Exhibit 10.7
AGREEMENT
February 26, 1998
THIS AGREEMENT (the "Agreement") is made and entered into and is
effective as of the date first written above, by and among Bill Knollenberg,
Doris Knollenberg, Bradley Knollenberg (collectively, the "Knollenbergs"), and
Jack Chance, George Sutherland, Feroze Variava, Steve McLoughlin, (all of the
above, collectively, the "Parties").
WHEREAS, certain disputes have arisen among the Parties relating to:
(i) Certain debentures (the "Debentures") issued by Erin Oil
Exploration, Inc., Erin Gas Producers, Inc. and Terra Pulse, Inc.
(collectively "ERIN") and claims, if any, which the holders of
said Debentures or their heirs, successors or assigns may have
against National Equities Holdings, Inc. ("NEHI") with respect
thereto;
(ii) The sale by the Knollenbergs of restricted securities, as defined
in Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Act"), issued by NEHI to the Knollenbergs or to
affiliates, entities or third parties in which the Knollenbergs
have a beneficial or controlling interest;
(iii) A certain debt owed by NEHI to Bill Knollenberg (the "Debt");
(iv) A certain debt owed by NEHI to Brad Knollenberg; and
(v) The governance, operations and financial condition of NEHI.
(All of the above, collectively, the "Disputes").
WHEREAS, the Parties desire to provide for a settlement and resolution
of the Disputes; and
WHEREAS, the Parties have determined to enter into this Agreement which
sets forth in writing the terms and conditions of their settlement and
resolution in connection with the Disputes; and
WHEREAS, the Parties understand that matters set forth herein are
subject to compliance with the Act, Rule 144 under the Act, and the applicable
securities laws of various states, including Texas.
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NOW, THEREFORE, in consideration of the mutual convenants,
representations and warrantees, herein, the Parties hereto agree as follows:
1. Sale of Restricted Securities by the Knollenbergs. Upon the
execution of this Agreement and continuing until December 31, 1998, the
number of shares of restricted securities owned or controlled by the
Knollenbergs which might otherwise be available for lawful sale,
transfer, or other disposition for value (the "Sales") shall be limited
as follows:
(a) The Knollenbergs shall be limited in Sales of such restricted
securities to the same number of shares of restricted
securities through Rule 144 transactions which may be legally
available for Sale in the aggregate by Jack Chance, George
Sutherland, Feroze Variava and Steve McLoughlin, in the
aggregate, at any point in time.
(b) Not withstanding Section 1(a) above, the Knollenbergs may
effect Sales of restricted securities in excess of said
limitation as follows:
(i) The Knollenbergs may Sell of up to $20,000,000 in gross
Sales price of restricted securities per thirty day for
their personal purposes; and
(ii) The Knollenbergs may Sell restricted securities in any
amount for the express purpose of conveying the proceeds
thereof to NEHI for its continued operations; and
(iii) The Knollenbergs may Sell restricted securities in any
amount for the express purpose of effecting a buy-back
and cancellation of the ERIN Debentures, it being
acknowledged and reconfirmed by the Parties that
2,913,200 shares of NEHI common stock have been issued
to Bill Knollenberg for this purpose; and
(iv) The Knollenbergs may Sell up to an aggregate of
$30,100.00 in gross sales price of restricted securities
for the express purpose of reimbursing amounts owed to
Brad Knollenberg by NEHI. In such event, NEHI shall
issue additional shares of common stock to the
Knollenbergs to replace the shares so disposed of.
2. Composition of the Board of Directors. The Parties agree that the
NEHI Board of Directors (the "Board") shall consist of three Directors selected
by the Knollenbergs; three Directors selected by Jack Chance, George Sutherland,
Feroze Variava and Steve McLoughlin; and one ex officio advisor, to be selected
by the Parties, who shall have authority to vote if the Board of Director is at
an impasse (all of the above, collectively,
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the "Directors"). The Parties designate Daniel R. Kirshbaum to serve as the
initial ex officio advisor until such time as he resigns or is replaced by the
Board of Directors.
3. Board Meetings. The Board shall meet at least once every thirty days
at which time NEHI management shall make presentations to the Board about NEHI
activities. At such meetings, management shall provide regular reports in
reasonable detail regarding the management, operations, financial condition,
business prospects and activities of NEHI. Management shall also provide similar
reports reflecting the operational status, source and application of funds,
timetables and scheduling regarding the development of the rotary steerable
tool. Management shall respond promptly to any inquiries by any Board member
regarding these matters.
4. Viewing of the Rotary Steerable Tool. Bill Knollenberg is granted
the right to a physical viewing of the rotary steerable tool during normal
business hours at locations where the rotary steerable tool is undergoing
initial development or manufacturing. Such right shall be limited to one viewing
per month, arranged five working days in advance and it shall be accompanied by
an officer of Rotary Steerable Tool (U.S.A.) L.P. Due to the highly confidential
nature of the rotary steerable tool, this right to view may be exercised only by
Bill or Brad Knollenberg and does not include any other person.
5. Corporate Officers.
5.1 The corporate officers of NEHI in place as of the date hereof shall
continue as officers in the capacities in which they presently serve until such
time as they are replaced by the Board. Notwithstanding the above, Bill and Brad
Knollenberg hereby resign, effective immediately, as employees and officers of
NEHI in any capacity. Furthermore, Bill and Brad Knollenberg agree that they
shall have no further participation or involvement in the day-to-day operations
of NEHI from the date of execution of this Agreement other than in their
capacity as directors and shareholders of NEHI.
5.2 Upon the execution of this Agreement, Bill and Brad Knollenberg
shall convey or cause to be conveyed to NEHI the following:
(a) Any and all oil, gas or other mineral properties, wells or leases
and other assets owned by NEHI but held by, or in the name of,
others including, without limitation, ERIN; and
(b) Any and all financial accounting books and records, file
material, business records and other assets of NEHI in their
possession, custody or control.
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6. Relationship Between ERIN and NEHI. The Parties acknowledge as
follows:
(a) ERIN is a completely separate company from NEHI and no connection,
relationship or affiliation exists between ERIN and NEHI;
(b) NEHI is not responsible for paying the ERIN Debentures, which is
and shall continue to be solely the obligation of ERIN; and
(c) All oil and gas properties acquired by NEHI from ERIN, together
with all debt relating to such properties, shall remain assets of
NEHI.
7. Release. In connection with the acknowledgement set forth in
Paragraph 6 above, the Parties further agree as follows:
(a) The Knollenbergs for themselves, their respective agents,
attorneys, representatives, servants, employees, stockholders,
owners, heirs, executors, administrators, affiliates, successors
and assigns, and each of them, do hereby release, acquire, and
forever discharge NEHI and its officers, directors, agents,
attorneys, representatives, servants, employees, stockholders,
owners, heirs, executors, administrators, affiliates, successors
and assigns, and each of them, of and from any and all claims,
demands, and causes of action which the Knollenbergs ever had, now
have, or may have in the future, whether known or unknown, on
account of any matter relating to or arising out of, directly or
indirectly, the ERIN Debentures or any other ERIN debt; and
(b) As additional consideration for the above release, NEHI has issued
2,913,200 shares of NEHI stock to Bill Knollenberg.
8. Bill Knollenberg Advances. The Parties acknowledge that NEHI owes
the Knollenbergs approximately $400,000.00 for previous advances prior to
September 1, 1997, which NEHI agrees to repay upon the execution of this
Agreement, as follows:
(a) NEHI shall issue 400,000 shares of restricted common stock to the
Knollenbergs upon the execution of this Agreement; and
(b) NEHI shall deliver an unsecured promissory note in the amount of
$200,000.00, due in one lump sum on December 31, 1998 (the "Bill
Knollenberg Note").
9. Brad Knollenberg Advances. The Parties acknowledge that NEHI owes
Brad Knollenberg approximately $30,100.00 which NEHI agrees to repay upon
execution of this Agreement by delivering an unsecured promissory note of NEHI
in the amount of $30,100.00 due in one lump sum on September 1, 1998 be issued
to Brad promptly upon the execution
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of this Agreement (the "Brad Knollenberg Note"). It is agreed that if the
Knollenbergs effect a Sale pursuant to Section 1(b)(iv) above and apply the
proceeds thereof to retire the Brad Knollenberg Note in whole or in part. Then
in such event, the balance due and owing on said note shall be reduced
accordingly. In such event, NEHI shall issue additional shares of common stock
to the Knollenbergs to replace the shares so disposed of.
10. Damages Claim. The Parties agree that $400,000 claim against Texas
Capital Securities, Inc., and any recovery therefrom, is an asset of Bill
Knollenberg.
11. Commencement of Drilling Activities. The Parties agree that they
shall cause NEHI to use its best efforts to commence such drilling activities on
its leasehold interests in Scurry County, Texas and Wirt County, West Virginia,
as are necessary to maintain the leases thereon and prevent the expiration of
same. Should NEHI be unable to commence drilling activities within the
specified time, the Knollenbergs shall have a right of first refusal to
personally provide funding for such activity and to acquire some or all of
NEHI's interest in said leases or to enter into a form of joint venture with
NEHI for the development of these leases, as the case may be. NEHI shall provide
the Knollenbergs with notice of any such inability within seven (7) days of the
applicable expiration date.
12. Return of Tangible Assets. Jack Chance, George Sutherland, Feroze
Variava, and Steve McLoughlin shall each promptly return to the Knollenbergs
certain tangible items as the Knollenbergs have provided to each of them,
specifically, certain motor vehicles and cellular phones, upon the execution of
this Agreement.
13. Office Space. ERIN and NEHI shall promptly, upon the execution of
this Agreement, move to opposite sides of the office they currently share, and
NEHI shall promptly seek a separate lease or sublease for non-shared office
space.
14. Further Assurances by Parties. The Parties shall deliver or cause
to be delivered upon the execution of this Agreement, and at such other times
and places as shall be reasonably agreed on, such additional instruments as may
reasonably be requested by any Party for the purpose of carrying out this
Agreement, including specifically the implementation of the terms set forth in
Section 6(c) attached hereto.
15. Effect on Existing Documents. The Parties agree that this
Agreement shall in no way effect, alter, supersede or modify the following
documents:
(a) NEHI and Rotary Steerable Tools (U.S.A.), L.P., dated November 5,
1997;
(b) NEHI and Horse Energy, L.P., dated November 1, 1997; and
(c) NEHI and Erin Oil Exploration, Inc., dated December 18, 1997.
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16. Execution and Counterparts. This agreement may be executed in two
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
18. Entire Agreement. This Agreement constitutes all of the promises,
agreements, conditions, understandings, warranties and representations between
the Parties hereto with respect to the transactions contemplated hereby and
supersedes all prior agreements, arrangements and understandings between the
Parties hereto, whether written or oral with respect to the transactions
contemplated hereby. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the Parties hereto.
19. Severability. If any term or provisions of this Agreement is or
shall become illegal, invalid or unenforceable in any jurisdiction, all other
terms and provisions of this Agreement shall remain legal, valid and enforceable
in such jurisdiction and such illegal, invalid or enforceable provision shall be
legal, valid and enforceable in all other jurisdictions.
20. Successors and Assigns. The terms, conditions, and obligations of
this Agreement shall inure to the benefit of and be binding upon the Parties
hereto and their respective successors and permitted assigns thereof.
IN WITNESS WHEREOF, each of the Parties hereto has duly executed this
Agreement as of the date first above written.
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Bill Knollenberg
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Doris Knollenberg
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Bradley Knollenberg
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Jack Chance
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George Sutherland
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Feroze Variava
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Steve McLoughlin
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