EXCHANGE AGREEMENT
This Exchange Agreement (this "Agreement") is made and entered into as
of May 13, 1998, by and between Frontier Natural Gas Corporation, an Oklahoma
corporation ("Frontier"), and R. Xxxxxxx Xxxxxx, Xxxxx X. Xxxxxx and Xxxxxx
X. Xxxxxx, residents of the State of Texas (collectively, the "Aspect
Employees").
1. INTRODUCTION. The parties acknowledge that Frontier has entered into
that Acquisition Agreement and Plan of Exchange, dated as of January 19, 1998
(the "Acquisition Agreement"), with Aspect Resources LLC, a Colorado limited
liability company ("Aspect"), and Esenjay Petroleum Corporation, a Texas
corporation ("Esenjay"). Under the Acquisition Agreement, Aspect is
contributing certain oil and gas interests and properties to Frontier. The
Aspect Employees have been granted certain overriding royalty interests and
working interests ("ORRI/WIs") in certain of the Aspect Assets (as such term
is defined in the Acquisition Agreement) and desire hereby to contribute such
ORRI/WIs to Frontier in exchange for common stock of Frontier. By their
execution hereof, the Aspect Employees acknowledge that they have been
provided with a copy of the executed Acquisition Agreement and that they had
an opportunity to review such agreement.
2. CONTRIBUTION. As of the date hereof, the Aspect Employees agree
that, in connection with a closing under the Acquisition Agreement and only
in connection with such a closing, they shall transfer, assign and convey
their ORRI/WIs in the Aspect Assets to Frontier in exchange for shares of the
common stock, par value $.01 per share, of Frontier (the "Frontier Common
Stock"), as set forth on Exhibit "A" attached hereto, which shares take into
account a 1 for 6 reverse stock split of the Frontier Common stock prior to a
closing under the Acquisition Agreement. Such transfer, assignment and
conveyance shall be treated as a contribution of the ORRI/WIs to the capital
of Frontier and, along with the contributions contemplated by the Acquisition
Agreement, is intended to qualify as a transfer under Section 351 of the
Internal Revenue Code of 1986, as amended. In connection with such transfers,
the Aspect Employees covenant and agree that they will execute and deliver
all other appropriate agreements, documents or instruments, and take any
other action necessary, to make this Agreement fully and legally effective,
binding and enforceable as between them and Frontier and as against third
parties.
3. REPRESENTATIONS AND WARRANTIES.
(a) FRONTIER. Frontier represents and warrants to the Aspect
Employees that: (i) the Frontier Common Stock, upon issuance to the Aspect
Employees, will be duly and validly issued and fully paid and non-assessable,
free and clear of any preemptive rights; (ii) Frontier has full and corporate
power and authority to enter into this Agreement and to perform it obligations
hereunder and to consummate the transactions contemplated hereby; (iii) this
Agreement constitutes a legal, valid and binding obligation of Frontier,
enforceable against Frontier in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect that affect the
enforcement of creditors' rights generally and
by equitable limitations on the availability of specific remedies; and (iv)
prior to the stock issuances contemplated by this Agreement and the
Acquisition Agreement, the authorized capital stock of Frontier consists of
40,000,000 shares of common stock, par value $.01 per share, of which
9,890,906 shares are issued and outstanding, and 5,000,000 share of preferred
stock, par value $.01 per share, of which 85,061 share are issued and
outstanding.
(b) ASPECT EMPLOYEES. Each of the Aspect Employees represents and
warrants to Frontier with respect to himself, as follows:
(i) Each of the Aspect Employees has full power and authority to
enter into this Agreement and to perform his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement
constitutes a legal, valid and binding obligation of each of the Aspect
Employees, enforceable against the Aspect Employees in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect that affect the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies.
(ii) To the knowledge of each of the Aspect Employees, the
following representations are true, correct and complete as of the date
hereof and will continue to be true contemplated hereby:
(1) the Frontier Common Stock to be issued to the Aspect
Employees hereunder will not be issued in satisfaction of an
indebtedness of Frontier or interest on indebtedness of
Frontier;
(2) Frontier will not assume any liabilities of the Aspect
Employees in connection with the transactions contemplated
hereby;
(3) there is no indebtedness between the Aspect Employees and
Frontier and there will be no indebtedness created by
Frontier in favor of the Aspect Employees as a result of the
transactions contemplated hereby;
(4) the Aspect Employees will receive Frontier Common Stock at
the closing hereunder approximately equal to the net fair
market value of the ORRI/WIs being transferred by the Aspect
Employees to Frontier;
(5) the Aspect Employees will pay their owner expenses, if any,
incurred in connection with the transactions contemplated
hereby;
(6) the Aspect Employees are not under the jurisdiction of a
court in a title 11 or similar case (within the meaning of
Section 368(a)(3)(A) of
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the Code) and the Frontier Common Stock to be received in
the transactions contemplated hereby will not be used to
satisfy any indebtedness of such party;
(7) All of the Frontier Common Stock that the Aspect Employees
will receive as part of the transactions contemplated
hereby will be received in exchange for the property
transferred by the Aspect Employees to Frontier pursuant to
this Agreement, and none of such common stock will
constitute separate consideration for, or be allocable to,
any employment, consulting or other services provided to (or
that will be provided to) Frontier by the Aspect Employees
(or any other person) either in connection with the
transactions contemplated hereby or otherwise;
(8) the Aspect Employees will not retain any rights or
interests in the property transferred to Frontier as part
of the transactions contemplated hereby; and
(9) the Aspect Employees have no plan or intention to sell,
exchange, or otherwise dispose of any of the Frontier Common
Stock to be received by the Aspect Employees pursuant hereto.
4. COVENANTS. The Aspect Employees shall reasonably cooperate in
the preparation and delivery to Frontier and its counsel of tax certificates or
similar documents that may be necessary or appropriate in connection with the
preparation of tax opinions or other items regarding the tax matters
associated with this Agreement and the transactions contemplated by the
Acquisition Agreement. Each of the Aspect Employees covenants and agrees that
he shall use his reasonable best efforts to take all actions, and shall not
fail to take any actions, which are necessary or appropriate to cause the
transfers contemplated hereby and by the Acquisition Agreement to constitute
tax-free exchanges under Section 351 of the Internal Revenue of Code of 1986,
as amended.
5. GOVERNING LAW. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Texas (without
regard to its conflicts of law doctrines).
6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto, and supersedes all prior agreements or
understandings (whether written or oral), with respect to the subject matter
hereof. There are no restrictions, promises, representations, warranties,
covenants or undertakings, other than those expressly set forth or referred
to herein.
7. AMENDMENT. This Agreement may be amended, modified or supplemented
only by the written agreement of the parties hereto.
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8. BINDING EFFECT. This Agreement and the rights and obligations
hereunder shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, successors and
assigns.
9. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
FRONTIER:
Frontier Natural Gas Corporation
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Xxxxx
Title: President
ASPECT EMPLOYEES:
/s/ R. Xxxxxxx Xxxxxx
------------------------------------
R. Xxxxxxx Xxxxxx
/s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx
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Exhibit "A"
Shares of
Aspect Employee Frontier Common Stock
--------------- ---------------------
R. Xxxxxxx Xxxxxx 23,334
Xxxxx X. Xxxxxxx 23,334
Xxxxxx X. Xxxxxx 16,667
