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Injunctive relief is moot. Once again, Frontera has elected to seek relief from this Court without disclosing relevant facts occurring in the Cayman Islands. Frontera Resources Caucus Corporation (“FRCC”), the direct holding company of the Frontera operating companies and the object of the stock pledged to OMF, is now controlled by David Griffin and Andrew Morrison, independent professional fiduciaries with FTI Consulting (“FTI”), who have been appointed as joint voluntary liquidators (the “JVLs”) of FRCC by and through the Collateral Agent and pursuant to applicable Cayman Islands law. Throughout the Motion, Frontera references a “scheme” by the Defendants to take over Frontera. OMF is rightly and legally seeking to collect on its unpaid Note. There is no “scheme.” OMF is, however, undertaking its legal remedies authorized in the Loan Documents that were negotiated over the course of months in 2016 by sophisticated, ably-represented parties in connection with the replacement of Outrider’s notes and resolution of the first wave of baseless litigation by Frontera against Outrider. Litigation which has since been dismissed and the claims released. Under the Collateral Agency Agreement, which was principally drafted by Frontera and its counsel, OMF was granted a first-priority security interest by borrower FIC in 100% of the stock of FRCC. The agreement authorizes OMF to direct the Collateral Agent, mutually selected by the parties, to release and execute certain FRCC board resignations and take other appropriate actions authorized under Cayman Islands law. Upon irrefutable payment default, and after successfully defending against Frontera’s meritless allegations (substantively identical to those asserted in this proceeding) in the Cayman Action, OMF finally initiated a formal collection process through the Collateral Agent. The Collateral Agent, by and through FTI, has initiated a voluntary liquidation process for FRCC. The JVLs’ powers, responsibilities, and procedures are governed entirely under Cayman Islands law, specifically the Companies Law (2018 revision) (“Companies Law”) and the Companies Winding Up Rules, 2018. The JVLs have fiduciary duties and, as required under Cayman Islands law, must act impartially and independently. Accordingly, the voluntary liquidation of FRCC is now within the control and governance of the JVLs and applicable Cayman Islands law. Plaintiff FIC, as well as FRC’s directors Steve Nicandros and Zaza Mamulaishvili
PRELIMINARY STATEMENT1 Plaintiffs Frontera Resources Corporation (“FRC”) and Frontera International Corporation (“FIC”) (collectively, “Plaintiffs” or “Frontera”) seek a preliminary injunction to enjoin and restrain defendants Stephen Hope (“Hope”), Outrider Management, LLC and Outrider Onshore, LP (collectively, “Defendants”) from “directly or indirectly” causing Outrider Master Fund, L.P. (“OMF”), a Cayman Islands entity that is not a party to this action, from exercising OMF’s rights as a secured creditor in possession of a promissory note for which FIC is indisputably in payment default and in arrears for over $30 million. Distilled to its essence, Frontera’s Motion for a Preliminary Injunction (the “Motion”) indirectly seeks injunctive relief against non-party OMF because Stephen Hope, in his then-capacity as director of parent company FRC, refused to approve transactions—the details and merits of which were serially undisclosed to the non-insider FRC Board members and remain undisclosed to this Court—that were premised on violating OMF’s first-priority lien position and/or transferring assets beyond the reach OMF in material breach of the Loan Agreement. Principally, Plaintiffs’ Motion for a Preliminary Injunction (the “Motion”) should be denied on the same bases for which the Court denied Plaintiffs’ TRO request. This case represents “an effort by a creditor to enforce its rights under outstanding notes[,]” and “Plaintiffs have not alleged any facts to suggest that the debt is invalid or that Defendants are exercising any powers not granted to them as creditors.” (Dkt. 32, 4:9-12.) As Judge Kawaley, the Judge presiding over the immediately preceding lawsuit filed by Plaintiffs in the Grand Court of the Cayman Islands (the “Cayman Action”), held, “Plaintiffs’ allegations here not only fail to establish that it is likely to succeed on the merits, but also fail even to raise a serious question going to the merits.” (Dkt. 32, 4:18-20.) The Motion should be denied for three principal, independent reasons. 1 Capitalized terms not defined herein shall have the meaning ascribed to such terms in the Defendants’ Memorandum of Points and Authorities in Opposition to Plaintiffs’ Motion for Temporary Restraining Order and supporting Declarations of Stephen Hope and John Cornwell
third parties, and are in the process of securing a debt offering of $150 million to 2 ensure the stability and future of the Plaintiffs. These opportunities will evaporate 3 if Defendants succeed in liquidating and selling off Plaintiffs' assets before this 4 Court can adjudicate the case on its merits. 5 45. Defendants clearly intend to liquidate, dismantle, and fundamentally 6 reshape Plaintiffs' companies, disrupting its relationships with the countries of 7 Georgia, Moldova and the Ukraine, and impacting Plaintiffs' contribution of 8 natural resources to the worldwide supply. Defendants' efforts to protect their own 9 investment at any cost will have lasting consequences for many innocent third 10 parties employed by Plaintiffs' various companies, impacting Plaintiffs' many 11 vendors, agents, field workers, rig operators, administrative workers and on the 12 people of those emerging and developing countries as a whole. The country of 13 Georgia has a population of only 4 million people. Plaintiffs' operation in that 14 country for 23 years has helped bring it into the 21st-century. If Mr. Hope is 15 successful in liquidating Plaintiffs or selling it off in the result will have lasting 16 impacts on those countries, their infrastructure and their people, as the oil and gas 17 production Frontera currently provides the Republic of Georgia is an economic 18 boon to the economy-while also supplying a much-needed resource and reducing 19 worldwide reliance on less stable nations for oil and gas supplies.
refused, asserting that Plaintiffs "fully stand by and re-affirm their claims as made 2 in the" Cayman Islands Action, and that Plaintiffs reserved their right to re-file 3 such claims and any related claims. The Cayman Defendants quickly capitulated, 4 consenting to Plaintiffs' discontinuance being without prejudice. 5 40. On April 15, 2019, the Court in the Cayman Islands Action executed 6 the "Consent Order," which was drafted jointly by, and signed by, counsel for both 7 Plaintiffs and the Cayman Defendants, and which confirmed that the action was 8 discontinued without prejudice. 9 41. Plaintiffs negotiated to voluntarily dismiss the Cayman Islands Action 10 without prejudice because voluntary dismissal was preferable to continuing with 11 the complex and costly requirements of the Cayman court system. In particular, 12 Plaintiffs were being forced to participate in a special session of the Court of 13 Appeal on May 17, 2019 in London, England despite their request for an extension 14 due to scheduling conflicts. Based on their experience litigating over several 15 months in the Caymans, Plaintiffs also believed that it was more practical and cost-16 effective to litigate in the United States where all of the witnesses and documents 1 7 are located. 18 42. There was never an "unfavorable ruling" in the Cayman Islands 19 Action that influenced Plaintiffs' decision to voluntarily dismiss the Cayman 20 Action without prejudice. 21 43. In the several weeks that this action has been pending before the 22 Court, Defendants have instructed their agents to take the following steps: firing 23 the FRCC Board, replacing that Board with a new board of designees controlled by 24 Mr. Hope, commencing "voluntary" liquidation, and tendering Mr. Hope's 25 resignation so that he can pursue his own interests unburdened by any inconvenient 26 fiduciary duties in the future. 27 44. While Mr. Hope has been taking these steps, the existing management 28 team has been diligently pursuing opportunities to secure new investment from
the operations of its subsidiaries. Specifically, section 7.2 of the Replacement Note 2 Agreement provides, in pertinent part: 3 4 5 6 7 8 9 10 11 (a) The Company shall not, and shall not permit any Company Subsidiary to, Incur, directly or indirectly, any Indebtedness; provided however, that the Company and its Company Subsidiaries shall be entitled to Incur Indebtedness if, on the date of such Incurrence and after giving effect thereto on a pro forma basis, the Consolidated Coverage Ratio exceeds 2.0 to 1.0. (b) In addition to the foregoing paragraph (a), so long as no Default has occurred and is continuing, the Company and its Company Subsidiaries shall be entitled to Incur any or all Permitted Indebtedness or Permitted Noteholder Indebtedness. A true and correct copy of the Replacement Note Agreement is attached hereto as 12 Exhibit "C." 13 3 7. Permitted Indebtedness is defined, pertinent part, in Schedule 1 of the 14 Replacement Note Agreement as: 15 16 17 18 19 (1) Indebtedness of up to $200 million Incurred pursuant to a Credit Facility, with interest not to exceed LIBOR plus 1500 basis points, provided that any such indebtedness may only be incurred with the unanimous written consent of the members of the board of directors of FRC, and further provided that, absent such unanimous consent of the board of directors of FRC, any transaction incurring such indebtedness shall be void .... 20 (See Exh. C, Schedule 1 ). 21 38. Plaintiffs previously pursued an action in the Cayman Islands (the 22 "Cayman Islands Action") against Mr. Hope and Outrider Master Fund, L.P., the 23 Cayman Islands entity that he controls, (collectively, the "Cayman Defendants"). 24 39. On Friday, April 12, 2019, Plaintiffs' Cayman Islands counsel 25 informed counsel for the Cayman Defendants that Plaintiffs intended to voluntarily 26 "discontinue" (the Cayman Islands equivalent of dismissing without prejudice) the 27 Cayman Islands Action. Counsel for the Cayman Defendants attempted to get 28 Plaintiffs to agree to dismiss the Cayman Islands Action with prejudice. Plaintiffs
declined to disclose its confidential, proprietary and trade secret information to 2 Lothian. 3 34. In July 2016, it became apparent that FRH would be unable to pay off 4 the New Notes when they matured on August 1, 2016. Consequently, in July 2016 5 FRH filed a petition in bankruptcy under chapter 7 of the United States Bankruptcy 6 Code (11 U.S.C. §§ 101 et seq.) in the United States Bankruptcy Court for the 7 Southern District of Texas, Galveston Division, Case No. 16-80220. FRC then 8 commenced an adversary proceeding (Adversary No. 16-08008) against Mr. Hope, 9 OML, OMF, and others alleging tortious interference with contract, 1 O misappropriation of trade secrets, and fraud, arising out of the inducement of FRC 11 to supply confidential, proprietary and trade secret information to MND. 12 35. The parties agreed to mediate the case and reached a settlement. The 13 salient points of the settlement, relevant to this action, were: 14 • FRC agreed that one of its subsidiaries, Frontera International Corporation 15 ("FIC"), would issue $22,910,094 in notes to OMF to replace the New 16 Notes issued by FRH (the "Replacement Notes"). The amount of the 17 Replacement Notes reflected the amounts owed to OMF as of August 1, 18 2016. 19 • FRC agreed that repayment of the Replacement Notes would be secured by 20 the stock of FRCC. 21 • FRC agreed that as long as the Replacement Notes remained outstanding, 22 OML could nominate an independent director to the Board of Directors of 23 FRC. 24 A true and correct copy of the Mediation Settlement Agreement is attached hereto 25 as Exhibit "B." 26 36. The Replacement Note Agreement negotiated subsequent to the 27 Mediation Settlement Agreement restricted the ability of FIC to incur debt to fund
Notes. OML refused to consider repeated proposals by FRC to repurchase or 2 restructure the debt on terms that were exceptionally lucrative to OML. 3 31. In June 2016, OML introduced yet another entity to FRC, Lothian 4 Partners ("Lothian"), which OML represented was interested in investing in FRC. 5 Consistent with its prior conduct in concert with MND, OML demanded that FRC 6 provide Lothian access to its confidential information in order to evaluate a 7 potential investment by Lothian in FRC. At that time, FRC, through its financial 8 advisors at Rothschild & Co., was already engaged in good faith efforts to 9 reacquire or restructure its debt. Notwithstanding FRC's past experience with 10 OML, Rothschild & Co. responded to Lothian's overture in good faith. 11 32. During an introductory conversation between Lothian and Rothschild 12 & Co., Rothschild & Co. requested basic information regarding Lothian's identity, 13 the sources of the funds it proposed to invest, the nature of its proposed 14 investment, its past experience in similar investments, and related basic 15 information that any oil and gas exploration company would reasonably request 16 prior to considering disclosures of confidential information to a third party. This 17 information was especially crucial, in light of FRC's past experience with OML, 18 and its fraudulent attempt to present MND as a "Trojan horse" investor to obtain 19 FRC' s trade secrets and confidential information in aid of a hostile takeover bid. 20 33. Despite numerous requests over a period of weeks, Lothian 21 inexplicably refused to provide this basic information. Instead, OML and Lothian 22 jointly engaged in a campaign to pressure FRC through a series of increasingly 23 hostile telephone calls and emails that implied that FRC had fiduciary or other 24 legal duties to open its books and records to an unknown third party with 25 undisclosed intentions towards it. Finally, in mid-July 2016, following repeated 26 refusals by Lothian to reveal the nature of its intended investments, the identity of 27 its principals, the sources of its funds, and other such basic information, FRC
27. OML actively participated in inducing FRC to enter into the 2 confidentiality agreement and share its confidential information and trade secrets 3 on the basis of misrepresentations regarding MND' s intentions, and pushed FRC to 4 provide ever greater amounts of information to MND pursuant to the terms of that 5 agreement. OML took these steps despite knowing that MND was using that 6 information for purposes that were wholly inconsistent with the farm-in agreement 7 that OML and MND had proposed as a basis for soliciting the confidentiality 8 agreement with FRC, and that were in fact inimical to the best interests of FRC and 9 its shareholders. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 28. Unaware that its plans had been revealed to FRC, MND, with OMLs support, continued its misrepresentations regarding its intentions and attempted to garner additional confidential and trade secret information from FRC. 29. For its part, FRC initiated an effort to obtain financing for a true farm-in investment from another entity and, in April 2014, FRC announced a deal with V arange Exploration, Ltd., at which time MND and OML abandoned their efforts. OML and MND's actions nevertheless caused FRC extensive actual damages, by interfering with a then-ongoing process to identify farm-in partners to help finance its development of its mineral interests in the Republic of Georgia, and by causing the failure of advanced, confidential negotiations towards such an investment with a third party. 30. During the period between mid-2015 and June 2016, in light ofwell-known adverse conditions in the oil and gas industry, FRC repeatedly sought to engage OML in negotiations to repurchase its debt on terms that, while reflecting a discount to the face value of the New Notes, would have provided OML with substantial returns on its initial $4 million investment. OML rejected every such overture, despite its knowledge that the New Notes might not be capable of repayment in light of market conditions and the unsecured nature of the New
requested information and seeking information and insights into FRC' s negotiation 2 posture. 3 23. In late February 2014, having received no specific proposals from 4 MND, FRC proposed that MND enter into a farm-in agreement whereby MND 5 would provide approximately $31 million in funding for a multi-well drilling 6 project in exchange for a share of working interest in the Taribani Field. 7 24. MND's CEO, Mr. Cociancig, responded the following day that MND 8 would begin the board recommendation and approval process in connection with 9 that transaction. However, unbeknownst to FRC, MND had no intention of 10 entering into a farm-in agreement. 11 25. On February 27, 2014, FRC learned, through an email that MND 12 inadvertently sent to FRC's financial advisors at Rothschild & Co., that MND's 13 board of directors had approved a resolution to acquire FRC itself with the support 14 of VTB Bank, a Russia-based banking group. Mr. Hope was a recipient of that 15 email. In short, MND had misrepresented its intentions in order to induce FRC to 16 enter into the confidentiality agreement, and then used FRC 's confidential 17 information and trade secrets to evaluate and pursue a hostile takeover of the 18 company. 19 26. It was immediately clear that MND had pursued this course of 20 conduct with OML' s full knowledge, consent, encouragement, and participation. 21 OML brought MND to the table as a potential deal partner for FRC, took an active 22 and continual interest in the negotiation process, sought information from FRC 23 with respect to its intentions and negotiation positions, and repeatedly sought to 24 manufacture an impression of urgency with respect to completing that process. 25 OML's complicity was revealed by the fact that OML's principal, Mr. Hope, was 26 included in the otherwise internal MND email that revealed MND' s board approval 27 of a plan to pursue a hostile takeover ofFRC.
19. Following receipt of MND's bona fides, including information about 2 the company, its sources of capital, and further information regarding the nature of 3 its proposed farm-in, FRC agreed to enter into a November 7, 2013 Confidentiality 4 Agreement with MND permitting it to perform due diligence in connection with 5 the proposal. Under the terms of the Confidentiality Agreement, MND agreed that 6 it would use FRC' s confidential information only in connection with its evaluation 7 of the potential farm-in transaction described in the agreement, and that it would 8 not disclose FRC' s confidential information to any person other than its own or an 9 affiliate' s officers and directors, or its professional advisors, with a clear need to 10 access the information in connection with evaluating the proposed transaction. 11 20. In reliance on MND's confidentiality agreements, during the months 12 that followed between November 2013 and February 2014, FRC made extensive 13 disclosures to MND which included much of its most sensitive and protected 14 confidential and trade secret information. This information included, without 15 limitation, commercial, drilling, completion, and production logs for numerous 16 wells; technical, geological, and geophysical information related to its mineral 17 reserves derived at great expense through seismic and drilling core analyses; well 18 bore studies; field studies analyzing production results, and characteristics of its 19 wells; authorizations for expenditures related to drilling, recompletion, and other 20 projects; reservoir descriptions; historical production data; project economics and 21 assumptions; schematics of gathering capabilities; economic modeling data for 22 future projects, and myriad other data developed by FRC. 23 21. Throughout this period, FRC continually pressed MND to provide it 24 with a specific proposal. MND delayed providing any such specifics, but 25 nevertheless made ever more detailed and extensive demands for information. 26 22. Despite the fact that OML was neither a signatory to the 27 Confidentiality Agreement, nor a direct participant in negotiations with MND, it 28 continually sought to insert itself into that process by pressing FRC to provide the
and his agents informed FRC that those notes were acquired at a steeply discounted 2 price of approximately $4 million. 3 14. Since then, OML and its founder, Mr. Hope, have aggressively sought 4 to leverage that discounted acquisition of debt into a controlling position over 5 FRC, and the Frontera entities, and the valuable oil and gas rights throughout their 6 operations, to the detriment of FRC' s shareholders and other creditors of FRC and 7 the Frontera entities. 8 15. After acquiring the New Notes, Mr. Hope engaged in regular contact 9 with FRC and its officers and directors, including FRC' s then vice president for 1 O investor relations/business development, Liz Williamson, and me. During mid-11 2013, Mr. Hope introduced to FRC parties presented as potential investors or deal 12 partners. On one such occasion, in October 2013, Mr. Hope sent me an emailed 13 introduction of Bernhard Cociancig, the CEO of a Czeck oil and gas exploration 14 and production company known as MND. Mr. Hope represented that the purpose 15 of the introduction was to facilitate MND's exploration of a potential farm-in 16 investment opportunity through which MND hoped to purchase an interest in 17 mineral rights related to the Taribani Field Complex of Block 12 in the Kakheti 18 region of Georgia. 19 16. Mr. Hope further sought to insert himself and OML at the center of 20 the negotiation process for that transaction, stating that, as the principal of a 21 significant creditor, he believed he could add value to the negotiation process. 22 17. Despite having no direct apparent interest in these negotiations, nor an 23 expertise in the oil and gas business, Mr. Hope thereafter engaged in a series of 24 communications with FRC regarding MND's proposal, simultaneously attempting 25 to direct the timing and content of FRC' s responses to MND and manufacturing an 26 artificial atmosphere of urgency surrounding those negotiations. 27 18. On or about November 1, 2013, FRC met with several MND 28 representatives in Vienna, Austria. -4
evidence that Defendants are far from the disinterested lenders they have portrayed 2 themselves to be. 3 9. FRC and its subsidiaries ( collectively "Frontera"), comprise an 4 independent international oil and gas exploration and production company whose 5 strategy is to identify and operate in emerging markets in Eastern Europe around 6 the Black Sea, and is based in Houston, Texas. 7 10. On June 28, 2011, FRC announced an offer to holders of two series of 8 existing notes issued by an FRC subsidiary, FRH, due in 2012 and 2013, proposing 9 to restructure those debt obligations pursuant to the terms of an accompanying 10 Note Purchase Agreement (the "Agreement") and for other consideration set forth 11 in that Agreement. Specifically, the offer was made to the holders of 10% 12 Convertible Notes due in 2012, and holders of 10% Convertible Notes due in 2013 13 ( collectively, the "Old Notes"). 14 11. Under the terms of the offer, holders of the Old Notes would receive 15 at their option: (1) ordinary shares ofFRC's common stock; (2) newly issued, 10% 16 convertible notes with principal amounts of $1,000, maturing on August 1, 2016 17 (the "New Notes"), which were to be unsecured and payable by FRH; or (3) a 18 combination of PRC shares and the New Notes. 19 12. The Agreement stipulated that the New Notes would constitute a 20 senior, unsecured obligation of FRH, which would be solely responsible for 21 payment of principal and interest at an annual rate of 10%, unless either the 22 Noteholders elected to convert them to FRC shares, or the New Notes were 23 redeemed or repurchased at an earlier date. 24 13. Some of the New Notes were purchased by Defendant Outrider 25 Management, LLC ("OML"), through its subsidiary, OMF, from an original 26 subscriber to the New Notes. Specifically, between late 2011 and early 2012, OML 27 acquired New Notes with a face value of approximately $14.7 million. Mr. Hope 28 -3
1. My name is Steve C. Nicandros. I am over the age of eighteen (18) 2 and competent to give this Second Declaration. I am Chairman of the Board of 3 Directors of Plaintiff Frontera Resources Corporation, and I have personal 4 knowledge of all matters set forth herein. This Second Declaration is given for use 5 in connection with Plaintiffs' Motion for Preliminary Injunction, and for all other 6 purposes permitted by law. 7 2. In 2011 and 2012 Defendant Outrider Management, LLC ("OML"), 8 through Outrider Master Fund, L.P. ("OMF"), acquired notes with a face value of 9 approximately $14.7 million for only $4 million. 10 3. During 2013 and 2014 OML and Mr. Hope pressured FRC to pursue 11 investment in FRC by a Czeck company that, in cooperation with OML,. sought a 12 hostile takeover of FRC rather than an investment stake. OML tried a similar 13 takeover effort with a different entity in 2016. 14 4. OML and Mr. Hope's interference with FRC's efforts to obtain 15 investment funding forced FRH to file a chapter 7 bankruptcy case in July 2016. 16 5. FRC filed an adversary complaint against Mr. Hope, OML, OMF, and 17 others in connection with FRH' s bankruptcy case seeking damages for tortious 18 interference with contract, misappropriation of trade secrets, and fraud. 19 6. FRC mediated a settlement of the adversary proceeding that provided 20 Mr. Hope and OML the ability to appoint an "independent" director ofFRC. 21 7. Mr. Hope appointed himself as the "independent" director, and 22 represented to me and others at FRC that he would serve in an independent 23 manner. Nonetheless, he has unabashedly been acting in the interests OML only in 24 order to choke off funding for FRC and its subsidiaries, appoint himself as Chief 25 Restructuring Office, and force a liquidation of all assets. 26 8. Attached hereto as Exhibit "A" are Board minutes and emails from 27 April 23-25, 2018 that are representative of Mr. Hope's conduct, and provide
Hi Zen....There are more emails from Zaza back to hope in April. I think these were previously disclosed on here when the Cayman action began so didn’t want to clog the board up with old news. I can copy again if needed. There is also a Steve N affidavit which is pretty similar to the main court document from what I can see but again can copy if it’s of additional interest
I know hindsight is a wonderful thing but I would have bitten his hand off unless they were worried that with the increased share holding he could have taken over the company
Hope seems to be offering to convert 50% of his loan notes into stock with the option to buy back his stock at a premium. Presumably beneficial for company/shareholders to do this if the share price rocketed.
He was offering to waive 8% step up on notes.....I’m assuming that’s the increasing value.
This is on the basis that the company also raise 5 million through new share subscriptions ( I think)
Anyone else care to comment. Is there any procedural reason why they didn’t accept this offer?
m: Giorgi Kalandarishvili
Steve Nicandros responded that, at this moment, before we demonstrate commerciality and profitability, very low -because testing program has not been completed and the value has not been finally established, also because of pending lawsuits. Steve Hope then asked why Zaza Mamulaishvili's proposal is for the debt to come at a senior level? Steve Nicandros responded that, in this situation, any lender will need to have a confidence to be paid back, which is natural, and seniority is crucial for any new money to come in. Zaza Mamulaishvili responded that this new money will allow completion of the ongoing program and, if successful, will result in the Company being able to raise more money on a corporate level via new equity or debt, but on much better terms that are available now. Steve Hope stated that he would consider a loan from CEO of no more than $1 million at a subsidiary level, but any other money should come in at a parent level subject to board's unanimous approval and Outrider's approval. The Company also should continue to see if any other third party funding is available. However, allowing seniority over Outrider's notes is not an option. Zaza Mamulaishvili stated that the Company will continue searching for a third party funding but, as many times discussed previously, under current circumstances it is not possible unless Steve Hope and Outrider allow them. Steve Nicandros stated that everybody should concentrate on not allowing the Company to collapse. Andrew Szescila concurred with Steve Nicandros and stated that we need to do everything not to allow collapse, taking away the license, etc. Need to complete the program and move forward. Steve Hope noted that "I will wait to hear from further you and we will see what we can do." The meeting ended at 11 :45 CST.
As a senior note holder, he cannot allow to be in a position to be put behind senior management debt. "If I am put behind in seniority, I need to control the flow. I provided waivers, I should not be accused of bad things." "I made a proposal and happy to work with you on that proposal. But I am not willing to approve the proposal from Zaza." Zaza Mamuaishvili responded that he believed that, by putting forward his proposal, he was making a good thing for the Company and its shareholders, because "we do need to complete the ongoing operations." "However, if your [ ie, Steve Hope's] best proposal is to pay $2 million and then liquidate the Company, then NO! We will not allow you to do that!" Then Mr. Mamulaishvili asked Mr. Hope what would be the amount of funding form a third party that would be acceptable for Mr. Hope to put ahead of the secured creditor (Outrider). Steve Hope responded that to answer this question "he would need to know more details." Steve Hope then stated that "this Company is going bankrupt!" Zaza Mamulaishvili responded "this Company is NOT going bankrupt!" "You blocked JCAM's and other proposals and you want it to go bankrupt!" "I cannot allow you to do this, as I am fiduciary to the Company and its shareholders!" Zaza Mamulaishvili then stated that the Company badly needs new capital to complete the ongoing operations and that "we will do everything to raise money legally and avoid any takeover or bankruptcy!" "Can you (Steve Hope) think and give us answer what would be the funding amount that you would agree to put ahead of Outrider's secured debt?" Steve Hope responded that he could agree to up to $3 million but it should come at a parent level. If there is no other way, "we need to shit it down." Zaza Mamulaishvili: "No shutting down!" "Again, what is the amount that you would be OK with?" Steve Hope" "Perhaps $500,000? But I will have to look into it and think." Zaza Mamulaishvili stated that, although the money may eventually come at parent level, "we first urgently need to complete the ongoing operations and testings." Steve Nicandros also stated that "we need to stay focused on how to complete the ongoing operations." Zaza Mamulaishvili then offered Steve Hope to "think about it and please let us know what would be an acceptable amount of funding to come in below Frontera International Corporation level. Steve Hope asked "how much would the Company be worth at a fire sale?" 2
FRONTERA RESOURCES CORPORATION Minutes of the Meeting and Record of Respective Resolutions of the Board of Directors Held On April 25, 2018 At 10:30 A.M. CST By way of telephonic conference A meeting of the duly constituted Board of Directors (the "Board") of Frontera Resources Corporation (the "Company") was duly called and held on the date and time indicated above, by way of telephonic conference call whereby all participant could hear and speak to each other. The following members of the Board were attending: Mr. Steve C. Nicandros Mr. Zaza Mamulaishvili Mr. Stephen M. Hope Mr. Andrew J. Szescila Mr. Levan Bakhutashvili, Corporate Secretary Apologies were received from Mr. Luis Giusti who was not able to attend the meeting. It was noted that due notice had been given of the matters to be discussed at the meeting and that a quorum was present. Mr. Nicandros acted as Chairman of the meeting and Mr. Bakhutashvili as Secretary. Chairman opened the meeting and turned it over to Zaza Mamulaishvili, the Company's President and CEO. Mr. Mamulaishvili started with an update regarding status of operations at wells T-45 and Ud-2. No change at Ud-2 well which is flowing gas and water, with pressure at 600psi. At T-45, flow is 2 barrels per hour (approx. 50 barrels per day), 70% oil and 30% water, still in the testing as the well is cleaning itself. The Company is getting ready to frac Dino-2 well this week. Directors asked questions about operations and discussions ensued about T-45, Ud-2 and Dino-2 wells. It was noted that both T-45 and Ud-2 wells were at a "clean-up" stage. Steve Nicandros then offered to speak about recent email exchanges between Steve Hope and Zaza Mamulaishvili about the overall situation of the Company. Steve Hope mentioned that his view is that he wants the Company to succ~ed, however he has been the largest note holder of the Company for more than 6 years but never has been paid so far, instead he had been sued albeit he put it behind.