Document:

cnsv_ex10-1.htm

    SEPARATION AND DISTRIBUTION
AGREEMENT

     

    THIS SEPARATION AND DISTRIBUTION AGREEMENT
(this “Agreement”), dated as of January 1, 2010, by and between
Consolidation Services, Inc., a Delaware corporation (“Parent”), and Colt Resources, Inc., a Nevada corporation
(“Spinco” and together with Parent, the “Parties”,  and each individually, a “Party” ).

     

    RECITALS

     

    WHEREAS, the Board of Directors of Parent has
determined that it is in the best interests of Parent and its shareholders to
separate Parent’s existing energy businesses into two independent businesses,
with the Parent to retain oil and gas assets and liabilities related to its
business and Spinco to receive all other assets and liabilities of
Parent;

     

    WHEREAS, on or before the Effective Time,
Parent shall transfer or cause its subsidiaries to transfer the Spinco Assets to
Spinco and shall cause Spinco to assume the Spinco Liabilities, all as more
fully described in this Agreement;

     

    WHEREAS, the Board of Directors of Parent has
further determined that it is in the best interests of Parent, Spinco and the
shareholders of Parent to distribute to the shareholders of record of the issued
and outstanding shares of Parent Common Stock on January 31, 2010 (the “Record
Date”) 100% of the shares of Spinco Common Stock on the basis of one share of
Spinco Common Stock for every one share of issued and outstanding Parent Common
Stock (the  “Distribution” );

     

    WHEREAS, Parent and Spinco have prepared, and
Spinco shall file with the Commission the Information Statement prior to the
Distribution Date, which sets forth the appropriate disclosure concerning Spinco
and the Distribution;

     

    WHEREAS, the Distribution is intended to
qualify as a tax-free spin-off under Sections 355 and 368 of the Code; and

     

    WHEREAS, the parties hereto have determined to
set forth herein the principal corporate and other transactions required to
effect the Distribution and to set forth herein certain other agreements that
will govern other matters prior to and following the Distribution.

     

    NOW, THEREFORE, in consideration of the mutual
covenants contained in this Agreement, the parties hereby agree as
follows:

     

    ARTICLE I

     

    DEFINITIONS

     

    1.1 DEFINITIONS.  As used herein, the following terms have
the meanings set forth below:

     

    “Accounts” is defined in Section 4.1(a).

     

    
      
          

      

      
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    “Action” means any claim, suit, arbitration, inquiry,
proceeding, or investigation by or before any court, governmental or other
regulatory or administrative agency or commission or any other
tribunal.

     

    “Affiliate” means, when used with respect to a specified
Person, a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with such
specified Person. For the purposes of this definition, “control”, when used with
respect to any specified Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
other interests, by contract or otherwise.

     

     “Assets” means all properties, rights, contracts,
leases and claims, of every kind and description, wherever located, whether
tangible or intangible, and whether real, personal or mixed.

     

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

     

    “Commission” means Securities and Exchange
Commission.

     

    “Confidential Information” means all business or operational
information concerning a Party and/or its subsidiaries (including (i) 
business and strategic plans, (ii)  litigation presentations and risk
assessments, (iii) budgets, (iv) financing and credit-related
information, (v) specifications, ideas and concepts for products and
services, (vi) technical reports, mining and land/property reports and
information, (vii) information marked or designated as “confidential” or which
by its nature would be generally understood to be “confidential,” (viii)
software, and (ix) information regarding third parties and leasees, (x) all
other know-how, non-public intellectual property, methodology, procedures,
techniques and trade secrets which, prior to or following the Effective Time,
has been disclosed by a Party or its subsidiaries to the other Party or its
subsidiaries, in written, oral (including by recording), electronic, or visual
form to, or otherwise has come into the possession of, the other (except to the
extent that such information can be shown to have been (i) in the public
domain through no action of such Party or its subsidiaries, (ii) lawfully
acquired from other sources by such Party or its subsidiaries to which it was
furnished or (iii) independently developed by such Party or its
subsidiaries; provided, however, in the case of clause (ii) that, to the
furnished Party’s knowledge, such sources did not provide such information in
breach of any confidentiality obligations).

     

    “Distribution” is defined in the recitals to this
Agreement.

     

    “Distribution Date” means the date upon which the
Distribution shall be effective, as determined by the Board of Directors of
Parent.

     

    “Effective Time” means 12:01 a.m. New York City time on
January 1, 2010.

     

    “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

     

    
      
          

      

      
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    “Governmental Entity” means any nation or government, any
state, municipality or other political subdivision thereof and any entity, body,
agency, commission, department, board, bureau or court, whether domestic,
foreign or multinational, exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
official thereof.

     

    “Group” means the Parent Group or Spinco (including any
future subsidiaries of Spinco), as the context so requires.

     

    “Guaranteed Spinco Liabilities” means the Spinco Liabilities on which the Parent is an
obligor by reason of any guarantee or contractual commitment, including
Liabilities under any contract assumed by Spinco from any member of the Parent
Group with respect to which any member of the Parent Group remains
liable.

     

    “Indebtedness” means (i) any indebtedness for borrowed
money or the deferred purchase price of property as evidenced by a note, bond or
other instruments, (ii) obligations as lessee under capital leases,
(iii) obligations secured by any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind existing on any asset owned or held by
any Person, whether or not such Person has assumed or becomes liable for the
obligations secured thereby, (iv)  accounts payable, (v) reimbursement
obligations with respect to surety and performance bonds or letters of credit,
and (vi) obligations under direct or indirect guarantees of (including
obligations, contingent or otherwise, to assure a creditor against loss in
respect of) indebtedness or obligations of the kinds referred to in clauses (i),
(ii), (iii), (iv), and (v) above.

     

    “Indemnifiable Loss” means any and all damage, loss,
liability, and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys’ fees and expenses) in connection with
any and all Actions or threatened Actions.

     

    “Information Statement” means the information statement
required by the Commission to be sent to each Record Holder of Parent Common
Stock in connection with the Distribution, and prepared in accordance with the
Exchange Act.

     

    “Intercompany Accounts” means any receivables, payables or loans between any
member of the Parent Group, on the one hand, and Spinco, on the other hand, that
exist prior to the Effective Time and is reflected in the Records of the
relevant members of the Parent Group and Spinco, except for any such
receivables, payables or loans that arise pursuant to this
Agreement.

     

    “IRS” means the United States Internal Revenue
Service.

     

    “Joint Action” means any current or future Action with
respect to which it is unclear at the onset of such Action whether Liabilities
will arise primarily in connection with the Spinco Business or the Parent
Business.

     

    “Law” means any United States or non-United States federal,
national, supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law (including
common law).

     

    
      
          

      

      
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    “Liabilities” means any and all claims, debts, liabilities
and obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, action, order or consent decree of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.

     

    “Party” is defined in the Preamble to this
Agreement.

     

    “Parent” is defined in the Preamble to this
Agreement.

     

    “Parent Action” means any current or future Action that does
not relate primarily to the Spinco Business and in which Spinco is a defendant
or the party against whom any claim or investigation is directed, but excluding
any Joint Action.

     

    “Parent Asset” means all Assets of Parent or any member of the Parent Group
that relate to the Parent’s oil and gas business and that are not Spinco
Assets.

     

    “Parent Business” means the oil and gas business conducted by
Parent and its present and former subsidiaries, joint ventures and partnerships,
other than the Spinco Business.

     

    “Parent Royalty” shall have the meaning provided in Section
2.3(a).

     

    “Parent Royalty Repurchase Options” shall have the meaning
provided in Section 2.3(a).

     

    “Parent Common Stock” means the outstanding shares of common
stock of Parent.

     

    “Parent Group” means Parent and its subsidiaries, affiliates,
joint ventures and partnerships, excluding Spinco.

     

    “Parent Indemnitees” is defined in Section
6.1.

     

    “Parent Liabilities” means (i) Liabilities of any member
of the Parent Group arising out of or relating to the operation or conduct of
the Parent Business and that is held or retained by the Parent or any member of
the Parent Group pursuant to this Agreement, and (ii) any other Liabilities
of Spinco or the Parent, whether arising before, at, or after the Effective
Time, that do not constitute Spinco Liabilities.  FOR THE AVOIDANCE OF
DOUBT, NO LIABILITY SHALL BE A PARENT LIABILITY SOLELY AS A RESULT OF PARENT OR
ANY OTHER MEMBER OF THE PARENT BEING NAMED AS PARTY TO, OR IN, ANY
ACTION.

     

    “Person” means any natural person, firm, individual,
corporation, business trust, joint venture, association, company, limited
liability company, partnership or other organization or entity, whether
incorporated or unincorporated, or any Governmental Entity.

     

    
      
          

      

      
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    “Policies” means insurance policies and insurance agreements
or arrangements of any kind (other than life and benefits policies, agreements
or arrangements), including primary, excess and umbrella policies, comprehensive
general liability policies, director and officer liability, fiduciary liability,
automobile, aircraft, property and casualty, business interruption, workers’
compensation and employee dishonesty insurance policies, bonds and
self-insurance company arrangements, together with the rights, benefits and
privileges thereunder.

     

    “Record Date” means the date designated by or under the
authority of Parent’s Board of Directors as the record date for determining the
shareholders of Parent entitled to receive the
Distribution. 

     

    “Records” means any information, agreements, documents,
books, records or files.

     

    “Record Holder” shall have the meaning set forth in Section
3.3.

     

    “Separation” shall have the meaning set forth in Section
2.1.

     

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

     

     “Spinco” is defined in the Preamble to this
Agreement.

     

    “Spinco Action” means any current or future Action relating
primarily to the Spinco Business in which one or more members of the Parent
Group is a defendant or the party against whom a claim or investigation is
directed, but excluding any Joint Action.

     

    “Spinco Assets” means the those Assets relating to the now or
formerly conducted coal business of Parent, as listed on Schedule “A”, attached
hereto and made a part hereof, to be transferred to Spinco pursuant to this
Agreement, including but not limited to all Assets that are owned of record or
held in the name of Spinco at the Effective Time, and excluding the Parent
Royalty.

     

    “Spinco Business” means the coal business comprised of the
Spinco Assets and the Spinco Liabilities.

     

    “Spinco Common Stock” means the outstanding shares of common
stock of Spinco.

     

    “Spinco Indemnitee” is defined in Section
6.2.

     

    “Spinco Liabilities” means the Liabilities listed or
described on Schedule “B”, attached hereto and made a part hereof, and any and
all Liabilities that are expressly contemplated by this Agreement as Liabilities
that are assumed by Spinco, and any Liabilities arising out of or resulting from
the operation or conduct of the Spinco Business following the Effective Time,
and any and all Liabilities of the guarantor under the Guaranteed Spinco
Liabilities, except as otherwise provided herein.  FOR THE AVOIDANCE
OF DOUBT, NO LIABILITY SHALL BE A SPINCO LIABILITY SOLELY AS A RESULT OF SPINCO
BEING NAMED AS PARTY TO, OR IN, ANY ACTION.

     

    
      
          

      

      
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    “Tax” shall mean all taxes, charges, duties, fees, levies, or
other assessments, including income, gross receipts, excise, property, sales,
transfer, ad valorem, profits, windfall profits, use, license, payroll,
franchise, value-added, production, severance, withholding, payroll, employment,
social security, and other taxes, however denominated, imposed by any
Governmental Entity, whether disputed or not, and includes any estimated taxes,
interest, penalties or additions to tax that are payable or may become payable
in respect thereof.

     

    “Tax Returns” shall mean all reports or returns (including
information returns and amended returns) required to be filed or that may be
filed for any period with any taxing authority in connection with any Tax or
Taxes (whether domestic or foreign).

     

    “Third Party Parent Policies” means all Policies, whether or
not in force on the Effective Time, issued by unaffiliated third-party insurers
to Parent or its Affiliates that cover risks that relate to both the Parent
Business and the Spinco Business as operated or conducted by the Parent or any
member of the Parent Group prior to the Effective Time.

     

    ARTICLE II

     

    SEPARATION; CONVEYANCE OF CERTAIN
ASSETS;

     

    ASSUMPTION OF CERTAIN LIABILITIES; INTERCOMPANY
ROYALTIES; AND TRANSITION ARRANGEMENTS

     

    2.1 SEPARATION.  Effective as of the Effective Time, Parent
shall transfer and assign to Spinco all of the Spinco Assets and Spinco shall
assume all of the Spinco Liabilities in exchange for all of the shares of Spinco
Common Stock to be distributed to the Parent’s shareholders, as provided in
Section 3.3, below (the “Separation”).

     

    2.2 CONVEYANCE OF ASSETS; ASSUMPTION OF LIABILITIES.  Except
as otherwise expressly provided herein:

     

    (a)           Effective
as of the Effective Time (i) all Parent Assets intended to remain assets of
Parent shall remain Assets of Parent, (ii) all Parent Liabilities intended
to remain liabilities of Parent shall remain Liabilities of Parent, and
(iii) all other Assets and Liabilities of Parent and its subsidiaries are
intended to become the Assets and Liabilities of Spinco.

     

    (b)           Effective
as of the Effective Time, Parent agrees to transfer or cause to be transferred
to Spinco all right, title and interest of the Parent or any member of the
Parent Group in and to all of the Spinco Assets and all of the Spinco
Liabilities.

     

    (c)           Parent
agrees that it will, or will cause another member of the Parent Group designated
by Parent to timely pay and discharge all of the Parent Liabilities, at and
after the Effective Time.

     

    (d)           In
the event that any conveyance of an Asset or transfer of Liability, including
conveyance of any Spinco Asset and Spinco Liability required hereby is not
effected at or before the Effective Time, the obligation to transfer such Asset
or Liability shall continue past the Effective Time and shall be accomplished as
soon thereafter as practicable.

     

    
      
          

      

      
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    (e)           If
any Spinco Asset and/or Spinco Liability may not be transferred by reason of the
requirement to obtain the consent of any third party and such consent has not
been obtained by the Effective Time, then (unless otherwise expressly agreed by
Parent and Spinco) such Asset or Liability may be transferred to Spinco if
Spinco shall indemnify and hold harmless Parent for such
transaction.  Parent and Spinco, as the case may be, shall
(i) cause the owner of such Asset or Liability to use commercially
reasonable efforts to provide to the appropriate member of the other party all
the rights and benefits under such Asset or Liability, (ii) cause such
owner to enforce such Asset or Liability for the benefit of such party, and
(iii) cause such Party to assume all obligations of such Asset or
Liability, in each case to the extent that such action does not cause a breach
or default under such Asset or Liability. Both parties shall otherwise cooperate
and use commercially reasonable efforts to provide the economic and operational
equivalent of an assignment or transfer of the Asset or Liability as of the
Effective Time.

     

    (f)           From
and after the Effective Time, each Party shall promptly transfer or cause the
members of its Group promptly to transfer to the other Party or the appropriate
member of the other Party’s Group, from time to time, any property received that
is an Asset or Liability of the other Party or a member of its
Group.

     

    (g)           Except
as expressly set forth in this Agreement or any instrument or document
contemplated by this Agreement, neither any member of the Parent nor Spinco has
made or shall be deemed to have made any representation or warranty as to
(i) the Assets, business or Liabilities retained, transferred or assumed as
contemplated hereby or thereby, (ii) any consents or approvals required in
connection with the transfer or assumption by such party of any Asset or
Liability contemplated by this Agreement, (iii) the value or freedom from
any lien, claim, equity or other encumbrance of, or any other matter concerning,
any Assets of such Party, (iv) the absence of any defenses or right of
setoff or freedom from counterclaim with respect to any claim or other Asset of
such Party, or (v) the legal sufficiency of any assignment, document or
instrument delivered to convey title to any Asset transferred. EXCEPT AS MAY BE
EXPRESSLY SET FORTH IN THIS AGREEMENT, ALL ASSETS WERE, OR ARE BEING,
TRANSFERRED, OR ARE BEING RETAINED, ON AN “AS IS”, “WHERE IS” BASIS AND THE
RESPECTIVE TRANSFEREES WILL BEAR THE ECONOMIC AND LEGAL RISKS THAT ANY
CONVEYANCE OR OTHER TRANSFER SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE
TRANSFEREE A TITLE THAT IS FREE AND CLEAR OF ANY LIEN, CLAIM, EQUITY OR OTHER
ENCUMBRANCE.

     

    2.3 INTERCOMPANY ROYALTIES.  In exchange for the
transfer of the Spinco Assets and Spinco Liabilities to Spinco as provided
herein:

     

    (a)           Parent
shall 
grant, transfer,
assign, convey, execute and deliver to Spinco in accordance with applicable
federal regulations, an overriding 
royalty interest of 12.5% in the those certain oil and gas assets included within
the Parent Assets as set forth on Schedule “C”, attached hereto and made a part
hereof, on the Distribution Date (the “Parent Royalty”).

     

    (b)           The
Parties shall cooperate to file the necessary assignments, mineral deeds, or
similar filings with the appropriate Governmental Entities promptly following
the Effective Time in order to reflect the aforementioned royalty
assignments.

     

    
      
          

      

      
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    2.4 LIMITATION OF LIABILITY.

     

    (a)           Except
as otherwise expressly provided in this Agreement, no Party or any member of
such Party’s Group shall have any Liability to any other Party or any member of
each other Party’s Group in the event that any information exchanged or provided
pursuant to this Agreement which is an estimate or forecast, or which is based
on an estimate or forecast, is found to be inaccurate.

     

    (b)           Except
as otherwise set forth herein, neither Party nor any member of such Party’s
Group shall have any Liability to any other Party or any member of such other
Party’s Group based upon, arising out of or resulting from any agreement,
arrangement, course of dealing or understanding existing on or prior to the
Effective Time (other than this Agreement or any agreement entered into in
connection herewith or therewith in order to consummate the transactions
contemplated hereby or thereby).

     

    2.5 NOVATION OF LIABILITIES; CONSENTS.

     

    (a)           Each
Party, at the request of the other Party, shall use commercially reasonable
efforts to obtain, or to cause to be obtained, any consent, release,
substitution or amendment required to novate or assign all obligations under
agreements, arrangements, licenses and other obligations or Liabilities for
which a member of such Party’s Group and a member of the other Party’s Group are
jointly or severally liable and that do not constitute Liabilities of such other
Party as provided in this Agreement (such other Party, the “Other Party”), or to obtain in writing the unconditional
release of all parties to such arrangements (other than any member of the Group
who assumed or retained such Liability as set forth in this Agreement), so that,
in any such case, the members of the applicable Group will be solely responsible
for such Liabilities.

     

    (b)           If
the Parties are unable to obtain, or to cause to be obtained, any such required
consent, release, substitution or amendment, the Other Party or a member of such
Other Party’s Group shall continue to be bound by such agreement, arrangement,
license or other obligation that does not constitute a Liability of such Other
Party and, unless not permitted by Law or the terms thereof, as agent or
subcontractor for such Party, the Party or member of such Party’s Group who
assumed or retained such Liability as set forth in this Agreement (the  “Liable Party”) shall, or shall cause a member of
its Group to, pay, perform and discharge fully all the obligations or other
Liabilities of such Other Party or member of such Other Party’s Group thereunder
from and after the Effective Time; provided, however, that the Other Party shall
not be obligated to extend, renew or otherwise cause such agreement,
arrangement, license or other obligation to remain in effect beyond the term in
effect as of the Effective Time. The Liable Party shall indemnify the Other
Party and the members of the Other Party’s Group and hold each of them harmless
against any and all Liabilities arising in connection
therewith;  provided, however, that the Liable Party shall have no
obligation to indemnify the Other Party or any member of such Other Party’s
Group with respect to any matter to the extent that such Other Party has engaged
in any knowing violation of Law, fraud or misrepresentation in connection
therewith.  The Other Party shall, without further consideration,
promptly pay and remit, or cause to be promptly paid or remitted, to the Liable
Party or to another member of the Liable Party’s

     

    
      
          

      

      
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    Group, all money, rights and other
consideration received by it or any member of its Group in respect of such
performance by the Liable Party (unless any such consideration is an Asset of
such Other Party pursuant to this Agreement). If and when any such consent,
release, substitution or amendment shall be obtained or such agreement, lease,
license or other rights or obligations shall otherwise become assignable or able
to be novated, the Other Party shall promptly assign, or cause to be assigned,
all rights, obligations and other Liabilities thereunder of any member of such
Other Party’s Group to the Liable Party or to another member of the Liable
Party’s Group without payment of any further consideration and the Liable Party,
or another member of such Liable Party’s Group, without the payment of any
further consideration, shall assume such rights and Liabilities.

     

    ARTICLE III

     

    THE DISTRIBUTION

     

    3.1 COOPERATION PRIOR TO THE DISTRIBUTION; SECURITIES
MATTERS.

     

    (a)           Parent
and Spinco shall prepare, and Parent shall distribute to the Record Holders of
Parent Common Stock, the Information Statement, which shall set forth
appropriate disclosure concerning Spinco, the Distribution, the “restricted”
nature of Spinco Common Stock and transfer restrictions related thereto, and any
other appropriate matters.

     

    (b)           Parent
and Spinco both acknowledge that Spinco is and shall continue to be a
non-reporting privately held company following the Distribution Date and that
there will not be a public market in the Spinco Common Stock, nor is one
expected to develop, and that the Spinco Common Stock that Record Holders
receive shall be “restricted securities.”  In that connection both
Parties agree: (i) the Spinco Common Stock shall have the appropriate
restrictive legends which describe the transfer restrictions related thereto;
and (ii) Spinco’s stock transfer books shall include “stop transfer”
instructions that indicate such transfer limits.

     

    (c)           Parent
and Spinco shall take all such action as may be necessary or appropriate under
federal and state securities laws and the “blue sky” laws of states or other
political subdivisions of the United States in connection with the transactions
contemplated by this Agreement.

     

    3.2 CONDITIONS PRECEDENT TO THE DISTRIBUTION.  Neither the
Distribution nor the related transactions set forth in this Agreement will
become effective unless the following conditions have been satisfied or waived
by Parent, in its sole and absolute discretion, at or before the Distribution
Date:

     

    (a)           Parent
will have received from its accounting professionals, reasonable assurances
substantially to the effect that, for U.S. federal income tax purposes,
(i) the Distribution and certain transactions to be effected in connection
with the separation of Parent and Spinco qualify under Sections 355 and/or
368(a) of the Code, and (ii) the Distribution and such
transactions will qualify for tax-free treatment to Parent and to
Spinco;

     

    (b)           the
Distribution will not violate or result in a breach of any Law or any material
agreement;

     

    
      
          

      

      
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    (c)           the
actions and filings necessary or appropriate under applicable federal or state
securities laws and blue sky laws in connection with the Distribution will have
been taken;

     

    (d)           all
consents required to be received or made before the Distribution may take place
will have been received or made and be in full force and effect, and this
Agreement will not have been terminated and will not violate, conflict with or
result in a breach (with or without the passage of time) of any Law or any
material agreements of Parent;

     

    (e)           no
preliminary or permanent injunction or other order, decree, or ruling issued by
a Governmental Entity, and no statute (as interpreted through orders or rules of
any Governmental Entity duly authorized to effectuate the statute), rule,
regulation or executive order promulgated or enacted by any Governmental Entity
will be in effect preventing, or materially limiting the benefits of, the
Distribution;

     

    (f)           No
event or development shall have occurred or exist that, in the judgment of
Parent's Board of Directors, in its sole discretion, makes it inadvisable to
effect the Separation, the Distribution or any other transaction related
thereto.

     

    3.3 THE
DISTRIBUTION. 

     

    (a)           On
the Distribution Date, subject to satisfaction or waiver of the conditions set
forth in this Agreement, Spinco shall issue, distribute and deliver certificates
representing 100% of the shares of Spinco Common Stock to each shareholder of
Parent Common Stock on the Record Date (the “Record Holder”) on a pro-rata
basis, of one (1) share of Spinco Common Stock for each one (1) share of
Parent Common Stock so held by such Record Holder.  The certificates
for the Spinco Common Stock shall be delivered directly to each Record Holder by
mail at their respective addresses as listed in the Parent transfer agent’s
books and records.

     

    (b)           Both
Parties agree that the Distribution shall not constitute or be construed as a
“sale” or a disposition for value of the Spinco Common Stock under Section
2(a)(3) of the Securities Act, and that the Record Holders shall not remit any
consideration to receive the Spinco Common Stock; nor does such Distribution
constitute a stock dividend issued by either of the Parties, but rather is a
distribution merely for the purpose of effectuating the transactions
contemplated hereby.

     

    ARTICLE IV

     

    COVENANTS

     

    4.1 BANK ACCOUNTS.

     

    (a)           The
Parties agree to take, or cause the respective members of their respective
Groups to take, at the Effective Time (or such other time as the Parties may
agree), all actions necessary to amend all agreements or arrangements governing
each bank and brokerage account owned by Parent, Spinco or any of their
respective Groups (the “Accounts” ), so that such Accounts, if currently linked
(whether by automatic withdrawal, automatic deposit, or any other authorization
to transfer funds from or to, hereinafter  “linked” ) to any bank or brokerage account owned
by the other Party or any other member of the other Party’s Group are de-linked
from such other Party’s Accounts from and after the Effective
Time.

     

    
      
          

      

      
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    (b)           With
respect to any outstanding checks issued by Parent, Spinco, or any member of
their respective Groups prior to the Effective Time, such outstanding checks
shall be honored following the Effective Time by the entity or Group owning the
account on which the check is drawn.

     

    (c)           As
between the two Parties (and the members of their respective Groups) all
payments and reimbursements received after the Effective Time by any Party (or
member of its Group) that relate to a business, Asset or Liability of another
Party (or member of its Group), shall be held by such Party in trust for the use
and benefit of the Party entitled thereto (at the expense of the Party entitled
thereto) and, promptly upon receipt by such Party of any such payment or
reimbursement, such Party shall pay over, or shall cause the applicable member
of its Group to pay over to the other Party the amount of such payment or
reimbursement without right of set-off.

     

    4.2 GUARANTEED SPINCO LIABILITIES.

     

    (a)           Spinco
shall use commercially reasonable efforts (excluding payment of money or
incurrence of Liabilities) to obtain as promptly as practicable after the
Effective Time the release of all members of the Parent from any obligations
with respect to Guaranteed Spinco Liabilities, including removing all members of
the Parent from their obligations as guarantors with respect to the guarantees
listed or described on Schedule “B.”  In no event shall any member of
Spinco take any action with respect to any Guaranteed Spinco Liabilities which
could be reasonably expected to adversely affect the Parent members in any way,
including, without limitation, extending the term of any Guaranteed Spinco
Liabilities or increasing the liability guaranteed thereunder, unless the
guarantee or obligation of all Parent Group members is released as to any
extended or modified liability obligations under such Guaranteed Spinco
Liabilities or Parent otherwise consents in writing.

     

    (b)           In
the event that any Parent Group member is required to pay or otherwise satisfy
any Guaranteed Spinco Liabilities, without limiting any of Parent’s rights and
remedies against Spinco under this Agreement or otherwise, in order to secure
Spinco’s indemnity obligations to Parent hereunder in respect of such Guaranteed
Spinco Liabilities, Parent shall be entitled to all the rights of the payee in
any property of any member of Spinco pledged as security for such Guaranteed
Spinco Liabilities.

     

    4.3 INSURANCE.

     

    Except as otherwise provided in this Agreement,
from and after the Effective Time, Spinco and Parent shall be responsible for
obtaining and maintaining their own respective insurance programs for their risk
of loss and such insurance arrangements shall be separate programs apart from
each other and each Party will be responsible for its own deductibles,
self-insured retentions, premium adjustments, audits, collateral, Taxes and
claims handling charges or other expenses associated with for such insurance
programs.

     

    4.4 TRADEMARKS; TRADENAMES.  Each Party shall exercise
commercially reasonable efforts to cease (and cause all of the members of its
Group to cease), as soon as reasonably practicable after the Effective Time:
(i) making any use of any names or trademarks that include (A) any of
the trademarks of the other Party or such other Party’s subsidiaries or
Affiliates and (B) any names or trademarks related thereto including any
names or trademarks confusingly similar thereto or dilutive
thereof.

     

    
      
          

      

      
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    4.5 AUDITORS
AND AUDITS; ANNUAL AND QUARTERLY FINANCIAL STATEMENTS AND ACCOUNTING.
Each Party agrees to the following:

     

    (a)           Annual
Financial Statements. Following the Effective Time, each Party shall provide to
the other Party on a timely basis all information reasonably required to meet
its schedule for the preparation, printing, filing, and public dissemination of
its annual financial statements and, to the extent applicable to such Party, for
management’s assessment of the effectiveness of its disclosure controls and
procedures and its internal control over financial reporting in accordance with
all applicable provisions of Regulation S-K, and to the extent applicable to
such party, its auditor’s audit of its internal control over financial reporting
and management’s assessment thereof in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the Commission’s and Public Company Accounting
Oversight Board’s rules and auditing standards thereunder (such assessments and
audit being referred to as the “Internal Control Audit and Management Assessments”).
Without limiting the generality of the foregoing, each Party will provide all
required financial and other information with respect to itself and its
subsidiaries to its auditors in a sufficient and reasonable time and in
sufficient detail to permit its auditors to take all steps and perform all
reviews necessary to provide sufficient assistance to the other Party’s auditors
with respect to information to be included or contained in the other Party’s
annual financial statements and to permit the other Party’s auditors and
management to complete the Internal Control Audit and Management
Assessments.

     

    (b)           Access
to Personnel and Records. Following the Effective Time, each audited
Party shall authorize its auditors, and use commercially reasonable efforts to
cause its respective auditors, to make available to the other Party’s auditors
(the “Other Party’s Auditors”), at the sole cost and expense of
the Party requesting access, both the personnel who performed or are performing
the annual audits of such audited party (each such Party with respect to its own
audit, the “Audited Party”) and work papers related to the annual
audits of such Audited Party, in all cases within a reasonable time prior to
such Audited Party’s auditors’ opinion date, so that the Other Party’s Auditors
are able to perform the procedures they consider necessary to take
responsibility for, or otherwise to review to the extent deemed required, the
work of the Audited Party’s auditors as it relates to their auditors’ report on
or review of such other Party’s financial statements, all within sufficient time
to enable such other Party to meet its timetable for the printing, filing and
public dissemination of its annual or interim financial statements. In such an
event, each Party shall make available to the Other Party’s Auditors and
management its personnel and Records, at the sole cost and expense of the Party
requesting access, in a reasonable time prior to the Other Party’s Auditors’
opinion or review date and the other party’s management’s assessment date so
that the Other Party’s Auditors and the other Party’s management are able to
prepare its annual or interim financial statements or to perform the procedures
they consider necessary to conduct the Internal Control Audit and Management
Assessments.

     

    (c)           If
any Party or member of its respective Group is required, pursuant to Rule 3-09
of Regulation S-X or otherwise, to include in its Exchange Act filings audited
financial statements or other information of the other Party or member of the
other Party’s Group, the other Party shall use commercially reasonable efforts
(i) to provide such audited financial statements or other information, and
(ii) to cause its outside auditors to consent to the inclusion of such
audited financial statements or other information in the Party’s Exchange Act
filings.

     

    
      
          

      

      
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    (d)           Nothing
in this Section 4.5 shall require any Party to violate any agreement with any
third party regarding the confidentiality of confidential and proprietary
information relating to that third party or its
business;  provided,  however, that in the event that a
Party is required under this Section 4.5 to disclose any such information, such
Party shall use commercially reasonable efforts to seek to obtain such third
party’s consent to the disclosure of such information.

     

    4.6 RIGHT OF OFFSET.

     

    (a)           To
the extent Parent or any other member of the Parent Group has the right to
receive any amounts hereunder, including under the provisions of Article VI or
under any other arrangement between any member of the Parent and Spinco, then
following notice of such proposed offset, Parent may satisfy such amounts out of
and shall have a right of off-set against any amounts then currently due from
Spinco to Parent or any other member of the Parent Group hereunder or
thereunder.

     

    (b)           To
the extent Spinco has the right to receive any amounts hereunder, including
under the provisions of Article VI, or under any other arrangement between any
member of Spinco and Parent or any other member of the Parent Group, then
following notice of such proposed offset, Spinco may satisfy such amounts out of
and shall have a right of off-set against any amounts then currently due from
Parent or any other member of the Parent Group to Spinco or any other member of
Spinco hereunder or thereunder.

     

    ARTICLE V

     

    LITIGATION MATTERS

     

    5.1 CASE ALLOCATION.

     

    (a)           As
of the Effective Time, Spinco shall (i) diligently conduct, at its sole
cost and expense, the defense of the Spinco Actions and any applicable future
Spinco Actions; (ii) notify Parent of material litigation developments
related to the Spinco Actions; and (iii) agree not to file any cross claim
or institute separate legal proceedings against Parent in relation to the Spinco
Actions.

     

    (b)           As
of the Effective Time, Parent shall, and, as applicable, shall cause the other
members of the Parent Group to, (i) diligently conduct, at its sole cost
and expense, the defense of the Parent Actions and any applicable future Parent
Actions; and (ii) agree not to file any cross claim or institute separate
legal proceedings against Spinco in relation to the Parent
Actions.

     

    (c)           Notwithstanding
anything in this Section 5.1 to the contrary, Parent shall have the right to
participate in the defense of any Spinco Action and to be represented by
attorneys of its own choosing and at its sole cost and
expense.

     

    (d)           Spinco
shall indemnify and hold harmless Parent and other members of the Parent Group
against Liabilities arising in connection with Spinco Actions, and Parent shall
indemnify and hold harmless Spinco and other members of Spinco against
Liabilities arising in connection with Parent Actions, in each case, in
accordance with the indemnification provisions of Article
VI.

     

    
      
          

      

      
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    (e)           As
of the Effective Time, Parent shall, and, as applicable, shall cause the other
members of the Parent to, (i) diligently conduct the defense of the Joint
Actions and any applicable future Joint Actions; (ii) notify Spinco of
material litigation developments related to the Joint Actions; and
(iii) agree not to file any cross claim or institute separate legal
proceedings against Spinco in relation to the Joint Actions; provided that if it
becomes clear that a Joint Action relates primarily to the Spinco Business then
from and after such time such Joint Action shall instead be deemed to be a
Spinco Action subject to clause (a) above;
and  provided,  further, that if it becomes clear that a
Joint Action does not relate primarily to the Spinco Business then from and
after such time such Joint Action shall instead be deemed to be a Parent Action
subject to clause (b) above. Parent and Spinco shall regularly meet to
review and discuss the progress of the Joint Actions and the classification
thereof.  Any dispute regarding whether an Action remains a Joint
Action shall be settled pursuant to the dispute resolution mechanics of
Section 9.15.

     

    (f)           Until
such time as the respective Liabilities of the members of the Parent and Spinco
Group are determined in connection with any Joint Action, Parent and Spinco
shall each pay fifty percent (50%) of the cost and expenses associated with the
defense of such Joint Action. The parties agree that, to effect the foregoing
sharing arrangement, counsel in connection with any Joint Action shall be
instructed to render separate bills to Parent and to Spinco. In the event that
either Party pays any costs or expenses that are the responsibility of the other
Party hereunder, the responsible Party shall promptly reimburse the other Party
for such amounts. Spinco shall have the right to employ separate counsel to
represent Spinco and/or any members of the Spinco Group if Spinco shall have
reasonably concluded that there may be a legal defense available to Spinco that
are different from or in addition to those available to Parent or representation
of both Parent (or any member of the Parent Group) and Spinco (or any member of
the Spinco Group) by the same counsel would be inappropriate due to actual or
potential differing interests between them, in which case fees and expenses of
such counsel incurred by Spinco shall be included in the amounts allocated by
the next sentence of this paragraph (f). Upon the determination of Liability of
the members of the Parent Group and Spinco Group in connection with any Joint
Action, Spinco shall indemnify and hold harmless Parent and other members of the
Parent against the portion of such Liabilities relating primarily to the Spinco
Business, and Parent shall indemnify and hold harmless Spinco (and any members
of the Spinco Group) against the portion of such Liabilities relating primarily
to the Parent Business, including, in each case, the costs and expenses
associated with the defense of such Joint Action since the beginning of such
Joint Action, which shall be allocated between Parent and Spinco in proportion
to the Liability with respect to such Joint Action of members of the Parent, on
the one hand, and members of Spinco, on the other hand. Indemnification pursuant
to this Section 5.1(f) shall be in accordance with the indemnification
provisions of Article VI.

     

    5.2 LITIGATION COOPERATION.

     

    (a)           Each
of Parent and Spinco agrees that at all times from and after the Effective Time,
if an Action currently exists or is commenced by a third-party with respect to
which a Party (or any member of such Party’s respective Group) is a named
defendant but such Action is otherwise not a Liability allocated to such named
Party under this Agreement, then the other Party shall use commercially
reasonable efforts to cause the named but not liable defendant to be removed
from such Action and such defendant shall not be required to make any payments
or contribution in connection therewith.

     

    
      
          

      

      
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    (b)           If,
in the case of any Action involving a matter contemplated by Section 5.1, there
is believed to be a conflict of interest between the Parties, or in the event
that any third party claim seeks equitable relief which would restrict or limit
the future conduct of the non-responsible Party or such Party’s business or
operations, such Party shall be entitled to retain, at the responsible Party’s
expense, separate counsel as required by the applicable rules of professional
conduct (which counsel shall be reasonably acceptable to the responsible Party)
and to participate in (but not control) the defense, compromise, or settlement
of that portion of the Action where there is believed to be a conflict of
interest or the third party claim that seeks equitable relief with respect to
the named Party.

     

    (c)           Parent
and Spinco shall each use commercially reasonable efforts to make available to
the other, upon written request, its officers, directors, employees and agents,
and the officers, directors, employees and agents of its subsidiaries, as
witnesses to the extent that such individuals may reasonably be required in
connection with any legal, administrative or other proceedings arising out of
the business of the other, or of any entity that is part of the other Party’s
Group in which the requesting Party or a member of its Group may be involved.
The requesting Party shall bear all out-of-pocket expenses in connection
therewith. On and after the Effective Time, in connection with any matter
contemplated by this Section 5.2(c), the Parties will maintain any attorney-client
privilege or work product immunity of any member of any Group as required by
this Agreement.

     

    ARTICLE VI

     

    INDEMNIFICATION

     

    6.1 SPINCO
INDEMNIFICATION OF THE PARENT.  On and after the Effective Time,
Spinco shall indemnify, defend and hold harmless each member of the Parent
Group, and each of their respective directors, officers, employees and agents
(the “Parent Indemnitees”) from and against any and all Indemnifiable Losses incurred
or suffered by any of the Parent Indemnitees and arising out of, or due to,
(a) the failure of Spinco to pay, perform or otherwise discharge, any of
the Spinco Liabilities, (b) any untrue statement or alleged untrue
statement of any material fact regarding Spinco contained in the final
Information Statement or any amendment or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading (other than the
information about Parent included in the Information Statement), excluding
information in the Information Statement regarding whether the Distribution is
taxable, and (c) any breach by Spinco of this Agreement; provided, that
Spinco shall have no obligation to indemnify Parent or any other member of the
Parent Group with respect to any matter to the extent that such party has
engaged in any knowing violation of Law, fraud or misrepresentation in
connection therewith.

     

    6.2 PARENT
INDEMNIFICATION OF SPINCO GROUP.  On and after the Effective Time,
Parent shall indemnify, defend and hold harmless Spinco, any future member of
the Spinco Group, and each of their respective directors, officers, employees
and agents (the
“Spinco Indemnitees”) from and against any and all Indemnifiable Losses incurred
or suffered by any of the Spinco Indemnitees and arising out of, or due to,
(a) the failure of Parent or any member of the Parent Group to pay, perform
or otherwise discharge, any of the Parent Liabilities, (b) any untrue
statement or alleged untrue statement of any material fact
regarding

     

    
      
          

      

      
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    Parent contained in the final Information
Statement, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading (other than the
information about Spinco included in the Information Statement), excluding
information in the Information Statement regarding whether the Distribution is
taxable, and (c) any breach by Parent or any member of the Parent Group of
this Agreement; provided, that Parent shall have no obligation to indemnify
Spinco and any future member of the Spinco Group with respect to any matter to
the extent that such party has engaged in any knowing violation of Law, fraud or
misrepresentation in connection therewith.

     

    6.3 CONTRIBUTION.  In circumstances in which the indemnity agreements
provided for in Sections 6.1 and 6.2 are unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any Indemnifiable
Losses arising thereunder, each indemnifying party, in order to provide for just
and equitable contribution, shall contribute to the amount paid or payable by
such indemnified party as a result of such Indemnifiable Losses, in proportion
to the relative fault of the indemnifying party or parties on the one hand and
the indemnified party on the other in connection with the Indemnifiable Losses,
as well as any other relevant equitable considerations.

     

    6.4 INSURANCE AND THIRD PARTY OBLIGATIONS.  No insurer or
any other third party shall be, by virtue of the foregoing indemnification
provisions, (a) entitled to a benefit it would not be entitled to receive
in the absence of such provisions, (b) relieved of the responsibility to
pay any claims to which it is obligated, or (c) entitled to any subrogation
rights with respect to any obligation hereunder.

     

    6.5 NOTICE
AND PAYMENT OF CLAIMS.  If any Parent or Spinco Indemnitee (the
“Indemnified Party”) determines that it is or may be entitled
to indemnification by a Party (the “Indemnifying Party ”) under this Article VI, the Indemnified
Party shall deliver to the Indemnifying Party a written notice specifying, to
the extent reasonably practicable, the basis for its claim for indemnification
and the amount for which the Indemnified Party reasonably believes it is
entitled to be indemnified. After the Indemnifying Party shall have been
notified of the amount for which the Indemnified Party seeks indemnification,
the Indemnifying Party shall, within thirty (30) days after receipt of such
notice, pay the Indemnified Party such amount in cash or other immediately
available funds (or reach agreement with the Indemnified Party as to a mutually
agreeable alternative payment schedule) unless the Indemnifying Party objects to
the claim for indemnification or the amount thereof. If the Indemnifying Party
does not give the Indemnified Party written notice objecting to such claim and
setting forth the grounds therefor within the same thirty (30) day period, the
Indemnifying Party shall be deemed to have acknowledged its liability for such
claim and the Indemnified Party may exercise any and all of its rights under
applicable law to collect such amount.

     

    
      
          

      

      
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    ARTICLE VII

     

    EMPLOYEE, TAX AND ACCOUNTING
MATTERS

     

    7.1 EMPLOYEE
MATTERS.  Other than the principals, Messrs. Johnny R. Thomas
and John C. Francis (the “Principals”), Parent does not have any
employees.  Following the Effective Time, Spinco shall have sole
responsibility for any of its respective directors, officers, employees, agents,
and independent contractors and Parent and members of the Parent Group shall
have sole responsibility for any of its respective directors, officers,
employees, agents, and independent contractors.  The Principals shall
provide their management services with respect to Spinco through holding
officer, director and employee positions with Spinco, that are separate and
independent from such officer, director and employee positions at
Parent.  The Principals shall allocate a sufficient amount of their
time to Spinco in order to properly carry out the Spinco
Business.

     

    7.2 TAXES. Parent shall prepare and file or cause to be prepared
and filed all Tax Returns of Parent and Spinco relating to the Spinco Business,
Spinco Assets or Spinco Liabilities that are due on or before the Effective Time
(taking into account any valid extensions thereof), all such Tax Returns
relating to taxable periods ending on or before the Effective Time and all such
Tax Returns for any taxable period that includes the Effective Time (the
“Straddle Period”).  Spinco shall prepare and file or cause to be
prepared and filed all Tax Returns relating to the Spinco Business, Spinco
Assets and Spinco Liabilities for taxable periods ending after the Effective
Time, except for Tax Returns for the Straddle Period.  Except as
otherwise provided in this Section, Parent shall prepare and file all Tax
Returns relating to the Parent Business, the Parent Assets and the Parent
Liabilities for taxable periods ending after the Effective
Time.  Notwithstanding anything to the contrary herein, Parent shall
bear any and all stamp, duty, transfer, sales and use or similar Taxes incurred
in connection with the Distribution.

     

    7.3 INTERCOMPANY ACCOUNTS.  To the extent any
Intercompany Accounts exist or are outstanding immediately prior to the
Effective Time under any of the general ledger accounts of Parent, Spinco or any
of their respective Affiliates and continue to be outstanding after the
Effective Time, thereafter any such Intercompany Accounts (i) shall be an
obligation of the relevant Party (or the relevant member of such Party’s Group),
each responsible for fulfilling its (or a member of such Party’s Group’s)
obligations in accordance with the terms and conditions applicable to such
obligation, and (ii) shall be for each relevant Party (or the relevant
member of such Party’s Group) an obligation to a third-party and shall no longer
be an Intercompany Account. 

     

    ARTICLE VIII

     

    INFORMATION; SEPARATION OF DATA

     

    8.1 PROVISION OF CORPORATE RECORDS.  As soon as practicable
following the Effective Time, Parent and Spinco shall each arrange for the
provision to the other of existing Records in its possession relating to the
other Party or its business and affairs or to any other entity that is part of
such other Party’s respective Group or to the business and affairs of such other
entity.

     

    
      
          

      

      
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    8.2 ACCESS TO INFORMATION; RETENTION OF RECORDS.  From and after the Effective Time, Parent and Spinco
shall each afford the other and its accountants, counsel and other designated
representatives reasonable access (including using commercially reasonable
efforts to give access to Persons possessing information) and duplicating rights
during normal business hours to all Records in its possession relating to the
business and affairs of the other Party or a member of its Group (other than
data and information subject to an attorney/client or other privilege),
including, but not limited to, the shared records, insofar as such access is
reasonably required by the other including, without limitation, for audit,
accounting, regulatory and litigation purposes.  Except as otherwise
required by law or agreed to in writing, each Party shall, and shall cause the
members of its Group to, retain all information relating to the other Party’s
business and affairs in accordance with the past practice of such
Party.

     

    8.3 CONFIDENTIALITY.

     

    (a)           Notwithstanding
any termination of this Agreement, the Parties shall hold, and shall cause each
of their respective subsidiaries to hold, and shall each cause their respective
officers, employees, agents, consultants and advisors to hold, in strict
confidence, and not to disclose or release or use, for any ongoing or future
commercial purpose, without the prior written consent of the other Party, any
and all Confidential Information concerning any other Party; provided, that the
Parties may disclose, or may permit disclosure of, Confidential Information
(i) to their respective auditors, attorneys, financial advisors, bankers
and other appropriate consultants and advisors who have a need to know such
information for our auditing and other non-commercial purposes and are informed
of their obligation to, and agree to, hold such information confidential to the
same extent as is applicable to the Parties and in respect of whose failure to
comply with such obligations, the applicable Party will be responsible,
(ii) if the Parties or any of their respective subsidiaries are required or
compelled to disclose any such Confidential Information by judicial or
administrative process or by other requirements of Law or stock exchange rule,
(iii) as required in connection with any legal or other proceeding by one
Party against any other Party, or (iv) as necessary in order to permit a
Party to prepare and disclose its financial statements, or other required
disclosures; provided, further, that each Party (and members of its Group as
necessary) may use, or may permit use of, Confidential Information of the other
Party in connection with such first Party performing its obligations, or
exercising its rights, under this Agreement. Notwithstanding the foregoing, in
the event that any demand or request for disclosure of Confidential Information
is made pursuant to clause (iii) above, each Party, as applicable and to
the extent not prohibited by any applicable Laws, shall promptly notify the
other of the existence of such request or demand and shall provide the other a
reasonable opportunity to seek an appropriate protective order or other remedy,
which such Parties will cooperate in obtaining. In the event that such
appropriate protective order or other remedy is not obtained, the Party whose
Confidential Information is required to be disclosed shall or shall cause the
other applicable Party or Parties to furnish, or cause to be furnished, only
that portion of the Confidential Information that is legally required to be
disclosed and shall take commercially reasonable steps to ensure that
confidential treatment is accorded such information.

     

    
      
          

      

      
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    (b)           Each
Party acknowledges that it and the other members of its Group may have in their
possession confidential or proprietary information of third parties that was
received under confidentiality or non-disclosure agreements with such third
party prior to the Effective Time. Such Party will hold, and will cause the
other members of its Group and their respective representatives to hold, in
strict confidence the confidential and proprietary information of third parties
to which they or any other member of their respective Groups has access, in
accordance with the terms of any agreements entered into prior to the Effective
Time between one or more members of the such Party’s Group (whether acting
through, on behalf of, or in connection with, the separated businesses) and such
third parties.

     

    (c)           Upon
the written request of a Party, the other Party shall promptly, (i) deliver
to such requesting Party all original Confidential Information (whether written
or electronic) concerning such requesting Party and/or its subsidiaries, and
(ii) if specifically requested by such requesting Party, destroy any copies
of such Confidential Information (including any extracts there
from).  Upon the written request of such requesting Party, the other
Party shall cause one of its duly authorized officers to certify in writing to
such requesting Party that the requirements of the preceding sentence have been
satisfied in full.

     

    8.4 PRIVILEGED MATTERS.

     

    (a)           The
Parties recognize that legal and other professional services that have been and
will be provided prior to the Effective Time have been and will be rendered for
the collective benefit of each of the members of the Parent Group and Spinco,
and that each of the members of the Parent and Spinco should be deemed to be the
client with respect to such pre-separation services for the purposes of
asserting all privileges which may be asserted under applicable
Law.

     

    (b)           The
Parties recognize that legal and other professional services will be provided
following the Effective Time which will be rendered solely for the benefit of
Parent or Spinco, as the case may be.

     

    (c)           The
Parties agree that they shall have a shared privilege, with equal right to
assert or waive, subject to the restrictions in this Section 8.4, with respect to all privileges not allocated
pursuant to the terms of Section 8.4(b). All privileges relating to any claims,
proceedings, litigation, disputes, or other matters which involve both Parent
and Spinco in respect of which both Parties retain any responsibility or
Liability under this Agreement, shall be subject to a shared privilege among
them.

     

    (d)           No
Party may waive any privilege which could be asserted under any applicable Law,
and in which any other Party has a shared privilege, without the consent of the
other Party, which shall not be unreasonably withheld or delayed. Consent shall
be in writing, or shall be deemed to be granted unless written objection is made
upon the Party requesting such consent within twenty (20) days after notice
is given to the other Party.  Each Party shall use its reasonable best
efforts to preserve any privilege held by the other party if that privilege is a
shared privilege or has been allocated to the other party pursuant to
Section 8.4(b).

     

    
      
          

      

      
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    (e)           In
the event of any litigation or dispute between or among any of the Parties, or
any members of their respective Groups, either such Party may waive a privilege
in which the other Party or member of such Group has a shared privilege, without
obtaining the consent of the other Party; provided, that such waiver of a shared
privilege shall be effective only as to the use of information with respect to
the litigation or dispute between the relevant Parties and/or the applicable
members of their respective Group’s, and shall not operate as a waiver of the
shared privilege with respect to third parties.

     

    (f)           Upon
receipt by either Party or by any subsidiary thereof of any subpoena, discovery
or other request which arguably calls for the production or disclosure of
information subject to a shared privilege or as to which the other Party has the
sole right hereunder to assert a privilege, or if either Party obtains knowledge
that any of its or any of its subsidiaries’ current or former directors,
officers, agents or employees have received any subpoena, discovery or other
requests which arguably calls for the production or disclosure of such
privileged information, such Party shall promptly notify the other Party of the
existence of the request and shall provide the other Party a reasonable
opportunity to review the information and to assert any rights it or they may
have under this Section 8.4 or otherwise to
prevent the production or disclosure of such privileged
information.

     

    ARTICLE IX

     

    MISCELLANEOUS

     

    9.1 EXPENSES.  Except as set forth in this Agreement, Spinco
shall pay (a) all costs and expenses incurred in connection with the
spin-off and the transactions contemplated by this Agreement and the fees and
expenses of all counsel, accountants and financial and other advisors,
(b) all costs and expenses incurred in connection with the preparation,
execution, delivery and implementation of this Agreement and (c) all legal,
filing, accounting, printing, and other expenses in connection with the
preparation, printing and filing of the Information
Statement.

     

    9.2 NOTICES.  All notices and communications under this
Agreement shall be in writing and shall be deemed to have been given
(a) when received, if such notice or communication is delivered by
facsimile, hand delivery or overnight courier, and, (b) three
(3) business days after mailing if such notice or communication is sent by
United States registered or certified mail, return receipt requested, first
class postage prepaid. All notices and communications, to be effective, must be
properly addressed to the party to whom the same is directed at its address as
follows:

     

    
      	
                

            	
              If to Parent,
      to:             

            

    

     

    Consolidation Services, Inc.

    2756 N. Green Valley Parkway

    Suite 225

    Henderson, NV  89014

    Attention: Johnny R. Thomas

    Fax: (702) 614-5171

    
      
          

      

      
        20

        
          
 

      

      
          

      

    

     

    
      	
                

            	
              With copies
      to:             

            

    

     

    Phillips Nizer LLP

    666 Fifth Avenue

    New York, NY 10103

    Fax: (212) 262-5152

    Attention: Elliot H. Lutzker, Esq.

     

    
      	
                

            	
              If to Spinco,
      to:             

            

    

     

    Colt Resources, Inc.

    2756 N. Green Valley Parkway

    Suite 225

    Henderson, NV  89014

    Attention: John C. Francis

    Fax: (702) 614-5171

     

    
      	
                

            	
              With copies
      to:   

            

    

             

    Phillips Nizer LLP

    666 Fifth Avenue

    New York, NY 10103

    Fax: (212) 262-5152

    Attention: Elliot H. Lutzker, Esq.

     

    Either Party may, by written notice delivered
to the other Party in accordance with this Section 9.2, change the address to
which delivery of any notice shall thereafter be made.

     

    9.3 AMENDMENT AND WAIVER.  This Agreement may not be altered or amended, nor may
any rights hereunder be waived, except by an instrument in writing executed by
the Party or Parties to be charged with such amendment or waiver.  No
waiver of any term, provision or condition of or failure to exercise or delay in
exercising any rights or remedies under this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.

     

    9.4 ENTIRE
AGREEMENT.  This Agreement constitutes the entire understanding of
the Parties hereto with respect to the subject matter hereof, superseding all
negotiations, prior discussions and prior agreements and understandings relating
to such subject matter.

     

    9.5 CONSOLIDATION, MERGER, ETC.; PARTIES IN
INTEREST.

     

    (a)           Neither
Party (referred to in this Section 9.5(a) as a “Transferring Party”) shall consolidate with or merge into
any other entity or convey, transfer or lease all or any substantial portion of
its properties and assets to any entity, unless, in each case, the other party
to such transaction expressly assumes, by a written agreement, executed and
delivered to the other Party hereto, in form reasonably satisfactory to such
other Party, all of the Liabilities of the Transferring Party under this
Agreement and the due and punctual performance or observance of every agreement,
obligation and covenant of this Agreement on the part of the Transferring Party
to be performed or observed.

     

    
      
          

      

      
        21

        
          
 

      

      
          

      

    

    (b)           Neither
of the Parties hereto may assign its rights or delegate any of its duties under
this Agreement without the prior written consent of each other Party. This
Agreement shall be binding upon, and shall inure to the benefit of, the Parties
hereto and their respective successors and permitted assigns. Nothing contained
in this Agreement, express or implied, is intended to confer any benefits,
rights or remedies upon any Person other than members of the Parent Group and
Spinco and the Parent Indemnitees and Spinco Indemnitees under Article VI
hereof.

     

    9.6 TERMINATION.  This Agreement may be terminated and
the Distribution may be amended, modified or abandoned at any time prior to the
Distribution and the Separation be abandoned or rescinded by and in the sole
discretion of Parent without the approval of Spinco or the shareholders of
Parent.  In the event of such termination, neither Party shall have
any liability of any kind arising from such termination to the other Party or
any other Person. After the Distribution, this Agreement may not be terminated
except by an agreement in writing signed by the Parties;
provided,  however, that Articles VI and VIII shall not be terminated
or amended after the Distribution in respect of any Parent Indemnitee or Spinco
Indemnitee without the consent of such Person.

     

    9.7 FURTHER
ASSURANCES AND CONSENTS.   In addition to the actions
specifically provided for elsewhere in this Agreement, each of the Parties
hereto will use commercially reasonable efforts to (a) execute and deliver
such further instruments and documents and take such other actions as any other
Party may reasonably request in order to effectuate the purposes of this
Agreement and to carry out the terms hereof and (b) take, or cause to be
taken, all actions, and do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable laws, regulations and agreements
or otherwise to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using commercially reasonable
efforts to obtain any consents and approvals, make any filings and applications
and remove any liens, claims, equity or other encumbrance on an Asset of the
other Party necessary or desirable in order to consummate the transactions
contemplated by this Agreement;  provided  that no Party
hereto shall be obligated to pay any consideration therefor (except for filing
fees and other similar charges) to any third party from whom such consents,
approvals and amendments are requested or to take any action or omit to take any
action if the taking of or the omission to take such action would be
unreasonably burdensome to the Party or its Group or the business
thereof.

     

    9.8 SEVERABILITY.   In the event that any one or more
of the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby, and the Parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

     

    9.9 GOVERNING LAW; JURISDICTION.  This Agreement shall be
construed in accordance with, and governed by, the laws of the State of Nevada,
without regard to the conflicts of law rules of such state. Each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of the
courts of the State of Nevada or any federal court with subject matter
jurisdiction located therein (and any appeals court therefrom) in the event any
dispute arises out of this Agreement or any transaction contemplated hereby,
(b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and
(c) agrees that it will not bring any action relating to this Agreement or
any transaction contemplated hereby in any court other than such
courts.

     

    
      
          

      

      
        22

        
          
 

      

      
          

      

    

    9.10 COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, including by facsimile or electronic transmission, each of which
shall be deemed an original instrument, but all of which together shall
constitute one and the same Agreement.

     

    9.11 THIRD PARTY BENEFICIARIES.  Except as provided in Article VI, this Agreement is
solely for the benefit of the Parties and should not be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, cause of action or
other right in excess of those existing without reference to this
Agreement.

     

    9.12 SPECIFIC PERFORMANCE.   The Parties agree that irreparable damage would occur
in the event that the provisions of this Agreement were not performed in
accordance with their specific terms. Accordingly, it is hereby agreed that the
Parties shall be entitled to provisional or temporary injunctive relief in
accordance therewith in any court of the United States, this being in addition
to any other remedy or relief to which they may be entitled.

     

    9.13 LIMITATIONS OF LIABILITY.  Notwithstanding anything in
this Agreement to the contrary, no Indemnifying Party shall be liable to an
Indemnified Party for any special, indirect, incidental, punitive,
consequential, exemplary, statutorily-enhanced or similar damages in excess of
compensatory damages (provided that any such liability with respect to a third
party claim shall be considered direct damages) arising in connection with the
transactions contemplated by this Agreement.

     

    9.14 CONSTRUCTION.  The Parties have participated jointly in
the negotiation and drafting of this Agreement. This Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation against a party drafting or causing any instrument to be
drafted.

     

    9.15 DISPUTES.  The Parties shall use good faith efforts
to resolve any disputes arising out of this Agreement within fifteen (15) days
of receipt of a Party’s written notice of a dispute.  In the event that
such Parties are unable to resolve a dispute within thirty (30) business days
(or such longer period as the Parties may mutually determine), they shall submit
the matter to binding arbitration according to the rules of the American
Arbitration Association for commercial disputes. The arbitration shall be
conducted by one arbitrator, expert in matters relating to commercial law,
mutually selected by the Parties.  If the Parties fail to mutually
agree upon one arbitrator within ten (10) days of submission of the dispute to
arbitration, one will be appointed in accordance with the commercial rules and
practices of the American Arbitration Association.  Any award, order
or judgment pursuant to such arbitration shall be deemed final and binding and
may be enforced in any court of competent jurisdiction. The Parties agree that
the arbitrator shall only have the power and authority to make awards and issue
orders as expressly permitted herein and shall not, in any event, make any award
that provides for punitive damages. The schedule and rules for the arbitration
proceedings shall be as set by the arbitrator and the arbitration proceedings
shall be held in Las Vegas, Nevada.  Each Party shall bear its own
costs of participating in the arbitration proceedings, but shall share the costs
of the arbitrator.

     

    [SIGNATURE PAGE FOLLOWS]

     

    
      
          

      

      
        23

        
          
 

      

      
          

      

    

    IN
WITNESS WHEREOF, the undersigned have caused this Separation and
Distribution Agreement to be executed by their duly authorized officers as of
the date first set forth above.

     

     

     

    
      	  	
              PARENT:

              CONSOLIDATION SERVICES, INC.

               

              By:        /s/ Johnny R.
      Thomas

              Name:   Johnny R.
      Thomas

              Title:     Chief Executive
      Officer

            
	  	  
	  	
              SPINCO:

              COLT RESOURCES, INC.

               

              By:           /s/ John C.
      Francis

              Name:      John C.
      Francis

              Title:        Vice
      President

            

    

     

     

     

     

     

     

    
      
          

      

      
        24ex10-23.htm

    
      

      

    

    EXHIBIT
10.23

    
       

       

      LOAN
AGREEMENT

      June 10,
2009

      

      Richard N. Jeffs (the
“Lender”) of 4 Montpelier Street, Suite 521, London, SW71EE, advanced US$7,500 (the “Principal Sum”)
to Red Metal Resources Ltd. (the “Borrower”) of 195 Park Avenue, Thunder Bay,
Ontario, P7B 1B9.  The Lender advanced the funds on June 10,
2009

       

      The
Borrower agrees to repay the Principal Sum on demand, together with interest
calculated and compounded monthly at the rate of 8% per year (the “Interest”)
from June 10, 2009..  The Borrower is liable for repayment for the
Principal Sum and accrued Interest and any costs that the Lender incurs in
trying to collect the Principal Sum and the Interest.

       

      The
Borrower will evidence the debt and its repayment of the Principal Sum and the
Interest with a promissory note in the attached form.

       

      
        
          	
                  LENDER

                  Richard N.
      Jeffs

                	 	 	
                  BORROWER

                  Red Metal Resources
      Ltd.

                	 
	 	 	 	 	 
	Per:	 	 	Per:	 
	 	 	 	 	 
	
                  /s/
      Richard N.
      Jeffs  

                	 	 	
                  /s/
      Caitlin
      Jeffs

                	 
	
                  Richard
      N. Jeffs 

                	 	 	
                  Authorized
      Signatory

                	 

        

      

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      

      PROMISSORY
NOTE

       

      
        	Principal
      Amount:  US$7,500	June 10,
    2009

      

       

       

      For value received Red
Metal Resources Ltd., (the “Borrower”) promises to pay on demand to the order of
Richard N. Jeffs (the “Lender”) the sum
of $7,500 lawful money of United States of America (the “Principal Sum”)
together with interest on the Principal Sum from June 10, 2009 (“Effective
Date”) both before and after maturity, default and judgment at the Interest Rate
as defined below.

      

      For the
purposes of this promissory note, Interest Rate means 8 per cent per
year.  Interest at the Interest Rate must be calculated and compounded
monthly not in advance from and including the Effective Date (for an effective
rate of 8.3% per annum calculated monthly), and is payable together with the
Principal Sum when the Principal Sum is repaid.

      

      The
Borrower may repay the Principal Sum and the Interest in whole or in part at any
time.

      

      The
Borrower waives presentment, protest, notice of protest and notice of dishonour
of this promissory note.

      

      
        
          	 	 	 	
                  BORROWER

                  Red
      Metal Resources Ltd.

                	 
	 	 	 	 	 
	 	 	 	Per:	 
	 	 	 	 	 
	
                   

                	 	 	
                  “Caitlin
      Jeffs”

                	 
	
                   

                	 	 	
                  Authorized
      signatory

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}]]