx
$25,000; Xxxxx $25,000 and CSI $50,000. All disbursement of any
LeeCo funds shall be by a budget, which must be approved by at least one
of the Owners and an officer of CSI and in accordance with the LeeCo
operating agreement. CSI shall make its $50,000 capital contribution to
LeeCo within four (4) days of the effective date or within four days of
the last signature on this Agreement; whichever, is later. The Owners
$25,000 capital contribution shall be paid directly by CSI on behalf of
the Owners at closing, said dollars are those referenced in item 2. a) Of
this Agreement.
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5)
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Owners,
LeeCo and CSI acknowledge that LeeCo will generally need to retain minimal
working capital, less than $100,000. Consequently, it is agreed that LeeCo
will distribute all dollars in excess of $100,000 to the Owners and CSI on
a pro rata ownership basis (50% to CSI, 25% to Xxxxx and 25% to Xxx) once
each quarter. This clause may be amended by agreement between CSI and at
least one Owner. It is the intent of the parties to grow LeeCo’s business,
and therefore, it is the intent of the parties to increase the $100,000
number as required to accommodate planned
growth.
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6)
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CSI
shall become a manager and a member of LeeCo upon closing of this
agreement. CSI shall appoint an individual to perform the duties
associated with this role. Said individual shall be Xxxxxx X. Xxxxxx,
President of CSI until CSI notifies LeeCo of a change by written notice.
LeeCo corporate documents shall be updated to shown the new
ownership/member/manager profile.
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7)
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The
Shares shall be sold subject to a lock up agreement (the “Lock Up”), as
specified in item eight and the $450,000 value of the Shares shall be
guaranteed (the “Guarantee”) as specified in item ten
below.
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8)
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The
Lockup shall permit Owners to sell 4,327 shares per week (the “Weekly
Quota”) commencing on the January 1, 2009 and ending on December 31, 2009.
Owners may elect to not sell the Weekly
Quota.
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9)
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Any
shares not sold on schedule will not be eligible for sale until after the
Lock Up period (after December 31, 2009. After the Lock Up period, any
weekly quota not sold on schedule will be eligible for sale as the holder
of said shares deems desirable. There shall be no volume
limitations on the sale of said shares. The Guarantee will not apply to
the shares and the surplus payable to CSI (referenced in item eleven
below) will also be null and void for said shares. Owners shall be deemed
to be a speculator on said shares.
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10)
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CSI
Shall Guarantee the $450,000 value of the Shares so long as the Shares are
sold in compliance with the Lock Up. Owners shall submit copies of all
sales transactions of the Shares to CSI in order to allow determination of
dollars owed by CSI to Owners in the event of a deficit. Owners shall
submit said copies of sales transactions to CSI on a monthly basis, copies
are to be provided to CSI by the tenth of the month for the preceding
month’s sales transactions. At the end of the Lock Up, CSI and Owners
shall calculate the total dollars received through the sale of Shares. In
the event the sales of Shares averages less than the Market Price used to
calculate the number shares issued ($2.00 per share), CSI shall pay Owners
enough cash to bring the average sales price for the entire Lock Up period
to $2.00/share. In the event Owner sells more shares than
permitted at any time during the Lock Up, the Guarantee shall be null and
void for all sales of Shares: however, the surplus (if any) referenced in
item eleven shall be payable to
CSI.
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11)
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In
the event Owners sell shares at a price that is greater than $5.00 per
share, Owners shall pay CSI any surplus. Said surplus shall be determined
and payable as with the deficit payment described in the preceding
paragraph.
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12)
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LeeCo
projects shall be defined as properties identified by owners, as
properties which have coal reserves suitable for mining that can be
successfully leased, permitted and subleased for mining to third parties
at acceptable rates. LeeCo shall lease coal sufficient to put together a
mining unit, plan and permit the mine and sublease the coal mining
operation for a profit. Owners shall not enter into other agreements as
individuals, or become a part of other legal entities which compete with
LeeCo projects as defied in this paragraph without CSI’s written approval.
This Agreement shall in no way limit Owners right to enter into agreements
of any kind which do not conflict or compete with LeeCo projects as
defined herein. In the event Owners desire to participate in new
opportunities that might be perceived as overlapping or conflicting with
LeeCo projects, owners may disclose them in writing to CSI, so the parties
can insure no conflicts arise.
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13)
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Owners
shall have the right to purchase any lands which they identify for sale
and desire to purchase for them or their immediate families defined as;
spouses, children and grand children. Owners shall hereby grant CSI a
first right of refusal to purchase any lands identified by owners for
sale, which Owners do not purchase for themselves or their immediate
families. Owners will refer all land and mineral rights owners who would
like to sell their ownership rights to CSI, along with the full terms of
purchase, including fees and rights which Owners would like to be paid as
part of the transaction. CSI shall have 30 days to accept said terms
and/or negotiate terms acceptable to all parties. If CSI declines the
offered terms, Owners may sell the property on identical terms to any
third party. In the event Owners and the landowner agree to terms that are
different than those declined by CSI, then CSI shall have a new 20 day
period to accept or reject the amended
terms.
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14)
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CSI
shall indemnify and hold harmless Owners from and against any and all
losses, damages, liabilities, reasonable attorney fees, court costs and
expenses resulting from or in connection with this Agreement, or any act
or omission of the Company.
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15)
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For
the purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been
duly given (i) when delivered, if personally delivered, (ii) when sent by
facsimile transmission, when receipt therefore has been duly received, or
(iii) when mailed by United States registered mail, return receipt
requested, postage prepaid, or by recognized overnight courier, addressed
set forth in the preamble to this Agreement or to such other address as
any-party
may have furnished to the other in any writing in accordance herewith,
except that notices of change of address shall be effective only upon
receipt.
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16)
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No
provisions of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing signed by
authorized officers of each party. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be
performed by such party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not set forth expressly in this Agreement. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the internal laws of the State of Delaware. Any
controversy arising under or in relation to this Agreement shall be
settled by binding arbitration in Las Vegas, Nevada in accordance with the
laws of the State of Nevada and the rules of the American Arbitration
Association.
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17)
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This
Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together will constitute one
and the same instrument.
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18)
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If
in any jurisdiction, any provision of this Agreement or its application to
any party or circumstance is restricted, prohibited or unenforceable, such
provision shall, as to such jurisdiction, be ineffective only to the
extent of such restriction, prohibition or unenforceability, without
invalidating the remaining provisions hereof and without affecting the
validity or enforceability of such provision in any other jurisdiction or
its application to other parties or circumstances. In addition,
if any one or more of the provisions contained in this Agreement shall for
any reason in any jurisdiction be held to be excessively broad as to time,
duration, geographical scope, activity or subject, it shall be construed,
by limiting and reducing it, so as to be enforceable to the extent
compatible with the applicable law of such jurisdiction as it shall then
appear.
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5
IN WITNESS WHEREOF, this
Agreement has been executed by CSI and Owners as of the date written
below.
Signature
of Owners
/s/ Xxxxx Xxxxx
Xxxxxxx
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6-24-08
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Name:
Xxxxx Xxxxx Xxxxxxx
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Date
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/s/ Xxx X.
Xxxxxxxx
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6-24-08
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Name:
Xxx X. Xxxxxxxx
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Date
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Signature
of LeeCo
/s/ Xxxxx Xxxxx
Xxxxxxx
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6-24-08
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Xxxxx
Xxxxx Xxxxxxx, Manager and Member
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Date
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Signature
of CSI
/s/ Xxxxxx X.
Xxxxxx
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9-11-08
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Xxxxxx
X. Xxxxxx
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Date
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CEO,
President
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