-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HQYnbuUYo+vr8oZgASz8EZUa3imMctS0OhjQbVUCc/7G3XlO/ePTniRpZPBnE+4O 2pOpKSuwlUVMNB+VMYgCyw== 0000950129-02-001517.txt : 20020415 0000950129-02-001517.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950129-02-001517 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20020326 GROUP MEMBERS: ECM ACQUISITION COMPANY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ESENJAY EXPLORATION INC CENTRAL INDEX KEY: 0000901611 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731421000 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-48068 FILM NUMBER: 02587234 BUSINESS ADDRESS: STREET 1: 500 N WATER STREET STREET 2: SUITE 1100 CITY: CORPUS CHRISTI STATE: TX ZIP: 78471 BUSINESS PHONE: 5128837464 MAIL ADDRESS: STREET 1: 500 DALLAS STREET STREET 2: SUITE 2920 CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: FRONTIER NATURAL GAS CORP DATE OF NAME CHANGE: 19931006 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SANTOS AMERICAS & EUROPE CORP CENTRAL INDEX KEY: 0001169371 IRS NUMBER: 760383212 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 10111 RICHMOND AVE STREET 2: SUITE 500 CITY: HOUSTON STATE: TX ZIP: 77042 BUSINESS PHONE: 7139861700 MAIL ADDRESS: STREET 1: 10111 RICHMOND AVE STREET 2: SUITE 500 CITY: HOUSTON STATE: TX ZIP: 77042 SC TO-T 1 h95090tscto-t.txt SANTOS AMERICAS FOR ESENJAY EXPLORATION SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE TO TENDER OFFER STATEMENT under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934 ESENJAY EXPLORATION, INC. (Name of Subject Company (issuer)) ECM ACQUISITION COMPANY SANTOS AMERICAS AND EUROPE CORPORATION (Names of Filing Persons (offerors)) COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) 29642610 (CUSIP Number of Class of Securities) Kathleen A. Hogenson Santos Americas and Europe Corporation 10111 Richmond Ave., Suite 500 Houston, Texas 77042 (713) 986-1700 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) Copy to: James L. Leader Baker Botts L.L.P. One Shell Plaza 910 Louisiana Houston, Texas 77002-4995 (713) 229-1234 CALCULATION OF FILING FEE TRANSACTION VALUATION* AMOUNT OF FILING FEE** ---------------------- ---------------------- $55,783,838 $5,133 - ---------- * For purposes of calculating amount of filing fee only. This amount assumes (i) the purchase of all outstanding shares of common stock, par value $.01 per share, of Esenjay Exploration, Inc. (19,121,568 shares as of March 1, 2002) at a purchase price of $2.84 per share, (ii) the payment of cash in respect of outstanding in-the-money options to purchase shares (2,287,169 shares as of March 1, 2002) at a purchase price of $2.84 per share less the weighted average exercise price of such options of $2.34 per share, and (iii) the payment of cash in respect of outstanding in-the-money warrants to purchase shares (250,000 shares as of March 1, 2002) at a purchase price of $2.84 per share less the weighted average exercise price of such warrants of $1.50 per share. ** The amount of the filing fee equals $92 per $1 million of the value of the transaction. [ ] Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing registration statement number, or the Form or Schedule and the date of its filing. [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [X] third-party tender offer subject to Rule 14d-1. [ ] issuer tender offer subject to Rule 13e-4. [ ] going-private transaction subject to Rule 13e-3. [ ] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] ---------------------------------------------------------------------- ---------------------------------------------------------------------- 2 This Tender Offer Statement on Schedule TO (the "Schedule TO") relates to an offer by ECM Acquisition Company (the "Purchaser," "we" or "us"), a Delaware corporation and a direct wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation ("Santos"), to purchase all outstanding shares of common stock, par value $.01 per share, of Esenjay Exploration, Inc. ("Esenjay") at a purchase price of $2.84 per share, net to the seller in cash, without interest thereon, on the terms and subject to the conditions set forth in the Offer to Purchase dated March 26, 2002 and in the related letter of transmittal (which, together with any amendments or supplements thereto, collectively constitute the "offer") that are annexed to and filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively. This Schedule TO is being filed on behalf of the Purchaser and Santos. Santos has entered into a Stockholders Agreement, dated as of March 17, 2002 (the "Stockholders Agreement") with certain stockholders of Esenjay (the "Tendering Stockholders") in which the Tendering Stockholders have agreed to tender an aggregate of 10,035,392 shares of common stock that they own (the "committed shares") under the offer. In addition, the Tendering Stockholders have agreed to vote the committed shares in favor of consummation of the offer and the follow-on merger should any vote of stockholders be taken in connection therewith. Additional information about the Stockholders Agreement is contained in section 12 ("Purpose of the Offer; The Transaction Agreements; Plans for Esenjay") of the Offer to Purchase. All information set forth in the Offer to Purchase, including all schedules and annexes thereto, filed as Exhibit (a)(1)(A) to this Schedule TO is incorporated by reference in response to all Items of this Schedule TO and is supplemented by the information specifically provided herein. ITEM 10. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not applicable. ITEM 12. MATERIALS TO BE FILED AS EXHIBITS. (a)(1)(A) Offer to Purchase, dated March 26, 2002 (a)(1)(B) Letter of Transmittal (a)(1)(C) Notice of Guaranteed Delivery (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(1)(E) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 (a)(1)(G) Press release issued by Santos Ltd on March 18, 2002 (incorporated herein by reference to the Schedule TO filed March 19, 2002) (a)(1)(H) Summary Advertisement, published March 26, 2002 (b) None (d)(1) Agreement dated March 17, 2002 by and among Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. (d)(2) Stockholders Agreement dated March 17, 2002 by and between the Tendering Stockholders and Santos Americas and Europe Corporation (d)(3) Option Agreement dated March 17, 2002 by and between the stockholders signatory thereto and Santos Americas and Europe Corporation (g) None (h) None
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not applicable. 3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: March 26, 2002 ECM ACQUISITION COMPANY By: /s/ KATHLEEN A. HOGENSON ------------------------ Kathleen A. Hogenson President SANTOS AMERICAS AND EUROPE CORPORATION By: /s/ KATHLEEN A. HOGENSON ------------------------ Kathleen A. Hogenson President 4 INDEX OF EXHIBITS (a)(1)(A) Offer to Purchase, dated March 26, 2002 (a)(1)(B) Letter of Transmittal (a)(1)(C) Notice of Guaranteed Delivery (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(1)(E) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9 (a)(1)(G) Press release issued by Santos Ltd on March 18, 2002 (incorporated herein by reference to the Schedule TO filed March 19, 2002) (a)(1)(H) Summary Advertisement, published March 26, 2002 (b) None (d)(1) Agreement dated March 17, 2002 by and among Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. (d)(2) Stockholders Agreement dated March 17, 2002 by and between the Tendering Stockholders and Santos Americas and Europe Corporation (d)(3) Option Agreement dated March 17, 2002 by and between the stockholders signatory thereto and Santos Americas and Europe Corporation (g) None (h) None
5 EX-99.A1.A 3 h95090tex99-a1_a.txt OFFER TO PURCHASE EXHIBIT (a)(1)(A) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ESENJAY EXPLORATION, INC. AT $2.84 NET PER SHARE BY ECM ACQUISITION COMPANY A WHOLLY OWNED SUBSIDIARY OF SANTOS AMERICAS AND EUROPE CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 22, 2002, UNLESS THE OFFER IS EXTENDED. THE OFFER (THE "OFFER") IS BEING MADE UNDER AN AGREEMENT DATED AS OF MARCH 17, 2002 (THE "ACQUISITION AGREEMENT") AMONG SANTOS AMERICAS AND EUROPE CORPORATION ("SANTOS"), ECM ACQUISITION COMPANY (THE "PURCHASER") AND ESENJAY EXPLORATION, INC. ("ESENJAY"). THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE THE NUMBER OF SHARES THAT, TOGETHER WITH ANY SHARES OWNED BY THE PURCHASER, SANTOS OR SANTOS' OTHER DIRECT OR INDIRECT SUBSIDIARIES, WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM TENDER CONDITION"). SEE SECTION 14. IN CONNECTION WITH THE ACQUISITION AGREEMENT, SANTOS ENTERED INTO A STOCKHOLDERS AGREEMENT DATED AS OF MARCH 17, 2002 WITH STOCKHOLDERS OF ESENJAY WHO OWN APPROXIMATELY 52% OF THE OUTSTANDING SHARES AND HAVE AGREED TO TENDER THEIR SHARES UNDER THE OFFER. IN ADDITION, SANTOS ENTERED INTO AN OPTION AGREEMENT DATED AS OF MARCH 17, 2002 WITH STOCKHOLDERS OF ESENJAY WHO OWN APPROXIMATELY 52% OF THE OUTSTANDING SHARES AND HAVE GRANTED SANTOS AN IRREVOCABLE OPTION TO PURCHASE THOSE SHARES UNDER SPECIFIED CIRCUMSTANCES AFTER TERMINATION OF THE OFFER. ---------------------- THE BOARD OF DIRECTORS OF ESENJAY HAS APPROVED THE ACQUISITION AGREEMENT AND THE TRANSACTIONS IT CONTEMPLATES, INCLUDING THE OFFER AND THE MERGER. THAT BOARD ALSO HAS DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AND THE OTHER TRANSACTIONS THE ACQUISITION AGREEMENT CONTEMPLATES ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, ESENJAY AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS OF ESENJAY ACCEPT AND TENDER THEIR SHARES UNDER THE OFFER. ---------------------- IMPORTANT Any stockholder desiring to tender all or any portion of that stockholder's shares should either (1) complete and sign the letter of transmittal, or a facsimile thereof, in accordance with the instructions to the letter of transmittal, have that stockholder's signature thereon guaranteed if instruction 1 to the letter of transmittal so requires, mail or deliver the letter of transmittal, or facsimile, or, in the case of a book-entry transfer effected by the procedure section 2 sets forth, an agent's message (as defined therein), and any other required documents to the depositary and either deliver the certificates for those shares to the depositary along with the letter of transmittal, or facsimile, or deliver those shares in accordance with the procedure for book-entry transfer section 2 sets forth or (2) request that stockholder's broker, dealer, bank, trust company or other nominee to effect the transaction for that stockholder. A stockholder having shares registered in the name of a broker, dealer, bank, trust company or other nominee must contact that person if that stockholder desires to tender those shares. If a stockholder desires to tender shares and that stockholder's certificates for shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis, or time will not permit all required documents to reach the depositary prior to the expiration date (as defined herein), that stockholder's tender may be effected by following the procedure for guaranteed delivery section 2 sets forth. Questions and requests for assistance or for additional copies of this Offer to Purchase, the letter of transmittal and the notice of guaranteed delivery may be directed to MacKenzie Partners, Inc. (the "information agent") or to Merrill Lynch & Co. (the "dealer manager") at their respective addresses and telephone numbers the back cover of this Offer to Purchase sets forth. ---------------------- The Dealer Manager for the Offer is: MERRILL LYNCH & CO. March 26, 2002 TABLE OF CONTENTS
PAGE ---- Summary Term Sheet......................................................... 1 Introduction............................................................... 6 The Tender Offer........................................................... 7 Section 1. Terms of the Offer.......................................... 7 Section 2. Procedure for Tendering Shares.............................. 10 Section 3. Withdrawal Rights........................................... 13 Section 4. Acceptance for Payment and Payment.......................... 14 Section 5. U.S. Federal Income Tax Consequences........................ 15 Section 6. Price Range of the Shares; Dividends on the Shares.......... 16 Section 7. Effect of the Offer on the Market for the Shares; Share Quotation and Listing; Exchange Act Registration; Margin Regulations................................................. 17 Section 8. Information Concerning Esenjay.............................. 18 Section 9. Information Concerning the Purchaser and Its Affiliates..... 19 Section 10. Source and Amount of Funds.................................. 20 Section 11. Contacts and Transactions With Esenjay; Background of the Offer....................................................... 20 Section 12. Purpose of the Offer; The Transaction Agreements; Plans for Esenjay..................................................... 22 Section 13. Dividends and Distributions................................. 38 Section 14. Conditions to the Offer..................................... 38 Section 15. Legal Matters............................................... 40 Section 16. Fees and Expenses........................................... 41 Section 17. Miscellaneous............................................... 42 Schedule I -- Directors and Executive Officers of Santos, the Purchaser, Santos International Holdings Pty Ltd and Santos Ltd......... S-1
SUMMARY TERM SHEET ECM Acquisition Company, to which this Offer to Purchase refers as the "Purchaser," "we" or "us," is offering to purchase all outstanding shares of common stock of Esenjay Exploration, Inc., to which this Offer to Purchase refers as "Esenjay," for $2.84 per share in cash. The following are some questions you, as a stockholder of Esenjay, may have and answers to those questions. We urge you to read the remainder of this Offer to Purchase and the accompanying letter of transmittal carefully because the information in this summary is not complete and the remainder of this Offer to Purchase and the letter of transmittal contain additional important information. WHO IS OFFERING TO BUY MY SHARES? The Purchaser, ECM Acquisition Company, is a Delaware corporation formed to make this tender offer. It is a direct wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation, to which this Offer to Purchase refers as "Santos." See section 9 of this Offer to Purchase, "Information Concerning the Purchaser and Its Affiliates." WHAT SHARES ARE YOU SEEKING IN THIS OFFER? We are offering to purchase all the outstanding shares of common stock of Esenjay. See "Introduction" and section 1 of this Offer to Purchase, "Terms of the Offer." HOW MUCH ARE YOU OFFERING TO PAY, WHAT IS THE FORM OF PAYMENT AND WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $2.84 per share, net to you, in cash. If you are the record owner of your shares and you tender your shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and that person tenders your shares on your behalf, that person may charge you a fee for doing so. You should consult your broker or other nominee to determine whether any charges will apply. See "Introduction" and section 1 of this Offer to Purchase, "Terms of the Offer." DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? Yes. Santos International Holdings Pty Ltd, to which this Offer to Purchase refers as "Santos International," the parent company of Santos, will provide us with sufficient funds to acquire all shares in this transaction. Santos International intends to use cash on hand or available to it to make this capital contribution. We have not conditioned the offer on any financing arrangements. See section 10 of this Offer to Purchase, "Source and Amount of Funds." IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? We do not think our financial condition is relevant to your decision whether to tender shares and accept the offer because: - the offer is being made for all outstanding shares solely for cash; - the offer is not subject to any financing condition; - Santos and Santos International have available cash and financing commitments that are more than sufficient to pay the purchase price for all the outstanding shares; and - if we consummate the offer, we will cash out all remaining shares in the merger and convert these shares into cash at the price per share we have paid under the offer. 1 WHY ARE YOU MAKING THIS OFFER? We are making the offer because Santos wants to acquire control of, and the entire equity interest in, Esenjay. If we consummate the offer, we intend to effect a follow-on merger with Esenjay in which Esenjay will become a direct wholly owned subsidiary of Santos and all shares of Esenjay we do not purchase under the offer will be exchanged for an amount in cash per share equal to the same price per share we pay under the offer. We sometimes refer to this offer together with the proposed merger as "the transaction." HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You will have at least until 12:00 midnight, New York City time, on April 22, 2002, to decide whether to tender your shares in the offer. If you cannot deliver everything that we require in order to make a valid tender by that time, you may be able to use a guaranteed delivery procedure, which we discuss in sections 1 and 2 of this Offer to Purchase, "Terms of the Offer" and "Procedure for Tendering Shares--Guaranteed Delivery." CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? Yes. We have agreed with Esenjay that we may extend the offer: - in increments of not more than five business days each, if we determine that at the time the offer is scheduled to expire, including at the end of an earlier extension, any of the offer conditions is not capable of being satisfied; - for one or more periods totaling up to 10 business days if we have acquired less than 90% of all outstanding shares as of the scheduled expiration date of the offer; and - for any period or periods if, prior to our acceptance for payment of the shares under the offer, Esenjay has terminated the acquisition agreement because of its intent to enter into an agreement respecting a superior takeover proposal from a third party and we have not within four days of receiving notice of that intent delivered to Esenjay a written counteroffer that the board of directors of Esenjay has determined in good faith after consultation with its financial advisor and counsel is at least as favorable to Esenjay's stockholders as the third party's proposal. In addition, we will extend the offer if the rules of the SEC require us to do so. See section 1 of this Offer to Purchase, "Terms of the Offer." We also may elect to provide a "subsequent offering period" for the offer. A subsequent offering period, if we include one, will be an additional period of time beginning after we have purchased shares tendered under the offer, during which stockholders may tender their shares and receive the offer consideration. We may, in our sole discretion, provide a subsequent offering period regardless of whether or not the events or facts section 14 of this Offer to Purchase, "Conditions to the Offer," sets forth have occurred or exist. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform The Bank of New York, which is the depositary for the offer, of that fact and will make a public announcement of the extension, by not later than 9:00 a.m., New York City time, on the business day after the day on which the offer was scheduled to expire. WHAT ARE THE MOST IMPORTANT CONDITIONS TO THE OFFER? Esenjay stockholders must validly tender and not withdraw before expiration of the offer the number of shares of common stock of Esenjay that, when added to the number of shares then owned by Santos or Santos' other direct and indirect subsidiaries, would represent at least a majority of the outstanding shares on a fully diluted basis. The offer is also subject to a number of other conditions. See section 14 of this Offer to Purchase, "Conditions to the Offer." 2 HOW DO I TENDER MY SHARES? To tender shares, you must deliver the certificates representing your shares, together with a completed letter of transmittal, or facsimile thereof, and any other documents required, to The Bank of New York, the depositary for the offer, not later than the time the offer expires. If your shares are held in street name, the shares can be tendered only by your nominee through The Depository Trust Company. If you cannot deliver something that is required to the depositary by the expiration of the offer, you may get a little extra time to do so by having a broker, bank or other fiduciary that is a member of the Securities Transfer Agents Medallion Program or another eligible institution guarantee that the depositary will receive the missing items within a period of three trading days. The depositary must receive the missing items within that period for the tender to be valid. See section 2 of this Offer to Purchase, "Procedure for Tendering Shares." UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES? You can withdraw shares at any time until the offer has expired and, if we have not agreed by May 24, 2002 to accept your shares for payment, you can withdraw them at any time after that time until we accept shares for payment. If we decide to provide a subsequent offering period, we will accept shares tendered during that period immediately, and thus you will not be able to withdraw shares tendered in the offer during any subsequent offering period. See sections 1 and 3 of this Offer to Purchase, "Terms of the Offer" and "Withdrawal Rights." HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to the depositary while you still have the right to withdraw the shares. If you have tendered your shares by giving instructions to a broker or nominee, you must instruct that person to arrange for the withdrawal of your shares. See sections 1 and 3 of this Offer to Purchase, "Terms of the Offer" and "Withdrawal Rights." WHAT DOES ESENJAY'S BOARD OF DIRECTORS THINK OF THIS OFFER? We are making the offer under an acquisition agreement we entered into with Esenjay. On March 16, 2002, Esenjay's board of directors, with one director abstaining, approved the acquisition agreement, our tender offer and our proposed merger with Esenjay. The board of directors of Esenjay has determined that each of the acquisition agreement, the offer and the merger is advisable and fair to Esenjay's stockholders and in their best interests. Esenjay's board of directors recommends that you accept the offer and tender your shares. See "Introduction," and sections 11 and 12 of this Offer to Purchase, "Contacts and Transactions with Esenjay; Background of the Offer" and "Purpose of the Offer; The Transaction Agreements; Plans for Esenjay." Esenjay has prepared a Solicitation and Recommendation Statement containing additional information regarding the Esenjay board of directors' determination and recommendation, including a discussion of a written opinion of Hibernia Southcoast Capital, Inc., addressed to the Esenjay board of directors and dated March 16, 2002 to the effect that, as of the date of that opinion and based on and subject to certain matters stated in that opinion, the $2.84 per share cash consideration to be received in the offer and the merger was fair, from a financial point of view, to Esenjay's stockholders. That Solicitation and Recommendation Statement is being sent to stockholders contemporaneously with this Offer to Purchase. HAVE ANY STOCKHOLDERS ALREADY AGREED TO TENDER THEIR SHARES? Yes. Stockholders holding approximately 52% of Esenjay's shares have entered into a stockholders agreement in which they have agreed to tender their shares in the offer. In addition, stockholders holding approximately 52% of Esenjay's shares have entered into an option agreement in which they have granted Santos an irrevocable option to purchase those shares under specified circumstances after the termination 3 of the Offer. See "Introduction" and section 12 of this Offer to Purchase, "Purpose of the Offer; The Transaction Agreements; Plans for Esenjay." IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL ESENJAY CONTINUE AS A PUBLIC COMPANY? No. If the merger occurs, Esenjay will no longer be publicly owned. Even if the merger does not occur, if we purchase all the tendered shares, so few stockholders and publicly held shares may remain that the shares no longer may be eligible to be traded through the Nasdaq SmallCap Market or any other securities market, a public trading market for the shares may cease to exist and Esenjay may cease making filings with the SEC or otherwise cease being required to comply with SEC rules relating to publicly held companies. See section 7 of this Offer to Purchase, "Effect of the Offer on the Market for the Shares; Share Quotation and Listing; Exchange Act Registration; Margin Regulations." WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL THE SHARES ARE NOT TENDERED IN THE OFFER? If we purchase in the offer a number of shares that equals at least a majority of the shares of Esenjay outstanding on a fully diluted basis, we will merge with and into Esenjay. Once that merger takes place, Santos will own all the shares of Esenjay, and all other stockholders of Esenjay will have the right to receive the same price we have paid in the offer, that is, $2.84 per share in cash or any other higher price per share we paid in the offer. See "Introduction" and section 12 of this Offer to Purchase, "Purpose of the Offer; The Transaction Agreements; Plans for Esenjay." No appraisal rights are available in connection with the offer. If the merger takes place, however, stockholders who have not sold their shares in the offer and have complied with the applicable provisions of Delaware law will have appraisal rights under Delaware law. See section 12 of this Offer to Purchase, "Purpose of the Offer; The Transaction Agreements; Plans for Esenjay--Appraisal Rights." IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If Esenjay's stockholders do not tender shares that equal at least a majority of the shares of Esenjay outstanding on a fully diluted basis, we may not purchase any shares under our offer or, if we do purchase shares under our offer, the merger may not take place. If the merger takes place, stockholders who do not tender in the offer will receive in the merger the same amount of cash per share they would have received had they tendered their shares in the offer, subject to their right to pursue appraisal under Delaware law. Therefore, if the merger takes place and you do not perfect your appraisal rights, the only difference to you between tendering shares and not tendering shares is that you will be paid earlier if you tender your shares. Until the merger takes place or if the merger does not take place for some reason, however, the number of stockholders of Esenjay and the shares of Esenjay that are still in the hands of the public may be so small that an active public trading market, or, possibly, any public trading market, for the shares no longer will exist. Also in that event, the shares no longer may be eligible to be traded through the Nasdaq SmallCap Market or any other securities market, and Esenjay may cease making filings with the SEC or otherwise cease being required to comply with the SEC's rules relating to publicly held companies. See sections 7 and 12 of this Offer to Purchase, "Effect of the Offer on the Market for the Shares; Share Quotation and Listing; Exchange Act Registration; Margin Regulations" and "Purpose of the Offer; The Transaction Agreements; Plans for Esenjay." WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On March 15, 2002, the last trading day before Santos and Esenjay announced that they had signed the acquisition agreement, the last sale price of the shares reported by the Nasdaq SmallCap Market was $2.72 per share. On March 25, 2002 the last trading day before we commenced our tender offer, the last sale price of the shares was $2.81 per share. We advise you to obtain a recent price for shares in deciding whether to tender your shares. See section 6 of this Offer to Purchase, "Price Range of the Shares; Dividends on the Shares." 4 WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You may call MacKenzie Partners, Inc., which is acting as the information agent for our offer, toll free at (800) 322-2885. You may also call Merrill Lynch & Co., which is acting as the dealer manager for our offer, toll free at (866) 276-1462. 5 To the Holders of Common Stock of Esenjay Exploration, Inc.: INTRODUCTION ECM Acquisition Company (the "Purchaser," "we" or "us"), a Delaware corporation and a wholly owned subsidiary of Santos Americas and Europe Corporation ("Santos"), a Delaware corporation, hereby offers to purchase all outstanding shares of common stock, par value $.01 per share (the "shares"), of Esenjay Exploration, Inc. ("Esenjay"), a Delaware corporation, at a purchase price of $2.84 per share, net to the seller in cash, without interest thereon, on the terms and subject to the conditions set forth in this Offer to Purchase and in the related letter of transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "offer"). In this Offer to Purchase, references to sections are to sections hereof unless otherwise indicated. Tendering stockholders whose shares are registered in their own names and who tender directly to The Bank of New York, the depositary for the offer, will not be obligated to pay brokerage fees or commissions or, except as Instruction 6 to the letter of transmittal sets forth, stock transfer taxes on the purchase of shares by us under the offer. We will pay all fees and expenses of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), which is acting as dealer manager, The Bank of New York and MacKenzie Partners, Inc., which is acting as the information agent, which are attributable to the offer. See section 16. We are making the offer under the terms of an agreement dated as of March 17, 2002 (the "acquisition agreement") among Santos, Esenjay and us. The acquisition agreement provides that, following the consummation of the offer and on the terms and subject to the conditions it contains, we will merge with and into Esenjay. Following the effective time of the merger (the "effective time"), Esenjay will continue as the surviving corporation and a wholly owned subsidiary of Santos. In the merger, each outstanding share (other than shares owned by Esenjay, the Purchaser or Santos or by stockholders, if any, who are entitled to and properly exercise appraisal rights under Delaware law) will be converted into the right to receive the price per share paid under the offer in cash, without interest thereon. Section 12 describes the acquisition agreement more fully. Consummation of the merger is subject to conditions, including (1) approval by stockholders of Esenjay, if the Delaware General Corporation Law (the "DGCL") requires that approval, and (2) our having purchased shares under the offer. If we acquire at least 90% of the outstanding shares, under the offer or otherwise, we will be able, and intend, to effect the merger under the "short-form" merger provisions of the DGCL, without prior notice to, or any action by, any other stockholder of Esenjay. See section 12. ESENJAY'S BOARD OF DIRECTORS, BY THE UNANIMOUS VOTE OF ALL DIRECTORS VOTING: - HAS APPROVED THE ACQUISITION AGREEMENT AND THE TRANSACTIONS IT CONTEMPLATES, INCLUDING THE OFFER AND THE MERGER; - HAS DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AND THE OTHER TRANSACTIONS THE ACQUISITION AGREEMENT CONTEMPLATES ARE ADVISABLE AND FAIR TO AND IN THE BEST INTERESTS OF ESENJAY AND ITS SHAREHOLDERS; AND - RECOMMENDS THAT ESENJAY'S STOCKHOLDERS ACCEPT AND TENDER THEIR SHARES UNDER THE OFFER. ESENJAY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-9") DESCRIBES THE FACTORS ESENJAY'S BOARD CONSIDERED IN ARRIVING AT ITS DECISION TO TAKE THE ACTIONS WE DESCRIBE ABOVE. THE SCHEDULE 14D-9 IS OR WILL BE ON FILE WITH THE SECURITY AND EXCHANGE COMMISSION (THE "SEC") AND IS BEING MAILED TO ESENJAY'S STOCKHOLDERS CONCURRENTLY WITH THIS OFFER TO PURCHASE. HIBERNIA SOUTHCOAST CAPITAL, INC. ("HIBERNIA") HAS ACTED AS ESENJAY'S FINANCIAL ADVISOR IN CONNECTION WITH THE TRANSACTIONS THE ACQUISITION AGREEMENT CONTEMPLATES. AN ANNEX TO THE SCHEDULE 14D-9 CONTAINS THE FULL OPINION OF HIBERNIA, DATED MARCH 16, 2002, THAT, AS OF THAT DATE, THE 6 CONSIDERATION HOLDERS OF SHARES WILL RECEIVE UNDER THE OFFER OR AS RESULT OF THE MERGER IS FAIR TO THOSE HOLDERS FROM A FINANCIAL POINT OF VIEW. WE URGE YOU TO, AND YOU SHOULD, READ THE SCHEDULE 14D-9 AND HIBERNIA'S OPINION CAREFULLY IN THEIR ENTIRETY. ONE OF THE CONDITIONS TO THE OFFER IS THAT THERE SHALL HAVE BEEN VALIDLY TENDERED AND NOT SUBSEQUENTLY PROPERLY WITHDRAWN PRIOR TO THE OFFER'S "EXPIRATION DATE" (AS SECTION 1 DEFINES THAT TERM) THE NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM TENDER CONDITION"). Esenjay has informed us that: - its authorized capital stock consists of 40,000,000 shares of common stock and 5,000,000 shares of preferred stock; and - as of March 1, 2002, 19,121,568 shares of its common stock and no shares of its preferred stock were issued and outstanding and 3,220,086 shares of its common stock were reserved for issuance on the exercise of outstanding options and warrants. If all outstanding options and warrants were to be exercised and no additional shares of common stock are issued after March 1, 2002, 22,341,654 shares would be outstanding on a fully diluted basis, and the Minimum Tender Condition would be satisfied if at least 11,170,828 shares are validly tendered and not subsequently properly withdrawn prior to the expiration date. The actual number of shares required to be tendered to satisfy the Minimum Tender Condition will depend on the actual number of shares outstanding on a fully diluted basis on the date we accept shares for payment under the offer. If the Minimum Tender Condition is satisfied, and we accept for payment shares tendered under the offer, we will be able to elect a majority of the members of Esenjay's board of directors and to effect the merger without the affirmative vote of any other stockholder of Esenjay. See section 12. Stockholders of Esenjay owning approximately 52% of the total number of shares outstanding as of March 1, 2002 have entered into a stockholders agreement in which they have agreed to tender those shares under the offer. In addition, stockholders of Esenjay owning approximately 52% of the total number of shares outstanding as of March 1, 2002 have entered into an option agreement under which Santos has an irrevocable option to purchase those shares under specified circumstances after termination of the offer. See section 12. Section 5 describes various United States federal income tax consequences of a sale of shares under the offer and of the merger on shares not sold under the Offer. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT YOU SHOULD READ CAREFULLY BEFORE YOU MAKE ANY DECISION RESPECTING THE OFFER. THE TENDER OFFER SECTION 1. TERMS OF THE OFFER On the terms of and subject to the conditions to the offer, we will accept for payment and pay for all shares validly tendered prior to the expiration date and not theretofore properly withdrawn in accordance with section 3. The term "expiration date" means 12:00 midnight, New York City time, on April 22, 2002, unless and until we, in our sole discretion, shall have extended the period of time during which the offer is open, in which event the term "expiration date" will mean the latest time and date on which the offer, as so extended by us, will expire. 7 In the acquisition agreement, we have agreed that while the acquisition agreement remains in effect, we will not, without the prior written consent of Esenjay: - waive or make any change in the Minimum Tender Condition; - reduce the maximum number of shares we will purchase under the offer; - reduce the price per share payable under the offer or, other than by adding consideration, change the form of consideration payable under the offer; or - make any change in or addition to the conditions to the offer which section 14 describes in a manner adverse to the holders of shares. The acquisition agreement provides that none of the following will constitute a change in the offer in a manner adverse to the holders of shares: - any increase in or addition to the consideration payable under the offer; or - any extension of the offer beyond the then scheduled expiration date: - for any period any applicable law or other governmental requirement, including any court order, or any interpretation thereof or position thereunder by the SEC, may require; - in increments of not more than five business days each, if we have reasonably determined that any of the conditions to the offer which section 14 describes is not capable of being satisfied prior to that scheduled expiration date; - for one or more periods, up to a total of 10 business days for all those periods, if, notwithstanding that all those conditions to the offer have been satisfied or waived by us, to the extent waivable by us, as of that scheduled expiration date, less than 90% of all outstanding shares have been validly tendered and not subsequently properly withdrawn; or - for any period or periods if, prior to our acceptance for payment of shares under the offer, Esenjay has, under the circumstances section 12 describes under "--The Acquisition Agreement--Termination," terminated the acquisition agreement in connection with a takeover proposal superior to our transaction. So long as the offer remains outstanding and complies with the provisions of the acquisition agreement we describe above, Esenjay has agreed that it will not at any time, notwithstanding that it may have terminated the acquisition agreement, adopt any anti-takeover measure having or purporting to have a deterrent effect on our ability to consummate the offer and thereafter acquire the remaining equity interest in Esenjay that we do not own. The acquisition agreement also provides that if any party terminates the acquisition agreement at any time prior to our acceptance for payment of shares under the offer, we, in our sole discretion, without the consent of Esenjay and notwithstanding the provisions of the acquisition agreement we describe above, may make any change in the terms and conditions of the offer and revise this Offer to Purchase and the other offer documents accordingly. Subject to the terms of the acquisition agreement and the applicable rules and regulations of the SEC, we reserve the right, but will not be obligated, except as we describe below, in our sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts section 14 describes shall have occurred or exist, to: - extend the offer beyond the then scheduled expiration date, and thereby delay acceptance for payment of and payment for any shares, by giving oral or written notice of that extension to the depositary; - elect to provide a subsequent offering period after completion of the offer; and 8 - amend the offer in any other respect by giving oral or written notice of that amendment to the depositary. UNDER NO CIRCUMSTANCES WILL WE PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT WE EXERCISE OUR RIGHT TO EXTEND THE OFFER. There can be no assurance that we will exercise our right to extend the offer. Any extension, waiver, amendment or termination by us will be followed as promptly as practicable by a public announcement thereof. In the case of an extension, Rule 14e-1(d) under the Securities Exchange Act of 1934 (the "Exchange Act") requires that the announcement be issued no later than 9:00 a.m., Eastern Time, on the next business day after the previously scheduled expiration date in accordance with the public announcement requirements of Exchange Act Rule 14d-4(d). Subject to applicable law (including Exchange Act Rules 14d-4(d) and 14d-6(d), which require that any material change in the information published, sent or given to stockholders in connection with the offer be promptly disseminated to them in a manner reasonably designed to inform them of that change) and without limiting the manner in which we may choose to make any public announcement, we will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. In this Offer to Purchase, "business day" has the meaning Exchange Act Rule 14d-1 sets forth. If we extend the offer, or we are delayed in our acceptance for payment of or payment, whether before or after our acceptance for payment, for shares or are unable to pay for shares under the offer for any reason, then, without prejudice to our rights under the offer, the depositary may retain tendered shares on our behalf, and those shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as section 3 describes. Exchange Act Rule 14e-1(c), however, will limit our ability to delay our payment for shares we have accepted for payment. That rule requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of that bidder's offer. If we make a material change in the terms of, or the information concerning, the offer or waive a material condition to the offer, we will disseminate additional tender offer materials and extend the offer to the extent Exchange Act Rules 14d-4(d), 14d-6(d) and 14e-1 require. The minimum period during which an offer must remain open following material changes in its terms or the information concerning it, other than a change in price or the percentage of securities sought, will depend on the facts and circumstances then existing, including the relative materiality of the changed terms or information. In the SEC's view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and, if material changes are made with respect to information that approaches the significance of price and the percentage of securities sought, a minimum of 10 business days may be required to allow for adequate dissemination and investor response. With respect to a change in price, a minimum period of 10 business days from the date of the change is generally required to allow for adequate dissemination to stockholders. Under Exchange Act Rule 14d-11, we may, subject to conditions, provide a subsequent offering period of from three to 20 business days in length following the expiration of the offer on the expiration date. A subsequent offering period would be an additional period of time, following the expiration of the offer and our purchase of shares thereunder, during which stockholders may tender shares they still hold. A subsequent offering period, if we include one, would not be an extension of the offer, which we already will have completed. During a subsequent offering period, tendering stockholders will not have withdrawal rights, and we will promptly purchase and pay for any shares tendered at the same price we paid under the offer. 9 Exchange Act Rule 14d-11 provides that we may provide a subsequent offering period so long as, among other things: - the initial 20 business day period of the offer has expired; - we offer the same form and amount of consideration for shares in the subsequent offering period as in the initial offer; - we accept and promptly pay for all securities tendered during the offer prior to its expiration; - we announce the results of the offer, including the approximate number and percentage of shares deposited in the offer, no later than 9:00 a.m., New York City time, on the next business day after the expiration date and immediately begin the subsequent offering period; and - we immediately accept and promptly pay for shares as they are tendered during the subsequent offering period. We will be able to provide a subsequent offering period, if we satisfy these conditions, after April 22, 2002. We may, in our sole discretion, provide a subsequent offering period regardless of whether the events or facts section 14 describes have occurred or exist. Under Exchange Act Rule 14d-7, no withdrawal rights apply to shares tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to shares tendered in the offer and accepted for payment. We will pay the same consideration to stockholders tendering shares in the offer or in a subsequent offering period, if we include one. Esenjay has provided us with its stockholder lists and security position listing for the purpose of disseminating the offer to holders of shares. We will mail this Offer to Purchase, the related letter of transmittal and other relevant materials to record holders of shares, and we will furnish those materials to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on Esenjay's stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of shares. Those materials also will include the Schedule 14D-9. SECTION 2. PROCEDURE FOR TENDERING SHARES VALID TENDER. For a stockholder validly to tender shares under the offer: - the depositary must receive, at one of its addresses the back cover of this Offer to Purchase sets forth and prior to the expiration date: - a letter of transmittal, or a facsimile thereof, properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message (see "-- Book-Entry Transfer" below), and any other required documents; and - either certificates representing the tendered shares or, in the case of tendered shares delivered in accordance with the procedures for book-entry transfer we describe below, a book-entry confirmation of that delivery (see "-- Book-Entry Transfer" below); or - the tendering stockholder must comply with the guaranteed delivery procedures we describe below. The valid tender of shares by you by one of the procedures this section 2 describes will constitute a binding agreement between you and us on the terms of and subject to the conditions to the offer. BOOK-ENTRY TRANSFER. For purposes of the offer the depositary will establish accounts for the shares at The Depository Trust Company (the "book-entry transfer facility") within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the book-entry transfer facility's system may make book-entry delivery of shares by causing the book-entry transfer facility to transfer those shares into the depositary's account in accordance with the book-entry transfer facility's procedures for that transfer. Although delivery of shares may be effected through book-entry transfer into 10 the depositary's account at the book-entry transfer facility, the letter of transmittal, or a facsimile thereof, properly completed and duly executed, with any required signature guarantees, or an agent's message, and any other required documents, must, in any case, be transmitted to, and received by, the depositary at one of its addresses the back cover of this Offer to Purchase sets forth prior to the expiration date, or the tendering stockholder must comply with the guaranteed delivery procedures we describe below. The confirmation of a book-entry transfer of shares into the depositary's account at the book-entry transfer facility as we describe above is a "book-entry confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "agent's message" means a message transmitted by the book-entry transfer facility to, and received by, the depositary and forming a part of a book-entry confirmation, stating that the book-entry transfer facility has received an express acknowledgment from the participant in the book-entry transfer facility tendering the shares that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce that agreement against that participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF YOU PLAN TO MAKE DELIVERY BY MAIL, WE RECOMMEND THAT YOU DELIVER BY REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND OBTAIN PROPER INSURANCE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. SIGNATURE GUARANTEES. No signature guarantee will be required on a letter of transmittal for shares tendered thereby if: - the "registered holder(s)" of those shares signs that letter of transmittal and has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on that letter of transmittal; and - those shares are tendered for the account of an "eligible institution." For purposes hereof, a "registered holder" of tendered shares will include any participant in the book-entry transfer facility's system whose name appears on a security position listing as the owner of those shares, and an "eligible institution" is a "financial institution," which term includes most commercial banks, savings and loan associations and brokerage houses, that is a participant in any of the following: - the Security Transfer Agents Medallion Program; - the New York Stock Exchange, Inc. Medallion Signature Guarantee Program; or - the Stock Exchanges Medallion Program. Except as we describe above, all signatures on any letter of transmittal for shares tendered thereby must be guaranteed by an eligible institution. See instructions 1 and 5 to the letter of transmittal. If the certificates for shares are registered in the name of a person other than the signer of the letter of transmittal, or if payment is to be made or certificates for shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See instructions 1 and 5 to the letter of transmittal. GUARANTEED DELIVERY. If you wish to tender shares under the offer and your certificates for shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis 11 or time will not permit all required documents to reach the depositary prior to the expiration date, your tender may be effected if all the following conditions are met: - your tender is made by or through an eligible institution; - you ensure that a properly completed and duly executed notice of guaranteed delivery, substantially in the form we provide, is received by the depositary, as provided below, prior to the expiration date; and - you ensure that the depositary receives, at one of its addresses the back cover of this Offer to Purchase sets forth and within the period of three trading days after the date of execution of that notice of guaranteed delivery, either: - the certificates representing the shares being tendered together with (1) a letter of transmittal, or a facsimile thereof, relating thereto which has been properly completed and duly executed and includes all signature guarantees required thereon and (2) all other required documents; or - in the case of any book-entry transfer of the shares being tendered which is effected in accordance with the book-entry transfer procedures we describe above under "-- Book-Entry Transfer" within the same period (1) either a letter of transmittal, or a facsimile thereof, relating thereto which has been properly completed and duly executed and includes all signature guarantees required thereon or an agent's message, (2) a book-entry confirmation relating to that transfer and (3) all other required documents. For these purposes, a "trading day" is any day on which the New York Stock Exchange is open for business. A notice of guaranteed delivery may be delivered by hand to the depositary or transmitted by facsimile transmission or mail to the depositary and must include a guarantee by an eligible institution in the form that notice of guaranteed delivery sets forth. OTHER REQUIREMENTS. Notwithstanding any other provision hereof, payment for shares accepted for payment under the offer will in all cases be made only after timely receipt by the depositary of: - certificates representing, or a timely book-entry confirmation respecting, those shares; - a letter of transmittal, or a facsimile thereof, properly completed and duly executed, with any required signature guarantees thereon, or, in the case of a book-entry transfer, an agent's message in lieu of a letter of transmittal; and - any other documents the letter of transmittal requires. Accordingly, tendering stockholders may be paid at different times depending on when certificates representing, or book-entry confirmations respecting, their shares are actually received by the depositary. UNDER NO CIRCUMSTANCES WILL WE PAY INTEREST ON THE PURCHASE PRICE OF THE SHARES WE PURCHASE UNDER THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING THAT PAYMENT. APPOINTMENT. By executing a letter of transmittal, or a facsimile thereof, or, in the case of a book-entry transfer, by delivery of an agent's message in lieu of a letter of transmittal, you will irrevocably appoint our designees as your attorneys-in-fact and proxies in the manner the letter of transmittal sets forth, each with full power of substitution, to the full extent of your rights with respect to the shares tendered by you and accepted for payment by us and with respect to any and all other shares or other securities issued or issuable in respect of those shares on or after March 17, 2002 (collectively, "additional securities"). All these proxies will be considered coupled with an interest in the tendered shares and additional securities attributable thereto. This appointment will be effective when, and only to the extent that, we accept for payment shares tendered by you as provided herein. On that appointment, all prior powers of attorney, proxies and consents you have given with respect to the shares tendered by you and accepted for payment by us and all additional securities attributable thereto will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by you or on 12 your behalf (and, if given, will not be effective). Our designees will thereby be empowered to exercise all your voting and other rights with respect to those shares and additional securities in respect of any annual, special or adjourned meeting of Esenjay's stockholders, actions by written consent without any such meeting or otherwise, as our designees in their sole discretion deem proper. We reserve the right to require that, in order for shares to be deemed validly tendered, we must be able, immediately on our acceptance for payment of those shares, to exercise full voting, consent and other rights with respect to those shares and the additional securities attributable thereto, including voting at any meeting of stockholders or acting by written consent without such a meeting. DETERMINATION OF VALIDITY. We will decide, in our sole discretion, all questions as to the validity, form, eligibility, including time of receipt, and acceptance of any tender of shares, and each such decision will be final and binding. We reserve the absolute right to reject any or all tenders we determine not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in the tender of any shares of any particular stockholder whether or not we waive similar defects or irregularities in the case of other stockholders. No tender of shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Santos, the depositary, the information agent, the dealer manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Our interpretation of the terms of and conditions to the offer, including the letter of transmittal and the instructions thereto, will be final and binding. By tendering shares to us you agree to accept all decisions we make concerning these matters and waive any right you might otherwise have to challenge those decisions. BACKUP U.S. FEDERAL INCOME TAX WITHHOLDING. Under the U.S. federal income tax laws, payments in connection with the transaction may be subject to "backup withholding" at a rate of 30% unless a stockholder that holds shares: - provides a correct taxpayer identification number (which, for an individual stockholder, is the stockholder's social security number) and any other required information; or - is a corporation or comes within other exempt categories and, when required, demonstrates this fact and otherwise complies with applicable requirements of the backup withholding rules. A stockholder that does not provide a correct taxpayer identification number may be subject to penalties imposed by the Internal Revenue Service. To prevent backup U.S. federal income tax withholding on cash payable under the offer or in the proposed merger, as the case may be, each stockholder should provide the depositary with his or her correct taxpayer identification number and certify that he or she is not subject to backup U.S. federal income tax withholding by completing the Substitute Internal Revenue Service Form W-9 the letter of transmittal includes. Noncorporate foreign stockholders should complete and sign an Internal Revenue Service Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the depositary, in order to avoid backup withholding. See instruction 9 to the letter of transmittal. SECTION 3. WITHDRAWAL RIGHTS Except as this section 3 otherwise provides, tenders of shares are irrevocable. You may withdraw shares that you have previously tendered under the offer according to the procedures we describe below at any time prior to the expiration date and, unless theretofore accepted for payment and paid for by us under the offer, you may also withdraw your previously tendered shares at any time after May 24, 2002. For a withdrawal to be effective, a written notice of withdrawal must: - be received in a timely manner by the depositary at one of its addresses the back cover of this Offer to Purchase sets forth; and 13 - specify the name of the person having tendered the shares to be withdrawn, the number of shares to be withdrawn and the name of the registered holder of the shares to be withdrawn, if different from the name of the person who tendered the shares. If certificates for shares have been delivered or otherwise identified to the depositary, then, prior to the physical release of those certificates, the serial numbers shown on those certificates must be submitted to the depositary and, unless an eligible institution has tendered those shares, an eligible institution must guarantee the signatures on the notice of withdrawal. If shares have been delivered in accordance with the procedures for book-entry transfer section 2 describes, any notice of withdrawal must also specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn shares and otherwise comply with the book-entry transfer facility's procedures. Withdrawals of tenders of shares may not be rescinded, and any shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the offer. Withdrawn shares may be retendered at any time prior to the expiration date by again following one of the procedures section 2 describes. We will decide, in our sole discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal, and each such decision will be final and binding. We also reserve the absolute right to waive any defect or irregularity in the withdrawal of shares by any stockholder, whether or not we waive similar defects or irregularities in the case of any other stockholder. None of the Purchaser, Santos, the depositary, the information agent, the dealer manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. If we provide a subsequent offering period following the offer, no withdrawal rights will apply to shares tendered during that subsequent offering period or to shares tendered under the offer and accepted for payment. SECTION 4. ACCEPTANCE FOR PAYMENT AND PAYMENT On the terms of and subject to the conditions to the offer, including, if we extend or amend the offer, the terms and conditions of any such extension or amendment, we will accept for payment and will pay promptly after the expiration date for all shares validly tendered prior to the expiration date and not properly withdrawn in accordance with section 3. We will decide, in our sole discretion, all questions as to the satisfaction of those terms and conditions, and each such decision will be final and binding. See sections 1 and 14. We expressly reserve the right, in our sole discretion, to delay acceptance for payment of or payment for shares in order to comply in whole or in part with any applicable law. We will effect any such delays in compliance with Exchange Act Rule 14e-1(c), which relates to the obligation of a bidder to pay for or return tendered securities promptly after the termination or withdrawal of its offer. In all cases, we will pay for shares we have accepted for payment under the offer only after timely receipt by the depositary of: - certificates representing, or a timely book-entry confirmation respecting, those shares; - a letter of transmittal, or a facsimile thereof, properly completed and executed with any required signatures thereon or, in the case of a book-entry transfer, an agent's message; and - any other documents the letter of transmittal requires. Accordingly, tendering stockholders may be paid at different times depending on when certificates for shares or book-entry confirmations respecting shares are actually received by the depositary. The per share consideration we will pay to any stockholder under the offer will be the highest per share consideration we will pay to any other stockholder under the offer. 14 For purposes of the offer, we will be deemed to have accepted for payment, and thereby purchased, shares properly tendered to us and not withdrawn as, if and when we give oral or written notice to the depositary of our acceptance for payment of those shares. On the terms of and subject to the conditions to the offer, we will pay for shares we have accepted for payment under the offer by depositing the purchase price therefor with the depositary. The depositary will act as agent for tendering stockholders for the purpose of receiving payment from us and transmitting payment to tendering stockholders whose shares we have accepted for payment. UNDER NO CIRCUMSTANCES WILL WE PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF OR AMENDMENT TO THE OFFER OR ANY DELAY IN PAYING FOR THOSE SHARES. If we are delayed in our acceptance for payment of or payment for shares or are unable to accept for payment or pay for shares under the offer for any reason, then, without prejudice to our rights under the offer, but subject to our compliance with Exchange Act Rule 14e-1(c), the depositary nevertheless may retain tendered shares on our behalf and those shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, the withdrawal rights section 3 describes. If we do not purchase any tendered shares under the offer for any reason, then, as promptly as practicable following the expiration or termination of the offer and at no expense to tendering stockholders: - the depositary will return certificates it has received respecting tendered shares to the person who delivered those certificates to the depositary; and - in the case of tendered shares delivered by book-entry transfer into the depositary's account at the book-entry transfer facility in accordance with the procedures section 2 describes, those shares will be credited to the account at the book-entry transfer facility from which that transfer had been previously made. SECTION 5. U.S. FEDERAL INCOME TAX CONSEQUENCES TAXABLE TRANSACTION. Your receipt of cash for shares in our transaction will be a taxable transaction for U.S. federal income tax purposes under the Internal Revenue Code of 1986 (the "Code") and also may be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, you will recognize gain or loss equal to the difference between the amount of cash you receive in our transaction and your adjusted tax basis in the shares for which you received that cash. Gain or loss will be calculated separately for each block of shares tendered and purchased under the offer or converted into cash by the merger, as the case may be. If you hold shares as capital assets, the gain or loss you recognize will be capital gain or loss, which will be long-term capital gain or loss if your holding period for the shares exceeds one year. If you are an individual, long-term capital gains will be eligible for a maximum federal income tax rate of 20%. Under present law the ability to use capital losses to offset ordinary income is limited. You should consult your own tax advisor in this regard. The foregoing discussion may not be applicable with respect to (1) shares received on the exercise of employee stock options or otherwise as compensation or (2) holders of shares who are subject to special tax treatment under the Code, such as non-U.S. persons, life insurance companies, tax-exempt organizations and financial institutions. In addition, the foregoing discussion may not apply to a holder of shares in light of individual circumstances, such as holding shares as a hedge or as part of a straddle or a hedging, constructive sale, integrated or other risk-reduction transaction. We base this discussion on present law, which is subject to change, possibly with retroactive effect. We urge you to consult your own tax advisor to determine the particular tax consequences of the offer and the merger to you, including the application and effect of the alternative minimum tax and of state, local or foreign income and other tax laws and of changes in tax laws. 15 BACKUP WITHHOLDING. Some noncorporate stockholders may be subject to backup withholding at a 30% rate on cash payments they receive under the offer and or as a result of the merger. Backup withholding will not apply, however, to a stockholder who: - furnishes a correct taxpayer identification number and certifies that he or she is not subject to backup withholding on the Substitute Internal Revenue Service Form W-9 the letter of transmittal includes; - provides a certification of foreign status on Internal Revenue Service Form W-8 or successor form; or - is otherwise exempt from backup withholding. If backup withholding applies to you, the depositary must withhold 30% from amounts otherwise payable to you. If you do not provide a correct taxpayer identification number, you may be subject to penalties imposed by the IRS. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against your U.S. federal income tax liability provided the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder by filing a U.S. federal income tax return. You should consult your own tax advisor as to your qualification for exemption from withholding and the procedure for obtaining the exemption. SECTION 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The shares are traded on the Nasdaq SmallCap Market under the symbol "ESNJ." The following table sets forth, for each of the periods indicated, the high and low sales prices per share as reported by the Nasdaq SmallCap Market based on published financial sources.
HIGH LOW ----- ----- FISCAL YEAR ENDED DECEMBER 31, 2000: First Quarter............................................. $2.75 $1.56 Second Quarter............................................ $4.13 $1.63 Third Quarter............................................. $4.75 $2.47 Fourth Quarter............................................ $5.19 $3.13 FISCAL YEAR ENDED DECEMBER 31, 2001: First Quarter............................................. $5.19 $3.50 Second Quarter............................................ $5.24 $3.50 Third Quarter............................................. $4.10 $2.45 Fourth Quarter............................................ $3.19 $2.00 FISCAL YEAR ENDING DECEMBER 31, 2002: First Quarter (through March 25, 2002).................... $3.06 $2.12
On March 15, 2002, the last trading day before Santos, Esenjay and we entered the acquisition agreement, the last sale price of Esenjay's shares reported by the Nasdaq SmallCap Market was $2.72. On March 25, 2002, which was the last full trading day before commencement of the offer, the last reported sale price of Esenjay's shares reported by the Nasdaq SmallCap Market was $2.81. WE URGE STOCKHOLDERS TO OBTAIN A CURRENT MARKET PRICE FOR THE SHARES. According to Esenjay's annual report on Form 10-KSB for the fiscal year ended December 31, 2000 as filed with the SEC, Esenjay has never paid any dividends on the shares. Esenjay's current credit agreement with Deutsche Bank AG restricts its ability to pay cash dividends. Esenjay's management has advised us that Esenjay has not declared or paid any stock or other noncash dividends on the shares. 16 SECTION 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; SHARE QUOTATION AND LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS MARKET FOR THE SHARES. Our purchase of shares under the offer will reduce the number of holders of shares and the number of shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining shares the public holds. SHARE QUOTATION AND LISTING. Depending on the number of shares purchased under the offer, the shares may no longer meet the requirements for continued listing on the Nasdaq SmallCap Market. In that event, the market for the shares could be adversely affected. According to the published guidelines for listing on the Nasdaq SmallCap Market, that market would consider delisting the outstanding shares of Esenjay if, among other things: - the number of publicly held shares, (exclusive of shares held by officers, directors or shareholders holding more than 10% of the total shares outstanding) falls below 500,000; - the number of shareholders holding 100 or more shares falls below 300; or - the aggregate market value of publicly held shares falls below $1 million. If the Nasdaq SmallCap Market delists the shares, it is possible that the shares would trade on another securities exchange or in the over-the-counter market and that other sources would report price quotations. The extent of the public market for the shares and the availability of those quotations would, however, depend on a number of factors, including: - the number of remaining holders of shares; - the interests of securities firms in maintaining a market in shares; and - the possible termination of registration of the shares under the Exchange Act. We cannot predict whether the reduction in the number of shares that might otherwise trade publicly would have an adverse or a beneficial effect on the market price for or marketability of the shares or whether it would cause future market prices to be greater or less than the offer price. EXCHANGE ACT REGISTRATION. The shares currently are registered under the Exchange Act. That registration may be terminated on application of Esenjay to the SEC if the shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of that registration would substantially reduce the information Esenjay would have to provide to its stockholders and to the SEC and would make various provisions of the Exchange Act no longer applicable to Esenjay, including the following requirements: - the furnishing of a proxy or information statement under Section 14 of the Exchange Act in connection with meetings of stockholders; - the furnishing of an annual report to stockholders; and - the filing of annual, quarterly and other reports with the SEC. Termination of that registration also would foreclose use of Rule 144 under the Securities Act of 1933 for sales of securities of Esenjay by its affiliates and, in the case of "restricted securities" of Esenjay, by other persons. We intend to seek to cause Esenjay to apply for termination of registration of the shares under the Exchange Act as soon after the completion of the offer as the requirements for that termination are met. Registration of the shares under the Exchange Act will be terminated after the consummation of the merger, if not before. Margin Regulations. The shares are currently "margin securities" under the margin regulations of the Board of Governors of the Federal Reserve System. This classification allows banks and brokers to extend credit on the collateral of the shares. Depending on factors similar to those we describe above 17 regarding listing and market quotations, it is possible that, following the offer, the shares would no longer constitute "margin securities" under those margin regulations and therefore could no longer be used as collateral for loans made by banks on brokers. SECTION 8. INFORMATION CONCERNING ESENJAY GENERAL. Esenjay is an independent energy company engaged in the exploration for and the development of natural gas and oil. With an extensive inventory of technology enhanced natural gas exploration projects located onshore along the Texas and Louisiana gulf coast, Esenjay is focused on the generation and enhancement of these projects utilizing computerized exploration technologies and 3-D seismic data prior to drilling. Esenjay is a Delaware corporation. Its executive offices are at 500 North Water Street, Suite 1100, Corpus Christi, Texas 78471, and its telephone number at that address is (361)883-7464. The information contained in the following summary of Esenjay year end 2001 reserves and drilling activity was excerpted from Esenjay's March 22, 2002 press release: During 2001, Esenjay participated in a total of 46 wells that reached total depth and were logged. Of the total wells drilled and logged during the year, 26 were completed as of March 10, 2002, one is scheduled to commence production upon completion and pipeline connection, and 19 were dry holes. For the comparable period of 2000, the Company drilled a total of 52 wells. The decrease in the number of wells drilled in 2001 is primarily the result of an increase in deeper and more expensive high potential wells. Esenjay also reported that total proved reserves at year-end 2001 were 18.3 billion cubic feet equivalent (BCFE) of natural gas. At year-end 2000, the Company had proved reserves of 23.8 BCFE of natural gas. The year-to-year decline in reserves is principally due to the sale of reserves in a significant Esenjay project. During 2001, the Company produced approximately 6.8 BCFE of natural gas, added 10.3 BCFE as a result of discoveries and other drilling activity, registered downward revisions of 0.7 BCFE and sold reserves totaling 8.3 BCFE. Year-end reserve volumes were estimated by Ryder Scott & Company. In November 2001, Esenjay sold a substantial portion of its working interest in the Runnells Field in the South Texas Frio trend to Santos USA Corp., effective September 16, 2001 for $20.25 million in cash, plus reimbursements (attributable to the interests sold) for drilling costs associated with a well in progress. Included in the sale were proved reserves of 7.8 BCFE and substantial probable and possible reserves and acreage associated with the project. The Company will record a gain on this sale of approximately $15.5 million in fourth quarter 2001 results. Esenjay believes that the transaction monetized a substantial portion of the ultimate value to be created from the project. AVAILABLE INFORMATION. Esenjay is subject to the informational requirements of the Exchange Act and, in accordance therewith, is required to file reports relating to its business, financial condition and other matters. Esenjay must disclose in its proxy statements distributed to Esenjay's stockholders and filed with the SEC information as of particular dates concerning its directors and officers, their remuneration, stock options and other matters, the principal holders of its securities and any material interest of those persons in transactions with Esenjay. That information should be available for inspection at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, DC 20549. You can obtain copies of that information by mail, upon payment of the SEC's customary charges, by writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, DC 20549. The SEC also maintains a web site that contains reports, proxy statements and other information regarding registrants that file electronically with it. You can find those reports, proxy statements and other information on the SEC's web site, http://www.sec.gov. Except as otherwise stated herein, the information concerning Esenjay contained herein has been taken from or based on publicly available documents on file with the SEC and other publicly available 18 information. Although the Purchaser and Santos do not have any knowledge that any such information is untrue, neither the Purchaser nor Santos takes any responsibility for the accuracy or completeness of that information or for any failure by Esenjay to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to Santos or the Purchaser. SECTION 9. INFORMATION CONCERNING THE PURCHASER AND ITS AFFILIATES GENERAL. The Purchaser, a Delaware corporation, was formed to acquire Esenjay and has not conducted any unrelated activities since its organization. Its principal office is located at 1209 Orange Street, Wilmington, Delaware 19801 and its telephone number is (713) 986-1700. Santos directly owns all outstanding shares of capital stock of the Purchaser. Santos is a Delaware corporation with its principal offices located at 1209 Orange Street, Wilmington, Delaware 19801 and its telephone number is (713) 986-1700. Santos is wholly owned by Santos International, an Australian corporation, whose shares are owned by Santos Ltd, an Australian corporation. Santos Ltd and its subsidiaries and affiliates are engaged, principally in Australia, the United States and Southeast Asia, in gas and petroleum exploration, the production, treatment and marketing of natural gas, crude oil, condensate, naphtha and liquid petroleum gas and the transportation by pipeline of crude oil. Schedule I to this Offer to Purchase sets forth the name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Santos, the Purchaser, Santos International and Santos Ltd. Except as this Offer to Purchase, including schedule I, otherwise describes or discloses: - none of the Santos Entities or, to the best of their knowledge, the Santos Managers: - has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, during the past five years; - has been a party to any judicial or administrative proceeding, except for matters that were dismissed without sanction or settlement, during the past five years that resulted in a judgment or final order enjoining that person from future violations of, or prohibiting activities subject to, federal or state securities laws in the United States, or a finding of any violation of those laws; - has any contract, arrangement, understanding or relationship with any other person with respect to any securities of Esenjay, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of those securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies; - has had during the past two years any business relationship or transaction with Esenjay or any of its executive officers, directors or affiliates which the rules and regulations of the SEC applicable to the offer require to be reported; - has had, nor has any subsidiary of any Santos Entity had, during the past two years, any contacts, negotiations or transactions with Esenjay or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets; or - has during the past 60 days effected any transaction in any equity securities of Esenjay; and - none of the Santos Entities or any associate or majority-owned subsidiary of any Santos Entity or, to the best of the knowledge of the Santos Entities, the Santos Managers or any associate or majority-owned subsidiary of any Santos Manager beneficially owns or has the right to acquire, directly or indirectly, any equity securities of Esenjay. 19 In the preceding paragraph, "Santos Entity" means any of Santos Ltd, Santos International, Santos or us, and "Santos Manager" means each of the other persons schedule I hereto lists. SECTION 10. SOURCE AND AMOUNT OF FUNDS The offer is not conditioned on any financing arrangements. We estimate that we will require funds totaling approximately $80 million in order to purchase all the outstanding shares, satisfy obligations under outstanding stock options and warrants, pay all the costs, fees and expenses related to the offer and the merger and fund the repayment of Esenjay's currently outstanding bank debt of approximately $18.6 million. We plan to obtain all funds needed for the offer through a capital contribution that will be made by Santos International to Santos, which in turn will make a capital contribution to the Purchaser at the time the Purchaser accepts for payment shares tendered pursuant to the offer. Santos International intends to use cash on hand or available to it to make this capital contribution. SECTION 11. CONTACTS AND TRANSACTIONS WITH ESENJAY; BACKGROUND OF THE OFFER In May 2000, Santos USA Corp., a wholly owned subsidiary of SAEC ("Santos USA"), acquired interests in the Amerada 8/Ashland Deep prospects through a farm-in arrangement with Esenjay for a payment to Esenjay of approximately $540,000. In September 2000, representatives of Randall & Dewey, Inc. ("Randall & Dewey"), a provider of transaction and advisory related services to Esenjay, contacted Mr. Bruce Wood, President of Santos USA Corp. ("Santos USA"), to inquire about Santos USA's interest in considering a potential business alliance or transaction with Esenjay, including a possible sale of assets or stock to Santos USA or a merger with Santos USA. Between December 2000 and March 2001, Esenjay and Santos USA continued discussions of a possible merger or sale. On January 25, 2001, Mr. Jeff Barndt, of Randall & Dewey, provided information relating to Esenjay to representatives of Santos USA regarding a potential purchase of Esenjay. On February 6, 2001, the parties agreed to further explore a possible purchase transaction, and Esenjay agreed to provide Santos USA with information concerning its operations under the terms of a confidentiality agreement. In the second half of February 2001, Esenjay provided various materials and information about its operations to Santos USA. On February 28, 2001, representatives of Santos USA visited Esenjay's office in Corpus Christi, Texas, to discuss with Esenjay management and staff Esenjay's assets and exploration prospects portfolio. Throughout the months of March, April and May 2001, Santos USA evaluated the potential of an acquisition of Esenjay. On June 28, 2001, there was an introductory meeting between Mr. Michael Johnson, President and Chief Executive Officer of Esenjay, and representatives of Santos and its parent, Santos Ltd, to discuss a possible purchase of Esenjay's exploration prospects portfolio. In July 2001, Santos USA acquired interests in the Lafite/Allen Dome prospects through a farm-in arrangement with Esenjay for a payment to Esenjay of approximately $1.6 million. On July 16, 2001, Ms. Kathleen Hogenson, President of Santos USA and successor to Mr. Wood, met with Mr. David Berry, Chairman of the Board of Directors of Esenjay, to discuss matters relating to a potential acquisition of Esenjay. 20 On August 2, 2001, representatives of Santos USA's Acquisition Evaluation Team met with members Esenjay's technical team in Esenjay's office in Corpus Christi, Texas, to review materials relating to the producing and exploratory assets of Esenjay. Ms. Hogenson also discussed with Mr. Johnson, Santos USA's interest in moving forward with a potential acquisition of Esenjay. On August 29, 2001, Mr. Jack Randall, a member of the board of directors of Esenjay and a principal of Randall & Dewey, met with Ms. Hogenson and Mr. Peter Robinson, Chief Financial Officer of Santos USA, to continue discussions on moving forward with a purchase transaction. Mr. Randall offered suggestions for possible structures for such a transaction. From August through October 2001, Santos conducted additional evaluation and due diligence on Esenjay and its operations. During this time, representatives of Santos USA had meetings and telephone conversations with representatives of Esenjay to discuss matters with respect to its due diligence review and the potential of an acquisition transaction with Esenjay. On October 10, 2001, Santos USA representatives met with Mr. Berry, Mr. Johnson and other representatives of Esenjay to discuss issues related to Santos USA's due diligence of Esenjay. Following the meeting, Mr. Robinson and Mr. Gordon Springate, Manager Business Development of Santos USA, met with Messrs. Berry, Johnson and David Christofferson, General Counsel and Chief Financial Officer of Esenjay to discuss whether the parties should continue to pursue a potential transaction. On or about October 12, 2001, Ms. Hogenson advised Mr. Johnson that Santos USA remained interested in a transaction with Esenjay, but that Santos needed to continue work on valuation issues and seek internal approvals. On October 24, 2001, Ms. Hogenson contacted Mr. Johnson to discuss Santos USA's potential acquisition of Esenjay, subject to the approval by the respective parties' boards of directors, further analysis and other conditions. Mr. Johnson offered an informal counterproposal, also subject to approval by the respective parties' boards of directors. Additionally, Mr. Johnson asked Ms. Hogenson to propose an offer to purchase Esenjay's interest in Runnells Field, a deep geopressured discovery within Esenjay's Duncan Slough 3-D seismic project in Matagorda County, Texas. Mr. Johnson indicated that if Santos USA did not purchase Esenjay's interest in Runnells Field, that interest would be sold to other interested buyers. Ms. Hogenson made an informal offer to purchase that interest. Mr. Johnson asked her to reconsider her offer. Ms. Hogenson contacted Mr. Johnson on October 27, 2001 and, following a brief discussion, they agreed that, subject to approval by the parties' respective boards of directors, Santos USA would offer to purchase 70% of Esenjay's interest in the Runnells Field for approximately $20.25 million. On October 29, 2001, Santos USA's management and Merrill Lynch representatives met with members of Esenjay's senior management and representatives of Randall & Dewey to discuss Santos USA's potential purchase of the ownership interests in or remaining assets of Esenjay. On November 1, 2001 representatives of Santos USA met with members of Randall & Dewey and Esenjay management to discuss the potential sale of a portion of Esenjay's interest in the Runnells Field and surrounding area. The parties continued to discuss possible other transactions. On November 2, 2001, Santos USA and Esenjay signed a letter of intent regarding Santos USA's purchase of a portion of Esenjay's interest in the Runnells Field and surrounding area. On November 16, 2001, Santos USA and Esenjay executed two Purchase and Sale Agreements. The purchase of Esenjay's sale of a 23.45 percent working interest in Runnells Field to Santos USA closed on November 19, 2001. The purchase of Esenjay's interest in the surrounding area closed on December 6, 2001. The total sale price of these transactions was $20.25 million in cash. In late December 2001, Ms. Hogenson contacted Mr. Johnson to propose a transaction between Santos USA and Esenjay in which approximately one half of the value of Esenjay's undrilled portfolio 21 would be paid out once drilled and the other half would be paid at the onset. Although Mr. Johnson indicated he would consider the possibility of the proposal, he did not respond to Ms. Hogenson. In early January 2002, Mr. Johnson contacted Ms. Hogenson to inform her that Esenjay would consider a proposal from Santos USA for Santos USA to purchase all of Esenjay's common stock. Ms. Hogenson stated that Santos USA would consider the proposal. In mid-February, 2002, Ms. Hogenson contacted Mr. Johnson to propose that Santos USA acquire Esenjay for $80 million. Mr. Johnson said Esenjay would consider the proposal. A few days later, Mr. Johnson asked Ms. Hogenson to memorialize in writing the proposal prior to Esenjay's board of directors meeting in late February 2002, so that Esenjay's board of directors could consider the proposal at that meeting. On February 26, 2002, Ms. Hogenson delivered a written proposal to Mr. Johnson in response to his request. The proposal provided that Santos USA would pay $2.86 per share in cash to purchase all of Esenjay's common stock, based on an enterprise value of $80 million less certain adjustments, subject to, among other conditions, adjustments for further due diligence, the negotiation and execution of a mutually acceptable definitive merger agreement and approval of that agreement by the parties' boards of directors. Between February 26, 2002 and March 4, 2002, Santos USA conducted a further evaluation and due diligence review of Esenjay's financial affairs, operations and assets. On March 5, 2002, Ms. Hogenson contacted Mr. Johnson to inform him of Santos USA's revised proposal following Santos USA's additional due diligence. Following discussion, the parties agreed on a purchase price of $2.84 per share of Esenjay, based on an enterprise value of $80.0 million and conditioned upon the execution of a stockholders agreement and option agreement with certain stockholders, directors and officers of Esenjay. On March 7, 2002, Esenjay executed a confidentiality agreement with respect to the terms of the proposal. Between March 5 and March 17, 2002, representatives of Santos and Esenjay, and their respective counsel, held discussions that led to the negotiation of a definitive acquisition agreement, stockholders agreement and option agreement. Santos USA also indicated that the acquisition would be consummated by Santos and the Purchaser. On March 17, 2002, the Purchaser, Santos and Esenjay executed and delivered the acquisition agreement, and Santos Ltd and Esenjay issued a press release announcing the execution and delivery of the acquisition agreement. SECTION 12. PURPOSE OF THE OFFER; THE TRANSACTION AGREEMENTS; PLANS FOR ESENJAY PURPOSE OF THE OFFER The purpose of the offer is to enable Santos to acquire control of Esenjay. The offer, as the first step in the acquisition of Esenjay, is intended to facilitate the acquisition of all the outstanding shares. As promptly as practicable following the purchase of shares pursuant to the offer and after the satisfaction or waiver of all conditions to the merger set forth in the acquisition agreement, we intend to acquire all outstanding shares of Esenjay not tendered and purchased pursuant to the offer by consummating the merger. 22 THE TRANSACTION AGREEMENTS THE ACQUISITION AGREEMENT The following is a summary of the material provisions of the acquisition agreement, a copy of which Santos and we have filed as an exhibit to the Tender Offer Statement on Schedule TO under Exchange Act Rule 14d-3 in connection with the offer (the "Schedule TO"). The summary is qualified in its entirety by reference to the acquisition agreement. THE OFFER. The acquisition agreement provides that we must commence the offer no later than March 26, 2002. Our obligation to accept for payment and pay for shares tendered under the offer is subject to the satisfaction of the Minimum Tender Condition and the satisfaction or waiver by us of the other conditions that section 14 describes. The Minimum Tender Condition is that there shall be validly tendered and not properly withdrawn prior to the expiration date of the offer the number of shares that, together with the shares the Purchaser, Santos and Santos' other direct and indirect subsidiaries own, would represent at least a majority of all outstanding shares of Esenjay on a fully diluted basis on the date of purchase. We may modify the terms of and conditions to the offer and waive any condition section 14 describes except that, without the prior written consent of Esenjay, we may not while the acquisition agreement remains in effect: - waive or make any change in the Minimum Tender Condition; - reduce the maximum number of shares we will purchase under the offer; - reduce the price per share payable under the offer or, other than by adding consideration, change the form of offer consideration; or - make any change in or addition to the conditions section 14 describes in any manner adverse to the holders of shares. The acquisition agreement provides that none of the following will constitute a change in the offer in a manner adverse to the holders of shares: - any increase in or addition to the consideration payable under the offer; or - any extension of the offer beyond the then scheduled expiration date: - for any period any applicable law or other governmental requirement including any court order, or any interpretation thereof or position thereunder by the SEC may require; - in increments of not more than five business days each, if we have reasonably determined that any condition section 14 describes is not capable of being satisfied prior to that scheduled expiration date; - for one or more periods, up to a total of 10 business days for all those periods, if, notwithstanding that all conditions section 14 describes have been satisfied or waived by us, to the extent waivable by us, as of that scheduled expiration date, less than 90% of all outstanding shares have been validly tendered and not subsequently properly withdrawn; or - for any period or periods, if, prior to our acceptance for payment of shares under the offer, Esenjay has terminated the acquisition agreement because of its intent to enter into an agreement respecting a Superior Takeover Proposal (as defined below) from a third party and we have not within four days of receiving notice of Esenjay's intent delivered to Esenjay a written counteroffer that Esenjay's board of directors has determined in good faith after consultation with its financial advisor and counsel is at least as favorable to Esenjay's stockholders as the Superior Takeover Proposal. So long as the offer remains outstanding and complies with the provisions of the acquisition agreement we describe above, Esenjay has agreed that it will not at any time, notwithstanding that it may 23 have terminated the acquisition agreement, adopt any anti-takeover measure having or purporting to have a deterrent effect on our ability to consummate the offer and thereafter acquire the remaining equity interest in Esenjay that we do not own. The acquisition agreement also provides that if any party terminates the acquisition agreement at any time prior to our acceptance for payment of shares under the offer, we, in our sole discretion, without the consent of Esenjay and notwithstanding the provisions we describe above, may make and change in the terms and conditions of the offer and revise this Offer to Purchase and the other offer documents accordingly. COMPOSITION OF THE ESENJAY BOARD FOLLOWING CONSUMMATION OF THE OFFER. The acquisition agreement provides that promptly on our acceptance for payment of, and our payment for, any shares under the offer, we will be entitled to designate such number of members of Esenjay's board of directors as will give us, subject to compliance with Section 14(f) of the Exchange Act, at least a majority of the members of the whole board and Esenjay will, at that time, cause our designees to be so elected. If our designees are elected to the Esenjay board, the acquisition agreement provides that, until the effective time of the merger, that board will have at least two directors who are "independent directors." Under the acquisition agreement, an "independent director" would be: - a current director of Esenjay who is not an officer or employee of Esenjay and whom the Esenjay board has designated to continue service as a director for purposes of the acquisition agreement; or - any individual who is not an officer, director or employee of Esenjay or of us or any of our affiliates and whom the Esenjay board has elected to fill any vacancy resulting from a current director of Esenjay ceasing to serve as an "independent director." After our nominees have become members of Esenjay's board of directors and prior to the effective time, Esenjay may not: - amend or terminate the acquisition agreement, - extend the time for the performance of any of the obligations or other acts of any party, - waive any inaccuracies in the representations and warranties the acquisition agreement contains, or - waive compliance with any of the covenants or other agreements or conditions the acquisition agreement contains, unless a majority of the independent directors then in office, as well as a majority of Esenjay's whole board of directors, shall have duly authorized that action. THE MERGER. The acquisition agreement provides that, subject to satisfaction or waiver of the conditions section 14 describes, at the effective time: - we will merge with and into Esenjay in accordance with the DGCL; - we will cease to exist as a separate legal entity; - Esenjay will continue as the surviving corporation (as such, the "surviving corporation") and will possess all the properties and rights, and be subject to all the restrictions and duties, of Esenjay and us and be governed by the laws of the State of Delaware; - Esenjay's certificate of incorporation in effect immediately prior to the effective time will be amended to provide that the authorized capital stock of Esenjay will consist of 1,000 shares of common stock, par value $.001 per share, and to eliminate the classification of the surviving corporation's board of directors into three classes; and, as so amended, that certificate of incorporation will become the certificate of incorporation of the surviving corporation; 24 - Esenjay's bylaws immediately in effect immediately prior to the effective time will become the bylaws of the surviving corporation until thereafter changed or amended in accordance with their terms or applicable law; - Esenjay's directors immediately prior to the effective time who were our nominees will be the directors of the surviving corporation until the earlier of their resignation or removal or the election of their successors; and - the officers of the surviving corporation will be as set forth in the acquisition agreement, and each of those persons will serve in each office the acquisition agreement specifies until the earlier of that person's resignation or removal or the appointment or election of that person's successor. As of the effective time and without any action on the part of any holder of shares or the capital stock of the Purchaser: - the issued and outstanding shares of our capital stock will convert into and become 1,000 validly issued, fully paid and nonassessable shares of common stock, par value $.001 per share, of Esenjay; - each Esenjay share issued and outstanding immediately prior to the effective time that Esenjay, Santos or any of Santos' affiliates then owns automatically will be canceled and retired and cease to exist, and no consideration will be delivered in exchange therefor; - except as the clause immediately above otherwise provides and subject to the provisions of the clause immediately below, each Esenjay share issued and outstanding immediately prior to the effective time automatically will: - convert into the right, and solely the right, to receive the merger consideration of $2.84 per share, less any required withholding taxes, on surrender of the certificate representing that share; and - be canceled and retired and cease to exist; and - no dissenting share will convert into the right to receive the merger consideration of $2.84 per share, except that, if under Section 262 of the DGCL the right to an appraisal of that dissenting share thereafter ceases prior to that appraisal, that dissenting share will be treated as a share that had converted as of the effective time into the right to receive the merger consideration under the clause immediately above. Each holder of a certificate formerly representing shares that have converted into the right to receive the merger consideration or representing dissenting shares that will be deemed to have so converted will, as of the effective time and thereafter, cease to have any rights respecting the shares that certificate represented immediately prior to the effective time other than: - if those shares are not dissenting shares, the right to receive the merger consideration in respect of those shares; or - if those shares are dissenting shares, the rights Section 262 of the DGCL and the acquisition agreement provide. VOTE REQUIRED TO APPROVE THE MERGER; STOCKHOLDER MEETING. In order to effect our merger with Esenjay in accordance with the DGCL, Esenjay's board must approve and find advisable the agreement of merger the acquisition agreement contains and, if the "short-form" merger procedure we describe below is not available, the holders of at least a majority of the outstanding shares also must approve the agreement of merger. Esenjay's board of directors, by the unanimous vote of all directors voting: - has approved the acquisition agreement and the transactions it contemplates, including the offer and the merger; 25 - has determined that the terms of the offer, the merger and the other transactions the acquisition agreement contemplates are advisable and fair to and in the best interests of Esenjay and its stockholders; and - recommends that the Esenjay's stockholders accept and tender their shares under the offer. If the "short-form" merger procedure is not available to us or we choose to submit the merger to the holders of shares, Esenjay has agreed in the acquisition agreement to convene a meeting of its stockholders as soon as practicable after complying with the applicable informational requirements of the Exchange Act for the purpose of their acting on the agreement of merger the acquisition agreement contains. The DGCL will not require as a condition to the consummation of the merger that Esenjay's board continue to support the merger. The acquisition agreement provides that notwithstanding that Esenjay's board may hereafter determine that our agreement of merger is no longer advisable and recommend that the stockholders reject it, the Company will submit our agreement of merger to its stockholders. The DGCL provides that, if we acquire at least 90% of the outstanding shares, under the offer or otherwise, we may merge Esenjay into us, or we may merge into Esenjay, under its "short-form" merger procedures without prior notice to or the approval of the other stockholders of Esenjay. BOARD RECOMMENDATION; COMPETING ACQUISITION PROPOSALS. Except as the acquisition agreement expressly permits, neither Esenjay's board of directors nor any committee thereof will: - withdraw or modify, or propose to withdraw or modify, in a manner adverse to us, the approval or recommendation by Esenjay's board of directors of the offer or the agreement of merger the acquisition agreement contains; - approve or recommend, or propose to approve or recommend any "Acquisition Proposal"; or - cause Esenjay to enter into any agreement relating to any Acquisition Proposal. If at any time before we accept shares for payment under the offer, however, Esenjay receives an unsolicited bona fide written Acquisition Proposal that a majority of Esenjay's board of directors determines in good faith constitutes a Superior Takeover Proposal (as defined below), that board may, at any time that is after the fourth business day following Esenjay's delivery to Santos of written notice of the material terms and conditions of that Acquisition Proposal and the identity of the person making the Acquisition Proposal: - withdraw or modify its recommendation, but not its approval, which will be irrevocable, of the offer and the agreement of merger the acquisition agreement contains; and - approve or recommend that proposal or cause Esenjay to enter into an agreement implementing that proposal. During the four business day period the paragraph above describes, Esenjay will not enter into any binding agreement respect respecting any Superior Takeover Proposal. If, during or after such period, Esenjay changes its intention to enter into any such binding agreement, it promptly must notify Santos of that change and its particulars. An "Acquisition Proposal" means any inquiry, proposal or offer from any person relating to: - any direct or indirect acquisition or purchase, other than the offer and the merger or any other takeover transaction by Santos or any affiliate of Santos, of a substantial amount of assets of Esenjay or 15% or more of any class of equity securities of Esenjay; or - any other transaction the consummation of which reasonably could be expected to impede, interfere with, prevent or materially delay the offer or the merger or reasonably would be expected to dilute materially the benefits to Santos of the transactions the acquisition agreement contemplates. A "Superior Takeover Proposal" means any bona fide written Acquisition Proposal from any person relating to any direct or indirect purchase or other acquisition by any person, other than Santos or any of 26 its affiliates, of the entire equity interest in Esenjay which that person does not already own or the business and assets of Esenjay substantially as an entirety in a takeover transaction that: - is for cash, securities not issued by or convertible into the securities of Esenjay, or a combination of the two to the holders of shares and is otherwise on terms that Esenjay's board of directors determines in the good faith of its members and on the basis of written advice of Esenjay's financial advisor, and taking into account all legal, financial, regulatory and other aspects of that proposal and the person making that proposal, would, if consummated, be more favorable, from a financial point of view, to those holders than the offer and the merger and is reasonably likely to be consummated without undue delay; and - does not include or otherwise provide for or contemplate, directly or indirectly, the adoption by Esenjay of, or any commitment by it to perform, any measure having or purporting to have a deterrent effect on the ability of Santos or any of its affiliates to consummate the offer or otherwise effect a takeover of Esenjay thereafter or any restriction that is more restrictive than the non-solicitation provisions this Offer to Purchase describes below under "--No Solicitation" on Esenjay's ability to solicit, initiate, encourage or take any other action to facilitate a takeover of Esenjay by Santos or any of its affiliates (an "anti-takeover measure"). NO SOLICITATION. The acquisition agreement provides that Esenjay: - will, and will cause all its representatives to, cease immediately any discussions or negotiations with any parties which may be ongoing with respect, or which reasonably may be expected to lead, to any Acquisition Proposal; and - will not authorize or permit any of its representatives to: - solicit, initiate or encourage, including by way of furnishing information, or take any other action to facilitate, any inquiries or the making of any proposal which constitutes, or reasonably may be expected to lead to, any Acquisition Proposal; or - participate in any discussions or negotiations regarding, or which reasonably may be expected to lead to, any Acquisition Proposal; provided, however, that, if at any time before we accept shares for payment under the offer, Esenjay receives an unsolicited bona fide written Acquisition Proposal and a majority of Esenjay's board of directors determines in good faith that the proposal reasonably may be expected to constitute a Superior Takeover Proposal, Esenjay may, and may permit its representatives to, in response to that proposal, and provided that Esenjay complies with the requirements the next paragraph sets forth, furnish information about Esenjay to any person under a confidentiality agreement in a form Santos has previously approved in writing, which approval Santos will not unreasonably withhold, and participate in negotiations regarding that proposal. If Esenjay or, to its knowledge, any of its representatives receives any Acquisition Proposal or any request for information or inquiry with respect, or which reasonably may be expected to lead, to an Acquisition Proposal, Esenjay must: - immediately advise Santos orally of, and thereafter promptly, but in no event later than 24 hours after receipt, confirm to Santos in writing, the material terms and conditions of that Acquisition Proposal, request or inquiry and the identity of the person making that Acquisition Proposal, request or inquiry; and - thereafter keep Santos fully informed of the status and details, including amendments or proposed amendments, of that Acquisition Proposal, request or inquiry. Nothing in these provisions will prohibit Esenjay from taking and disclosing to its stockholders a position Exchange Act Rule 14e-2(a) contemplates or from making any disclosure to Esenjay's stockholders if, in the opinion of Esenjay's board of directors after consultation with its counsel, the failure to make such a disclosure would be inconsistent with the fiduciary duties of the Esenjay directors under 27 Delaware law; provided, however, that, except as the acquisition agreement otherwise permits, neither Esenjay nor its board of directors or any committee thereof will withdraw or modify, or propose to withdraw or modify, the position of Esenjay's board with respect to the offer and the agreement of merger or approve or recommend, or propose to approve or recommend, a Superior Takeover Proposal. The acquisition agreement provides that so long as the offer remains outstanding and complies with the provisions we describe above under "--The Offer," Esenjay will not at any time, notwithstanding that it may have terminated the acquisition agreement adopt, by means of any amendment to its certificate of incorporation or bylaws or any agreement or its part, any measure having or purporting to have, in the event Esenjay terminates the acquisition agreement in the manner and for the reasons we describe below in clause (4) of the first paragraph under "--Termination," a deterrent effect on the ability of Santos or any of its affiliates to consummate the offer or otherwise effect a takeover of Esenjay. CONDUCT OF BUSINESS OF ESENJAY. Esenjay has agreed that, until our nominees constitute a majority of its board of directors, it will, except as the acquisition agreement otherwise expressly contemplates or permits or as we otherwise have previously consented to in writing: - carry on its businesses in substantially the same manner as it has heretofore and not introduce any new methods of management, operation or accounting that in the aggregate are material to the business of Esenjay; - maintain its properties and facilities, including those it holds under leases, in as good working order and condition as on March 17, 2002, ordinary wear and tear excepted; - perform in all material respects all its obligations under agreements relating to or affecting its properties, rights and other assets, including its credit agreement with Deutsche Bank AG New York Branch (the "credit agreement"); - keep in full force and effect without interruption all its present insurance policies or other comparable insurance coverage; - use reasonable commercial efforts to maintain and preserve its business organization intact, retain its present employees and maintain its relationships with suppliers, customers and others having business relations with it; - comply with all applicable governmental requirements; and - maintain the instruments and agreements governing its outstanding indebtedness and leases on their present terms and not enter into new or amended indebtedness or new or amended lease instruments or agreements involving amounts over $25,000 in any single case or $100,000 in the aggregate. Esenjay also has agreed that until our nominees constitute a majority of its board, it will not, except as the acquisition agreement otherwise expressly contemplates or permits or as we otherwise have previously consented to in writing: - declare or pay any dividends on or make other distributions in respect of any of its capital stock; split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; or repurchase, redeem or otherwise acquire any shares of its capital stock; - issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock, or any derivative securities or phantom securities, except that it may issue: - shares on the exercise of options and warrants awarded and outstanding on March 17, 2002 in accordance with the present terms of those options or warrants and the applicable option plan or warrant agreement; - shares under its bonus pay plans for 2000 and 2001, as it has disclosed to us in writing; 28 - shares as contributions under its 401(k) savings plan, as it has disclosed to us in writing; and - options awarded but not issued under its long-term incentive plan, as it has disclosed to us in writing, provided those options are in form and substance reasonably satisfactory to Santos; - amend or propose to amend its certificate of incorporation or bylaws; - make, or enter into a contract or other commitment to make, directly or indirectly: - any investments, other than various permitted investments, in the capital stock or indebtedness of any person; or - except in connection with transactions generally accepted accounting principles properly characterize as hedging transactions, as distinct from trading transactions, that the credit agreement requires, issue or acquire any commodity derivatives; - negotiate for the acquisition of any business or the start-up of any new business or, merge, consolidate or otherwise effect a business combination with, or agree to merge, consolidate or otherwise effect a business combination with, any other entity; - other than sales of production and products in the ordinary course of business and consistent with prior practice and the requirements of the credit agreement, directly or indirectly sell, lease, license, encumber or otherwise dispose of, or enter into a contract to sell, lease, license, encumber or otherwise dispose of, any of its assets; - incur any indebtedness for borrowed money or guarantee any such indebtedness, issue or sell any debt securities or warrants or rights to acquire any of its debt securities or guarantee any debt securities of others; provided that in the case of any requested deviation from this provision, we will not unreasonably withhold our consent; - make any tax elections that, individually or in the aggregate, would have a material adverse effect on it or settle or compromise any of its income tax liabilities that, individually or in the aggregate, would have a material adverse effect on it; - pay, discharge, settle or satisfy any claims, liabilities or obligations, other than, in the ordinary course of business consistent with past practice or in accordance with their terms, liabilities (1) its unaudited consolidated financial statements for 2001 recognize or disclose or (2) incurred in 2002 in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which it is a party; - fail to comply with any covenant article VIII of the credit agreement contains; - except in the ordinary course of business, modify, amend or terminate any contract or agreement material to it to which it is a party or of which it is a beneficiary or by which it is bound or waive, release or assign any rights or claims material to it; - permit the call of the 2002 annual meeting, or any special meeting, of its stockholders; or - amend or otherwise change any agreement it or has with its financial advisors. ACCESS TO INFORMATION. The acquisition agreement provides that on reasonable notice and subject to some customary restrictions, Esenjay will: - afford to us and our representatives access during normal business hours to all its properties, books, contracts, commitments and records; and - furnish promptly to us copies of various reports and documents it files or receives under the federal securities or tax laws and all other information concerning its business, properties and personnel as we reasonably may request. 29 The acquisition agreement also provides that Esenjay will deliver to us copies of its audited consolidated financial statements for 2001, together with the report of Deloitte & Touche LLP thereon, promptly after they become available to it. Santos and we have agreed in the acquisition agreement to keep all confidential information of Esenjay confidential, subject to customary exceptions, and not use that information in a manner detrimental to Esenjay or its stockholders. The acquisition agreement does not contain, and we have not made, any provision to grant holders of shares access to our corporate files or to obtain at our expense counsel or appraisal services. MUTUAL REASONABLE EFFORTS. Esenjay, Santos and we have mutually agreed to take the actions that may be necessary to obtain approvals or clearances from governmental authorities, if any, which are necessary to effect our transaction. Our transaction does not require any filing or clearance under the Hart- Scott-Rodino Antritrust Improvements Act of 1976. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. The acquisition agreement provides that all rights to indemnification for acts or omissions occurring before the effective time existing as of March 17, 2002 in favor of the current or former directors or officers of Esenjay which its certificate of incorporation and bylaws then provide, or as applicable law otherwise provides, will survive the merger and continue in full force and effect in accordance with their terms. The acquisition agreement also provides that, for a period of six years after the effective time, Santos will, unless it elects at its option in writing to guarantee performance of those indemnification obligations, maintain in effect Esenjay's current policy of D&O liability insurance covering those persons who are currently covered by Esenjay's D&O policy; provided, however, that Santos will extend that current policy in effect to cover claims made prior to the first anniversary of the effective time if the premium for that additional coverage does not exceed $80,000. REPRESENTATIONS AND WARRANTIES. In the acquisition agreement, Esenjay has made customary representations and warranties to us, including those relating to: - its organization, power and qualification; - its certificate of incorporation, bylaws and capital structure; - corporate authorizations of our transaction and the enforceability of the acquisition agreement and other agreements relating to our transaction; - absence of conflicts; - compliance with laws and contractual obligations; - absence of specified changes or events and undisclosed liabilities; - accuracy of reserve and other information supplied; - litigation; - employee matters, including employee benefit and welfare plans and other compensation arrangements; - tax matters; - intellectual property; and - environmental matters. 30 In the acquisition agreement, Santos and we also have made customary representations and warranties to Esenjay, including those relating to: - our organization, powers and qualifications; - corporate authorizations of our transaction and the enforceability of the acquisition agreement; - compliance with laws and contractual obligations; and - availability of financing for our transaction. Some of Esenjay's representations and warranties in the acquisition agreement are qualified as to "materiality" or "company material adverse effect." In the acquisition agreement, a "company material adverse effect" means, with respect to the consequences of any fact or circumstance, including the occurrence or non-occurrence of any event, that the fact or circumstance has caused, is causing or reasonably could be expected to cause, directly, indirectly or consequentially, individually or in the aggregate with all other facts and circumstances qualified as to materiality, damage or loss, including under environmental laws, that is "material" to Esenjay. In the acquisition agreement "material" means, as applied to any person or to Esenjay, material to the business, operations, property or other assets, liabilities, financial condition, results of operations or prospects of that person and its subsidiaries considered as a whole or Esenjay, as the case may be. CONDITIONS TO THE MERGER. Under the acquisition agreement, the respective obligations of each party to effect the merger are subject to the satisfaction of each of the following conditions prior to the closing date of the merger: - if the DGCL so requires for the effectuation of the merger, Esenjay shall have obtained the approval by its stockholders of the agreement of merger; - no governmental requirement or other legal restraint or prohibition preventing or materially restraining the consummation of the merger shall be in effect; provided, however, that each of the parties shall have used reasonable efforts to prevent the entry of any injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered; and - we shall have previously accepted for payment and paid for shares under the offer. These conditions to the merger are different from the conditions to the offer, which section 14 sets forth. STOCK OPTIONS, WARRANTS AND BENEFIT PLANS. At the effective time, each then outstanding option to purchase shares will automatically convert solely into the right to receive with respect to each share subject thereto, without interest, cash in the amount equal to the excess, if any, of the offer consideration per share over the exercise price per share under that option. Also at the effective time, each then outstanding warrant to purchase or otherwise acquire shares or share equivalents will automatically convert into solely the right to receive with respect to each share or share equivalent subject thereto cash in the amount equal to the excess, if any, of the offer consideration per share over the exercise price per share or share equivalent under that warrant. The acquisition agreement requires Esenjay, prior to the consummation of the offer, to amend: - its employee incentive and severance protection plan, or "EISP," to limit participation in the EISP to persons who were its employees on March 17, 2002; - its option plans to provide that no options or other share-based awards hereafter will be available except as it has disclosed to us in writing; and - its 401(k) savings plan to limit participation in that plan to persons who were its employees on March 17, 2002. 31 Santos has agreed in the acquisition agreement that, after we consummate the offer, it will: - cause Esenjay to perform its payment options which thereafter become due under the EISP, for whose purposes that consummation will constitute a "change in control," and its 2000 and 2001 bonus pay plans; and - provide Esenjay employees service credit for purposes of Santos' 401(k) savings plan, vacation policy and bonus plan. TERMINATION. The acquisition agreement may be terminated, and the merger may be abandoned, at any time prior to the effective time, whether before or after approval by Esenjay's stockholders of the agreement of merger: (1) by mutual written consent of Santos and Esenjay; (2) by either Santos or Esenjay: (A) if: (1) as a result of the failure of any of the offer conditions section 14 describes, the offer shall have terminated or expired in accordance with its terms without our having accepted for payment any shares under the offer; or (2) we shall not have accepted for payment any shares under the offer within 180 days following March 17, 2002, provided, however, that the right to terminate the acquisition agreement under this provision will not be available to any party whose failure to perform any of its obligations or whose breach of any of its representations and warranties shall have caused that right to become exercisable; or (B) if any governmental authority shall have issued any order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting our acceptance for payment of, or payment for, shares under the offer or the consummation of the merger and that order, decree or ruling or other action shall have become final and nonappealable; (3) by Santos if, prior to our purchase of shares under the offer: (A) Esenjay's board of directors shall have: (1) withdrawn, or modified or otherwise changed, in a manner or to an effect adverse to Santos or us, its approval or recommendation of the offer or the agreement of merger; (2) approved or recommended any Acquisition Proposal or determined any Acquisition Proposal to be a Superior Takeover Proposal; or (3) taken any action for the purpose of rendering the restrictions of Section 203 of the DGCL inapplicable to any acquisition of shares, other than under the offer or the merger or as the acquisition agreement otherwise contemplates, or any takeover transaction other than the merger; (B) Esenjay shall have breached any provision we describe above under "--Board Recommendation; Competing Acquisition Proposals," or "--No Solicitation" in any material respect; (C) Esenjay shall have breached: (1) any of its representations and warranties that are qualified as to materiality or a company material adverse effect or are not so qualified if, as a result of all breaches thereof in the aggregate, a company material adverse effect has occurred or reasonably could be expected to occur; or (2) any of its covenants and other agreements under the acquisition agreement, other than those related to the adoption of any anti-takeover measure and those this Offer to Purchase 32 describes above under "--Board Recommendation; Competing Acquisition Proposals" and "--No Solicitation" in any material respect; all which breaches, in the case of clauses (C)(1) and (2), either are not capable of being cured or, in the case of any such breach that is so capable, that breach has not been cured before the first to occur of the elapse of ten consecutive business days after Santos or the Purchaser has delivered to Esenjay a written notice of that breach or the expiration of the offer; or (D) any stockholder who has signed the stockholders agreement shall have breached any of its covenants and other agreements in sections 2, 3, 4 and 5 of that agreement (see "--Transaction Agreements--Stockholders Agreement" below); (4) by Esenjay, if, prior to the purchase of shares under the offer: (A) the Esenjay board of directors, by a majority vote of the whole board, has determined in the good faith of its members and on the basis of, among other facts, the advice of Esenjay's financial advisor and outside counsel, that Esenjay has received a Superior Takeover Proposal; (B) the Esenjay board has directed Esenjay to notify Santos in writing that Esenjay intends to enter into a definitive agreement respecting that proposal, and Esenjay has delivered that notice to Santos together with either the then most current version of that agreement or an accurate, complete description of all the material terms and conditions thereof; and (C) Santos, within four business days after its receipt of that notice, either has not delivered to Esenjay a written counteroffer to that proposal or has delivered to Esenjay a written counteroffer to that proposal which the Esenjay board has determined, in the good faith of its members and after consultation with Esenjay's financial advisor and outside counsel, is not at least as favorable to Esenjay's stockholders, other than Santos and its subsidiaries, as that proposal; or (5) by Esenjay, if the Purchaser or Santos shall have breached: (A) any of its representations and warranties in the acquisition agreement that are qualified as to materiality or a material adverse effect or are not so qualified if, as a result of all breaches thereof in the aggregate, a material adverse effect on the ability of Santos and us to consummate the offer or the merger has occurred or reasonably could be expected to occur; or (B) any of its covenants and other agreements in the acquisition agreement in any material respect, if, as a result of all breaches thereof in the aggregate, a material adverse effect on the ability of Santos and us to consummate the offer or the merger has occurred or reasonably could be expected to occur; all which breaches, in the case of clauses (A) and (B) above, are not capable of being cured or, in the case of any such breach that is so capable, that breach has not been cured before the elapse of ten consecutive business days after Esenjay has delivered to Santos a written notice of that breach; or (6) by Esenjay if, prior to our acceptance for payment or purchase of shares under the offer, we shall have terminated the offer on the stated ground that Santos shall not have received the environmental site assessment reports section 14 describes in form and substance satisfactory to Santos. Any termination of the acquisition agreement which we describe in clause (3)(A) or (B) or (4) above in this paragraph will be a "trigger event" requiring Esenjay to pay Santos the termination fee we describe below under "--Fees and Expenses." Esenjay may not terminate the acquisition agreement for a reason clause (5) above describes if it is, and Santos may not terminate the acquisition agreement for a reason clause (3) above describes if either it or the Purchaser is, then in a material breach of any of its representations and warranties or covenants or other agreements the acquisition agreement contains. 33 Any termination of the acquisition agreement by any party will require the prior authorization of either the board of directors of that party or the duly authorized designee of that board. EFFECT OF TERMINATION. If a party terminates the acquisition agreement in accordance with its termination provisions, various of its other provisions, including the agreements of Esenjay we describe above under "--Board Recommendation; Competing Acquisition Proposals" and "--No Solicitation," will survive that termination and remain in full force and effect. FEES AND EXPENSES. Except as the next paragraph describes, each party will pay the fees and expenses it incurs in connection with the offer, the merger and the acquisition agreement and the other transactions the acquisition agreement contemplates, whether or not the offer or the merger is consummated. Esenjay will pay a termination fee of $3,000,000 to Santos at the applicable time the acquisition agreement specifies (1) if any of the trigger events we describe above under "--Termination" occurs or (2) if an Acquisition Proposal has been publicly announced, communicated or otherwise disclosed prior to both our purchase of shares under the offer and the termination of the acquisition agreement and the following events occur: - Santos becomes entitled to, and does, terminate the acquisition agreement for any of the reasons clause (3)(C) in the first paragraph under "--Termination" describes, except as we note below, or Esenjay becomes entitled to, and does, at a time when the Minimum Tender Condition has not been satisfied and neither Santos nor we are in a material breach of the acquisition agreement, terminates the acquisition agreement for the reasons clause (2)(A) in the first paragraph under "--Termination" describes; and - within 12 months after that termination, Esenjay consummates or enters into an agreement providing for the consummation of any transaction that has been the subject of any Acquisition Proposal. If the reason Santos terminates the acquisition agreement under the circumstances clause (3)(C) in the first paragraph under "--Termination" describes is Esenjay's breach of its representation and warranty that no company material adverse effect has occurred and the company material adverse effect giving rise to that breach was not caused by any action or omission to act by Esenjay, Esenjay will not be obligated to pay the terminate fee to Santos. If Esenjay becomes obligated to pay the termination fee to Santos, it also will reimburse Santos for all out-of-pocket fees and expenses Santos and we have reasonably incurred from and after January 1, 2002 in connection with the offer, the merger, the acquisition agreement and the transactions the acquisition agreement contemplates and the enforcement of their rights under acquisition agreement. If Esenjay becomes entitled to, and does, terminate the acquisition agreement for the reasons clause 5 in the first paragraph above under "--Termination" describes, Santos will reimburse Esenjay for all out-of-pocket fees and expenses Esenjay has reasonably incurred from and after January 1, 2002 in connection with the offer, the merger, the acquisition agreement and the transactions the acquisition agreement contemplates and the enforcement of its rights under the acquisition agreement. AMENDMENT; EXTENSION AND WAIVER. If: - Esenjay has given a notice to Santos of the type to which clause 4(B) in the first paragraph above under "--Termination" refers; - Santos has delivered to Esenjay within four business days after its receipt of that notice a written counteroffer to the Superior Takeover Proposal that is the subject of that notice; and - Esenjay's board of directors has determined that counteroffer to be at least as favorable to Esenjay's stockholders (other than Santos and its subsidiaries) as that proposal; the parties promptly will execute and deliver an amendment or supplement to the acquisition agreement, and Santos promptly after that execution and delivery by the parties will amend the offer documents, to 34 give effect to the changes in the terms of the offer and the merger which that counteroffer contemplates will be made. That amendment or supplement to the acquisition agreement will not require any further authorization by Esenjay's board of directors, whose initial approval of the acquisition agreement will constitute the approval of that amendment or supplement. Except as the acquisition agreement otherwise provides, the parties may amend the acquisition agreement if and to the extent that their respective boards of directors authorize them to do so, at any time before or after Esenjay's stockholders have approved the agreement of merger, if the DGCL requires that approval, but, after any such approval, the parties may not effect any further amendment that by law requires further approval by those stockholders without that further approval. To be effective, any amendment must be in a written document each party has executed and delivered to the other parties. At any time prior to the effective time, the parties, by action their respective boards of directors have taken or authorized, may, to the extent applicable governmental requirements permit: - extend the time for the performance of any of the obligations or other acts of any party; - waive any inaccuracies in the representations and warranties the acquisition agreement contains; or - waive compliance with any of the covenants or other agreements or conditions the acquisition agreement contains. To be effective, any agreement on the part of a party to any such extension or waiver must be in a written document that party has executed and delivered to the other parties. APPRAISAL RIGHTS. The holders of shares will not have appraisal rights as a result of the offer. If the merger is consummated, however, holders of shares at the effective time of the merger who do not vote in favor of the merger will have rights under Section 262 of the DGCL to demand appraisal of their shares. Under Section 262, stockholders who demand appraisal and comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their shares (excluding any element of value arising from the accomplishment or expectation of the merger) and to receive payment of that fair value in cash, together with a fair rate of interest, if any. Any judicial determination of the fair value of shares could be based on factors other than, or in addition to, the price per share to be paid in the merger or the market value of the shares. The value determined in this manner could be more or less than the price per share to be paid in the merger. This summary of Section 262 does not purport to be complete and is qualified in its entirety by reference to Section 262. IF YOU FAIL TO FOLLOW THE STEPS SECTION 262 REQUIRES FOR PERFECTING APPRAISAL RIGHTS, YOU MAY LOSE THOSE RIGHTS. "GOING PRIVATE" TRANSACTIONS. Exchange Act Rule 13e-3 applies to various types of "going private" transactions. We do not believe that this rule will apply to the merger unless it takes place more than one year after the termination of the offer. If applicable, Rule 13e-3 would require, among other things, that financial information concerning the fairness of the proposed transaction and the consideration offered to public stockholders in that transaction be filed with the SEC and disclosed to those stockholders prior to the consummation of that transaction. THE STOCKHOLDERS AGREEMENT Santos has entered into a stockholders agreement dated as of March 17, 2002 (the "stockholders agreement") with each of the following stockholders of Esenjay: Alex M. Cranberg, Aspect Energy, LLC, Michael E. Johnson, Esenjay Petroleum Corporation, David W. Berry, Alex B. Campbell, Jeffrey B. Pollicoff, Jack P. Randall, Hobart A. Smith, David B. Christofferson and William D. Dodge (the "tendering stockholders"). In the stockholders agreement, each tendering stockholder has agreed to tender under the offer all his or its shares as well as any other Esenjay securities that the tendering stockholder acquires after the date of the stockholders agreement (the "committed shares"). Each tendering 35 stockholder has irrevocably appointed officers of Santos as proxies to vote his or its committed shares in the following manner: - for adoption and approval of the acquisition agreement which sets forth the terms of the merger; and - against the taking of any action or entering any agreement that would result in any breach of Esenjay's representations, warranties, covenants or other agreements in the acquisition agreement or would prevent, impede, interfere with, delay or postpone the consummation of the offer or the merger, including any Acquisition Proposal. The stockholders agreement provides that each tendering stockholder will not take any of the following actions: - sell, transfer, pledge, assign, or otherwise dispose of any of that tendering stockholder's committed shares or enter into any contract, option or other agreement or understanding respecting any of the aforementioned actions; - grant any proxy, power-of-attorney or other authorization respecting that tendering stockholder's committed shares; - deposit into a voting trust, or enter into a voting agreement, respecting that tendering stockholder's committed shares; or - take any other action that reasonably could be expected in any way to restrict, limit or interfere with the consummation of the offer or the merger or that would interfere with the performance by that tendering stockholder of his or its obligations under the stockholders agreement. In the stockholders agreement, each of Michael E. Johnson, David W. Berry and David B. Christofferson has agreed to not use and to keep confidential any trade secrets, nonpublic or proprietary or other confidential information respecting Esenjay, Santos or its affiliates to which he has had, has or may have access unless Santos consents in advance in writing to the use or disclosure of that confidential information. Santos is entitled to enjoin any breach or threatened breach of the confidentiality provisions contained in the stockholders agreement. The confidentiality provisions terminate if the offer is terminated by us without our purchasing any shares under the offer; otherwise, these provisions continue indefinitely. The obligations of the stockholders under the stockholders agreement respecting their committed shares, including their agreement not to withdraw their shares from the offer and their irrevocable proxy, will terminate on the first to occur of: - the termination of the acquisition agreement by Esenjay in the manner and for the reasons clause (4) in the first paragraph under "--The Acquisition Agreement--Termination" describes; or - our termination of the offer without having purchased any shares thereunder. As of the date of the stockholders agreement, the tendering stockholders held in the aggregate 10,035,392 shares, representing approximately 52% of the issued and outstanding shares as of March 1, 2002. THE OPTION AGREEMENT Santos has entered into an option agreement dated as of March 17, 2002 (the "option agreement") with each of the following stockholders of Esenjay: Alex M. Cranberg, Aspect Energy, LLC, Michael E. Johnson, Esenjay Petroleum Corporation and David W. Berry (the "optionors"). In the option agreement, each optionor has granted to Santos an irrevocable option to purchase all his or its shares (the "original shares") as well as any other Esenjay securities that the optionor acquires after March 17, 2002 (together, the "optioned shares") at a purchase price equal to the product of the number of that optionor's original shares multiplied by $2.84. 36 Santos, at its election, may exercise the options in whole, but not in part, during the "option exercise period," which, if: - Santos becomes entitled to, and does, terminate the acquisition agreement for any of the reasons clause (3) in the first paragraph under "--The Acquisition Agreement--Termination" describes, or - Esenjay becomes entitled to, and does, terminate the acquisition agreement in the manner and for the reasons clause (4) in the first paragraph under "--The Acquisition Agreement--Termination" describes, is the 30-day period beginning on the next day following our termination of the offer without having purchased any shares thereunder. In the option agreement, each optionor has agreed to endorse certificates representing all of his or its optioned shares in blank with the signature guaranteed and to deposit them with an escrow agent. Each optionor has granted the escrow agent an irrevocable power of attorney authorizing the escrow agent to effect a valid tender of the optioned shares under the terms of the stockholders agreement. If any optionor withdraws his or its tendered shares from the offer, the escrow agent will hold the option shares in escrow until Santos exercises the options or the 30-day option period expires without Santos' having exercised the options. Each optionor has agreed to abide by certain limitations on his or its competitive activity with Esenjay from March 17, 2002 until the close of business on March 17, 2003. In that connection, each optionor must not: - acquire or enter into an agreement to acquire any interest in the lands or minerals located within the non-competition area the option agreement describes, whether by means of lease, purchase, assignment, trade, sublease, easement, farmout or any other form of acquisition, including any merger with or acquisition of stock or ownership interests in another entity; or - call on or otherwise solicit any natural person who is at that time employed by Esenjay in a managerial capacity with the purpose or intent of attracting that person from the employ of Esenjay. If any optionor acquires any interest in the non-compete area in contravention of the terms of the option agreement, whether directly or through direct or indirect ownership or contract rights with respect to another person or entity, including as principal, agent, stockholder, partner, joint venturer, employer, employee or in any other capacity, that optionor must transfer the acquired interest to Esenjay within 30 days of that optionor's acquisition of that interest without receiving payment therefor. Santos or Esenjay may enforce the non-competition provisions by injunctions and restraining orders against the optionor. As of the date of the option agreement, the optionors owned in the aggregate 9,972,922 shares, representing approximately 52% of the issued and outstanding shares as of March 1, 2002. PLANS FOR ESENJAY As we state under "--The Acquisition Agreement--Composition of the Esenjay Board Following Consummation of the Offer," if we purchase shares under the offer, the acquisition agreement provides that we will be entitled to designate representatives to constitute a majority of the Esenjay board of directors; provided, however, that, until the effective time, there must be at least two independent directors. Promptly on the consummation of the offer, we currently intend to seek the maximum representation on the Esenjay board of directors the acquisition agreement permits. We expect that our representation on the Esenjay board will permit us to exert substantial influence over Esenjay's conduct of its business and operations. As a result of the merger, the directors we have chosen to be the directors of Esenjay immediately prior to the effective time will become the directors of Esenjay as the surviving corporation. See "--The Acquisition Agreement--The Merger." 37 We describe under "-- The Acquisition Agreement -- The Merger" the effect of the merger on the capital stock of Esenjay and us and on the certificate of incorporation and bylaws of Esenjay. If registration of the shares is not terminated prior to the merger, the shares will be delisted from all stock exchanges and the registration of the shares under the Exchange Act will be terminated following the consummation of the merger. Esenjay will thereafter have no obligation to file reports with the SEC under the Exchange Act. Santos and we expect that, initially following the merger, the business and operations of Esenjay will, except as this Offer to Purchase describes, be continued substantially as they are currently being conducted. Under the acquisition agreement, the following individuals will assume the following positions with Esenjay as the surviving corporation once the offer and the merger have been consummated: Kathleen A. Hogenson............................ President Peter R. Robinson............................... Vice President, Secretary and Treasurer
On consummation of the merger, Santos intends to repay Esenjay's currently outstanding bank debt of approximately $18.6 million. Santos will continue to evaluate the business and operations of Esenjay during the pendency of the offer and after the consummation of the offer and the merger and will take the actions it deems appropriate under the circumstances existing at that time. Santos intends to seek additional information about Esenjay during this period. Thereafter, Santos will perform a comprehensive review of Esenjay's business, assets, operations, capitalization, dividend policy, management and personnel, with a view to optimizing development of Esenjay's potential in conjunction with Santos' current and future business plans. Except as this Offer to Purchase sets forth, Santos and we have no present plans or proposals that would relate to or result in any extraordinary corporate transaction involving Esenjay (such as a merger, reorganization or liquidation), any purchase, sale or transfer of a material amount of assets of Esenjay, any change in the board of directors or management of Esenjay, any material change in Esenjay's indebtedness, capitalization or dividend policy, any other material change in Esenjay's corporate structure or business, a class of securities of Esenjay being delisted from a national securities exchange or ceasing to be authorized to be quoted in an automated quotations system operated by a national securities association, a class of equity securities of Esenjay becoming eligible for termination of registration under Section 12(g) of the Exchange Act, the suspension of Esenjay's obligation to file reports under Section 15(d) of the Exchange Act, the merger or disposition of securities of Esenjay or changes in Esenjay's certificate of incorporation or bylaws. SECTION 13. DIVIDENDS AND DISTRIBUTIONS As section 12 describes, the acquisition agreement provides that Esenjay will not, between March 17, 2002 and the effective time, without our prior written consent, declare or pay any dividend or make other distributions with respect to any of its capital stock. SECTION 14. CONDITIONS TO THE OFFER Notwithstanding any other term of the offer or the acquisition agreement, we will not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Exchange Act Rule 14e-l(c) (which relates to our obligation to pay for or return tendered shares promptly after the termination or withdrawal of the offer), to pay for, and may postpone the acceptance for payment of and payment for, shares tendered, and, except as the acquisition agreement otherwise provides, terminate the offer as to any shares not then paid for if there shall not have been validly tendered and not withdrawn prior to the expiration of the offer that number of shares which would satisfy the Minimum Tender Condition. 38 Moreover, notwithstanding any other term of the offer or the acquisition agreement, we will not be required to accept for payment or, subject as aforesaid, pay for any shares we have not already accepted for payment or paid for, and may terminate or amend the offer, with or without the consent of Esenjay as the acquisition agreement provides, if, at any time on or after the date of the acquisition agreement and before our acceptance of shares for payment or our payment therefor, any of the following conditions exists: (a) there shall be pending any suit, action or proceeding by any governmental authority, or pending any suit, action or proceeding that has a reasonable likelihood of success by any other person: (1) seeking to restrain, prohibit or make illegal or materially more costly the making or consummation of the offer or the merger or any other transactions the acquisition agreement contemplates; (2) seeking to prohibit or limit the ownership or operation by Esenjay, Santos or any of their respective affiliates of any material portion of the business or assets of Esenjay, Santos or any of their respective affiliates, or to compel Esenjay, Santos or any of their respective affiliates to dispose of or hold separate any material portion of the business or assets of Esenjay, Santos or any of their respective affiliates, as a result of the offer, the merger or any other transaction the acquisition agreement contemplates; (3) seeking to impose limitations that in the aggregate are material on the ability of Santos or us or any affiliate of Santos to acquire or hold, or exercise full rights of ownership of, any shares, including the right to vote the shares purchased or otherwise acquired by it on all matters properly presented to the stockholders of Esenjay; (4) seeking to prohibit Santos or any of its affiliates from effectively controlling in any material respect the business or operations of Esenjay; or (5) that otherwise could reasonably be expected to have a company material adverse effect; (b) any statute, rule, regulation, legislation, interpretation, judgment, order or injunction shall be enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (1) Santos, Esenjay or any of their respective affiliates or (2) the offer, the merger or any other transaction the acquisition agreement contemplates, in either case by any governmental authority that is reasonably likely to result, directly or indirectly, in any of the consequences to which paragraph (a) above refers; (c)(1) it shall have been publicly disclosed, or Santos shall have otherwise learned, that beneficial ownership, determined for the purposes of this paragraph under Exchange Act Rule l3d-3, of more than 15% of the shares has been acquired by another person that is not a stockholder who has signed the stockholders agreement; or (2) Esenjay's board of directors or any committee thereof shall have: (A) withdrawn or modified that board's approval or recommendation of the offer, including by amendment of the Schedule 14D-9, in a manner adverse to Santos or us; (B) approved or recommended to the stockholders of Esenjay an Acquisition Proposal, determined that an Acquisition Proposal is a Superior Takeover Proposal or announced its intention to enter into an agreement with respect to an Acquisition Proposal; (C) approved or recommended that the stockholders of Esenjay tender their shares into any tender offer or exchange offer that is an Acquisition Proposal or is related thereto; or (D) resolved to do any of the foregoing; (d) Esenjay shall have breached any of its representations and warranties in the acquisition agreement which (1) are qualified as to materiality or a company material adverse effect or (2) are not so 39 qualified if, as a result of all breaches thereof, a company material adverse effect has occurred or reasonably could be expected to occur; (e) there shall have occurred any changes, conditions, events or developments that have had, or reasonably could be expected to have, individually or in the aggregate, a company material adverse effect; (f) there shall have occurred or been threatened: (1) any material change in Australian currency exchange rates relative to United States currency exchange rates or a suspension of, or limitation on, the markets therefor; (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (3) any limitations, whether or not mandatory, by any government or governmental authority, domestic, foreign or supranational, on, or other event that might affect the extension of credit by banks or other lending institutions; (g) Esenjay shall have breached in any material respect any of its material agreements or covenants under the acquisition agreement; (h) Santos shall not have received environmental site assessment reports from each of (1) Cornerstone Environmental Services, Inc., covering twelve of Esenjay's operating wells and (2) Anderson Environmental Services, Inc., covering Esenjay's remaining operating wells, in each case in form and substance satisfactory to Santos in its sole discretion; (i) the auditor's report to the audited consolidated financial statements of Esenjay for the year ended December 31, 2001, shall have contained any reservation, qualification or non-standard disclosure; or (j) the acquisition agreement shall have been terminated in accordance with its terms; in each case which, and regardless of the circumstances giving rise to any such condition, including any action or inaction by Santos or any of its affiliates, makes it inadvisable, in the good-faith judgment of Santos, to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Santos and us. Santos or we may assert any of those conditions regardless of the circumstances giving rise thereto or may waive any of those conditions in whole or in part at any time and from time to time in our sole discretion; provided, however, that while the acquisition agreement remains in effect, the Minimum Tender Condition may not be waived without the prior written consent of Esenjay. The failure by Santos or us or any other affiliate of Santos at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Santos with respect to the foregoing conditions will be final and binding on all parties. SECTION 15. LEGAL MATTERS GENERAL. Except as this section 15 describes, based on a review of publicly available filings Esenjay has made with the SEC and other publicly available information concerning Esenjay and discussions of representatives of Santos with representatives of Esenjay, none of Santos, Esenjay or us is aware of any license or regulatory permit that appears to be material to the business of Esenjay that might be adversely affected by our acquisition of shares as this Offer to Purchase contemplates or of any approval or other action by any governmental entity that would be required or desirable for the acquisition or ownership of shares by Santos or us as this Offer to Purchase contemplates. Should any approval or other action be required or desirable, Santos and we currently contemplate that Santos or we will seek that approval or other action, except as we describe below under "--State Takeover Laws." While, except as this section 15 otherwise describes, we do not currently intend to delay our acceptance for payment of or payment for shares tendered under the offer pending the outcome of any such matter, there can be no 40 assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to Esenjay's business or that certain parts of Esenjay's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters we discuss below, we could decline to accept for payment or pay for any shares tendered. See section 14 for a description of conditions to the offer. STATE TAKEOVER LAWS. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in those states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that those laws were applicable only under certain conditions. Subsequently, a number of federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Section 203 of the DGCL, in general, restricts the ability of a Delaware corporation such as Esenjay from engaging in a "business combination" (defined as a variety of transactions, including mergers) with an "interested stockholder" (defined generally as a person that is the beneficial owner of 15% or more of a corporation's outstanding voting stock) for a period of three years following the time that such person became an interested stockholder unless, among other exceptions, prior to the time that person became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder's becoming an interested stockholder. The Esenjay Board has approved the acquisition agreement, the offer, the merger and the other transactions the acquisition agreement contemplates. Therefore, section 203 of the DGCL is inapplicable to the offer and the merger. On the basis of information Esenjay has supplied, we do not believe that any other state takeover statutes or similar laws purport to apply to the offer or the merger. Neither Santos nor we has currently complied with any other state takeover statute or regulation. We reserve the right to challenge the applicability or validity of any state law purportedly applicable to the offer or the merger, and nothing in this Offer to Purchase or any action taken in connection with the offer or the merger is intended as a waiver of that right. If it is asserted that any state takeover statute is applicable to the offer or the merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the offer or the merger, we might be required to file certain information with, or to receive approvals from, the relevant state authorities, and we might be unable to accept for payment or pay for shares tendered under the offer or be delayed in consummating the offer or the merger. In that case, we may not be obligated to accept for payment or pay for any shares tendered under the offer. See section 14. SECTION 16. FEES AND EXPENSES Merrill Lynch is acting as dealer manager in connection with the offer. Santos has agreed to pay Merrill Lynch reasonable and customary compensation for such services, to reimburse Merrill Lynch for its reasonable out-of-pocket expenses, including the fees and expenses of its counsel and any other advisor it retains in connection with its engagement, and to indemnify Merrill Lynch and related persons against various liabilities and expenses, including various liabilities and expenses under federal securities laws. The Purchaser and Santos have retained MacKenzie Partners, Inc. to act as the information agent and The Bank of New York to serve as the depositary in connection with the offer. The information agent and the depositary each will receive reasonable and customary compensation for their services, be 41 reimbursed for certain reasonable out-of-pocket expenses and be indemnified against various liabilities and expenses in connection therewith, including various liabilities and expenses under federal securities laws. The information agent may contact Esenjay stockholders by mail, facsimile or personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the offer to beneficial owners of the shares. Neither Santos nor we will pay any fees or commissions to any broker or dealer or other person, other than the dealer manager and the information agent, in connection with the solicitation of tenders of shares under the offer. We will reimburse brokers, dealers, banks and trust companies on their request for customary mailing and handling expenses they incur in forwarding material to their customers. SECTION 17. MISCELLANEOUS The offer is not being made to, nor will tenders be accepted from or on behalf of, holders of shares in any jurisdiction in which the making of the offer or the acceptance thereof would not comply with the laws of that jurisdiction. In any jurisdiction the securities, blue sky or other laws of which require the offer to be made by a licensed broker or dealer, the offer is being made on our behalf by the dealer manager or one or more registered brokers or dealers licensed under the laws of that jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR SANTOS NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THAT INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED. Santos and we have filed with the SEC a Schedule TO under Exchange Act Rule 14d-3, together with exhibits, furnishing additional information with respect to the offer, and may file amendments thereto. That schedule and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner section 8 sets forth, except that this material will not be available at the regional offices of the SEC. ECM ACQUISITION COMPANY March 26, 2001 42 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF SANTOS, THE PURCHASER, SANTOS INTERNATIONAL HOLDINGS PTY LTD AND SANTOS LTD 1. DIRECTORS AND EXECUTIVE OFFICERS OF SANTOS. The name, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Santos are set forth below. All the directors and executive officers listed below are citizens of the United States except John Charles Ellice-Flint, who is an Australian citizen, and Charles Woodhouse, who is a citizen of the United Kingdom. Except as otherwise noted below, the principal business address of each director or executive officer is Santos Americas and Europe Corporation, 1209 Orange Street, Wilmington, Delaware 19801.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- Kathleen A. Hogenson.............. Director and President of Santos since May 2001. Ms. Hogenson is also director and President of Santos USA Corp., a position she has held since May of 2001. From January 1998 to May 2001, Ms. Hogenson served as Vice President of Engineering and Technology with Unocal Corporation at 14141 Southwest Freeway, Sugar Land, Texas 77478. In her 3 years at Unocal she also served as Global Chief Reservoir Engineer and Manager of Reservoir/Petrophysics Technology. Prior to that time, Ms. Hogenson served as Engineering Manager (August 1997 to January 1998) and Consulting Engineering Manager (March 1997 to July 1997) with Forest Oil International. From September 1985 to February 1997, Ms. Hogenson served as Business Unit Manager, Manager of Completions, Reservoirs & Economics and various operations positions, with Maxus/YPF. John Charles Ellice-Flint......... Director of Santos since March 2001. Mr. Ellice-Flint is currently the Managing Director and Chief Executive Officer of Santos Ltd, positions he has held since December 2000. Mr. Ellice-Flint is also chairman of other Santos Ltd subsidiary companies. Prior to joining Santos Ltd, Mr. Ellice-Flint served as Senior Vice President of Global Exploration and Technology (December 1997 to December 2000) and as Vice President Corporate Planning and Economics (March 1997 to December 1997) with Unocal at 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245. Mr. Ellice-Flint's principal business address is Santos House, 91 King William Street, Adelaide, South Australia 5000. Edward E. Hickam.................. Director of Santos since 1992. Mr. Hickam is the Chairman and Chief Executive Officer of Hickam Oil & Gas Inc, a position he has held since 1991. Prior to forming Hickam Oil & Gas Inc., Mr. Hickam was Vice President of Mobil Oil Exploration -- Operations in the U.S. (1977-1980) and also served as Senior Vice President for Texas Eastern Exploration & Production. Mr. Hickam has served in various management positions in exploration and production in the Middle East, Europe, South America and the Far East from 1958 to 1977. He has also served as Director of Eastman Christianson Oil Co. (1980-1990). Charles F. Woodhouse, CVO......... Director of Santos since 1995. Mr. Woodhouse currently serves as Honorary Legal Adviser to the Commonwealth Games Council for England and Chairman of the Sports Dispute Resolution Panel. From 1999 to 2001, Mr. Woodhouse served as a consultant to Farrer & Co. From 1969 to 1999, Mr. Woodhouse served as a partner at Farrer & Co. From 1994 to 2001, he was the Chairman of the Rank Pension Plan Trustee Ltd. From 1993 to 1996, he was a member of the Royal Parks Review Group, and from 1991 to 1997 he served as Chairman, The Chevoit Trust, the industry-wide pension scheme for the legal profession.
S-1 2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, present principal occupation or employment and five-year employment history of the sole director and executive officer of the Purchaser are set forth below. The director and executive officer listed below is a citizen of the United States. The business address of the director and executive officer is ECM Acquisition Company, 1209 Orange Street, Wilmington, Delaware 19801.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- Kathleen A. Hogenson.............. Director and President of ECM Acquisition Company since March 2002. Ms. Hogenson is also director and President of Santos USA Corp., a position she has held since May of 2001. From January 1998 to May 2001, Ms. Hogenson served as Vice President of Engineering and Technology with Unocal Corporation at 14141 Southwest Freeway, Sugar Land, Texas 77478. In her 3 years at Unocal she also served as Global Chief Reservoir Engineer and Manager of Reservoir/Petrophysics Technology. Prior to that time, Ms. Hogenson served as Engineering Manager (August 1997 to January 1998) and Consulting Engineering Manager (March 1997 to July 1997) with Forest Oil International. From September 1985 to February 1997, Ms. Hogenson served as Business Unit Manager, Manager of Completions, Reservoirs & Economics and various operations positions, with Maxus/YPF.
3. DIRECTORS AND OFFICERS OF SANTOS INTERNATIONAL HOLDINGS PTY LTD AND SANTOS LTD. Santos is a wholly owned subsidiary of Santos International Holdings Pty Ltd, an Australian corporation, whose shares are directly owned by Santos Ltd, an Australian corporation. The name, present principal occupation or employment and five-year employment history of each of the directors and officers of each of Santos International Holdings Pty Ltd and Santos Ltd are set forth below. Unless otherwise indicated, the principal business address of each director or officer of Santos International Holdings Pty Ltd and Santos Ltd is Santos House, 91 King William Street, Adelaide, South Australia 5000. Except where otherwise noted, all of the directors and executive officers listed below are citizens of Australia. SANTOS INTERNATIONAL HOLDINGS PTY LTD
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- John Charles Ellice-Flint......... Director of Santos International Holdings Pty Ltd since February 2001. Mr. Ellice-Flint is currently the Managing Director and Chief Executive Officer of Santos Ltd, positions he has held since December 2000. Mr. Ellice-Flint is also chairman of other Santos Ltd subsidiary companies. Prior to joining Santos Ltd, Mr. Ellice-Flint served as Senior Vice President of Global Exploration and Technology (December 1997 to December 2000) and as Vice President Corporate Planning and Economics (March 1997 to December 1997) with Unocal at 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245. Michael George Roberts............ Director of Santos International Holdings Pty Ltd since September 2000. Mr. Roberts is presently Group General Counsel and Company Secretary for Santos Ltd, a position he has held throughout the past five years. Mr. Roberts is a citizen of the United Kingdom.
S-2 SANTOS LTD
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- Stephen Gerlach................ Director since September 1989 and Chairman since May 2001. Mr. Gerlach is currently the Chairman of the Environmental Committee and a member of the Remuneration Committee of the board and Chairman of Santos Finance Ltd. Mr. Gerlach is the retired Managing Partner of the Adelaide legal firm, Finlaysons. Mr. Gerlach served in that capacity from 1985 through 1991. He currently serves as Chairman of Equatorial Mining Ltd, Elders Australia Ltd and Beston Pacific Vineyard Management Ltd and as a Director of Southcorp Holdings Ltd, Futuris Corporation Ltd, Challenger Beston Limited and Elders Rural Services Ltd. John Charles Ellice-Flint...... Managing Director and Chief Executive Officer since December 2000. Mr. Ellice-Flint is also chairman of other Santos Ltd subsidiary companies. Prior to joining Santos Ltd, Mr. Ellice-Flint served as Senior Vice President of Global Exploration and Technology (December 1997 to December 2000) and as Vice President Corporate Planning and Economics (March 1997 to December 1997) with Unocal at 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245. Peter Charles Barnett.......... Director since October 1995. Mr. Barnett is the retired Managing Director and Chief Executive Officer of Pasminco Ltd. Mr. Barnett served in that capacity from 1988 to 1995. Prior to that, Mr. Barnett was the Chief Executive Officer of EZ Industries Ltd and served in that capacity from 1984 to 1988. Mr. Barnett is also a director of Mayne Group Ltd, AMCIL Ltd and Opis Capital Ltd. Frank John Conroy.............. Director since October 1999. Mr. Conroy is the retired Managing Director of Westpac Banking Corporation. Mr. Conroy served in that capacity from 1991 to 1992. Mr. Conroy currently is Chairman of St. George Bank Ltd, Australian Pharmaceutical Industries Limited and ORIX Australia Corporation Ltd. Mr. Conroy is a Director of Futuris Corporation Ltd and is also a Director of Santos Finance Ltd. Graeme William McGregor........ Director since September 1999. Mr. McGregor is Chairman of the Audit Committee of the Board and a Director of Santos Finance Ltd. Mr. McGregor is the retired Executive Director of Finance of The Broken Hill Proprietary Company Limited. He served in that capacity from 1996 to 1999. He currently serves as Director of Foster's Brewing Group Ltd, Nufarm Ltd, Were Securities Ltd and Community Foundation Network Ltd. He is a member of the Financial Reporting Council. Michael Anthony O'Leary........ Director since October 1996. Mr. O'Leary is a member of the Environmental Committee of the Board. Mr. O'Leary is the retired Executive Director of Rio Tinto Ltd. He served in that capacity from 1992 to 1997. Mr. O'Leary is Deputy Chairman of Bank of Western Australia Ltd. and was formerly Chairman of Hamersley Iron, Argyle Diamonds, Dampier Salt and a Director of Rio Tinto Ltd and Rio Tinto plc. Professor Judith Sloan......... Director since September 1994. Professor Sloan is the Chairperson of the Remuneration Committee and member of the Audit Committee of the Board. Professor Sloan is a retired professor of Labour Studies at the Flinders University of South Australia and formerly served as Director of the National Institute of Labour Studies 1991 to 1998. Professor Sloan currently serves as Chairperson of SGIC Holding Ltd and is a Director of Mayne Group Ltd and a board member of the Australian Broadcasting Corporation.
S-3
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- -------------------------------------------------- Ian Ernest Webber.............. Director since February 1993 and member of the Audit Committee and Remuneration Committee of the Board. Mr. Webber is the retired Managing Director and Deputy Chairman of Chrysler Australia Ltd. Mr. Webber has also served as Managing Director of Mitsubishi Motors Australia Ltd and was formerly Chairman of Mayne Nickless Ltd Group and Managing Director between 1981 and 1991. He currently serves as Director of Pacific Dunlop Ltd and WMC Ltd. John C. Reynolds............... Executive General Manager of Corporate since October 2001. Prior to joining Santos Ltd, Mr. Reynolds was the Group Executive for Normandy Mining Ltd at 100 Hutt Street, Adelaide, South Australia, a position he held from October 1997 to October 2001. Prior to that Mr. Reynolds was Managing Director of Fairfax Ltd at 250 Spencer Street, Melbourne Victoria, Australia, a position he held from April 1995 to October 1997. Mr. Reynolds is a citizen of the United Kingdom. Jonathon Terence Young......... General Manager of Central Australia Business Unit since February 2002. Mr. Young has been with Santos Ltd since February 2000 and initially served as the General Manager of the South Australia Business Unit. Prior to joining Santos Ltd, Mr. Young was the Chief Executive Officer with Indo Mobil Ltd at 4A, DLF Corporate Park, Gungaon, Haryana, India, a position he held from March 1997 until he joined Santos Ltd. Graeme Charles Bethune......... General Manager of Finance & Investor Relations for Santos Ltd, a position he has held during the past five years. Donald Wayne Priestley......... General Manager of Accounting for Santos Ltd, a position he has held during the last five years. Mr. Priestley is a United States citizen. Michael George Roberts......... Group General Counsel and Company Secretary for Santos Ltd, a position he has held during the past five years. Mr. Roberts is a citizen of the United Kingdom.
S-4 Facsimile copies of the letter of transmittal, properly completed and duly executed, will be accepted. The letter of transmittal, certificates for shares and any other required documents should be sent or delivered by each stockholder of Esenjay or his broker, dealer, commercial bank, trust company or other nominee to the depositary as follows: The Depositary for the offer is: THE BANK OF NEW YORK
By Facsimile Transmission: By Mail: (For Eligible Institutions Only) By Hand or Overnight Delivery: Reorganization Services (973) 247-4077 Reorganization Services P.O. Box 11248 One Wall Street Church Street Station Third Floor New York, New York 10286-1248 New York, New York 10286 To Confirm Facsimile Transmissions: (For Eligible Institutions Only) (973) 247-4075
Questions and requests for assistance or for additional copies of this Offer to Purchase, the letter of transmittal and the notice of guaranteed delivery may be directed to the information agent or to the dealer manager at their respective telephone numbers and location listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the offer. The Information Agent for the offer is: [MACKENZIE PARTNERS, INC. LOGO] 105 Madison Avenue New York, New York 10016 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 The Dealer Manager for the offer is: MERRILL LYNCH & CO. Four World Financial Center New York, New York 10080 (866) 276-1462 (Call Toll-Free) EX-99.A1.B 4 h95090tex99-a1_b.txt LETTER OF TRANSMITTAL EXHIBIT (a)(1)(B) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF ESENJAY EXPLORATION, INC. PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 26, 2002 AT $2.84 NET PER SHARE BY ECM ACQUISITION COMPANY A WHOLLY OWNED SUBSIDIARY OF SANTOS AMERICAS AND EUROPE CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON MONDAY, APRIL 22, 2002, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: Reorganization Services (For Eligible Institutions Only) Reorganization Services P.O. Box 11248 (973) 247-4077 One Wall Street Church Street Station Third Floor New York, New York 10286-1248 To Confirm Facsimile Transmissions: New York, New York 10286 (For Eligible Institutions Only) (973) 247-4075
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This letter of transmittal is to be used either if certificates for shares (as defined below) are to be forwarded herewith or, unless an agent's message (as defined in section 2 of the Offer to Purchase (as defined below)) is utilized, if delivery of shares is to be made by book-entry transfer to an account maintained by the depositary (as defined below) at the book-entry transfer facility (as defined in section 2 of the Offer to Purchase) pursuant to the procedures set forth in section 2 of the Offer to Purchase. Tendering stockholders whose certificates for shares are not immediately available or who cannot deliver either the certificates for, or a book-entry confirmation (as defined in section 2 of the Offer to Purchase) with respect to, their shares and all other documents required hereby to the depositary prior to the expiration date (as defined in section 1 of the Offer to Purchase) must tender their shares in accordance with the guaranteed delivery procedures set forth in section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
- ------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARES TENDERED ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES REPRESENTED SHARE CERTIFICATE BY SHARE NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ----------------------------------------------------------- ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ TOTAL SHARES - ------------------------------------------------------------------------------------------------------------------- * Need not be completed if transfer is made by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all shares described above are being tendered. See Instruction 4. - -------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: ----------------------------------------------- Account Number: ---------------------------------------------------------------- Transaction Code Number: ------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY, ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s):------------------------------------------------ Date of Execution of Notice of Guaranteed Delivery: ---------------------------- Name of Institution that Guaranteed Delivery: ----------------------------------- IF DELIVERED BY BOOK-ENTRY TRANSFER, CHECK BOX: [ ] Account Number: ---------------------------------------------------------------- Transaction Code Number: ------------------------------------------------------- IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST OR DESTROYED, SEE INSTRUCTION 11. 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to ECM Acquisition Company (the "Purchaser"), a Delaware corporation and wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation, the above-described shares of common stock, par value $.01 per share (the "shares"), of Esenjay Exploration, Inc., a Delaware corporation ("Esenjay"), on the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated March 26, 2002 (the "Offer to Purchase") and this letter of transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the "offer"), receipt of which is hereby acknowledged. Subject to and effective on acceptance for payment of, and payment for, the shares tendered herewith in accordance with the terms of the offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the shares that are being tendered hereby (and any and all other shares or other securities or rights issued or issuable in respect thereof on or after March 17, 2002) and irrevocably constitutes and appoints The Bank of New York (the "depositary"), the true and lawful agent and attorney-in-fact of the undersigned, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to the full extent of the undersigned's rights with respect to such shares (and any such other shares or securities or rights), to (a) deliver certificates for such shares (and any such other shares or securities or rights) or transfer ownership of such shares (and any such other shares or securities or rights) on the account books maintained by the book-entry transfer facility, together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, (b) present such shares (and any such other shares or securities or rights) for transfer on Esenjay's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such shares (and any such other shares or securities or rights), all in accordance with the terms of the offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the shares tendered hereby (and any and all other shares or other securities or rights issued or issuable in respect of such shares on or after March 17, 2002) and, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good title thereto, free and clear of all liens, restrictions, claims and encumbrances, and the same will not be subject to any adverse claim or right. The undersigned will, on request by the depositary or the Purchaser, execute any additional documents deemed by the depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the shares tendered hereby (and any and all such other shares or other securities or rights), all in accordance with the terms of the offer. All authority conferred or agreed to be conferred pursuant to this letter of transmittal shall be binding on the successors, assigns, heirs, personal representatives, executors, administrators and other legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Kathleen A. Hogenson and Peter R. Robinson, and each of them, and any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of Esenjay's stockholders or otherwise in such manner as each such attorney-in-fact and proxy or his/her substitute shall in his/her sole discretion deem proper, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his/her substitute shall in his/her sole discretion deem proper, and to otherwise act as each such attorney-in-fact and proxy or his/her substitute shall in his/her sole discretion deem proper, with respect to the shares tendered hereby that have been accepted for payment by the Purchaser prior to the time any such action is taken and with respect to which the undersigned is entitled to vote (and any and all other shares or other securities or rights issued or issuable in respect of such shares on or after March 17, 2002). This appointment is effective when, and only to the extent that, the Purchaser accepts for payment such shares as provided in the Offer to Purchase. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such shares in accordance with the terms of the offer. Upon such acceptance for payment, all prior powers of attorney, proxies and consents given by the 3 undersigned with respect to such shares (and any such other shares or securities or rights) will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be effective) by the undersigned. The undersigned understands that the valid tender of shares pursuant to any of the procedures described in section 2 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser on the terms and subject to the conditions of the offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for payment of the purchase price and/or return any certificates for shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for payment of the purchase price and/or return any certificates for shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the "Special Delivery Instructions" and the "Special Payment Instructions" are completed, please issue the check for payment of the purchase price and/or return any certificates for shares not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return such certificates (and any accompanying documents, as appropriate) to, the person or persons so indicated. Please credit any shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the book-entry transfer facility designated above. The undersigned recognizes that the Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any shares from the name of the registered holder(s) thereof if the Purchaser does not accept for payment any of the shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for shares not tendered or not accepted for payment and/or the check for payment of the purchase price of shares accepted for payment are to be issued in the name of someone other than the undersigned. Issue: [ ] Check [ ] Certificate(s) to: Name: - ---------------------------------------- (Please Print) Address: - -------------------------------------- - ------------------------------------------------ (Include Zip Code) - ------------------------------------------------ (Employer Identification or Social Security Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for shares not tendered or not accepted for payment and/or the check for payment of the purchase price of shares accepted for payment are to be sent to someone other than the undersigned, or to the undersigned at an address other than that above. Mail: [ ] Check [ ] Certificate(s) to: Name: - ---------------------------------------- (Please Print) Address: - -------------------------------------- - ------------------------------------------------ (Include Zip Code) - ------------------------------------------------ (Employer Identification or Social Security Number) 4 SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Signature(s) of Stockholder(s)) Dated: - ------------------------------------, 2002 (Must be signed by registered holder(s) exactly as name(s) appear(s) on the certificate(s) for the shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Capacity (Full Title): - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) Daytime Area Code and Telephone Number: - ----------------------------------------------------------- Employer Identification or Social Security Number: - ---------------------------------------------------- (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature: - -------------------------------------------------------------------------------- Name: - -------------------------------------------------------------------------------- (Please Print) Name of Firm: - -------------------------------------------------------------------------------- Title: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) Daytime Area Code and Telephone Number: - ------------------------------------------------------------ Dated: - ------------------------------------, 2002 5 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES No signature guarantee is required on this letter of transmittal (a) if this letter of transmittal is signed by the registered holder(s) (which term, for purposes of this Instruction 1, includes any participant in the book-entry transfer facility's system whose name appears on a security position listing as the owner of the shares) of shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this letter of transmittal or (b) if such shares are tendered for the account of a firm that is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange, Inc. Medallion Signature Guarantee Program or the Stock Exchanges Medallion Program, or is otherwise an "eligible guarantor institution," as that term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each, an "eligible institution"). In all other cases, all signatures on this letter of transmittal must be guaranteed by an eligible institution. See Instruction 5. 2. REQUIREMENTS OF TENDER This letter of transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or, unless an agent's message (as defined below) is utilized, if delivery of shares is to be made pursuant to the procedures for book-entry transfer set forth in section 2 of the Offer to Purchase. For a stockholder validly to tender shares pursuant to the offer, either (a) a letter of transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message, and any other required documents, must be received by the depositary at one of its addresses set forth herein prior to the expiration date and either certificates for tendered shares must be received by the depositary at one of such addresses or shares must be delivered pursuant to the procedures for book-entry transfer set forth herein (and a book-entry confirmation must be received by the depositary), in each case prior to the expiration date, or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth below and in section 2 of the Offer to Purchase. Stockholders whose certificates for shares are not immediately available or who cannot deliver their certificates and all other required documents to the depositary or complete the procedures for book-entry transfer prior to the expiration date may tender their shares by properly completing and duly executing the notice of guaranteed delivery pursuant to the guaranteed delivery procedures set forth in section 2 of the Offer to Purchase. Pursuant to such procedures, (a) such tender must be made by or through an eligible institution, (b) a properly completed and duly executed notice of guaranteed delivery, substantially in the form provided by the Purchaser, must be received by the depositary prior to the expiration date and (c) the certificates for all tendered shares in proper form for transfer (or a book-entry confirmation with respect to all such shares), together with a letter of transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an agent's message, and any other required documents, must be received by the depositary, in each case within three trading days after the date of execution of such notice of guaranteed delivery as provided in section 2 of the Offer to Purchase. A "trading day" is any day on which the New York Stock Exchange is open for business. The term "agent's message" means a message transmitted by the book-entry transfer facility to, and received by, the depositary and forming a part of a book-entry confirmation, which states that such book-entry transfer facility has received an express acknowledgment from the participant in the book-entry transfer facility tendering the shares that such participant has received and agrees to be bound by the terms of the letter of transmittal and that the Purchaser may enforce such agreement against such participant. THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE SOLE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). 6 IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional shares will be purchased. All tendering stockholders, by execution of this letter of transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their shares for payment. 3. INADEQUATE SPACE If the space provided herein is inadequate, the certificate numbers and/or the number of shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER) If fewer than all the shares represented by any certificate submitted to the depositary are to be tendered, fill in the number of shares that are to be tendered in the box entitled "Number of Shares Tendered." In any such case, new certificate(s) for the remainder of the shares that were evidenced by the old certificate(s) will be sent to the registered holder(s), unless otherwise provided in the appropriate box on this letter of transmittal, as soon as practicable after the acceptance for payment of, and payment for, the shares tendered herewith. All shares represented by certificates delivered to the depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS If this letter of transmittal is signed by the registered holder(s) of the shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without any change whatsoever. If any of the shares tendered hereby are owned of record by two or more joint owners, all such persons must sign this letter of transmittal. If any shares tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate letters of transmittal as there are different registrations of certificates. If this letter of transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of the authority of such person so to act must be submitted with this letter of transmittal. If this letter of transmittal is signed by the registered owner(s) of the shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or certificates for shares not tendered or accepted for payment are to be issued, to a person other than the registered owner(s). Signatures on any such certificates or stock powers must be guaranteed by an eligible institution. If this letter of transmittal is signed by a person other than the registered owner(s) of the shares tendered hereby, the certificate(s) representing such shares must be properly endorsed for transfer or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered owner(s) appear(s) on the certificates(s). The signature(s) on any such certificate(s) or stock power(s) must be guaranteed by an eligible institution. 6. STOCK TRANSFER TAXES The Purchaser will pay any stock transfer taxes with respect to the transfer and sale of shares to it or its order pursuant to the offer. If, however, payment of the purchase price is to be made to, or if shares not tendered or accepted for payment are to be registered in the name of, any person(s) other than the registered owner(s), or if shares tendered hereby are registered in the name(s) of any person(s) other than the person(s) signing this letter of transmittal, the amount of any stock transfer taxes (whether imposed on the registered owner(s) or such person(s)) 7 payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted with this letter of transmittal. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this letter of transmittal. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS If a check is to be issued in the name of, and/or certificates for shares not accepted for payment are to be returned to, a person other than the signer of this letter of transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this letter of transmittal or to an address other than that shown above, the appropriate boxes on this letter of transmittal should be completed. 8. WAIVER OF CONDITIONS The Purchaser reserves the right, subject to the terms and conditions contained in the Agreement dated as of March 17, 2002 among the Purchaser, Santos Americas and Europe Corporation and Esenjay and to the applicable rules and regulations of the SEC, to waive any of the specified conditions (other than the Minimum Tender Condition (as defined in the Offer to Purchase)) of the offer, in whole or in part, in the case of any shares tendered. 9. 30% BACKUP WITHHOLDING In order to avoid backup withholding of U.S. federal income tax on payments of cash pursuant to the offer, a stockholder surrendering shares in the offer must, unless an exemption applies, provide the depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below in this letter of transmittal and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such stockholder and payment of cash to such stockholder pursuant to the offer may be subject to backup withholding of 30%. Backup withholding is not an additional income tax. Rather, the amount of the backup withholding can be credited against the U.S. federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. A tendering stockholder is required to give the depositary the TIN (i.e., social security number or employer identification number) of the record owner of the shares being tendered. If the shares are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. The box in part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the depositary will withhold 30% on all payments made prior to the time a properly certified TIN is provided to the depositary. However, such amounts will be refunded to such stockholder if a TIN is provided to the depositary within 60 days. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 8 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES Questions and requests for assistance or additional copies of the Offer to Purchase, this letter of transmittal, the notice of guaranteed delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the information agent at its address set forth on the last page of this letter of transmittal. 11. LOST, DESTROYED OR STOLEN CERTIFICATES If any certificate representing shares has been lost, destroyed or stolen, the stockholder should promptly notify the information agent at the phone number this letter of transmittal provides. The stockholder will then be instructed by the information agent as to the steps that must be taken in order to replace the certificate. This letter of transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF), TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 9 - -------------------------------------------------------------------------------------------------------------------- PAYER'S NAME: THE BANK OF NEW YORK - -------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ------------------------------------ THE RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number(s) FORM W-9 BELOW. OR DEPARTMENT OF THE ------------------------------------ TREASURY Employer Identification INTERNAL REVENUE Number(s) SERVICE ------------------------------------------------------------------------------------------ PART 2 -- Certifications -- Under penalties of PAYER'S REQUEST FOR perjury, I certify that: PART 3 -- TAXPAYER IDENTIFICATION (1) The number shown on this form is my correct Awaiting TIN NUMBER ("TIN") Taxpayer Identification Number (or I am [ ] waiting for a number to be issued to me); and (2) I am not subject to backup withholding because --------------------------------------- (a) I am exempt from backup withholding or (b) I have not been notified by the Internal PART 4 -- Revenue Service (the "IRS") that I am subject Exempt TIN to backup withholding as a result of a failure [ ] to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------------------------ CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax returns. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating you are no longer subject to backup withholding, do not cross out such item (2). If you are exempt from backup withholding, check the box in Part 4. - -------------------------------------------------------------------------------------------------------------------- Signature: ------------------------------------------------------------------------------------------------------------------- Date: - --------------------------------------------------------------------------------------------------------------------------, 2002 Name (Please Print): ------------------------------------------------------------------------------------------------------------------- Address (Please Print): ------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 30% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me and that either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number to the depositary by the time of payment, 30% of all reportable payments made to me will be withheld. Signature: - --------------------------------------------------------- Date: - ------------------------, 2002 10 The letter of transmittal, certificates for shares and any other required documents should be sent or delivered by each stockholder of Esenjay or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the depositary at one of its addresses set forth below. The Depositary for the Offer is: THE BANK OF NEW YORK
By Facsimile Transmission: By Mail: (For Eligible Institutions Only) By Hand or Overnight Delivery: Reorganization Services (973) 247-4077 Reorganization Services P.O. Box 11248 One Wall Street Church Street Station Third Floor New York, New York 10286-1248 New York, New York 10286 To Confirm Facsimile Transmissions: (For Eligible Institutions Only) (973) 247-4075
Questions and requests for assistance may be directed to the dealer manager or the information agent at their respective addresses set forth below. Additional copies of the Offer to Purchase, this letter of transmittal and the notice of guaranteed delivery may be obtained from the information agent. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the offer. The Information Agent for the Offer is: [MACKENZIE PARTNERS, INC. LOGO] 105 Madison Avenue New York, New York 10016 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 The Dealer Manager for the Offer is: MERRILL LYNCH & CO. Four World Financial Center New York, New York 10080 (866) 276-1462 (Toll-Free) 11 EX-99.A1.C 5 h95090tex99-a1_c.txt NOTICE OF GUARANTEED DELIVERY EXHIBIT (a)(1)(C) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF ESENJAY EXPLORATION, INC. As set forth in section 2 of the Offer to Purchase (as defined below), this form, or a form substantially equivalent to this form, must be used to accept the offer (as defined below) if (1) certificates representing shares of common stock, par value $.01 per share of Esenjay Exploration, Inc., a Delaware corporation ("Esenjay"), are not immediately available, (2) the procedures for book-entry transfer cannot be completed on a timely basis or (3) time will not permit all required documents to reach the depositary prior to the expiration date (as defined in the Offer to Purchase). This form may be delivered by hand or transmitted by facsimile transmission or mail to the depositary. See section 2 of the Offer to Purchase. The Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Delivery: Reorganization Services (For Eligible Institutions Only) Reorganization Services P.O. Box 11248 (973) 247-4077 One Wall Street Church Street Station To Confirm Facsimile Third Floor New York, New York 10286-1248 Transmissions: New York New York, 10286 (For Eligible Institutions Only) (973) 247-4075
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a letter of transmittal is required to be guaranteed by an eligible institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the letter of transmittal. Ladies and Gentlemen: The undersigned hereby tenders to ECM Acquisition Company, a Delaware corporation (the "Purchaser"), a wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation, on the terms and subject to the conditions set forth in the Offer to Purchase dated March 26, 2002 (the "Offer to Purchase"), and the related letter of transmittal (which, together with any amendments or supplements thereto, collectively constitute the "offer"), receipt of which is hereby acknowledged, the number of shares set forth below, all pursuant to the guaranteed delivery procedures set forth in section 2 of the Offer to Purchase. Number of Shares: - -------------------------------------------------------------------------------- Certificate Nos. (if available): - -------------------------------------------------------------------------------- Name(s) of Record Holder(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please Type or Print Address(es): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Zip Code Daytime Area Code and Telephone Number: - ----------------------------------------------------------------------- Signature(s): - -------------------------------------------------------------------------------- Dated: - ------------------------------------, 2002 If Shares will be tendered by book-entry transfer: Account Number at Book-Entry Transfer Facility: - ----------------------------------------------------------------- 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member in good standing of a recognized Medallion Program approved by the Securities Transfer Association, Inc., including the Security Transfer Agents Medallion Program, the New York Stock Exchange, Inc. Medallion Signature Program or the Stock Exchanges Medallion Program, or is otherwise an "eligible guarantor institution," as that term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby guarantees (1) that the above named person(s) "own(s)" the shares tendered hereby within the meaning of Rule 14e-4 under the Exchange Act, (2) that such tender of shares complies with Rule 14e-4 under the Exchange Act and (3) to deliver to the depositary either the certificates representing the shares tendered hereby, in proper form for transfer, or a book-entry confirmation (as defined in the Offer to Purchase) with respect to such shares, in any such case together with a properly completed and duly executed letter of transmittal (or a facsimile thereof), with any required signature guarantees, or an agent's message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, within three New York Stock Exchange trading days (as defined in the Offer to Purchase) after the date hereof. The eligible institution that completes this form must communicate the guarantee to the depositary and must deliver the letter of transmittal and certificates for shares to the depositary within the time period shown herein. Failure to do so could result in financial loss to such eligible institution. Name of Firm: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AUTHORIZED SIGNATURE Name: - -------------------------------------------------------------------------------- Please Type or Print Title: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- Zip Code Area Code and Telephone Number: - --------------------------------------------------------------------- Dated: - ------------------------------------, 2002 NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A1.D 6 h95090tex99-a1_d.txt LETTER TO BROKERS, DEALERS, COMMERCIAL BANKS EXHIBIT (a)(1)(D) [MERRILL LYNCH LOGO] Four World Financial Center New York, New York 10080 Call Toll Free: (866) 276-1462
OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ESENJAY EXPLORATION, INC. AT $2.84 NET PER SHARE BY ECM ACQUISITION COMPANY A WHOLLY OWNED SUBSIDIARY OF SANTOS AMERICAS AND EUROPE CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 22, 2002, UNLESS THE OFFER IS EXTENDED. March 26, 2002 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by ECM Acquisition Company, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation ("Santos"), and Santos to act as dealer manager in connection with the Purchaser's offer to purchase all outstanding shares of common stock, par value $.01 per share (the "shares"), of Esenjay Exploration, Inc., a Delaware corporation ("Esenjay"), at $2.84 per share, net to the seller in cash, on the terms and subject to the conditions set forth in the Offer to Purchase dated March 26, 2002 (the "Offer to Purchase") and the related letter of transmittal (which, together with any supplements or amendments thereto, collectively constitute the "offer"). Please furnish copies of the enclosed materials to those of your clients for whom you hold shares registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase dated March 26, 2002; 2. Letter of transmittal for your use in accepting the offer and tendering shares and for the information of your clients; 3. Letter to stockholders of Esenjay from the President and Chief Executive Officer of Esenjay, accompanied by Esenjay's Solicitation/Recommendation Statement on Schedule 14D-9; 4. A form of letter that may be sent to your clients for whose account you hold shares in your name or in the name of a nominee, with space provided for obtaining such client's instructions with regard to the offer; 5. Notice of guaranteed delivery with respect to shares; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to The Bank of New York, as the depositary. THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE) A NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE. CERTAIN OTHER CONDITIONS TO THE OFFER ARE DESCRIBED IN SECTION 14 OF THE OFFER TO PURCHASE. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 22, 2002, UNLESS THE OFFER IS EXTENDED. The Board of Directors of Esenjay has unanimously approved the acquisition agreement (as defined below) and the transactions contemplated by the acquisition agreement, including the offer and the merger (as defined below), and unanimously determined that the terms of the offer, the merger and the other transactions contemplated by the acquisition agreement are advisable and fair to and in the best interests of Esenjay and its stockholders and unanimously recommends that the stockholders of Esenjay accept the offer and tender their shares pursuant to the offer. The offer is being made pursuant to the terms of an agreement dated as of March 17, 2002 (the "acquisition agreement") among the Purchaser, Santos and Esenjay. The acquisition agreement provides that, following the consummation of the offer and on the terms and subject to the conditions of the acquisition agreement and in accordance with the General Corporation Law of the State of Delaware, the Purchaser will be merged with and into Esenjay, with Esenjay surviving the merger as a wholly owned subsidiary of Santos (the "merger"). At the effective time of the merger, each outstanding share (other than shares owned by Esenjay, the Purchaser, Santos or by stockholders, if any, who are entitled to and properly exercise appraisal rights under Delaware law) will be converted into the right to receive the price per share paid pursuant to the offer in cash, without interest thereon, as set forth in the acquisition agreement and described in the Offer to Purchase. In all cases, payment for shares accepted for payment pursuant to the offer will be made only after timely receipt by the depositary of (1) the certificates for (or a timely book-entry confirmation (as defined in the Offer to Purchase) with respect to) such shares, (2) a letter of transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer effected pursuant to the procedures set forth in section 2 of the Offer to Purchase, an agent's message (as defined in the Offer to Purchase), and (3) any other documents required by the letter of transmittal. Accordingly, tendering stockholders may be paid at different times depending on when certificates for shares or book-entry confirmations with respect to shares are actually received by the depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF OR AMENDMENT TO THE OFFER OR ANY DELAY IN PAYING FOR SUCH SHARES. Neither the purchaser nor Santos will pay any fees or commissions to any broker or dealer or other person (other than the information agent, the depositary and the dealer manager, as described in the Offer to Purchase) in connection with the solicitation of tenders of shares pursuant to the offer. However, the Purchaser will, on request, reimburse you for customary mailing and handling expenses incurred by you in forwarding copies of the enclosed offering materials to your clients. Questions and requests for additional copies of the enclosed material may be directed to the information agent or the dealer manager at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED 2 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, SANTOS, THE DEALER MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.A1.E 7 h95090tex99-a1_e.txt LETTER TO CLIENTS FOR USE BY BROKERS EXHIBIT (a)(1)(E) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ESENJAY EXPLORATION, INC. AT $2.84 NET PER SHARE BY ECM ACQUISITION COMPANY A WHOLLY OWNED SUBSIDIARY OF SANTOS AMERICAS AND EUROPE CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 22, 2002, UNLESS THE OFFER IS EXTENDED. March 26, 2002 To Our Clients: Enclosed for your consideration are an Offer to Purchase dated March 26, 2002 and a related letter of transmittal (which, together with any amendments or supplements thereto, collectively constitute the "offer") relating to the offer by ECM Acquisition Company, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation ("Santos"), and Santos to purchase all outstanding shares of common stock, par value $.01 per share (the "shares"), of Esenjay Exploration, Inc., a Delaware corporation ("Esenjay"), on the terms and subject to the conditions set forth in the offer. Also enclosed is the letter to stockholders of Esenjay from the President and Chief Executive Officer of Esenjay, accompanied by Esenjay's Solicitation/Recommendation Statement on Schedule 14D-9. We (or our nominees) are the holder of record of shares held by us for your account. A tender of those shares can be made only by us as the holder of record and pursuant to your instructions. The letter of transmittal is furnished to you for your information only and cannot be used to tender shares held by us for your account. We request instructions as to whether you wish to tender any or all of the shares held by us for your account pursuant to the terms and subject to the conditions set forth in the offer. Your attention is directed to the following: 1. The offer price is $2.84 per share, net to the seller in cash, without interest thereon, on the terms and subject to the conditions set forth in the offer. 2. The offer is being made for all outstanding shares. 3. The Board of Directors of Esenjay has approved the acquisition agreement (as defined below) and the transactions contemplated by the acquisition agreement, including the offer and the merger (as defined below), and determined that the offer and the merger and the other transactions contemplated by the acquisition agreement are advisable and fair to and in the best interests of the stockholders of Esenjay, and recommends that the stockholders of Esenjay accept the offer and tender their shares pursuant to the offer. 4. The offer is being made pursuant to the terms of an agreement dated as of March 17, 2002 (the "acquisition agreement") among the Purchaser, Santos and Esenjay pursuant to which, following the consummation of the offer and on the terms and subject to conditions of the acquisition agreement and in accordance with the General Corporation Law of the State of Delaware, the Purchaser will be merged with and into Esenjay, with Esenjay surviving the merger as a wholly owned subsidiary of Santos (the "merger"). At the effective time of the merger, each outstanding share (other than shares owned by Esenjay, the Purchaser, Santos or by stockholders, if any, who are entitled to and properly exercise appraisal rights under Delaware law) will be converted into the right to receive the price per share paid pursuant to the offer in cash, without interest thereon, as set forth in the acquisition agreement and described in the Offer to Purchase. 5. The offer is conditioned on, among other things, there being validly tendered and not properly withdrawn prior to the expiration date (as defined in the Offer to Purchase) a number of shares that would constitute at least a majority of all outstanding shares on a fully diluted basis on the date of purchase. Certain other conditions to the offer are described in section 14 of the Offer to Purchase. 6. The Purchaser will pay any stock transfer taxes with respect to the transfer and sale of shares to it or its order pursuant to the offer, except as otherwise provided in Instruction 6 of the letter of transmittal. 7. Tendering stockholders will not be obligated to pay brokerage fees or commissions to the depositary or the information agent or, except as set forth in Instruction 6 of the letter of transmittal, transfer taxes on the purchase of shares by the Purchaser pursuant to the offer. However, federal income tax backup withholding at a rate of 30% may be required, unless an exemption is provided or unless the required taxpayer identification information is provided. See Instruction 9 of the letter of transmittal. If you wish to have us tender any of or all the shares held by us for your account, please so instruct us by completing, executing and returning to us the instruction form set forth below. An envelope to return your instructions to us is enclosed. If you authorize the tender of your shares, all such shares will be tendered unless you otherwise specify below. YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED PROMPTLY TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE. In all cases, payment for shares accepted for payment pursuant to the offer will be made only after timely receipt by The Bank of New York (the "depositary") of (1) the certificates for (or a timely book-entry confirmation (as defined in the Offer to Purchase) with respect to) such shares, (2) a letter of transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer effected pursuant to the procedures set forth in section 2 of the Offer to Purchase, an agent's message (as defined in the Offer to Purchase), and (3) any other documents required by the letter of transmittal. Accordingly, tendering stockholders may be paid at different times depending on when certificates for shares or book-entry confirmations with respect to shares are actually received by the depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF OR AMENDMENT TO THE OFFER OR ANY DELAY IN PAYING FOR SUCH SHARES. The offer is not being made to, nor will tenders be accepted from or on behalf of, holders of shares in any jurisdiction in which the making of the offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer will be deemed to be made on behalf of the offer by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE ALL OUTSTANDING SHARES OF COMMON STOCK OF ESENJAY EXPLORATION, INC. The undersigned acknowledge(s) receipt of your letter enclosing the Offer to Purchase dated March 26, 2002 and the related letter of transmittal relating to the offer by ECM Acquisition Company, a Delaware corporation, to purchase all the outstanding shares of common stock, par value $.01 per share (the "shares"), of Esenjay Exploration, Inc., a Delaware corporation. This will instruct you to tender the number of shares indicated below held by you for the account of the undersigned (or, if no amount is indicated below, all the shares held by you for the account of the undersigned) on the terms and subject to the conditions set forth in the Offer to Purchase and the related letter of transmittal. Number of Shares to be Tendered* ----------------------------------------------------- ----------------------------------------------------- - ---------------------------------------------- Shares Signature(s) ----------------------------------------------------- Dated: ----------------------------------------, 2002 ----------------------------------------------------- ----------------------------------------------------- Please Type or Print Name(s) Address(es) (including Zip Code(s)): ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- ----------------------------------------------------- Area Code and Telephone No.: ----------------------------------------------------- Taxpayer Identification or Social Security No.: -------------------------------
- --------------- * Unless otherwise indicated, it will be assumed that all shares held by us for your account are to be tendered. 3 EX-99.A1.F 8 h95090tex99-a1_f.txt GUIDELINES FOR CERTIFICATION OF TAXPAYER ID. EXHIBIT (a)(1)(F) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- ---------------------------------------------- GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------
- ---------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------
1. An individual's account The individual 2. Two or more individuals The actual (joint account) owner of the account or, if combined funds, the first individual on the account(1) 3. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 4. a. The usual revocable The savings trust account grantor-trustee(1) (grantor is also trustee) b. So-called trust The actual account that is not a owner(1) legal or valid trust under State law 5. Sole proprietorship The owner(3) account - ---------------------------------------------- 6. A valid trust, estate, The legal or pension trust entity (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) 7. Corporate account The corporation 8. Partnership account held The partnership in the name of the partnership 9. Association, club, The religious, charitable, organization educational or other tax-exempt organization 10. A broker or registered The broker or nominee registered nominee 11. Account with the The public Department of entity Agriculture in the name of a public entity (such as a state or local government, school district or prison) that receives agricultural program payments - ----------------------------------------------
(1) List all names first and circle the name of the person whose number you furnish. If only one person on a joint account has a Social Security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List all names first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you do not have a taxpayer identification number, obtain Form SS-5, Application for a Social Security Card, at the local Social Security Administration office or Form SS-4, Application for Employer Identification Number, by calling 1 (800) TAX-FORM and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from withholding include: - An organization exempt from tax under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), an individual retirement account (IRA) or a custodial account under Section 403(b)(7) of the Code, if the account satisfies the requirements of Section 401(f)(2) of the Code. - The United States or any state thereof, the District of Columbia, a possession of the United States, or a political subdivision or wholly owned agency or instrumentality of any one or more of the foregoing. - An international organization or any agency, or instrumentality thereof. - A foreign government and any political subdivision, agency or instrumentality thereof. Payees that may be exempt from backup withholding include: - A corporation. - A financial institution. - A dealer in securities or commodities required to register in the United States, the District of Columbia or a possession of the United States. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a) of the Code. - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. - A futures commission merchant registered with the Commodity Futures Trading Commission. - A foreign central bank of issue. Payments of dividends and patronage dividends generally exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under Section 1441 of the Code. - Payments to partnerships that are not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Payments made by an ESOP in accordance with Section 404(k) of the Code. Payments of interest generally exempt from backup withholding include: - Payments of tax-exempt interest (including exempt-interest dividends under Section 852 of the Code). - Payments described in Section 6049(b)(5) of the Code to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451 of the Code. - Payments made by certain foreign organizations. Certain payments, other than payments of interest, dividends and patronage dividends, that are exempt from information reporting are also exempt from backup withholding. For details, see Sections 6041, 6041A, 6042, 6044, 6045, 6049, 6050A, and 6050N of the Code and the regulations thereunder. EXEMPT PAYEES SHOULD COMPLETE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. Furnish your taxpayer identification number, write "EXEMPT" on the form, sign and date the form and return it to the payer. PRIVACY ACT NOTICE. -- Section 6109 of the Code requires you to provide your correct taxpayer identification number to payers who must report the payments to the Internal Revenue Service. The Internal Revenue Service uses the numbers for identification purposes and for verification of the accuracy of your return and may also provide this information to various government agencies for tax enforcement or litigation purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 30% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis that results in no imposition of backup withholding, you are subject to a $500 penalty. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties, including fines and/or imprisonment. FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. 2 EX-99.A1.H 9 h95090tex99-a1_h.txt SUMMARY ADVERTISEMENT PUBLISHED 3/25/2002 EXHIBIT(a)(1)(H) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated March 26, 2002 and the related Letter of Transmittal and is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Merrill Lynch, Pierce, Fenner & Smith Incorporated or one or more registered brokers or dealers licensed under the laws of such jurisdictions. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Esenjay Exploration, Inc. at $2.84 Net Per Share by ECM Acquisition Company a wholly owned subsidiary of Santos Americas and Europe Corporation ECM Acquisition Company, a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Santos Americas and Europe Corporation, a Delaware corporation ("SAEC"), is offering to purchase all outstanding shares of common stock, par value $.01 per share (the "Shares"), of Esenjay Exploration, Inc., a Delaware corporation ("Esenjay"), at a purchase price of $2.84 per Share, net to the seller in cash, without interest thereon, on the terms and subject to the conditions set forth in the Offer to Purchase dated March 26, 2002 and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). The purpose of the Offer is to acquire for cash as many outstanding Shares as possible as a first step in acquiring the entire equity interest in Esenjay. After the consummation of the Offer, the Purchaser intends to effect the Merger (as defined below). The offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Monday, April 22, 2002, unless THE OFFER IS extended. The Offer is conditioned on, among other things, there being validly tendered and not properly withdrawn prior to the expiration of the Offer a number of Shares that would constitute at least a majority of all outstanding Shares on a fully diluted basis on the date of purchase. Certain other conditions to the Offer are described in Section 14 of the Offer to Purchase. The Offer is being made under the terms of an Agreement dated as of March 17, 2002 (the "Acquisition Agreement") among the Purchaser, SAEC and Esenjay. The Acquisition Agreement provides that, following the consummation of the Offer and on the terms and subject to the conditions of the Acquisition Agreement and in accordance with the General Corporation Law of the State of Delaware, the Purchaser will be merged with and into Esenjay (the "Merger"). Following the effective time of the Merger (the "Effective Time"), Esenjay will continue as the surviving corporation and a wholly owned subsidiary of SAEC. In the Merger, each outstanding Share (other than Shares owned by Esenjay, the Purchaser or SAEC or by stockholders, if any, who are entitled to and properly exercise appraisal rights under Delaware law) will be converted into the right to receive the price per Share paid under the Offer in cash, without interest thereon. The Acquisition Agreement is more fully described in Section 12 of the Offer to Purchase. Under Delaware law, if the Purchaser acquires at least 90% of the issued and outstanding Shares, under the Offer or otherwise, the Purchaser will be able to effect the Merger without prior notice to, or any action by, Esenjay's other stockholders. If, however, the Purchaser does not acquire at least 90% of the outstanding Shares, under the Offer or otherwise, and adoption of the Acquisition Agreement by Esenjay's stockholders is required under Delaware law to effect the Merger, a longer period of time will be required to effect the Merger as described in Section 12 of the Offer to Purchase. In connection with the Acquisition Agreement, SAEC entered a Stockholders Agreement, dated as of March 17, 2002 (the "Stockholder Agreement"), with the directors and certain officers and major stockholders of Esenjay who together own approximately 52% of the Shares that are outstanding. In the Stockholders Agreement, these stockholders have agreed, among other things, to tender all of their Shares under the Offer and to vote their shares in favor of the Merger in the event the Merger requires stockholder approval. In addition, stockholders of Esenjay owning approximately 52% of the total number of shares outstanding as of March 17, 2002 have entered into an option agreement under which SAEC has an irrevocable option to purchase those shares if one party terminates the Acquisition Agreement under certain circumstances that the Offer to Purchase describes. The Board of Directors of Esenjay has approved the acquisition agreement and the transactions it contemplates, including the Offer and the Merger, and determined that the terms of the Offer, the Merger and the other transactions contemplated by the acquisition agreement are advisable and fair to and in the best interest of Esenjay and its Stockholders and recommends that the stockholders of Esenjay accept the Offer and tender their Shares under the Offer. Tendering stockholders whose Shares are registered in their own names and who tender directly to The Bank of New York, as Depositary (the "Depositary"), will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser under the Offer. Stockholders who hold their Shares through banks or brokers should check with those institutions as to whether they charge any service fees. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment and thereby purchased Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. On the terms and subject to the conditions of the Offer, payment for Shares accepted for payment under the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders whose Shares have been accepted for payment. In all cases, payment for Shares accepted for payment under the Offer will be made only after timely receipt by the Depositary of (1) certificates for those Shares or timely confirmation of book-entry transfer of those Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase) under the procedures set forth in Section 2 of the Offer to Purchase, (2) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) and (3) any other documents required by the Letter of Transmittal. Under no circumstances will interest be paid on the purchase price of the Shares to be paid by the Purchaser, regardless of any extension of or amendment to the Offer or any delay in paying for such Shares. The term "Expiration Date" means 12:00 midnight, New York City time, on Monday, April 22, 2002, unless and until the Purchaser shall have extended the period of time during which the Offer is open in accordance with the provisions of the Acquisition Agreement, in which event the term "Expiration Date" shall mean the latest time and date as of which the Offer, as so extended by the Purchaser, will expire. Subject to the terms of the Acquisition Agreement (which prohibits certain amendments to the Offer) and the applicable rules and regulations of the Securities and Exchange Commission, the Purchaser reserves the right (but shall not be obligated, except as described in Section 1 of the Offer to Purchase), at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 14 of the Offer to Purchase shall have occurred, (1) to extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary, (2) to elect to provide a subsequent offering period for the Offer in accordance with Rule 14d-11 under the Securities Exchange Act of 1934, as amended (the -Exchange Act"), and (3) to amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. Under no circumstances will interest be paid on the purchase price for tendered Shares, whether or not the Purchaser exercises its right to extend the Offer. Any such extension will be followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such stockholder's Shares under the withdrawal procedures described below. Except as otherwise described below, tenders of Shares are irrevocable. Shares tendered under the Offer may be withdrawn under the procedures described below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser under the Offer, may also be withdrawn at any time after May 24, 2002, except as provided with respect to any subsequent offering. For a withdrawal to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any such notice must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in Section 2 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered under the procedures for book-entry transfer Section 2 of the Offer to Purchase sets forth, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 of the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, SAEC, Esenjay, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Under Rule 14d-11 under the Exchange Act, the Purchaser may, subject to certain conditions, provide a subsequent offering period from three to 20 business days in length following the Expiration Date. A subsequent offering period would be an additional period of time, following the expiration of the Offer and the purchase of Shares in the Offer, during which stockholders may tender Shares not tendered in the Offer. A subsequent offering period, if one is provided, is not an extension of the Offer, which already will have been completed. Under the Exchange Act, no withdrawal rights apply to Shares tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to Shares tendered in the Offer and accepted for payment. See Section 1 of the Offer to Purchase. Esenjay has provided the Purchaser with Esenjay's stockholder lists and security position listing for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on Esenjay's stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Purchaser expressly reserves the right to waive any condition to the Offer or modify the terms of the Offer, subject to (1) the Acquisition Agreement, which contains certain conditions that may not be waived and modifications that may not be made without the consent of Esenjay, and (2) the rules and regulations of the Securities and Exchange Commission. The information required to be disclosed by Rule 14d-6(d)(1) under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully and in its entirety before any decision is made with respect to the Offer. Requests for copies of the Offer to Purchase, the Letter of Transmittal, and other tender offer materials may be directed to the Information Agent or the Dealer Manager as set forth below, and copies will be furnished promptly at the Purchaser's expense. Neither the Purchaser nor SAEC will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent, the Depositary and the Dealer Manager, as described in the Offer to Purchase) for soliciting tenders of Shares under the Offer. The Information Agent for the Offer is: [Mackenzie Logo] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) E-mail: proxy@mackenziepartners.com or Call Toll-Free (800) 322-2885 The Dealer Manager for the Offer is: Merrill Lynch & Co. Four World Financial Center New York, New York 10080 (866) 276-1462 (Call Collect) March 26, 2002 EX-99.D1 10 h95090tex99-d1.txt AGREEMENT DATED MARCH 17, 2002 EXHIBIT (d)(1) - -------------------------------------------------------------------------------- AGREEMENT Among SANTOS AMERICAS AND EUROPE CORPORATION, ECM ACQUISITION COMPANY and ESENJAY EXPLORATION, INC. Dated as of March 17, 2002 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- ARTICLE ONE THE OFFER ..........................................................1 Section 1.01. The Offer......................................................1 Section 1.02. Company Actions................................................3 ARTICLE TWO THE MERGER .........................................................5 Section 2.01. Certificate of Merger..........................................5 Section 2.02. The Effective Time.............................................5 Section 2.03. Effects of the Merger..........................................5 Section 2.04. Closing........................................................6 ARTICLE THREE EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES...................................................6 Section 3.01. Effect on Capital Stock........................................6 Section 3.02. Derivative Securities and Derivative Securities Plans..........7 Section 3.03. Exchange of Certificates.......................................7 ARTICLE FOUR REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................8 Section 4.01. Organization; Power............................................8 Section 4.02. Capitalization.................................................8 Section 4.03. Authority; Enforceability......................................9 Section 4.04. Consents and Approvals; No Violations.........................10 Section 4.05. SEC Reports and Financial Statements..........................10 Section 4.06. Absence of Certain Changes or Events..........................11 Section 4.07. No Undisclosed Liabilities....................................12 Section 4.08. Information Supplied..........................................12 Section 4.09. Benefit Plans.................................................13 Section 4.10. Other Compensation Arrangements and Employee Matters..........15 Section 4.11. Litigation....................................................17 Section 4.12. Compliance With Governmental Requirements.....................17 Section 4.13. Reserve Information...........................................17 Section 4.14. Tax Matters...................................................17 Section 4.15. State Takeover Statutes.......................................19 Section 4.16. Brokers; Fees and Expenses....................................19 Section 4.17. Opinion of the Company Financial Advisor......................19 Section 4.18. Intellectual Property.........................................19 Section 4.19. Environmental Matters.........................................20 Section 4.20. Stockholders Agreement........................................21 Section 4.21. Option Agreement..............................................21 ARTICLE FIVE REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..................21 Section 5.01. Organization; Power...........................................21 Section 5.02. Authority; Enforceability.....................................21
-i- Section 5.03. Consents and Approvals; No Violations.........................22 Section 5.04. Information Supplied..........................................22 Section 5.05. Interim Operations of Sub.....................................23 Section 5.06. Brokers; Fees and Expenses....................................23 Section 5.07. Financing.....................................................23 ARTICLE SIX COVENANTS .........................................................23 Section 6.01. Covenants of the Company......................................23 Section 6.02. No Solicitation...............................................26 Section 6.03. Other Actions.................................................28 ARTICLE SEVEN ADDITIONAL AGREEMENTS............................................28 Section 7.01. Effecting the Merger; Stockholder Approval....................28 Section 7.02. Access to Information.........................................29 Section 7.03. Reasonable Efforts............................................29 Section 7.04. Benefits......................................................30 Section 7.05. Directors.....................................................30 Section 7.06. Fees and Expenses.............................................30 Section 7.07. Indemnification; Insurance....................................31 Section 7.08. Antitakeover Measures.........................................32 Section 7.09. Certain Litigation............................................32 Section 7.10. Credit Agreement..............................................32 ARTICLE EIGHT CONDITIONS ......................................................32 Section 8.01. Conditions to Each Party's Obligation To Effect the Merger....32 ARTICLE NINE TERMINATION AND AMENDMENT.........................................33 Section 9.01. Termination...................................................33 Section 9.02. Effect of Termination.........................................35 Section 9.03. Amendment.....................................................35 Section 9.04. Extension; Waiver.............................................36 Section 9.05. Independent Director Approval.................................36 ARTICLE TEN MISCELLANEOUS......................................................36 Section 10.01.Nonsurvival of Representations and Warranties.................36 Section 10.02.Notices.......................................................37 Section 10.03.Definitions and Interpretation................................38 Section 10.04.Counterparts..................................................39 Section 10.05.Entire Agreement; Third Party Beneficiaries...................39 Section 10.06.Publicity.....................................................39 Section 10.07.Assignment....................................................39 SECTION 10.08.GOVERNING LAW.................................................40 Section 10.09.Exercise of Rights and Remedies...............................40 Section 10.10.Reformation and Severability..................................40 Section 10.11.Remedies Cumulative...........................................40 Section 10.12.Enforcement...................................................40
-ii- Schedule 2.03 - Effects of the Merger - Officers Schedule 3.02 - Derivative Securities and Derivative Securities Plans Schedule 4.01 - List of Subsidiaries Schedule 7.04 - Benefits Schedule 7.06 - Fees and Expenses Exhibit A - Stockholders Agreement Exhibit B - Option Agreement Exhibit C - Definitions Exhibit D - Offer Conditions iii Santos Americas and Europe Corporation ("Parent"), ECM Acquisition Company ("Sub"), a wholly owned subsidiary of Parent, and Esenjay Exploration, Inc. (the "Company"), each of which is a Delaware corporation, hereby enter into this Agreement dated as of March 17, 2002. PRELIMINARY STATEMENT On the terms and subject to the conditions this Agreement contains, Parent proposes to acquire the Company in a two-step transaction. The first step would be a tender offer by Sub for all the outstanding shares of the Company's common stock, and the second step would be a follow-on merger between Sub and the Company in which the Company would become the surviving corporation. The board of directors of the Company has: o determined that Parent's proposed tender offer and merger are fair to and in the best interests of the Company's stockholders; o declared the agreement of merger this Agreement contains advisable and resolved to recommend that the holders of the Company's common stock accept that offer and adopt that agreement of merger; and o authorized the Company to enter into this agreement. AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: ARTICLE ONE THE OFFER Section 1.01. The Offer. (a) As soon as practicable after the date of this Agreement, and in any event during the period of seven business days beginning on the day of the first public announcement that Parent and the Company have entered into this Agreement, Sub will commence the Offer. The consideration Sub will pay under the Offer for Shares validly tendered and not subsequently properly withdrawn will be: (1) $2.84 per Share, net to the seller in cash and without interest; or (2) such greater consideration per Share, if any, as Sub may, in its sole discretion, offer in the Offer Documents to pay for each of those Shares. If any party terminates this Agreement under Article Nine at any time prior to the acceptance for payment by Sub of Shares under the Offer, Sub may, in its sole discretion, without the consent of the Company and notwithstanding Section 1.01(b) to the contrary, make any change in the terms and conditions of the Offer and revise the Offer Documents accordingly. (b) The obligation of Sub to accept for payment and pay for Shares validly tendered in the Offer and not subsequently properly withdrawn will be subject to the Offer Conditions. Sub expressly reserves the right, in its sole discretion, to waive any of the Offer Conditions or make any change in the terms and conditions of the Offer, except that, without the prior written consent of the Company, Sub will not: (1) waive or make any change in the Minimum Tender Condition; (2) reduce the maximum number of Shares it will purchase under the Offer; (3) decrease the Offer consideration or, other than by adding consideration, change the form of the Offer consideration; or (4) make any change in or addition to the Offer Conditions or otherwise amend the Offer in a manner adverse to the holders of Common Stock. For purposes of clause (4) above, none of the following will constitute a change in the Offer in a manner adverse to the holders of Common Stock: (1) any increase in or addition to the Offer consideration; or (2) any extension of the Offer beyond the then scheduled Expiration Date: (A) for any period any applicable Governmental Requirement or any interpretation thereof or position thereunder by the SEC may require; (B) in increments of not more than five business days each, if Parent has reasonably determined that any Offering Condition is not capable of being satisfied on or prior to that scheduled Expiration Date; (C) for one or more periods, up to a total of 10 business days for all those periods, if, notwithstanding that all Offer Conditions are satisfied or waived by Sub, to the extent waivable by Sub, as of that scheduled Expiration Date, less than 90% of all outstanding Shares have been validly tendered and not subsequently properly withdrawn; or (D) for any period or periods, if, prior to the acceptance for payment by Sub of Shares under the Offer, the Company has terminated this Agreement under Section 9.01(a)(4). (c) As soon as practicable on the Offer Commencement Date, Parent and Sub will file the Schedule TO with the SEC. Thereafter, in each case as and to the extent any applicable federal securities law so requires, Parent will: (1) promptly correct any information in the Offer Documents or the Schedule 14D-9 which is or has become false or misleading in any material respect concerning it or its Affiliates or the Company, provided that, in the case of information concerning the -2- Company, the Company shall have furnished the corrected information to Parent under Section 1.02(b); (2) cause the Schedule TO, as so corrected or otherwise changed, to be promptly filed with the SEC; and (3) take all lawful action necessary to cause the Offer Documents, as originally filed with the SEC and as thereafter so corrected or otherwise changed, to be disseminated to the holders of Shares. (d) For purposes of Section 7.05, Parent will supply to the Company in writing and be solely responsible for any information concerning Parent and Sub and their nominees, directors, officers and Affiliates which Section 14(f) of the Exchange Act and Exchange Act Rule 14f-1 require be disclosed to the Company's stockholders. (e) Parent will provide to Sub the funds necessary to enable Sub, as soon as practicable after the Offer expires and the satisfaction or waiver of the Offer Conditions, to accept for payment and pay for all Shares validly tendered in the Offer and not subsequently properly withdrawn. (f) In this Section 1.01, the terms "commence" and "public announcement" have the meanings Exchange Act Rule 14d-2 specifies. Section 1.02. Company Actions. (a) The Company hereby approves of and consents to the Offer and the agreement of merger this Agreement contains and represents and warrants to Parent and Sub that the Company Board, at a meeting duly called and held, has duly by the vote of directors which the Charter Documents of the Company require adopted resolutions: (1) confirming the Company Board's determination that the Offer and the Merger are fair to and in the best interests of the Company's stockholders; (2) approving and consenting to this Agreement and the transactions it contemplates, including the Offer and the Merger, which approval and consent are sufficient to render the Section 203 Restrictions inapplicable to the consummation of the Offer or the Merger; (3) declaring the advisability of this Agreement, including the agreement of merger it contains; and (4) resolving to recommend to the holders of Shares that they accept the Offer and adopt this Agreement, including the agreement of merger it contains; provided, however, that prior to the consummation of the Offer, the Company Board will have the right, under the circumstances Section 6.02(b) describes, to withdraw that recommendation and recommend that the holders of Shares reject the Offer and the agreement of merger this Agreement contains. -3- The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Company Board to which clause (4) above refers. Each director and executive officer of the Company has advised the Company Board that he intends to tender all his Shares in the Offer for so long as no party has terminated this Agreement under Article Nine. (b) As soon as practicable on or after the Offer Commencement Date, the Company will: (1) file the Schedule 14D-9 with the SEC; and (2) promptly commence mailing the Schedule 14D-9 to its stockholders. The Company will, if Parent so requests, include in the Schedule 14D-9 the information Section 14(f) of the Exchange Act and Exchange Act Rule 14f-1 require be disclosed to the Company's stockholders in connection with the performance by the Company of its obligations under Section 7.05. Thereafter, in each case as and to the extent any applicable federal securities law so requires, the Company will: (1) promptly correct any information in the Offer Documents or the Schedule 14D-9 which is or has become false or misleading in any material respect concerning it or its Affiliates or Parent and its Affiliates, provided that, in the case of information concerning Parent and its Affiliates, Parent shall have furnished the corrected information to the Company under Section 1.01(c); (2) cause the Schedule 14D-9, as so corrected or otherwise changed, to be promptly filed with the SEC; and (3) take all lawful action necessary to cause the Schedule 14D-9, as originally filed with the SEC and as thereafter so corrected or otherwise changed, to be disseminated to the holders of Shares. (c) In connection with the Offer, the Company will: (1) cause its transfer agent to furnish Sub promptly with (A) mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those persons becoming record holders subsequent to that date and (B) copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Common Stock; and (2) furnish to Sub such information and assistance, including updated lists of stockholders, security position listings and computer files, as Parent may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to -4- consummate the Merger, Parent and Sub and their agents will hold in confidence the information any such labels, listings and files contain, will use that information only in connection with the Offer and the Merger and, if this Agreement is terminated, will, on request, deliver, and will use their best efforts to cause their agents to deliver, to the Company all copies of and any extracts or summaries from that information then in their possession or control. ARTICLE TWO THE MERGER Section 2.01. Certificate of Merger. Subject to the terms and conditions hereof, the Company will cause the Certificate of Merger to be duly executed on or promptly following the Closing Date and filed with the Applicable Filing Office. Section 2.02. The Effective Time. The Effective Time will be the time and date the Certificate of Merger specifies or, if the Certificate of Merger does not so specify, the time the Certificate of Merger is duly filed with the Applicable Filing Office. Section 2.03. Effects of the Merger. At and as of the Effective Time: (1) Sub will merge with and into the Company in accordance with the DGCL; (2) Sub will cease to exist as a separate legal entity; (3) the Company will be the Surviving Corporation and, as such, will, all with the effect the DGCL provides, (A) possess all the properties and rights, and be subject to all the restrictions and duties, of the Company and Sub and (B) be governed by the laws of the State of Delaware; (4) the Company's certificate of incorporation in effect immediately prior to the Effective Time will be amended in article V thereof to provide that the authorized Capital Stock of the Company will consist of 1,000 shares of New Common Stock and in article VII thereof by deleting in their entirety the second and third paragraphs thereof and, as so amended, that certificate will become and thereafter remain, until changed in accordance with applicable law, the certificate of incorporation of the Surviving Corporation; (5) the Company's bylaws in effect immediately prior to the Effective Time will become and thereafter remain, until changed in accordance with their terms or applicable law, the bylaws of the Surviving Corporation; (6) the Company's directors immediately prior to the Effective Time who were Sub's nominees under Section 7.05 will be the directors of the Surviving Corporation until the earlier of their resignation or removal or the election of their successors; and (7) the officers of the Surviving Corporation will be as Schedule 2.03 sets forth, and each of those persons will serve in each office Schedule 2.03 specifies for that -5- person until the earlier of that person's resignation or removal or the appointment or election of that person's successor. Section 2.04. Closing. The closing of the Merger will take place at 10:00 a.m., local time, on a date Parent will specify, which will be no later than the second business day after satisfaction or waiver of the conditions Article Eight sets forth (the "Closing Date"), at the Applicable Baker Botts Office, unless the parties agree in writing to another date or place. ARTICLE THREE EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES Section 3.01. Effect on Capital Stock. (a) As of the Effective Time and without any action on the part of any holder of Common Stock or Capital Stock of Sub: (1) Capital Stock of Sub. The theretofore issued and outstanding shares of Capital Stock of Sub will convert into and become 1,000 validly issued, fully paid and nonassessable shares of New Common Stock; (2) Treasury Common Stock and Parent-Owned Common Stock. Each Share issued and outstanding immediately prior to the Effective Time which any Company Entity or Parent Entity then owns automatically will be cancelled and retired and cease to exist, and no consideration will be delivered in exchange therefor; (3) Conversion of Common Stock. Except as clause (2) above otherwise provides and subject to the provisions of clause (4) below, each Share issued and outstanding immediately prior to the Effective Time automatically will (A) convert into the right, and solely the right, to receive the Merger Consideration, less any required withholding taxes, on surrender of the Certificate representing that Share and (B) be cancelled and retired and cease to exist; and (4) Dissenting Shares. No Dissenting Share will convert into the right to receive the Merger Consideration, except that, if under the Appraisal Statute the right to an appraisal of that Dissenting Share thereafter ceases prior to that appraisal, that Dissenting Share will be treated as a Share that had converted as of the Effective Time into the right to receive the Merger Consideration under clause (3) above. (b) Rights of Certificate Holders. Each holder of a Certificate will, as of the Effective Time and thereafter, cease to have any rights respecting the shares that Certificate represented immediately prior to the Effective Time other than: (1) if those shares are not Dissenting Shares, the right to receive the Merger Consideration in respect of those shares under Section 3.01(a)(3); or (2) if those shares are Dissenting Shares, the rights the Appraisal Statute and Section 3.01(a)(4) provide. -6- (c) Control of Appraisal Process. If the Company receives any demand for an appraisal of Common Stock under the Appraisal Statute, it will promptly notify Parent of that demand and will not, without the prior written consent of Parent, offer, or accept an offer, to settle, or make or otherwise commit to make any payment in respect of, any such demand. Parent will have the right to participate in and direct all negotiations and proceedings with respect to all such demands. Section 3.02. Derivative Securities and Derivative Securities Plans. Each party will comply with the provisions of Schedule 3.02, which the parties incorporate herein by this reference. Section 3.03. Exchange of Certificates. (a) Prior to the Effective Time, Parent will designate the Paying Agent and from time to time will make or cause to be made available to the Paying Agent funds in the amounts and at the times necessary for the payment of the Merger Consideration on surrender of Certificates. Any and all interest earned on funds made available to the Paying Agent hereunder will belong to and be turned over to Parent. (b) As soon as reasonably practicable after the Effective Time, the Paying Agent will mail to each holder of record of a Certificate: (1) a letter of transmittal, which will specify that delivery will be effected, and risk of loss and title to Certificates will pass, only on delivery of Certificates to the Paying Agent and will be in a form and have such other provisions as Parent may specify; and (2) instructions for use in effecting the surrender of Certificates in exchange for the Merger Consideration. On surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as Parent may appoint, together with that letter of transmittal, duly executed, and such other documents as the Paying Agent reasonably may require, the holder of that Certificate will be entitled to receive for each Share that Certificate formerly represented the amount of cash equal to the Merger Consideration, and that Certificate forthwith will be cancelled. In the event of a transfer of ownership of Converted Shares which is not registered in the transfer records of the Company, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered, if that Certificate is properly endorsed or otherwise in proper form for transfer and the Person requesting that payment: (1) pays any transfer or other Taxes the payment to a Person other than the registered holder of that Certificate necessitates; or (2) establishes to the satisfaction of the Surviving Corporation that the Tax has been paid or is not applicable. No interest will accrue or become payable on the cash payable on the surrender of any Certificate. -7- (c) All cash paid on the surrender of Certificates in accordance with the terms of this Article Three will be deemed to have been paid in full satisfaction of all rights pertaining to the Converted Shares those Certificates theretofore represented. At the Effective Time, the stock transfer books of the Company will close, and there will be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Converted Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason, they will be cancelled and exchanged as this Article Three provides. (d) None of Parent, the Surviving Corporation or the Paying Agent will be liable to any Person in respect of any cash delivered to a public official under any applicable abandoned property, escheat or similar law. ARTICLE FOUR REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as the Company Disclosure Letter sets forth, the Company represents and warrants to Parent and Sub as follows: Section 4.01. Organization; Power. Each Company Entity is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority under those laws and its Charter Documents to own or lease and operate its properties and to carry on its business as now being conducted. Each Company Entity is duly qualified or licensed to do business and in good standing in each jurisdiction in which property it owns, leases or operates is located or the nature of the business it conducts makes that qualification or licensing necessary, except where the failures of all Company Entities to be so duly qualified or licensed and in good standing, individually or in the aggregate, would not have a Company Material Adverse Effect or prevent or materially delay the consummation of the Offer or the Merger. The Company has made available to Parent complete and correct copies of the Charter Documents of the Company and each of the other Company Entities, in each case as amended to the date of this Agreement. The respective Charter Documents of the Company Entities, other than the Company, do not contain any provision limiting or otherwise restricting the ability of the Company to control those Entities. Schedule 4.01 contains an accurate list of all the Subsidiaries of the Company. The Company owns all the outstanding shares of Capital Stock of each other Company Entity, directly or indirectly through one or more of the other Company Entities, free and clear of all liens, and all those shares are duly authorized, validly issued, fully paid and nonassessable. Section 4.02. Capitalization. As of the date of this Agreement, the authorized Capital Stock of the Company is comprised solely of: (1) 40,000,000 shares of Common Stock of which, as of March 1, 2002, 19,121,568 shares were issued and outstanding and no shares were treasury shares; and -8- (2) 5,000,000 shares of Preferred Stock, of which, as of March 1, 2002, no shares were issued and outstanding. As of March 1, 2002: (1) 2,653,836 shares of Common Stock were reserved for issuance on the exercise of Options then issued and outstanding under the Option Plan; and (2) 566,250 shares of Common Stock were reserved for issuance on the exercise of Warrants then issued and outstanding. Since March 1, 2002, no Options or Warrants have been granted and no shares of Common Stock have been issued except for shares of Common Stock issued: (1) on the exercise of Options and Warrants outstanding on that date; (2) as employer's contributions under the Savings Plan as the Company Disclosure Letter sets forth; (3) on the exercise of the Options to be granted as the Company Disclosure Letter sets forth; and (4) as payment under the Current Bonus Plan as the Company Disclosure Letter sets forth. All outstanding shares of Common Stock are, and all shares of Common Stock the Company may issue under the Option Plan or on the exercise of Warrants will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and free of any preemptive rights in respect thereto. As of the date of this Agreement: (1) no Derivative Securities of any Company Entity are outstanding other than the Options and Warrants this Section 4.02 describes above; (2) no Company Entity has outstanding any binding obligation to repurchase, redeem or otherwise acquire for value any Capital Stock of any Company Entity; and (3) the Company has delivered to Parent an accurate, complete schedule that sets forth, for each outstanding Option and Warrant, the exercise price thereof, the number of shares of Common Stock issuable on that exercise, the extent to which that Option or Warrant presently is exercisable and the expiration date and the holder thereof. Section 4.03. Authority; Enforceability. The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions this Agreement contemplates. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions this Agreement contemplates have been duly authorized by all necessary corporate action on the part of the -9- Company, other than, with respect to the Merger, the approval of the agreement of merger this Agreement contains by the holders of the outstanding Common Stock. The Company has duly executed and delivered this Agreement, and this Agreement, assuming it constitutes valid and binding obligations of Parent and Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as that enforceability may be: (1) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (2) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law. Section 4.04. Consents and Approvals; No Violations. Neither the execution, delivery or performance of this Agreement by the Company nor the consummation of the transactions this Agreement contemplates will: (1) conflict with or result in any breach of any provision of the Charter Documents of any Company Entity; (2) require any Governmental Approval, except (A) as the Exchange Act, the DGCL and state securities or blue sky laws may require and (B) where failures to obtain or effect Governmental Approvals would not have a Company Material Adverse Effect; (3) result in a violation or breach of, or constitute, with or without due notice or lapse of time or both, a default, or give rise to any right of termination, amendment, cancellation or acceleration, under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement, option, warrant or other instrument or obligation to which any Company Entity is a party or by which any of its properties or assets may be bound; or (4) violate any Governmental Requirement applicable to any Company Entity or any of its properties or assets; except, in the case of clauses (3) and (4), for violations, breaches or defaults that would not have, individually or in the aggregate, a Company Material Adverse Effect or prevent or materially delay the consummation of the Offer or the Merger. Section 4.05. SEC Reports and Financial Statements. Each Company Entity has timely filed with the SEC, and has made available to Parent true and complete copies of, all SEC Documents the federal securities laws have required it to so file. Each of those SEC Documents, as of its date: (1) complied in all material respects with the requirements of the Exchange Act or the Securities Act, as applicable; and -10- (2) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, in light, in the case only of SEC Documents filed under the Exchange Act, of the circumstances under which they were made. The consolidated financial statements of the Company included in any SEC Document, in fact or by incorporation by reference: (1) complied as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto; (2) were prepared in accordance with GAAP, except, in the case of unaudited quarterly statements on Exchange Act Form 10-Q, as that form otherwise permitted, applied on a consistent basis during the periods presented, except as the notes thereto indicate otherwise; and (3) presented fairly in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates of the balance sheets those financial statements include and the consolidated results of their operations and their consolidated cash flows for the periods ended on those dates, subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments. The audited consolidated financial statements of the Company for the year ended December 31, 2001 will not differ in any adverse respects, individually or in the aggregate, Material to the Company Entities from the unaudited consolidated financial statements of the Company for the year ended December 31, 2001, a true and correct copy of which is attached to the Company Disclosure Letter. The Company is, and the Company Entities considered as a whole are not "insolvent," as the federal bankruptcy code uses the quoted term. Section 4.06. Absence of Certain Changes or Events. Except as the Filed SEC Documents disclose, since the Current Audited Balance Sheet Date, each Company Entity has conducted its business only in the ordinary course, and there has not occurred: (1) any Company Material Adverse Effect; (2) any declaration, setting aside or payment of any dividend or other distribution with respect to the Capital Stock of any Company Entity or any redemption, purchase or other acquisition of any of that Capital Stock; (3) any split, combination or reclassification of any Capital Stock of any Company Entity or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of that Capital Stock; (4) any granting, or any commitment or promise to grant, by any Company Entity to any officer of any Company Entity of (A) any increase in compensation, except in the ordinary course of business, including in connection with promotions, consistent -11- with prior practice or as employment agreements in effect as of the Current Audited Balance Sheet Date required or (B) any increase in severance or termination pay, except as part of a standard employment package to any person promoted or hired, but not including the five most highly compensated executive officers of the Company, or as employment, severance or termination agreements in effect as of the Current Audited Balance Sheet Date required; (5) except for termination arrangements in the ordinary course of business consistent with past practice with employees other than any executive officer of the Company, any entry by any Company Entity into any employment, severance or termination agreement with any officer of any Company Entity; (6) any increase in, or any commitment or promise to increase, benefits payable or available under any pre-existing Benefit Plan, except in accordance with the pre-existing terms of that Benefit Plan, any establishment of, or any commitment or promise to establish, any new Benefit Plan, any amendment of any existing stock options, stock appreciation rights, performance awards or restricted stock awards or, except in accordance with and under pre-existing compensation policies, any grant, or any commitment or promise to grant, any stock options, stock appreciation rights, performance awards, or restricted stock awards; (7) any damage to or any destruction or loss of physical properties any Company Entity owns or uses, whether or not covered by insurance, that in the aggregate have had or reasonably could be expected to have a Company Material Adverse Effect; (8) any reevaluations by the Company Entities of any of their assets which, in accordance with GAAP, the Company will reflect in its consolidated financial statements, including any impairment of assets, and which in the aggregate are Material to them; or (9) any material change in accounting methods, principles or practices by the Company. Section 4.07. No Undisclosed Liabilities. Except as and to the extent the Current Audited Financial Statements, or the financial statements any subsequently Filed SEC Document contains, include an accrual or reserve therefor or otherwise disclose, no Company Entity has any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that GAAP would require to be reflected on a consolidated balance sheet of the Company and its consolidated Subsidiaries, including the notes thereto, except for liabilities or obligations they incurred in the ordinary course of business since the date of the most recently Filed SEC Document that have not had and will not have, individually or in the aggregate, a Company Material Adverse Effect. Section 4.08. Information Supplied. No information the Company has supplied or will supply specifically for inclusion or incorporation by reference in the Offer Documents or the Schedule 14D-9, at the respective times those documents are filed with the SEC or first published, sent or given to the Company's stockholders, contained or will contain any untrue statement of a material fact or omitted or will omit to state any material fact required to be stated -12- therein or necessary in order to make the statements therein, in light of the circumstances under which they were or are made, not misleading, except that the Company makes no representation or warranty with respect to statements made or incorporated by reference in the Schedule 14D-9 which constitute information Parent or Sub has supplied or may hereafter supply in writing specifically for inclusion or incorporation by reference in the Schedule 14D-9. The Schedule 14D-9 will comply as to form in all material respects with the applicable requirements of the Exchange Act. Section 4.09. Benefit Plans. (a) The Company has delivered to Parent prior to the date of this Agreement true and correct copies of all Benefit Plans now existing or which existed at any time within the six-year period ending on the date of this Agreement. Each such plan has been administered in accordance with its terms. Each Company Entity and all the Benefit Plans are in compliance with the applicable provisions of ERISA, the Code and all other applicable Governmental Requirements. (b) No Company Entity has, or had within the six-year period ending on the date of this Agreement, any ERISA Affiliates other than the other Company Entities. (c) All Benefit Plans intended to qualify under Section 401(a) of the Code (the "Qualified Plans") are so qualified, and the IRS has determined them to be so qualified or application for determination letters have been timely submitted to the IRS. The Company will promptly provide Parent after the date of this Agreement with true and complete copies of the current plan determination letters, most recent actuarial valuation reports, if any, most recent Form 5500, or, as applicable, Form 5500-C/R, filed with respect to each Qualified Plan and the most recent trustee or custodian report. To the extent that any Qualified Plans have not been amended to comply with applicable Governmental Requirements, the remedial amendment period permitting retroactive amendment of those Qualified Plans has not expired and will not expire within 120 days after the consummation of the Offer. All reports and other documents required to be filed with any Governmental Authority or distributed to plan participants or beneficiaries, including annual reports, summary annual reports, actuarial reports, PBGC-1 Forms, audits or returns, have been timely filed or distributed. (d) No Benefit Plan or Company Entity has engaged in any Prohibited Transaction. No Benefit Plan has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(a) of ERISA, and no circumstances exist as a result of which any Company Entity could have any direct or indirect liability whatsoever, including being subject to any statutory lien to secure payment of any such liability, to the PBGC under Title IV of ERISA or to the IRS for any excise tax or penalty with respect to any Benefit Plan now or hereafter maintained or contributed to by any Company Entity. Further: (1) no termination, partial termination or discontinuance of contributions to any Qualified Plan has occurred without a determination by the IRS that such action does not adversely affect the tax-qualified status of that plan; (2) no Termination Event has occurred; -13- (3) no Reportable Event has occurred with respect to any Benefit Plan which was not properly reported; (4) the valuation of assets of any Qualified Plan, as of the Effective Time, will equal or exceed the actuarial present value of all "benefit liabilities" (within the meaning of Section 4001(a)(16) of ERISA) under that plan in accordance with the assumptions the regulations of the PBGC governing the funding of terminated defined benefit plans contain; (5) with respect to Benefit Plans qualifying as "group health plans" under Section 4980B of the Code or Section 607)(1) or 609 of ERISA, relating to the benefit continuation rights "COBRA" or qualified medical child support orders impose, each Company Entity has complied in all material respects with all reporting, disclosure, notice, election and other benefit continuation and coverage requirements so imposed as and when applicable to those plans, and no Company Entity has incurred, or will incur, any direct or indirect liability or is, or will be, subject to any loss, assessment, excise tax penalty, loss of federal income tax deduction or other sanction, arising on account of or in respect of any direct or indirect failure by any Company Entity, at any time prior to the consummation of the Offer to comply with any such benefit continuation of coverage Governmental Requirement, which is capable of being assessed or asserted before or after that consummation directly or indirectly against any Company Entity, Parent or any Affiliate of Parent; and (6) no Company Entity has incurred liability under Section 4062 of ERISA. (e) No Company Entity is, or at any time within the six-year period ended on the date of this Agreement was, obligated to contribute to a Multiemployer Plan. (f) No act, omission or transaction has occurred which would result in the imposition on any Company Entity with respect to any Benefit Plan of: (1) any breach of fiduciary duty liability damages under Section 409 of ERISA; (2) a civil penalty under Section 502(c), (i) or (l) of ERISA; or (3) any excise tax under the Code. (g) Any Benefit Plan funded trust intended to be exempt under Section 501(c)(9) of the Code: (1) satisfies the requirements of that Section; (2) has received a favorable determination letter from the IRS regarding that exempt status; and (3) has not, since receipt of the most recent favorable determination letter, been amended or operated in a way that would adversely affect that exempt status. -14- (h) Each Benefit Plan that is a Welfare Plan may be amended or terminated at any time after the consummation of the Offer without liability to any Company Entity. Section 4.10. Other Compensation Arrangements and Employee Matters. (a) Except as the Filed SEC Documents disclose, and except for the Severance Plan, the TSIP and the Current Bonus Plan, as of the date of this Agreement, no Company Entity is a party to any written or oral: (1) consulting agreement not terminable on not more than 60 calendar days' prior notice or union or collective bargaining agreement; (2) agreement with any executive officer or other key employee of any Company Entity (A) the benefits of which are contingent, or the terms of which are materially affected or altered, on the occurrence of a transaction involving the Company of the nature this Agreement contemplates or (B) providing any term of employment or compensation guarantee; or (3) agreement or plan, including any stock option plan (other than the Option Plan), stock appreciation right plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased or affected, or the vesting of the benefits of which will be accelerated or affected, by the occurrence of any of the transactions this Agreement contemplates or the value of any of the benefits of which will be calculated on the basis of any of the transactions this Agreement contemplates. (b) Each Company Entity has been and is in compliance with the IRCA and all applicable Governmental Requirements respecting employment and employment practices, terms and conditions of employment, wages and hours and workplace health and safety at well sites and in other work areas. (c) No Company Entity has any obligation or made any commitment or promise to provide medical, dental or life insurance benefits to or on behalf of any of its employees who may retire or any of its former employees who have retired, except as the continuation of coverage provisions of Section 4980B of the Code and the applicable parallel provisions of ERISA may require. (d) No Company Entity is a party to or bound by any collective bargaining or other labor union agreement. To the knowledge of the Company, no labor union organizing activities involving any Company Entity are ongoing. (e) The Company has delivered to Parent prior to the date of this Agreement an accurate, complete schedule that sets forth as of March 1, 2002, on the basis of the assumptions that schedule contains: (1) the name of each "Participant" in the Severance Plan; and -15- (2) for each named "Participant:" (A) the amount of the "Incentive Benefit" to which that individual may be come entitled; and (B) the amount of the "Severance Benefit" to which that individual may become entitled. The consummation of neither the Offer nor the Merger will constitute a "succession" for purposes of Section 8.1 of the Severance Plan, and the failure of the Company to obtain from Parent or any of its Affiliates an agreement to assume and agree to perform the obligations of the Company under the Severance Plan will not constitute a breach of that plan for any purpose of that plan. The Severance Plan will permit its amendment in accordance with Schedule 7.04 without the consent of any Participant. Quoted terms this Section 4.10(e) uses have the meanings the Severance Plan specifies. (f) The Company has delivered to Parent prior to the date of this Agreement an accurate, complete schedule that sets forth as of March 1, 2002: (1) the names of all participants in the TSIP and, for each such participant, the estimated liability of the Company thereto under the TSIP; (2) the names of all participants in the Current Bonus Plan and, for each such participant, the estimated liability of the Company thereto for all amounts payable thereunder with respect to calendar years 2000 and 2001; and (3) the names of all "Grantees" of all then granted and outstanding "Incentive Awards" under the LIP and, for each such award, the "cash value" thereof for purposes of Section 5.7(b) of the LIP on the assumption that the highest price that will be paid under the Offer will be the dollar amount per Share Section 1.01(a) sets forth. Quoted terms this Section 4.10(f) uses have the meanings the LIP specifies. (g) Effecting the disposition of outstanding Options and Warrants in accordance with Schedule 3.02 will not require the consent of any holder of any Option or Warrant which has not been duly obtained prior to the date of this Agreement and furnished to Parent. (h) As of March 1, 2002, each then current employee of the Company had executed and delivered to the Company a confidentiality agreement in one of the forms the Company delivered to Parent prior to the date of this Agreement. Each of those agreements is a legal, valid and binding obligation of the employee party thereto. (i) The Company has delivered to Parent prior to the date of this Agreement an accurate, correct list of the names, years of service and current rates of salary and wages for all current employees and consultants who are employed or otherwise compensated by a -16- Company Entity. No person any Company Entity has classified as an independent contractor properly should be classified as a common-law employee of that Company Entity. (j) The Company Entities have no contract, commitment, obligation or intention, whether legally binding or not, to establish or adopt any new or additional plans or other arrangements that would constitute Benefit Plans if adopted, or to increase the benefits under any existing Benefit Plan. Section 4.11. Litigation. Except as the Filed SEC Documents disclose, and except for suits filed in connection with the Offer, no actions, claims, investigations, proceedings or suits are pending or, to the knowledge of the Company, threatened against Company Entities by or before any Governmental Authority the outcomes of which, individually or in the aggregate, reasonably could be expected to have a Company Material Adverse Effect or prevent or materially delay the consummation of the Offer or the Merger. Except as the Filed SEC Documents disclose, no Company Entity is subject to any outstanding orders, writs, injunctions, decrees or binding awards that reasonably could be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Section 4.12. Compliance With Governmental Requirements. Except as the Filed SEC Documents disclose, the Company Entities: (1) hold all Governmental Approvals necessary for the lawful conduct of their businesses; and (2) are in compliance with the terms of their Governmental Approvals and all applicable Governmental Requirements; except for such failures to hold Governmental Approvals and to comply with Governmental Approvals and Governmental Requirements as would not, individually or in the aggregate, have a Company Material Adverse Effect. Section 4.13. Reserve Information. The Company has delivered to Parent prior to the date of this Agreement the definitive report of Ryder Scott Company, independent petroleum engineers, on the Company's proved reserves as of December 31, 2001 together with the written acknowledgment by Ryder Scott Company that the report so delivered is as represented and warranted hereby. The underlying factual information provided to Ryder Scott Company, to the extent that Ryder Scott Company relied on it in the preparation of that report on the Company's proved reserves as of December 31, 2001, was, at the time of delivery, true and correct in all material respects, except for such errors as, individually or in the aggregate, could not reasonably be expected to have a Company Material Adverse Effect. Section 4.14. Tax Matters. (a) Each Company Entity has filed all federal income tax returns and all other material Tax returns and reports any Governmental Requirement has required it to file. All those returns are complete and correct. Each Company Entity has paid, or the Company has paid on its behalf, all Taxes those returns showed as due and all Taxes for which no return was required to be filed. -17- (b) No Tax return of any Company Entity is under audit or examination by any taxing authority, and no Company Entity has received any written or oral notice of any such audit or examination. With respect to Taxes paid or payable by any Company Entity, a Company Entity has paid each deficiency resulting from any audit or examination relating thereto, except for deficiencies a Company Entity is contesting in good faith, and no relevant taxing authority has raised in writing: (1) any issues relating thereto in the course of any presently pending audit or examination; or (2) any material issues relating thereto in any completed audit or examination which reasonably could be expected to recur in a later taxable period. The consolidated federal income tax returns of the Company have never been examined by the IRS and all years are closed through 1997. (c) No liens for Taxes exist with respect to any assets or properties of any Company Entity, except for statutory liens for Taxes not yet due. (d) No Company Entity is a party to or is bound by any Tax sharing agreement, Tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes, including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority. (e) Any disallowance of a deduction under Section 162(m) of the Code for employee remuneration will not apply to any amount paid or payable by any Company Entity under any contract, Option Plan, Benefit Plan, program, arrangement or understanding currently in effect. (f) Any amount or other entitlement that could be received, whether in cash or property or the vesting of property, as a result of any of the transactions this Agreement contemplates by any employee, officer or director of the Company or any of its Affiliates who is a "disqualified individual," as proposed Treasury Regulation Section 1.280G-1 defines that term, under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would not be characterized as an "excess parachute payment," as Section 280G(b)(1) of the Code defines that term. (g) Each Company Entity has timely filed, or caused to be timely filed on its behalf, all Royalty Returns any contract or Governmental Requirement has required it to file, and all those Royalty Returns are true, complete and accurate in all material respects as provided for under any contract or by any applicable Governmental Requirement. All Royalties those Royalty Returns showed to be due, or otherwise owing, as well as all Royalties for which no Royalty Return was required to be filed, have been timely paid. The Company Disclosure Letter contains lists of: (1) all jurisdictions in which any Company Entity currently files Royalty Returns; -18- (2) all planned audits by the relevant authorities; and (3) all disputed Royalty matters and an estimated dollar amount attributable to each of those matters; and each of those lists is true and complete in all material respects. No Governmental Authority or other Person has asserted, assessed, proposed or threatened any deficiencies with respect to any Royalty against the Company Entities which, individually or in the aggregate, are Material to them. (h) For purposes of Article Nine, no representations Section 4.09 and this Section 4.14 contain (each, a "Relevant Representation") will be deemed to be untrue unless all untruths the Relevant Representations contain cumulatively reasonably could be expected to have a Company Material Adverse Effect. Section 4.15. State Takeover Statutes. The Company Board has approved the Offer, the Merger and this Agreement, and that approval is irrevocable and sufficient to render the Section 203 Restrictions inapplicable to the Offer, the Merger and this Agreement and the transactions this Agreement contemplates. To the Company's knowledge, no other state takeover statute or similar Governmental Requirement applies or purports to apply to the Offer, the Merger, this Agreement or any of the transactions this Agreement contemplates. Section 4.16. Brokers; Fees and Expenses. No Company Entity has, directly or indirectly, agreed to pay or incurred any obligation to pay any broker, investment banker, financial advisor or other Person, other than the Company Financial Advisor and Randall & Dewey, Inc., the fees and expenses of which the Company will pay, any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions this Agreement contemplates. The Company Disclosure Letter correctly sets forth the estimated fees and expenses the Company has incurred and expects to incur in connection with this Agreement and the transactions it contemplates, including the fees of the Company's legal counsel, counsel for the Company Financial Advisor and Randall & Dewey, Inc. The Company has provided Parent true and complete copies of all executory agreements, all of which are in writing, between the Company Financial Advisor or Randall & Dewey, Inc. and the Company. Section 4.17. Opinion of the Company Financial Advisor. The Company has received the written opinion of the Company Financial Advisor to the effect that, as of the date of that opinion, the consideration the holders of Shares will receive under the Offer and in the Merger is fair to those holders from a financial point of view. Section 4.18. Intellectual Property. Except to the extent that the inaccuracies in any of the following, or the circumstances giving rise to those inaccuracies, individually or in the aggregate, would not have a Company Material Adverse Effect: (1) each Company Entity owns, or is licensed or otherwise has the right to use, in each case, clear of any liens or encumbrances of any kind, all Proprietary Rights used in or necessary for the conduct of its business as currently conducted; -19- (2) no claims are pending or, to the knowledge of the Company, threatened that any Company Entity is infringing on or otherwise violating the rights of any Person with regard to any Proprietary Rights any Company Entity owns or uses under a license; (3) to the knowledge of the Company, no Person is infringing on or otherwise violating any right of any Company Entity with respect to any Proprietary Rights any Company Entity owns or uses under a license; (4) none of the former or current members of management or key personnel of any Company Entity, including all former and current employees, agents, consultants and contractors who have contributed to or participated in the conception and development of the Proprietary Rights of any Company Entity, has asserted or threatened in writing any claim against any Company Entity in connection with the involvement of those Persons in the conception and development of the Proprietary Rights of any Company Entity; (5) the execution and delivery of this Agreement, compliance with its terms and consummation of the transactions it contemplates do not and will not conflict with or result in any violation or default, with or without notice or lapse of time or both, or give rise to any right or license or any creation or extension of any lien or encumbrance relating to the Proprietary Rights of any Company Entity or any right of termination, cancellation or acceleration or any loss of any Proprietary Rights of any Company Entity or benefits related thereto which, in the aggregate, are Material to the Company Entities, and no consent of any Person will be required for the use of any of these Proprietary Rights by Parent or any Affiliate or Parent following the consummation of the Offer; and (6) each Company Entity has taken reasonable and necessary steps to protect its Proprietary Rights, and, to the knowledge of the Company, none of the Proprietary Rights of the Company Entities has been lost or are in jeopardy of being lost because of any omission to act by any Company Entity. Section 4.19. Environmental Matters. Except as the Filed SEC Documents disclose or as would not, individually or in the aggregate, have a Company Material Adverse Effect: (1) each Company Entity has all Governmental Approvals all applicable Environmental Laws require it to have and is in compliance with the requirements of those Environmental Laws and Governmental Approvals; (2) to the knowledge of the Company, there are no pending or threatened claims against or governmental investigations involving any Company Entity under any Environmental Laws; and (3) to the knowledge of the Company, there are no circumstances with respect to any current or former property or operations of any Company Entity or any other Person for which any Company Entity has assumed liability that would form the basis of any claims of material violations of Environmental Laws against one or more of the Company Entities, and applicable Governmental Requirements have not required the -20- Company to disclose facts relating to environmental proceedings or matters in the Filed SEC Documents which the Company has not so disclosed. The representations and warranties in Section 7.17 of the Credit Agreement are true and correct. The Company has delivered to Parent prior to the date of this Agreement an accurate, complete copy of the "Disclosure Schedule," as the Credit Agreement defines the quoted term. Section 4.20. Stockholders Agreement. Each Stockholder has duly executed and delivered to Parent the Stockholders Agreement, and the Stockholders Agreement constitutes a valid and binding obligation of that Stockholder, enforceable against that Stockholder in accordance with its terms, except as that enforceability may be: (1) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (2) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law. Section 4.21. Option Agreement. Each Option Grantor has duly executed and delivered to Parent the Option Agreement, and the Option Agreement constitutes a valid and binding obligation of that Option Grantor, enforceable against that Option Grantor in accordance with its terms, except as that enforceability may be: (1) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (2) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law. ARTICLE FIVE REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub represent and warrant to the Company as follows: Section 5.01. Organization; Power. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority under those laws and its Charter Documents to: (1) own or lease its properties and carry on its business as now conducted; and (2) execute, deliver and perform its obligations under this Agreement and consummate the transactions this Agreement contemplates it will consummate. Section 5.02. Authority; Enforceability. The execution, delivery and performance of this Agreement by each of Parent and Sub and the consummation of the transactions this Agreement contemplates have been duly authorized by all necessary corporate -21- action on its part which its Charter Documents and the applicable Governmental Requirements of the State of Delaware require. No vote of Parent's stockholders is required to approve this Agreement or the other transactions this Agreement contemplates. Each of Parent and Sub has duly executed and delivered this Agreement, and this Agreement, assuming it constitutes a valid and binding obligation of the Company, constitutes its valid and binding obligation enforceable against it in accordance with its terms, except as that enforceability may be: (1) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (2) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law. Section 5.03. Consents and Approvals; No Violations. (a) The execution, delivery and performance of this Agreement by each Parent Entity, the consummation of the Offer and the Merger and the effectuation by either Parent Entity of any other transaction this Agreement contemplates it will effect do not and will not: (1) violate or breach any Charter Document of Parent or Sub; (2) violate any Governmental Requirement applicable to Parent or Sub; or (3) except as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the consummation of the Offer or the Merger, violate, breach or constitute, with or without due notice or lapse of time or both, a default under, or result in, or afford another Person the right to cause, any cancellation or termination of, any amendment or other change in the terms of or any acceleration of the obligations of either Parent or Sub or its obligations under any agreement Material to Parent. (b) Except as the Exchange Act, the DGCL and state securities or blue sky laws do or may require, no Governmental Requirement requires either of Parent or Sub to obtain any Governmental Approval, or make any filings, including any report or notice, with any Governmental Authority, in connection with its execution, delivery or performance of this Agreement, the enforcement against it of its obligations hereunder, the consummation of the Offer or the Merger or the effectuation of any other transaction this Agreement contemplates it will effect. Section 5.04. Information Supplied. The information Parent or Sub has supplied or may hereafter supply specifically for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the information statement, if any, respecting the Merger will, at the respective times they are filed with the SEC or first published, sent or given to the Company's stockholders, not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that Parent and Sub make no representation respecting the information the Company has supplied or may hereafter -22- supply in writing specifically for inclusion or incorporation by reference therein. The Offer Documents comply as to form in all material respects with the applicable requirements of Exchange Act. Section 5.05. Interim Operations of Sub. Sub was formed solely for the purpose of engaging in the transactions this Agreement contemplates, has engaged in no other business activities and has conducted its operations only as this Agreement contemplates. Section 5.06. Brokers; Fees and Expenses. Neither Parent nor Sub has, directly or indirectly, agreed to pay or incurred any obligation to pay any broker, investment banker, financial advisor or other Person, other than Merrill Lynch & Co., the fees and expenses of which Parent or Sub will pay, any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions this Agreement contemplates. Section 5.07. Financing. Parent has the funds available to purchase all the outstanding Shares on a fully diluted basis in the Offer and pay the Merger Consideration in the Merger and all fees and expenses this Agreement contemplates it or Sub will pay. ARTICLE SIX COVENANTS Section 6.01. Covenants of the Company. (a) Until such time as Parent's nominees constitute a majority of the whole Company Board, the Company will, and will cause each other Company Entity to, except as this Agreement otherwise expressly contemplates or permits or as Parent otherwise has previously consented in writing: (1) carry on its businesses in substantially the same manner as it has heretofore and not introduce any new methods of management, operation or accounting that in the aggregate are Material to the business of the Company Entities; (2) maintain its properties and facilities, including those it holds under leases, in as good working order and condition as at present, ordinary wear and tear excepted; (3) perform in all material respects all its obligations under agreements relating to or affecting its properties, rights and other assets, including the Credit Agreement; (4) keep in full force and effect without interruption all its present insurance policies or other comparable insurance coverage; (5) use reasonable commercial efforts to (A) maintain and preserve its business organization intact, (B) retain its present employees and (C) maintain its relationships with suppliers, customers and others having business relations with it; (6) comply with all applicable Governmental Requirements; and -23- (7) maintain the instruments and agreements governing its outstanding indebtedness and leases on their present terms and not enter into (i) new or amended indebtedness or (ii) new or amended lease instruments or agreements involving amounts over $25,000 in any single case or $100,000 in the aggregate. (b) Until such time as Parent's nominees constitute a majority of the whole Company Board, the Company will not, and will not permit any other Company Entity to, except as this Agreement otherwise expressly contemplates or permits or as Parent otherwise has previously consented in writing: (1) (A) declare or pay any dividends on or make other distributions in respect of any of its Capital Stock, other than dividends or distributions a wholly owned Subsidiary of the Company may declare, pay or make to the Company or one of its other wholly owned Subsidiaries, (B) split, combine or reclassify any of its Capital Stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its Capital Stock or (C) repurchase, redeem or otherwise acquire any shares of Capital Stock of any Company Entity; (2) issue, deliver or sell, or authorize, or propose the issuance, delivery or sale of, any shares of its Capital Stock of any class, or any Derivative Securities or phantom securities, except that: (A) the Company may issue: (i) shares of Common Stock on the exercise of Options and Warrants awarded and outstanding on the date of this Agreement in accordance with the present terms of those Options or Warrants and the applicable Option Plan or Warrant agreement, (ii) shares of Common Stock under the Current Bonus Plan, as the Company Disclosure Letter sets forth, (iii) shares of Common Stock as employer's contributions under the Savings Plan, as the Company Disclosure Letter sets forth and (iv) Options awarded but not issued under the LIP, as the Company Disclosure Letter sets forth, provided those Options are in form and substance reasonably satisfactory to Parent; and (B) any wholly owned Subsidiary of the Company may issue shares of its Capital Stock to the Company or one of its other wholly owned Subsidiaries; (3) amend or propose to amend its Charter Documents; -24- (4) make, or enter into a contract or other commitment to make, directly or indirectly: (A) any investments, other than Permitted Investments, in the Capital Stock or indebtedness of any Person; or (B) except in connection with transactions GAAP characterizes as hedging transactions, as distinct from trading transactions, that the Credit Agreement requires, issue or acquire any commodity derivatives; (5) negotiate for the acquisition of any business or the start-up of any new business or, merge, consolidate or otherwise effect a business combination with, or agree to merge, consolidate or otherwise effect a business combination with, any other Entity; (6) other than sales of production and products in the ordinary course of business and consistent with prior practice and the requirements of the Credit Agreement, directly or indirectly sell, lease, license, encumber or otherwise dispose of, or enter into a contract to sell, lease, license, encumber or otherwise dispose of, any of its assets; (7) incur any new or additional indebtedness for borrowed money (which, for purposes of this Section 6.01, will include any production payment, whether volumetric or denominated in a currency, or similar royalty, overriding royalty net profits or other interest in any oil or gas property) or guarantee any such indebtedness, issue or sell any debt securities or warrants or rights to acquire any debt securities of the Company or any other Company Entity or guarantee any debt securities of others; (8) make any Tax elections that, individually or in the aggregate, would have a Company Material Adverse Effect or settle or compromise any income tax liabilities of the Company or any other Company Entity that, individually or in the aggregate, would have a Company Material Adverse Effect; (9) pay, discharge, settle or satisfy any claims, liabilities or obligations, absolute, accrued, asserted or unasserted, contingent or otherwise, other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities the unaudited consolidated financial statements of the Company for the year ended December 31, 2001 recognize or disclose or incurred since December 31, 2001, in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company or any other Company Entity is a party; (10) fail to comply with any covenant Article VIII of the Credit Agreement contains; (11) except in the ordinary course of business, modify, amend or terminate any contract or agreement Material to the Company Entities to which any Company Entity is a party or of which it is a beneficiary or by which it is bound or waive, release or assign any rights or claims Material to the Company Entities; -25- (12) permit the call of the 2002 annual meeting, or any special meeting, of its stockholders; or (13) amend or otherwise change any agreement it or any other Company Entity has with the Company Financial Advisor. In the case of any requested deviation by the Company from the provisions of clause (7) above, Parent will not unreasonably withhold its consent. Section 6.02. No Solicitation. (a) The Company: (1) will, and will cause all its Representatives to, cease immediately any discussions or negotiations with any parties which may be ongoing with respect, or which reasonably may be expected to lead, to any Acquisition Proposal; and (2) will not authorize or permit any of its Representatives to (A) solicit, initiate or encourage, including by way of furnishing information, or take any other action to facilitate, any inquiries or the making of any proposal which constitutes, or reasonably may be expected to lead to, any Acquisition Proposal or (B) participate in any discussions or negotiations regarding, or which reasonably may be expected to lead to, any Acquisition Proposal; provided, however, that, if at any time before Sub accepts Shares for payment under the Offer, the Company receives an unsolicited bona fide written Acquisition Proposal and a majority of the Company Board determines in good faith that the proposal reasonably may be expected to constitute a Superior Takeover Proposal, the Company may, and may permit its Representatives to, in response to that proposal, and provided that the Company complies with Section 6.02(c): (1) furnish information about the Company to any Person under a confidentiality agreement in a form Parent has previously approved in writing, which approval Parent will not unreasonably withhold; and (2) participate in negotiations regarding that proposal. Without limiting the foregoing, the parties hereto acknowledge their respective understandings that any violation of the restrictions the preceding sentence sets forth will constitute a breach of this Section 6.02(a) by the Company. (b) Except as this Section 6.02(b) otherwise sets forth, neither the Company Board nor any committee thereof will: (1) withdraw or modify, or propose to withdraw or modify in a manner adverse to Parent, the approval or recommendation by the Company Board of the Offer or the agreement of merger this Agreement contains; (2) approve or recommend, or propose to approve or recommend, any Acquisition Proposal; or -26- (3) cause the Company to enter into any agreement respecting any Acquisition Proposal; provided, however, that if at any time before Sub accepts Shares for payment under the Offer, the Company receives an unsolicited bona fide written Acquisition Proposal that a majority of the Company Board determines in good faith constitutes a Superior Takeover Proposal, the Company Board may, at any time that is after the fourth business day following the Company's delivery to Parent of the written notice Section 6.02(c) requires the Company to deliver in connection with that proposal: (1) withdraw or modify its recommendation, but not its approval, which will be irrevocable, of the Offer and the agreement of merger this Agreement contains; and (2) approve or recommend that proposal or cause the Company to enter into an agreement implementing that proposal. (c) If the Company or, to its knowledge, any of its Representatives receives any Acquisition Proposal or any request for information or inquiry with respect, or which reasonably may be expected to lead, to an Acquisition Proposal, the Company will: (1) immediately advise Parent orally of, and thereafter promptly, but in no event later than 24 hours after receipt, confirm to Parent in writing, the material terms and conditions of that Acquisition Proposal, request or inquiry and the identity of the Person making that Acquisition Proposal, request or inquiry; and (2) thereafter will keep Parent fully informed of the status and details, including amendments or proposed amendments, of that Acquisition Proposal, request or inquiry. (d) Nothing this Section 6.02 contains will prohibit the Company from taking and disclosing to its stockholders a position Exchange Act Rule 14e-2(a) contemplates or from making any disclosure to the Company's stockholders if, in the opinion of the Company Board, after consultation with counsel, failure so to disclose would be inconsistent with the fiduciary duties of its members to the Company's stockholders under Delaware law; provided, however, that neither the Company nor the Company Board or any committee thereof will, except as Section 6.02(b) otherwise permits, withdraw or modify, or propose to withdraw or modify, the Company Board's position with respect to the Offer and the agreement of merger this Agreement contains or approve or recommend, or propose to approve or recommend, a Superior Takeover Proposal. (e) During any period of four business days which Section 6.02(b) describes, the Company will not, and will not permit any other Company Entity to, enter into any binding agreement respecting any Superior Takeover Proposal. If, during or after any such period, the Company changes its intention to enter into any such binding agreement, the Company promptly will notify Parent of that change and its particulars. -27- Section 6.03. Other Actions. The Company will not, and will not permit any other Company Entity to, take any action that would result in: (1) any of the representations and warranties of the Company in this Agreement which are qualified as to materiality or a Company Material Adverse Effect becoming untrue; (2) any of those representations and warranties which are not so qualified becoming untrue in any material respect; or (3) any of the Offer Conditions not being satisfied, subject to the Company's right to take the actions Section 6.02 expressly permits it to take. ARTICLE SEVEN ADDITIONAL AGREEMENTS Section 7.01. Effecting the Merger; Stockholder Approval. (a) If Parent Entities own at least 90% of the outstanding Shares after Sub consummates the Offer, the parties hereto will take all actions necessary to effect the Merger under Section 253 of the DGCL as soon as practicable after that consummation. (b) If Parent and Sub cannot or choose not to effect the Merger under Section 253 of the DGCL, the parties will effect the Merger under Section 251 of the DGCL as soon as practicable after complying with the applicable informational requirements of the Exchange Act, and the Company will submit the agreement of merger this Agreement contains to its stockholders for the purpose of their acting on that agreement notwithstanding that the Company Board, having heretofore declared that agreement advisable, may have determined after the date of this Agreement that that agreement is no longer advisable and recommended that its stockholders reject it. (c) If Parent will effect the Merger under Section 251 of the DGCL and, in connection therewith, the Company must furnish to its stockholders an information statement under Section 14(c) of the Exchange Act, the Company will, at Parent's request, as soon as practicable following the consummation of the Offer, prepare and file a preliminary information statement with the SEC and will use its reasonable best efforts to respond to any comments of the SEC or its staff and to cause that information statement to be mailed to the Company's stockholders as promptly as practicable after responding to all those comments to the satisfaction of that staff. The Company will notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to that information statement or for additional information and will supply Parent with copies of all correspondence between the Company or any of its Representatives and the SEC or its staff with respect to the information statement or the Merger. If at any time any event occurs that an amendment or supplement to the information statement should set forth, the Company will promptly prepare and mail to its stockholders that amendment or supplement. The Company will not mail any information statement, or any amendment or supplement thereto, to which Parent reasonably objects. -28- (d) In connection with the Merger, the Company will comply with the applicable notice requirements of the Appraisal Statute. (e) Parent will cause all Shares that all Parent Entities own to vote in favor of the agreement of merger this Agreement contains if it is to be effected under Section 251 of the DGCL. Section 7.02. Access to Information. On reasonable notice and subject to any restrictions that confidentiality agreements to which the Company is subject contain, from which restrictions the Company will use reasonable efforts to be released, the Company will: (1) afford to Parent and its Representatives access, during normal business hours at any time prior to the Effective Time, to all the properties, books, contracts, commitments and records of the Company Entities; and (2) furnish promptly to Parent (A) a copy of each report, schedule, registration statement and other document filed or received by it during such period under the federal securities or Tax laws and (B) all other information concerning its business, properties and personnel as Parent reasonably may request. The Company will deliver to Parent copies of its audited consolidated financial statements for the year ended December 31, 2001, together with the report of Deloitte & Touche LLP thereon, promptly after they become available to the Company. Except as the Company otherwise may agree, unless and until Parent Entities own at least a majority of the outstanding Shares, and notwithstanding termination of this Agreement, Parent will keep, and will cause its Representatives and Affiliates to keep, all Confidential Information of the Company Entities confidential and not to disclose any of that Confidential Information to any Person other than those Representatives and Affiliates and then only on a confidential basis; provided, however, that Parent or Sub may disclose that Confidential Information: (1) as any applicable Governmental Requirement may require; or (2) as any Governmental Authority may request. Neither Parent nor any of its Affiliates will use any Confidential Information of the Company Entities in any manner detrimental to the Company or its stockholders and, in the event any party terminates this Agreement for any reason under Article Nine, Parent will, and will cause Sub to, promptly return all that Confidential Information to the Company. Section 7.03. Reasonable Efforts. Each party agrees to use its reasonable efforts to: (1) take all actions necessary to comply promptly with all Governmental Requirements applicable to it with respect to the Offer or the Merger, which actions will include furnishing all information hereafter required to be filed in connection with approvals of or filings with any other Governmental Authority, and promptly cooperate -29- with and furnish information to each other in connection with any such requirements imposed upon any of them or their Affiliates in connection with the Offer or the Merger; and (2) take all reasonable actions necessary to obtain, and will cooperate with each other in obtaining, any Governmental Approval of, or any exemption by, any Governmental Authority or other public or private third party required to be obtained or made by Parent, Sub or the Company or any of their respective Affiliates in connection with the Offer or the Merger or the taking of any action those transactions or this Agreement contemplate. Parent will cause Sub to comply with its obligations under this Agreement. Section 7.04. Benefits. Each party will comply with the provisions Schedule 7.04 sets forth, which the parties incorporate herein by this reference. Section 7.05. Directors. Promptly on the acceptance for payment of, and payment for, any Shares by Sub in the Offer, Sub will be entitled to designate such number of members of the Company Board as will give Sub, subject to compliance with Section 14(f) of the Exchange Act, at least a majority of the members of the whole Company Board, and the Company will, at that time, cause Sub's nominees to be so elected by the then constituted Company Board; provided, however, that if Sub's nominees are so elected, then, until the Effective Time, the Company Board will have at least two directors who are Independent Directors. Subject to applicable Governmental Requirements, the Company will take all action Parent reasonably may request to effect the Company's compliance with this Section 7.05. Section 7.06. Fees and Expenses. (a) Except as Section 7.06(b) and (c) otherwise provide, each party will pay the fees and expenses it incurs in connection with the Offer, the Merger, this Agreement and the transactions this Agreement contemplates, whether or not the Offer or the Merger is consummated. (b) The Company will pay the Termination Fee to Parent if any of the following events occurs: (1) Parent becomes entitled to, and does, terminate this Agreement under Section 9.01(a)(3)(A) or (B); (2) the Company becomes entitled to, and does, terminate this Agreement under Section 9.01(a)(4); or (3) an Acquisition Proposal having been publicly announced, communicated or otherwise disclosed prior to the purchase of Shares under the Offer and the termination of this Agreement under Article Nine: (A) (1) Parent becomes entitled to, and does, terminate this Agreement under Section 9.01(a)(3)(C) unless that termination results from a breach of Section 4.06(1) that was not caused by any action or omission to act on the part of the Company or (2) the Company becomes entitled to, and does, at a time when -30- the Minimum Tender Condition has not been satisfied and neither Parent nor Sub is in a material breach of this Agreement, terminate this Agreement under Section 9.01(a)(2)(A); and (B) within 12 months after that termination, the Company consummates or enters into an agreement providing for the consummation of any transaction that has been the subject of any Acquisition Proposal. The Company must pay the Termination Fee to Parent by wire transfer of immediately available funds to Parent's account Schedule 7.06 specifies: (1) if an event clause (1) of the preceding sentence describes occurs, as promptly as is reasonable practicable, but in no event later than two business days, after that occurrence; and (2) if an event clause (2) or (3) of the preceding sentence describes occurs, concurrently with that occurrence. (c) If the Company becomes obligated to pay the Termination Fee to Parent under Section 7.06(b), it also will reimburse Parent for all out-of-pocket fees and expenses reasonably incurred by Parent and Sub from and after January 1, 2002 in connection with the Offer, the Merger, this Agreement and the transactions this Agreement contemplates and the enforcement of their rights hereunder. If the Company becomes entitled to, and does, terminate this Agreement under Section 9.01(a)(5), Parent will reimburse the Company for all out-of-pocket fees and expenses reasonably incurred by the Company from and after January 1, 2002 in connection with the Offer, the Merger, this Agreement and the transactions this Agreement contemplates and the enforcement of its rights hereunder. Section 7.07. Indemnification; Insurance. (a) All rights to indemnification for acts or omissions occurring before the Effective Time now existing in favor of the current or former directors or officers of the Company as its Charter Documents or contractual arrangements provide on the date of this Agreement, or as applicable law otherwise provides, will survive the Merger and continue in full force and effect in accordance with their terms. (b) For six years from the Effective Time, Parent will, unless Parent elects, at its option, in writing to guarantee performance of the indemnification obligations to which Section 7.07(a) refers, maintain in effect the Company's current D&O Insurance covering those persons who are currently covered by the Company's D&O Insurance policy, a copy of which the Company has made available to Parent; provided, however, that Parent will extend the Company's current D&O policy in effect to cover claims made prior to the first anniversary of the Effective Time if the premium for that additional coverage does not exceed $80,000. (c) This Section 7.07 will survive the consummation of the Merger at the Effective Time, is intended to benefit the Company, Parent, the Surviving Corporation and the indemnified parties and will be binding on all successors and assigns of Parent and the Surviving Corporation. -31- Section 7.08. Antitakeover Measures. So long as the Offer remains outstanding and complies with Section 1.01(b), the Company will not at any time, notwithstanding that the Company may have terminated this Agreement under Article Nine, adopt, or permit any other Company Entity to adopt, by means of any amendment to any of its Charter Documents or any agreement on its part, any Anti-Parent Takeover Measures, including any "poison pill" rights plan or any measure to the same or similar effect as the Section 203 Restrictions. Section 7.09. Certain Litigation. (a) The Company will not settle any litigation currently pending, or commenced after the date hereof, against the Company or any of its directors (other than human resources/employment matters), without the prior written consent of Parent, which consent Parent will not unreasonably withhold. (b) The Company will not voluntarily cooperate with any third party that has sought or may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and will cooperate with Parent and Sub to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger, unless the Company Board determines, in the good faith of its members after consultation with the Company's outside counsel, that failing so to cooperate with that third party or cooperating with Parent or Sub, as the case may be, would constitute a breach of its members' fiduciary duties under Delaware law. Section 7.10. Credit Agreement. The Company will use reasonable efforts to cause the lenders under the Credit Agreement to forbear from accelerating its indebtedness under the Credit Agreement solely as a result of the consummation of the Offer or the performance by the Company of its obligations under Section 7.05. ARTICLE EIGHT CONDITIONS Section 8.01. Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger will be subject to the satisfaction prior to the Closing Date of the following conditions: (1) Company Stockholder Approval. If the DGCL so requires for the effectuation of the Merger, the Company shall have obtained the approval by the Company's stockholders of the agreement of merger this Agreement contains; (2) No Injunctions or Restraints. No Governmental Requirement or other legal restraint or prohibition preventing or materially restraining the consummation of the Merger shall be in effect; provided, however, that each of the parties shall have used reasonable efforts to prevent the entry of any injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered; and (3) Purchase of Shares. Sub shall have previously accepted for payment and paid for Shares under the Offer. -32- ARTICLE NINE TERMINATION AND AMENDMENT Section 9.01. Termination. (a) This Agreement may be terminated, and the Merger may be abandoned, at any time prior to the Effective Time, whether before or after approval by the Company's stockholders of the agreement of merger this Agreement contains: (1) by mutual written consent of Parent and the Company; (2) by either Parent or the Company: (A) if (1) as a result of the failure of any of the Offer Conditions the Offer shall have terminated or expired in accordance with its terms without Sub having accepted for payment any Shares under the Offer or (2) Sub shall not have accepted for payment any Shares under the Offer within 180 days following the date of this Agreement; provided, however, that the right to terminate this Agreement under this Section 9.01(a)(2)(A) will not be available to any party whose failure to perform any of its obligations hereunder or whose breach of any of its representations and warranties herein shall have caused that right to become exercisable; or (B) if any Governmental Authority shall have issued any order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares under the Offer or the consummation of the Merger and that order, decree or ruling or other action shall have become final and nonappealable; (3) by Parent if, prior to the purchase of Shares under the Offer: (A) the Company Board shall have: (1) withdrawn, or modified or otherwise changed, in a manner or to an effect adverse to Parent or Sub, its approval or recommendation of the Offer or the agreement of merger this Agreement contains; (2) approved or recommended any Acquisition Proposal or determined any Acquisition Proposal to be a Superior Takeover Proposal; or (3) taken any action for the purpose of rendering the Section 203 Restrictions inapplicable to any acquisition of Shares, other than under the Offer or the Merger, or any Takeover Transaction, other than the Merger; (B) the Company shall have breached any provision of Section 6.02 or 7.08 in any material respect; -33- (C) the Company shall have breached: (1) any of its representations and warranties herein which (a) are qualified as to materiality or a Company Material Adverse Effect or (b) are not so qualified if, as a result of all breaches thereof in the aggregate, a Company Material Adverse Effect has occurred or reasonably could be expected to occur; or (2) any of its covenants and other agreements herein, other than in Sections 6.02 and 7.08, in any material respect, all which breaches, in the case of clauses (C)(1) and (C)(2), either are not capable of being cured or, in the case of any such breach that is so capable, that breach has not been cured before the first to occur of (1) the elapse of 10 consecutive business days after Parent or Sub has delivered to the Company a written notice of that breach or (2) the expiration of the Offer; or (D) any Stockholder shall have breached any of its covenants and other agreements in Sections 2, 3, 4 and 5 of the Stockholders Agreement; (4) by the Company, if, prior to the purchase of Shares under the Offer: (A) the Company Board, by a majority vote of the whole board, has determined in the good faith of its members and on the basis of, among other facts, the advice of the Company Financial Advisor and the Company's outside counsel, that the Company has received a Superior Takeover Proposal; (B) the Company Board has directed the Company to notify Parent in writing that the Company intends to enter into a definitive agreement respecting that proposal, and the Company has delivered that notice to Parent together with either the then most current version of that agreement or an accurate, complete description of all the material terms and conditions thereof; and (C) Parent, within four business days after its receipt of that notice, either (1) has not delivered to the Company a written counteroffer to that proposal or (2) has delivered to the Company a written counteroffer to that proposal which the Company Board has determined, in the good faith of its members and after consultation with the Company Financial Advisor and the Company's outside counsel, is not at least as favorable to the Company's stockholders, other than Parent Entities, as that proposal; (5) by the Company, if Sub or Parent shall have breached: (A) any of its representations and warranties herein which (1) are qualified as to materiality or a material adverse effect or (2) are not so qualified if, as a result of all breaches thereof in the aggregate, a material adverse effect on the ability of Parent and Sub to consummate the Offer or the Merger has occurred or reasonably could be expected to occur; or -34- (B) any of its covenants and other agreements herein in any material respect, if, as a result of all breaches thereof in the aggregate, a material adverse effect on the ability of Parent and Sub to consummate the Offer or the Merger has occurred or reasonably could be expected to occur, all which breaches, in the case of clauses (A) and (B), are not capable of being cured or, in the case of any such breach that is so capable, that breach has not been cured before the elapse of 10 consecutive business days after the Company has delivered to Parent a written notice of that breach; or (6) by the Company if, prior to the acceptance for payment or purchase of Shares under the Offer, Sub shall have terminated the Offer on the stated ground that condition (h) of the Offer Conditions has not been satisfied. (b) The Company may not terminate this Agreement under Section 9.01(a)(5) if it is, and Parent may not terminate this Agreement under Section 9.01(a)(3) if either Sub or it is, then in a material breach of any of its representations and warranties or covenants or other agreements herein. (c) Any termination of this Agreement by any party under this Article Nine will require the prior authorization of either the board of directors of that party or the duly authorized designee of that board. Section 9.02. Effect of Termination. If any party terminates this Agreement in accordance with Section 9.01, this Agreement will forthwith become void and no party will have any liability or obligation hereunder, except that Sections 4.16, 5.06, and 6.02, the last two sentences of Section 7.02, Sections 7.06 and 7.08, this Section 9.02 and Article Ten will survive any such termination and remain in full force and effect; provided, however, that nothing herein will relieve any party for liability for any breach by it hereof. Section 9.03. Amendment. (a) If: (1) the Company has given a notice to Parent of the type to which Section 9.01(a)(4)(B) refers, (2) Parent, within four business days after its receipt of that notice has delivered to the Company a written counteroffer to the Superior Takeover Proposal that is the subject of that notice and (3) the Company Board has determined that counteroffer to be at least as favorable to the Company's stockholders, other than Parent Entities, as that proposal, the parties promptly will execute and deliver an amendment or supplement to this Agreement, and Parent promptly after that execution and delivery by the parties will amend the Offer Documents, to give effect to the changes in the terms of the Offer and the Merger which that counteroffer contemplates will be made. That amendment or supplement to this Agreement will not require any further authorization by the Company Board, whose approval of this Agreement prior to the date hereof will constitute the approval of that amendment or supplement. -35- (b) Except as Section 9.02(a) otherwise provides, the parties may amend this Agreement if and to the extent that their respective boards of directors authorize them to do so, at any time before or after the Company's stockholders have approved the agreement of merger this Agreement contains, if the DGCL requires that approval, but, after any such approval, the parties hereto may not effect any further amendment which by law requires further approval by those stockholders without that further approval. To be effective, any amendment hereto must be in a written document each party has executed and delivered to the other parties. Section 9.04. Extension; Waiver. At any time prior to the Effective Time, the parties, by action their respective boards of directors have taken or authorized, may, to the extent applicable Governmental Requirements permit: (1) extend the time for the performance of any of the obligations or other acts of any party; (2) waive any inaccuracies in the representations and warranties this Agreement contains; or (3) waive compliance with any of the covenants or other agreements or conditions this Agreement contains. To be effective, any agreement on the part of a party to any such extension or waiver must be in a written document that party has executed and delivered to the other parties. Section 9.05. Independent Director Approval. After Sub's nominees have become members of the Company Board under Section 7.05 and prior to the Effective Time, the Company may not: (1) amend or terminate this Agreement or (2) take any action under Section 9.04, unless a majority of the Independent Directors then in office, as well as a majority of the whole Company Board, shall have duly authorized that action. ARTICLE TEN MISCELLANEOUS Section 10.01. Nonsurvival of Representations and Warranties. The representations and warranties herein will: (1) if made by Parent or Sub, terminate and expire as of the Effective Time; and (2) if made by the Company, terminate and expire as of the time Sub accepts Shares for payment in the Offer; provided, however, that if, prior to that payment and after all Offer Conditions have been satisfied or waived by Sub, to the extent waivable by -36- Sub, as of the then scheduled Expiration Date, Sub has extended the Offer because less than 90% of all outstanding Shares have been validly tendered and not subsequently properly withdrawn, the representations and warranties of the Company herein will terminate and expire as of that then scheduled Expiration Date. After a representation and warranty has terminated and expired, no claim for damages or other relief may be made or prosecuted through litigation or otherwise by any Person who would have been entitled to that relief on the basis of that representation and warranty prior to its termination and expiration. This Section 10.01 will not limit or otherwise affect any covenant or agreement of any party which by its terms contemplates performance by that party after the Effective Time. Section 10.02. Notices. All notices and other communications hereunder must be in writing and will be deemed given if delivered personally, telecopied or otherwise sent by means of electronic communications equipment (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as it has specified by like notice): (a) if to Parent or Sub, to it at 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy: (713) 229-1816 Email: james.dement@bakerbotts.com and -37- (b) if to the Company, to it at 500 North Water Street Suite 1100 Corpus Christi, Texas 78471 Attention: Michael E. Johnson Telecopy No.: (361) 883-7464 Email: johnson@esenjay.com With a copy, which will not constitute notice for purposes hereof, to: Porter & Hedges L.L.P. 700 Louisiana Street Houston, Texas 77002 Attention: Samuel N. Allen or T. William Porter Telecopy: (713) 226-0229 Email: snallen@porterhedges.com Section 10.03. Definitions and Interpretation. (a) Capitalized terms this Agreement uses have the meanings Exhibit C specifies. The parties hereto, by this reference to Exhibit C, hereby incorporate it herein. (b) Except as this Agreement otherwise specifies, all references herein to any Governmental Requirement, including the Code, ERISA, the Exchange Act and the Securities Act, are references to that Governmental Requirement or any successor Governmental Requirement, as the same may have been amended or supplemented from time to time, and any rules or regulations promulgated thereunder. (c) This Agreement uses the words "herein," "hereof" and "hereunder" and words of similar import to refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Article," "Section," "Schedule" and "Exhibit" refer to Articles and Sections of and Schedules and Exhibits to this Agreement, unless it otherwise specifies. This Agreement uses the word "party" to refer to any original signatory hereto and its permitted successors and assigns under Section 10.07. (d) Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter. (e) The word "including," and, with correlative meaning, the word "include," means including, without limiting the generality of any description preceding that word, and the words "shall" and "will" are used interchangeably and have the same meaning. -38- (f) The term "business day" means any day other than a day on which commercial banks are authorized or required to close in New York City. (g) The phrase "to the knowledge of the Company" or phrases with similar wording, when used in this Agreement to qualify any representation and warranty of the Company, means the collective knowledge, after reasonable investigation, of the executive officers of the Company and each other individual who holds a management position with the Company on or after the date of this Agreement; provided, however, that if any Governmental Requirement to which any such representation or warranty refers specifies a different meaning for that phrase, the meaning that Governmental Requirement specifies will apply for purposes of that representation and warranty. (h) The language this Agreement uses will be deemed to be the language the parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any party. (i) This Agreement includes captions to Articles, Sections and subsections of, and Schedules and Exhibits to, this Agreement for convenience of reference only, and these captions do not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. Section 10.04. Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 10.05. Entire Agreement; Third Party Beneficiaries. This Agreement, together with the Schedules, the Company Disclosure Letter and Exhibit C: (1) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; and (2) except for Article Three and Section 7.07, are not intended to confer on any Person other than the parties any rights or remedies hereunder. Section 10.06. Publicity. Except as any applicable Governmental Requirement or the rules of the National Association of Securities Dealers, Inc. otherwise require, for so long as this Agreement is in effect, the Company will not, and will not permit any of its Affiliates to, issue or cause the publication of any press release or other public announcement with respect to the transactions this Agreement contemplates without the consent of Parent, which consent Parent will not unreasonably withhold. Section 10.07. Assignment. This Agreement and the rights, interests or obligations of the parties hereunder may not be assigned by any of the parties (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, all or any of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject to the -39- preceding sentence, this Agreement will be binding on, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 10.08. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY. Section 10.09. Exercise of Rights and Remedies. Except as this Agreement otherwise provides, no delay or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default hereunder by any other party will impair any such right, power or remedy, nor will it be construed, deemed or interpreted as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any waiver of any single breach or default be construed, deemed or interpreted as a waiver of any other breach or default hereunder occurring before or after that waiver. Section 10.10. Reformation and Severability. If any provision of this Agreement is invalid, illegal or unenforceable, that provision will, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties as expressed herein, and if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. Section 10.11. Remedies Cumulative. No right, remedy or election any provision of this Agreement gives will be deemed exclusive, but each will be cumulative with all other rights, remedies and elections available at law or in equity. Section 10.12. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, the parties will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement in the Appropriate Delaware Court, this being in addition to any other remedy to which law or in equity entitles them. Each party will: (1) submit itself to the personal jurisdiction of the Appropriate Delaware Court with respect to any dispute that arises out of this Agreement or any transaction this Agreement contemplates; (2) not attempt to deny or defeat that personal jurisdiction by motion or other request for leave from any such court; and (3) not bring any action relating to this Agreement or any transaction this Agreement contemplates in any court other than the Appropriate Delaware Court. -40- The parties have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. SANTOS AMERICAS AND EUROPE CORPORATION By /s/ KATHLEEN A. HOGENSON ----------------------------------------- Kathleen A. Hogenson President ECM ACQUISITION COMPANY By /s/ KATHLEEN A. HOGENSON ----------------------------------------- Kathleen A. Hogenson President ESENJAY EXPLORATION, INC. By /s/ MICHAEL E. JOHNSON ----------------------------------------- Michael E. Johnson President SCHEDULE 2.03 to the Agreement to which Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. are parties EFFECTS OF THE MERGER - OFFICERS 1. Definitions. Capitalized terms this Schedule uses, but does not define, have the meanings the captioned Agreement specifies. 2. Officers. Effective as of the Effective Time, the officers of the Surviving Corporation will be as follows:
NAME OFFICE ---- ------ Kathleen A. Hogenson President Peter R. Robinson Vice President, Secretary and Treasurer
End of Schedule -1- SCHEDULE 3.02 to the Agreement to which Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. are parties DERIVATIVE SECURITIES AND DERIVATIVE SECURITIES PLANS 1. Definitions. Capitalized terms this Schedule uses, but does not define, have the meanings the captioned Agreement specifies. 2. Options. Effective as of the Effective Time, each then outstanding Option will automatically convert into solely the right to receive with respect to each Share subject thereto, without interest, cash in the amount equal to the amount by which the Merger Consideration exceeds the exercise price payable to purchase that Share under that Option. 3. Warrants. Effective as of the Effective Time, each then outstanding Warrant will automatically convert into solely the right to receive with respect to each Share (or stock unit or other phantom equivalent to a Share) subject thereto, without interest, cash in the amount, if any, equal to the amount by which the Merger Consideration exceeds the exercise price payable to purchase that Share (or stock unit or other phantom equivalent to a Share) under that Warrant. 4. Option Plan. The Company will take the action respecting the Option Plan which Schedule 7.04 specifies. End of Schedule -2- SCHEDULE 4.01 to the Agreement to which Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. are parties LIST OF SUBSIDIARIES 1. Definitions. Capitalized terms this Schedule uses, but does not define, have the meanings the captioned Agreement specifies. 2. Subsidiaries. The Company has no Subsidiaries. End of Schedule -3- SCHEDULE 7.04 to the Agreement to which Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. are parties BENEFITS 1. Definitions. Capitalized terms this Schedule uses, but does not define, have the meanings the captioned Agreement specifies. 2. Severance Plan. Prior to the consummation of the Offer, the Company will amend the Severance Plan, in form and substance satisfactory to Parent, to provide: (A) only individuals who are "Employees" on the date of this Agreement will be "Participants" under the Severance Plan; (B) the transfer of a "Participant's" employment with the Company to an Affiliate of Parent will not, in and of itself, constitute a termination of employment by the "Employer" for any purpose of the Severance Plan or a "Good Reason" for that "Participant" to terminate that employment. Parent acknowledges that the consummation of the Offer will constitute a "Change in Control" under Section 2.4(b) of the Severance Plan and will cause the Company thereafter to perform its obligations under the Severance Plan, and to make any payments to its employees the Severance Plan will require it to pay consistent with the methodology underlying the schedule to which Section 4.10(e) refers. The quoted terms this Section 2 uses have the meanings the Severance Plan specifies. 3. Option Plan. Prior to the consummation of the Offer, the Company will amend the Option Plan to provide that no additional Options will granted thereunder after the date of this Agreement except as disclosed in the Company Disclosure Letter. In addition, the Company will amend the LIP to: (A) provide that no "Incentive Awards" granted after the date of this Agreement can include, or become payable in whole or in part with, any Common Stock or other equity security; and (B) to delete the parenthetical phrase "(other than cash)" wherever it appears in Section 5.5(a) of the LIP. The quoted term this Section 3 uses has the meaning the LIP specifies. -4- 4. Savings Plan. Prior to the consummation of the Offer, the Company will amend the Savings Plan, in form and substance satisfactory to Parent, to provide only individuals who are "Employees" on the date of this Agreement will be "Participants" under the Savings Plan. Immediately on execution of this Agreement, the Company will adopt an amendment to the Savings Plan, in a form acceptable to the Parent, to provide that the participants in the Savings Plan shall have the right to direct a tender of Shares held by the trustee of the Savings Plan and to clarify that the Company and its officers shall have no fiduciary liability for the actions of the participants. The quoted terms this Section 4 uses has the meanings the Savings Plan specifies. 5. Service Credit. Parent will deem the period of continuous employment with the Company Entities to be service with the Parent for purposes of determining eligibility to join, and vesting under, the Parent's 401(k) Plan. Parent will recognize all industry service for purposes of determining vacation eligibility. Eligibility for a bonus under any bonus plan of Parent in which employees of the Company on the date of this Agreement become entitled to participate will be pro-rated on the basis of the number of complete months of service with Parent following the consummation of the Merger. 6. Current Bonus Plan. Parent will cause the Company to make the payments which become due after the consummation of the Offer under the Current Bonus Plan as the Company Disclosure Letter sets forth. End of Schedule -5- SCHEDULE 7.06 to the Agreement to which Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc. are parties FEES AND EXPENSES 1. Definitions. Capitalized terms this Schedule uses, but does not define, have the meanings the captioned Agreement specifies. 2. The Company will pay the Termination Fee, if it has become payable under Section 7.06, in accordance with the following wire-transfer instructions: Bank of America ABA 111000012 A/C No. 3750493171 End of Schedule -6- EXHIBIT A STOCKHOLDERS AGREEMENT Santos Americas and Europe Corporation ("Parent"), a Delaware corporation, and the holders of outstanding common stock of Esenjay Exploration, Inc. (the "Company"), a Delaware corporation, to which this Agreement refers to as "Stockholders" on the signature pages hereof (the "Stockholders") hereby enter into this Agreement dated as of March 17, 2002. PRELIMINARY STATEMENT Parent and its subsidiary, ECM Acquisition Company ("Sub"), a Delaware corporation, propose to enter into an agreement dated as of March 17, 2002 with the Company (the "Acquisition Agreement"). On the terms and subject to the conditions the Acquisition Agreement contains, Parent proposes to acquire the Company in a two-step transaction. The first step would be a tender offer by Sub for all the outstanding shares of the Company's common stock, and the second step would be a follow-on merger between Sub and the Company in which the Company would become the surviving corporation. The board of directors of the Company has: o determined that Parent's proposed tender offer and merger are fair to and in the best interests of the Company's stockholders; o declared the agreement of merger the Acquisition Agreement contains advisable and resolved to recommend that the holders of the Company's common stock accept that offer and adopt that agreement of merger; and o authorized the Company to enter into the Acquisition Agreement. The Stockholders collectively own approximately 53% of the shares of the Company's common stock issued and outstanding as of March 1, 2002. In order to induce Parent and Sub to enter into and thereafter perform their respective obligations under the Acquisition Agreement, the Stockholders are entering into this Agreement. AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: Section 1. Definitions. (a) In this Agreement: (1) the "Original Shares" of a Stockholder means the number of shares of Common Stock which appears opposite that Stockholder's name on the signature pages hereof; and A-1 (2) the "Subject Shares" of a Stockholder means that Stockholder's Original Shares together with: (A) all shares of Common Stock or other Capital Stock, all Derivative Securities, including any preferred stock purchase rights, and all other properties or rights, including any phantom securities, to which that Stockholder hereafter becomes entitled by reason of any dividend or other distribution the Company pays or makes in respect of the Common Stock or any other class or series of its Capital Stock; (B) all properties, securities and rights to which that Stockholder becomes entitled by reason of any split, combination or reclassification of the Common Stock or any other Capital Stock of the Company or any issuance by the Company in respect or lieu of or in substitution for shares of its Capital Stock; and (C) all properties, securities and rights of any type to which clause (2)(A) or (B) of this definition refers which that Stockholder purchases or otherwise acquires after the date hereof from the Company or any other Person. (b) Capitalized terms this Agreement uses, but does not define, have the meanings the Acquisition Agreement specifies. References herein to "this Agreement" are to this Agreement as it may be amended, modified or supplemented from time to time hereafter in writing by each party against which another party seeks to enforce that amendment, modification or supplement. Section 2. Tender of Subject Shares. (a) Each Stockholder will (1) effect a valid tender under and in accordance with the terms of the Offer, as soon as practicable after the Offer Commencement Date and in no event later than prior to the initially scheduled Expiration Date, of all that Stockholder's Subject Shares and (2) not withdraw or attempt to withdraw those tendered Subject Shares from the Offer until after the first to occur of (A) the termination of the Acquisition Agreement by the Company under Section 9.01(a)(4) thereof or (B) a termination of the Offer in accordance with its terms prior to the purchase by Sub of any Shares thereunder. Any tender of Subject Shares by a Stockholder in accordance with this Section 2 must include the physical delivery of certificates representing those Subject Shares and the execution and delivery of a properly completed letter of transmittal with respect thereto. (b) If the Subject Securities of a Stockholder include property, securities or rights that Sub has not amended the Offer to include, this Section 2 will not require that Stockholder to tender, and Sub will not be required to amend the Offer to include, any property, securities or rights not so included. Section 3. Voting of Subject Shares. (a) If the agreement of merger the Acquisition Agreement contains is duly submitted to the stockholders of the Company for their approval or disapproval, each Stockholder will duly and properly vote all that Stockholder's Subject Shares entitled to vote on that matter in favor of the adoption of that agreement. A-2 (b) If any action or agreement is duly submitted to the stockholders of the Company which, if taken or effected, reasonably could be expected to (1) result in a breach of any representation, warranty, covenant or other agreement of the Company in or under the Acquisition Agreement, or (2) prevent, impede, interfere with, delay or postpone the consummation of the Offer or the Merger, including any Acquisition Proposal, each Stockholder will duly and properly vote all that Stockholder's Subject Shares entitled to vote on that matter against the taking of that action or the effecting of that agreement. (c) If any action by the stockholders or the Company to which Section 3(a) or (b) refers is sought to be taken by written consent in lieu of a meeting of those stockholders, each Stockholder will give or withhold that Stockholder's consent thereto to the same effect as if that action were presented for approval or disapproval at such a meeting. (d) Each Stockholder: (1) hereby irrevocably grants to, and appoints, Kathy Hogenson and Peter Robinson, or either of them, in their respective capacities as officers of Parent or Sub, and any individual who hereafter succeeds to any such office, and each of them individually, that Stockholder's proxy and attorney-in-fact, with full power of substitution, for and in the name, place and stead of that Stockholder, to vote that Stockholder's Subject Shares in accordance with this Section 3; (2) represents that any proxies that Stockholder has heretofore given in respect of any of that Stockholder's Subject Shares are not irrevocable and hereby revokes all such proxies and agrees to give all notices required to evidence that revocation; (3) acknowledges that Stockholder's understanding that Parent is entering into the Acquisition Agreement in reliance on that Stockholder's execution and delivery of this Agreement and affirms that that Stockholder is granting the irrevocable proxy this Section 3 contains in connection with Parent's execution and delivery of the Acquisition Agreement and to secure the performance by that Stockholder of that Stockholder's obligations hereunder; (4) affirms that that irrevocable proxy is coupled with an interest and may not be revoked under any circumstances; and (5) ratifies all that the proxies and attorneys-in-fact designated by that proxy lawfully may do or cause to be done in their several capacities as such and confirms that that proxy is intended to be irrevocable under the applicable Delaware law. A-3 Section 4. No Inconsistent Arrangements. Each Stockholder agrees that, except as the Acquisition Agreement and this Agreement otherwise provide or contemplate, that Stockholder will not: (1) sell, transfer, pledge, assign or otherwise dispose of (collectively, "Transfer"), for value, by gift or otherwise, or consent to or permit any Transfer of, any of that Stockholder's Subject Shares or any interest therein; (2) enter into any contract, option or other agreement or understanding respecting any such Transfer; (3) grant any proxy, power-of-attorney or other authorization respecting those Subject Shares; (4) deposit into a voting trust, or enter into a voting agreement respecting, any of those Subject Shares; or (5) take any other action that reasonably could be expected in any way to restrict, limit or interfere with the performance by that Stockholder of that Stockholder's obligations hereunder or with the consummation of the Offer or the Merger. Section 5. Waiver of Appraisal Rights. Each Stockholder hereby waives all rights of appraisal or dissent that Stockholder has under the DGCL with respect to the Merger. Section 6. Treatment of Confidential Information. (a) Each of Michael E. Johnson, David W. Berry and David B. Christofferson (the "Receiving Stockholders"), severally and not jointly with any other Person, acknowledges that he has or may have had in the past, currently has and in the future may have access to Confidential Information of the Company Entities and Parent and its Affiliates. Each Receiving Stockholder, severally and not jointly with any other Person, agrees that he will keep confidential and not use, directly or indirectly, for his own benefit or the benefit of any business of any Person other than the Company Entities and Parent and its Affiliates, all that Confidential Information that Receiving Stockholder has or hereafter obtains and, except with the specific prior written consent of Parent, will not disclose that Confidential Information to any Person except (1) Representatives of Parent and (2) his own Representatives, provided that these Representatives, other than counsel, agree to the confidentiality provisions of this Section 6; provided, however, that, for purpose of this Section 6(a), Confidential Information a Receiving Stockholder has does not include such information as: (1) becomes known to the public generally through no fault of that Receiving Stockholder; (2) is required to be disclosed by law or the order of any Governmental Authority under color of law, provided, that prior to the disclosure by that Receiving Stockholder of any information under this clause (2), that Receiving Stockholder will give prior written notice thereof to Parent and provide Parent with the opportunity to contest that disclosure; or A-4 (3) that Receiving Stockholder reasonably believes is required to be disclosed in connection with the defense of a lawsuit against that Receiving Stockholder. In the event of a breach or threatened breach by any Receiving Stockholder of the provisions of this Section 6 with respect to any Confidential Information, Parent or the Company will be entitled to an injunction restraining that Receiving Stockholder from disclosing, in whole or in part, that Confidential Information. Nothing herein shall be construed as prohibiting Parent or the Company from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. (b) Because of (1) the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 6(a) and (2) the immediate and irreparable damage that would be caused to Parent or the Company for which it would have no other adequate remedy, each of the Receiving Stockholders agrees that Parent or the Company may enforce the provisions of Section 6(a) by injunctions and restraining orders against each of them who breaches any of those provisions. Section 7. Representations and Warranties. Each Stockholder represents and warrants to Parent that, as applied solely to that Stockholder, all the following representations and warranties in this Section 7 are as of the date of this Agreement, and will be immediately prior to Sub's payment for that Stockholder's Subject Shares, true and correct: (1) the Stockholder: (A) is the record and beneficial owner of, and has good and marketable title to, the Stockholder's Original Shares and, as of the date Sub consummates the Offer, all other Subject Shares the Stockholder hereafter acquires, in each case free and clear of any "adverse claim," as the applicable Uniform Commercial Code defines that term, or other lien or encumbrance; and (B) has and will have, with respect to the Original Shares, and will have, with respect to all other Subject Shares the Stockholder hereafter acquires, the sole right to Transfer and direct the voting of those securities; (2) except as this Agreement or the Option Agreement otherwise provides, none of the Original Shares is, and none of the other Subject Shares the Stockholder hereafter acquires will be, subject to any voting trust, voting agreement or other agreement, arrangement or restriction respecting the Transfer or voting of any of those securities; (3) the Stockholder has the full power, legal capacity and authority to execute, deliver and perform the Stockholder's obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as that enforceability may be: A-5 (A) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (B) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law; (4) if the Stockholder is an Entity, the Stockholder has obtained, in accordance with all applicable Governmental Requirements and its Charter Documents, all approvals and the taking of all actions necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement; (5) if the Stockholder is acting otherwise than in his individual capacity, whether as an executor or a guardian or in any other fiduciary or representative capacity, all actions on the part of the Stockholder and all other Persons, including any court, necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement have been duly taken; (6) the Stockholder's execution, delivery and performance in accordance with its terms of this Agreement and the effectuation of the transactions this Agreement contemplates do not and will not: (A) violate or conflict with any Governmental Requirement; (B) breach or constitute a default under any agreement or instrument to which the Stockholder is a party or by which the Stockholder or any Subject Shares the Stockholder owns is bound; (C) result in the creation or imposition of, or afford any Person the right to obtain, any lien upon any Subject Shares the Stockholder owns, or upon any revenues, income or profits of the Stockholder therefrom; or (D) if the Stockholder is an Entity, violate the Stockholder's Charter Documents; and (7) no litigation is pending or, to the knowledge of the Stockholder, threatened to which the Stockholder is or may become a party which: (A) questions or involves the validity or enforceability of any of the Stockholder's obligations under this Agreement; or (B) seeks, or reasonably could be expected to seek, (1) to prevent or delay the consummation by the Stockholder of the transactions this Agreement contemplates the Stockholder will consummate or (2) damages in connection with any such consummation. A-6 Section 8. Several Nature of Obligations. The obligations of each Stockholder under this Agreement are several and not joint, or joint and several, with the obligations of any other Stockholder under this Agreement. Section 9. Termination of Various Obligations. The obligations of each Stockholder under Sections 2, 3, 4 and 5, and the irrevocable proxy each Stockholder has granted in Section 3, will terminate on the first to occur of the termination of the Acquisition Agreement by the Company under Section 9.01(a)(4) thereof or the termination by Sub of the Offer without purchasing any Shares thereunder. The obligations of each Receiving Stockholder under Section 6 will terminate on the termination by Sub of the Offer without purchasing any Shares thereunder, but, except for termination on that occurrence, will continue in accordance with its terms notwithstanding any termination of the Acquisition Agreement. Section 10. Notices. All notices and other communications hereunder must be in writing and will be deemed given if delivered personally, telecopied or otherwise sent by means of electronic communications equipment (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as it has specified by like notice): (1) if to Parent, to it at 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy: (713) 229-1816 Email: james.dement@bakerbotts.com and (2) if to a Stockholder, to the address set forth opposite that Stockholder's name on the signature pages hereto. Section 11. Construction and Interpretation. (a) This Agreement uses the words "herein," "hereof" and "hereunder" and words of similar import to refer to this Agreement A-7 as a whole and not to any provision of this Agreement, and the word "Section" refers to a Section of this Agreement, unless it otherwise specifies. This Agreement uses the word "party" to refer to any original signatory hereto and its permitted successors and assigns under Section 15. (b) Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter. (c) The word "including," and, with correlative meaning, the word "include," means including, without limiting the generality of any description preceding that word, and the words "shall" and "will" are used interchangeably and have the same meaning. (d) The language this Agreement uses will be deemed to be the language the parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any party. (e) This Agreement includes captions for convenience of reference only, and these captions do not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. Section 12. Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective as to any Stockholder when two or more counterparts have been signed by that Stockholder and Parent and delivered to each other, it being understood that to be binding on any Stockholder, no other Stockholder need sign this Agreement and Parent need not sign the same counterpart. Section 13. Entire Agreement; No Third Party Beneficiaries. This Agreement: (1) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; and (2) except as Section 6 otherwise provides, is not intended to confer on any Person other than the parties any rights or remedies hereunder. Section 14. Publicity. (a) Each Stockholder hereby agrees that Parent and any of its Affiliates may publish and disclose in the Offer Documents and the information statement Section 7.01(c) of the Acquisition Agreement contemplates, and any other documents Parent or Sub files with the SEC in connection with the Offer or the Merger, the identity and ownership of Subject Shares by that Stockholder and the nature of that Stockholder's commitments, agreements and understandings under this Agreement. (b) Except as any applicable Governmental Requirement or the rules of the National Association of Securities Dealers, Inc. otherwise require, for so long as this Agreement is in effect, no Stockholder will, or will permit any of its Affiliates to, issue or cause the publication of any press release or other public announcement with respect to the transactions A-8 this Agreement contemplates without the consent of Parent, which consent Parent will not unreasonably withhold. Section 15. Assignment. This Agreement and the rights, interests or obligations of the parties hereunder may not be assigned by any Stockholder, whether by operation of law or otherwise, without the prior written consent of Parent. Subject to the preceding sentence, this Agreement will be binding on, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 16. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY. Section 17. Exercise of Rights and Remedies. Except as this Agreement otherwise provides, no delay or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default hereunder by any other party will impair any such right, power or remedy, nor will it be construed, deemed or interpreted as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any waiver of any single breach or default be construed, deemed or interpreted as a waiver of any other breach or default hereunder occurring before or after that waiver. Section 18. Reformation and Severability. If any provision of this Agreement is invalid, illegal or unenforceable, that provision will, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties as expressed herein, and if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. Section 19. Remedies Cumulative. No right, remedy or election any provision of this Agreement gives will be deemed exclusive, but each will be cumulative with all other rights, remedies and elections available at law or in equity. Section 20. Enforcement. Each Stockholder agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, Parent will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement in the Appropriate Delaware Court, this being in addition to any other remedy to which Section 6, law or equity entitles Parent or any of its Affiliates. Each Stockholder will: (1) submit itself to the personal jurisdiction of the Appropriate Delaware Court with respect to any dispute that arises out of this Agreement or any transaction this Agreement contemplates; (2) not attempt to deny or defeat that personal jurisdiction by motion or other request for leave from any such court; and A-9 (3) not bring any action relating to this Agreement or any transaction this Agreement contemplates in any court other than the Appropriate Delaware Court. A-10 The parties have signed this Agreement as of the date first written above. SANTOS AMERICAS AND EUROPE CORPORATION By: ------------------------------- Kathleen A. Hogenson President STOCKHOLDERS No. of Original Shares: 48,000 Aspect Resources, LLC 511 16th Street, Suite 300 By: Denver, Colorado 80202 ------------------------------- Alex M. Cranberg ASPECT ENERGY, LLC BY: ASPECT MANAGEMENT CORPORATION, MANAGER No. of Original Shares: 4,729,456 c/o Alex M. Cranberg BY: Aspect Resources, LLC ------------------------------- 511 16th Street, Suite 300 ALEX M. CRANBERG Denver, Colorado 80202 PRESIDENT No. of Original Shares: 132,754 Esenjay Exploration, Inc. 500 North Water, Suite 1100 By: Corpus Christi, Texas 78471 ------------------------------- Michael E. Johnson ESENJAY PETROLEUM CORPORATION No. of Original Shares: 4,896,415 c/o Michael E. Johnson Esenjay Exploration, Inc. By: 500 North Water, Suite 1100 ------------------------------- Corpus Christi, Texas 78471 Michael E. Johnson President STOCKHOLDERS (continued) No. of Original Shares: 202,297 Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: Houston, Texas 77002 --------------------------------- David W. Berry No. of Original Shares: 0 Aspect Resources, LLC 511 16th Street, Suite 300 By: Denver, Colorado 80202 --------------------------------- Alex B. Campbell No. of Original Shares: 14,000 Pollicoff, Smith & Remel One Greenway Plaza, Suite 300 By: Houston, Texas 77046 --------------------------------- Jeffrey B. Pollicoff No. of Original Shares: 12,000 Randall & Dewey Incorporated 16800 Greenspoint Park Drive, Suite 380S By: --------------------------------- Houston, Texas 77060 Jack P. Randall No. of Original Shares: 12,000 Smith International Inc. 16740 E. Hardy Street By: Houston, Texas 77032 --------------------------------- Hobart A. Smith No. of Original Shares: 12,470 Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: Houston, Texas 77002 --------------------------------- David B. Christofferson No. of Original Shares: 12,000 110 Ocean Way By: Corpus Christi, Texas 78411 --------------------------------- William D. Dodge EXHIBIT B OPTION AGREEMENT Santos America and Europe Corporation ("Parent"), a Delaware corporation, and the holders of outstanding common stock of Esenjay Exploration, Inc. (the "Company"), a Delaware corporation, to which this Agreement refers to as "Stockholders" on the signature pages hereof (the "Stockholders") hereby enter into this Agreement dated as of March 17, 2002. PRELIMINARY STATEMENT Parent and its subsidiary, ECM Acquisition Company ("Sub"), a Delaware corporation, propose to enter into an agreement dated as of March 17, 2002 with the Company (the "Acquisition Agreement"). On the terms and subject to the conditions the Acquisition Agreement contains, Parent proposes to acquire the Company in a two-step transaction. The first step would be a tender offer by Sub for all the outstanding shares of the Company's common stock, and the second step would be a follow-on merger between Sub and the Company in which the Company would become the surviving corporation. The board of directors of the Company has: o determined that Parent's proposed tender offer and merger are fair to and in the best interests of the Company's stockholders; o declared the agreement of merger the Acquisition Agreement contains advisable and resolved to recommend that the holders of the Company's common stock accept that offer and adopt that agreement of merger; and o authorized the Company to enter into the Acquisition Agreement. The Stockholders collectively own approximately 52% of the shares of the Company's common stock issued and outstanding as of March 1, 2002. In order to induce Parent and Sub to enter into and thereafter perform their respective obligations under the Acquisition Agreement, the Stockholders are entering into this Agreement. AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: Section 1. Definitions. (a) In this Agreement: (1) the "Original Shares" of a Stockholder means the number of shares of Common Stock which appears opposite that Stockholder's name on the signature pages hereof; and (2) the "Subject Shares" of a Stockholder means that Stockholder's Original Shares together with: B-1 (A) all shares of Common Stock or other Capital Stock, all Derivative Securities, including any preferred stock purchase rights, and all other properties or rights, including any phantom securities, to which that Stockholder hereafter becomes entitled by reason of any dividend or other distribution the Company pays or makes in respect of the Common Stock or any other class or series of its Capital Stock; (B) all properties, securities and rights to which that Stockholder becomes entitled by reason of any split, combination or reclassification of the Common Stock or any other Capital Stock of the Company or any issuance by the Company in respect or lieu of or in substitution for shares of its Capital Stock; and (C) all properties, securities and rights of any type to which clause (2)(A) or (B) of this definition refers which that Stockholder purchases or otherwise acquires after the date hereof from the Company or any other Person. (b) Capitalized terms this Agreement uses, but does not define, have the meanings the Acquisition Agreement specifies. References herein to "this Agreement" are to this Agreement as it may be amended, modified or supplemented from time to time hereafter in writing by each party against which another party seeks to enforce that amendment, modification or supplement. Section 2. Option To Purchase Subject Shares. (a) Each Stockholder hereby grants to Parent an irrevocable option (each such option, a "Purchase Option") to purchase from that Stockholder at any time during the Option Exercise Period all that Stockholder's Subject Shares at a total cash option exercise price equal to the product of (1) the total number of that Stockholder's Original Shares multiplied by (2) $2.84 (each such price, a "Purchase Price"). (b) In this Section 2, "Option Exercise Period" means, if Parent becomes entitled to, and does, terminate the Acquisition Agreement under Section 9.01(a)(3) thereof or the Company becomes or purports to become entitled to, and does or purportedly does, terminate this Agreement under Section 9.01(a)(4) thereof, the period of 30 days beginning the date of that termination or purported termination; provided, however, that if the Offer Commencement Date shall have previously occurred, that 30-day period will begin on the next day following the date Sub terminates the Offer without having purchased any Shares thereunder. (c) Parent must exercise each Purchase Option in whole only and must exercise all Purchase Options at the same time. To exercise the Purchase Options, Parent must deliver to each Stockholder a written notice of Parent's intention to effect that exercise, and the closing of the purchase of the Subject Shares subject to the Purchase Options will take place: (1) in accordance with the escrow arrangement Section 2(d) describes below or, if for any reason that escrow arrangement and the deposit thereunder of the Subject Shares has not occurred when Parent exercises the Purchase Options, (2) in the office of Baker Botts LLP in Houston, Texas. B-2 In the latter case, Parent will designate in that notice the date and time of the closing, which date may be the next day after Parent has delivered that notice. At that closing, Parent will pay in respect of each Purchase Option the Purchase Price payable under that Purchase Option against delivery of the certificates representing the Subject Shares subject to that Purchase Price, duly endorsed for transfer to Parent. (d) Each Stockholder agrees to deposit as promptly as possible (1) certificates representing all of that Stockholder's Subject Shares, duly endorsed in blank with signatures guaranteed, and (2) an irrevocable power of attorney with Bank of America, Bank of New York or such other party as may be mutually agreed upon by the Parent and the Stockholders, as escrow agent (the "Escrow Agent") under an escrow agreement substantially in the form of Annex A with such changes therein, if any, as the Escrow Agent may require or as Parent and the Stockholders may agree (the "Escrow Agreement"). The irrevocable power of attorney shall authorize the Escrow Agent to effect a valid tender of such Subject Shares under and in accordance with the terms of the Offer, pursuant to the terms of the Stockholders Agreement. This shall include, without limitation, physical delivery of such certificates and the execution and delivery of a properly completed letter of transmittal and any other required documentation or instruments with respect thereto. If any Stockholder withdraws its tendered Subject Shares from the Offer in accordance with the terms of the Stockholders Agreement, the Escrow Agent shall hold such Subject Shares in escrow until Parent exercises its Purchase Option with respect thereto or the Option Exercise Period has otherwise ended. When that escrow is established (the "Escrow"), the Purchase Options may be exercised in accordance with this Section 2, by delivery to the Escrow Agent of a notice in the form of Exhibit 1 to the Escrow Agreement and the Purchase Prices thereunder. Section 3. Limitation on Competition. (a) Each Stockholder agrees, severally and not jointly with any other Person, that that Stockholder will not, during the period beginning on the date hereof and ending on the first anniversary of the date hereof (the "Non-Compete Period"), directly or indirectly, for any reason, for that Stockholder's own account or on behalf of or together with any other Person: (1) acquire or enter into an agreement to acquire, directly or through direct or indirect ownership or contract rights with respect to a Person, including without limitation whether as principal, agent, stockholder, partner, joint venturer, employer, employee or in any other capacity, any interest (an "Interest") of any kind or character in the lands or in the minerals on or under said lands whatsoever located within the Non-Compete Area (as Annex B defines that term), whether by means of lease, purchase, assignment, trade, sublease, easement, farmout, or any other form of acquisition, including any merger with or acquisition of stock or ownership interests in any other Person; or (2) call on or otherwise solicit, directly or indirectly through any Person, any natural person who is at that time employed by the Company in any managerial capacity with the purpose or intent of attracting that person from the employ of the Company. Notwithstanding the foregoing, any Stockholder may own and hold as a passive investment up to 10% of the outstanding Capital Stock of a competing Entity. In the event that a Stockholder B-3 acquires an Interest in the Non-Compete Area during the Non-Compete Period, that Stockholder (the "Acquiring Stockholder") must promptly notify Parent in writing of that acquisition, including a full description of the acquired Interest and the rights, obligations and duties with respect thereto, accompanied by a copy of any acquisition agreement and any other relevant documents. Within 30 days following that acquisition, the Acquiring Stockholder will convey, transfer and assign all its rights, titles, and interests in the Interest so acquired to the Company without consideration. (b) Because of (1) the difficulty of measuring economic losses to Parent or the Company as a result of any breach by a Stockholder of that Stockholder's covenants in Section 3(a) and (2) the immediate and irreparable damage that could be caused to Parent or the Company for which it would have no other adequate remedy, each Stockholder agrees that Parent or the Company may enforce the provisions of Section 3(a) by injunctions and restraining orders against that Stockholder if that Stockholder breaches any of those provisions. The breaching Stockholder will be responsible for, and Parent and the Company will be entitled to receive reimbursement of, all costs of enforcing their rights under this Section 3, including reasonable attorney's fees. (c) The parties each agree that Sections 3(a) and (b) impose a reasonable restraint on the Stockholders in light of the activities and business of Parent and the Company on the date hereof and the current business plans of the Company and Parent and its Affiliates. (d) The covenants in this Section 3 are severable and separate, and the unenforceability of any specific covenant in this Section 3 is not intended by any party to, and will not, affect the provisions of any other covenant in this Section 3. If any court of competent jurisdiction determines that the scope, time or territorial restrictions Section 3(a) sets forth are unreasonable as applied to any Stockholder, the parties, including that Stockholder, acknowledge their mutual intention and agreement that those restrictions be enforced to the fullest extent the court deems reasonable, and thereby will be reformed to that extent as applied to that Stockholder and any other Stockholders similarly situated. (e) All the covenants in this Section 3 are intended by each party to be, and will be construed as, an agreement independent of any other provision in this Agreement. It is specifically agreed that the time periods Section 3(a) specifies will be computed in the case of each Stockholder by excluding from that computation any time during which that Stockholder is in violation of any provision of Section 3(a). The covenants this Section 3 contains will not be affected by any breach of any other provision hereof by any party. (f) Each Stockholder, severally and not jointly with any other Person, hereby agrees that this Section 3 is a material and substantial part of the transactions the Acquisition Agreement contemplates. B-4 Section 4. Representations and Warranties. Each Stockholder represents and warrants to Parent that, as applied solely to that Stockholder, all the following representations and warranties in this Section 4 are as of the date of this Agreement, and will be immediately prior to Sub's payment for that Stockholder's Subject Shares, true and correct: (1) the Stockholder: (A) is the record and beneficial owner of, and has good and marketable title to, the Stockholder's Original Shares and, as of the date Sub consummates the Offer, all other Subject Shares the Stockholder hereafter acquires, in each case free and clear of any "adverse claim," as the applicable Uniform Commercial Code defines that term, or other lien or encumbrance; and (B) has and will have, with respect to the Original Shares, and will have, with respect to all other Subject Shares the Stockholder hereafter acquires, the sole right to Transfer and direct the voting of those securities; (2) except as the Stockholders Agreement otherwise provides, none of the Original Shares is, and none of the other Subject Shares the Stockholder hereafter acquires will be, subject to any voting trust, voting agreement or other agreement, arrangement or restriction respecting the Transfer or voting of any of those securities; (3) the Stockholder has the full power, legal capacity and authority to execute, deliver and perform the Stockholder's obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as that enforceability may be: (A) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (B) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law; (4) if the Stockholder is an Entity, the Stockholder has obtained, in accordance with all applicable Governmental Requirements and its Charter Documents, all approvals and the taking of all actions necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement; (5) if the Stockholder is acting otherwise than in his individual capacity, whether as an executor or a guardian or in any other fiduciary or representative capacity, all actions on the part of the Stockholder and all other Persons, including any court, necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement have been duly taken; B-5 (6) the Stockholder's execution, delivery and performance in accordance with its terms of this Agreement and the effectuation of the transactions this Agreement contemplates do not and will not: (A) violate or conflict with any Governmental Requirement; (B) breach or constitute a default under any agreement or instrument to which the Stockholder is a party or by which the Stockholder or any Subject Shares the Stockholder owns is bound; (C) result in the creation or imposition of, or afford any Person the right to obtain, any lien upon any Subject Shares the Stockholder owns, or upon any revenues, income or profits of the Stockholder therefrom; or (D) if the Stockholder is an Entity, violate the Stockholder's Charter Documents; and (7) no litigation is pending or, to the knowledge of the Stockholder, threatened to which the Stockholder is or may become a party which: (A) questions or involves the validity or enforceability of any of the Stockholder's obligations under this Agreement; or (B) seeks, or reasonably could be expected to seek, (1) to prevent or delay the consummation by the Stockholder of the transactions this Agreement contemplates the Stockholder will consummate or (2) damages in connection with any such consummation. Section 5. Several Nature of Obligations. The obligations of each Stockholder under this Agreement are several and not joint, or joint and several, with the obligations of any other Stockholder under this Agreement. Section 6. Termination of Certain Obligations. The obligations of each Stockholder under Sections 2 and 3 will terminate on the expiration of an Option Exercise Period during which Parent has not exercised its Purchase Options, but, except for termination on that occurrence, will continue in accordance with its terms notwithstanding any termination of the Acquisition Agreement. The obligations of each Stockholder under Section 3 will, if they have not terminated earlier in accordance with the preceding sentence, terminate at 5:00 p.m., Denver, Colorado time, on March 17, 2003. Section 7. Notices. All notices and other communications hereunder must be in writing and will be deemed given if delivered personally, telecopied or otherwise sent by means of electronic communications equipment (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as it has specified by like notice): B-6 (1) if to Parent, to it at 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy: (713) 229-1816 Email: james.dement@bakerbotts.com and (2) if to a Stockholder, to the address set forth opposite that Stockholder's name on the signature pages hereto. Section 8. Construction and Interpretation. (a) This Agreement uses the words "herein," "hereof" and "hereunder" and words of similar import to refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Section" and "Annex" refer to a Section of or Annex to this Agreement, unless it otherwise specifies. This Agreement uses the word "party" to refer to any original signatory hereto and its permitted successors and assigns under Section 12. (b) Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter. (c) The word "including," and, with correlative meaning, the word "include," means including, without limiting the generality of any description preceding that word, and the words "shall" and "will" are used interchangeably and have the same meaning. (d) The language this Agreement uses will be deemed to be the language the parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any party. (e) This Agreement includes captions for convenience of reference only, and these captions do not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. B-7 Section 9. Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective as to any Stockholder when two or more counterparts have been signed by that Stockholder and Parent and delivered to each other, it being understood that to be binding on any Stockholder, no other Stockholder need sign this Agreement and Parent need not sign the same counterpart. Section 10. Entire Agreement; Third Party Beneficiaries. This Agreement: (1) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; and (2) except as Sections 3 and 4 otherwise provide, is not intended to confer on any Person other than the parties any rights or remedies hereunder. Section 11. Publicity. (a) Each Stockholder hereby agrees that Parent and any of its Affiliates may publish and disclose in the Offer Documents and the information statement Section 7.01(c) of the Acquisition Agreement contemplates, and any other documents Parent or Sub files with the SEC in connection with the Offer or the Merger, the identity and ownership of Subject Shares by that Stockholder and the nature of that Stockholder's commitments, agreements and understandings under this Agreement. (b) Except as any applicable Governmental Requirement or the rules of the National Association of Securities Dealers, Inc. otherwise require, for so long as this Agreement is in effect, no Stockholder will, or will permit any of its Affiliates to, issue or cause the publication of any press release or other public announcement with respect to the transactions this Agreement contemplates without the consent of Parent, which consent Parent will not unreasonably withhold. Section 12. Assignment; Assumption. (a) This Agreement and the rights, interests or obligations of the parties hereunder may not be assigned by any Stockholder, whether by operation of law or otherwise, without the prior written consent of Parent. Parent may assign its rights and interest hereunder against any Stockholder to any of its Affiliates, and any such assignee Affiliate may reassign those rights and interests to any other Affiliate of Parent, without the consent of that Stockholder, but any other such assignment to any other Person will require the prior written consent of that Stockholder, which consent that Stockholder will not unreasonably withhold. Subject to the preceding sentence, this Agreement will be binding on, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. (b) Each Stockholder that is an Entity will require the successor to that Entity's business and assets substantially as an entirety, whether by merger, consolidation, sale of assets or other transaction, to assume in writing that Stockholder's obligations hereunder. Section 13. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS B-8 THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY; PROVIDED, HOWEVER, THAT SECTION 3 AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. Section 14. Exercise of Rights and Remedies. Except as this Agreement otherwise provides, no delay or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default hereunder by any other party will impair any such right, power or remedy, nor will it be construed, deemed or interpreted as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any waiver of any single breach or default be construed, deemed or interpreted as a waiver of any other breach or default hereunder occurring before or after that waiver. Section 15. Reformation and Severability. If any provision of this Agreement is invalid, illegal or unenforceable, that provision will, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties as expressed herein, and if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. Section 16. Remedies Cumulative. No right, remedy or election any provision of this Agreement gives will be deemed exclusive, but each will be cumulative with all other rights, remedies and elections available at law or in equity. Section 17. Enforcement. Each Stockholder agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, Parent will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement in the Appropriate Court, this being in addition to any other remedy to which Section 3, law or equity entitles Parent or any of its Affiliates. Each Stockholder will: (1) submit itself to the personal jurisdiction of the Appropriate Court with respect to any dispute that arises out of this Agreement or any transaction this Agreement contemplates; (2) not attempt to deny or defeat that personal jurisdiction by motion or other request for leave from any such court; and (3) not bring any action relating to this Agreement or any transaction this Agreement contemplates in any court other than the Appropriate Court. In this Section 17, "Appropriate Court" means: (1) in the case of any dispute that arises under this Agreement or any transaction this Agreement contemplates, other than under Section 3 and the conduct that Section contemplates, the Appropriate Delaware Court; and B-9 (2) in the case of any dispute that arises under Section 3 or any conduct to which that Section relates, the civil district courts located in Harris County, Texas. Section 18. Further Assurances. At the request of Parent, each Stockholder will duly execute and deliver to Parent a signature page hereto together with the notarization of that Stockholder's signature by an appropriate notary public and such other documents as, in the good-faith judgment of Parent, are reasonably necessary or advisable to carry out more effectively other provisions and purposes of Section 3. B-10 The parties have signed this Agreement as of the date first written above. SANTOS AMERICAS AND EUROPE CORPORATION By: ---------------------------------- Kathleen A. Hogenson President STOCKHOLDERS No. of Original Shares: 48,000 Aspect Resources, LLC 511 16th Street, Suite 300 By: Denver, Colorado 80202 ---------------------------------- Alex M. Cranberg ASPECT ENERGY, LLC BY: ASPECT MANAGEMENT CORPORATION, MANAGER No. of Original Shares: 4,729,456 c/o Alex M. Cranberg Aspect Resources, LLC BY: 511 16th Street, Suite 300 ---------------------------------- Denver, Colorado 80202 ALEX M. CRANBERG PRESIDENT No. of Original Shares: 132,754 Esenjay Exploration, Inc. 500 North Water, Suite 1100 Corpus Christi, Texas 78471 By: --------------------------------- Michael E. Johnson STOCKHOLDERS (continued) ESENJAY PETROLEUM CORPORATION No. of Original Shares: 4,896,415 c/o Michael E. Johnson Esenjay Exploration, Inc. By: 500 North Water, Suite 1100 ---------------------------------- Corpus Christi, Texas 78471 Michael E. Johnson President No. of Original Shares: 202,297 Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: Houston, Texas 77002 ---------------------------------- David W. Berry STATE OF __________ ) ) COUNTY/PARISH OF _______________ ) (Alabama) I, _________________, a _________________, in and for the above mentioned county and state, hereby certify that Michael E. Johnson, whose name as president, of Esenjay Petroleum Corporation, a corporation, is signed to the foregoing agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he, as such officer and with full authority, executed the same voluntarily for and as the act of such corporation. (Louisiana) On this the ___ day of March, 2002, before me, ______________, the undersigned officer, personally appeared Michael E. Johnson who acknowledged himself to be the president of Esenjay Petroleum Corporation, a corporation, and that he, as such president, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as president. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of March, 2002, within my jurisdiction, the within named Michael E. Johnson, who acknowledged that he is president of Esenjay Petroleum Corporation, a Delaware corporation, and that for and on behalf of the corporation, and as its act and deed he executed the above and foregoing instrument, after first having been duly authorized by the corporation so to do. (Oklahoma) This instrument was acknowledged before me on March __, 2002, by Michael E. Johnson, as president of Esenjay Petroleum Corporation. (Texas) This instrument was acknowledged before me on March __, 2002, by Michael E. Johnson, president of Esenjay Petroleum Corporation, a Delaware corporation, on behalf of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this _______ day of March, A. D. 2002. ---------------------------------- Signature Printed Name: Title of officer: My commission or term of office expires on _______________. [SEAL] STATE OF __________ ) ) COUNTY/PARISH OF _______________ ) (Alabama) I, _______________ , a _______________ , hereby certify that Alex M. Cranberg, whose name is signed to the foregoing agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he executed the same voluntarily on the day the same bears date. (Louisiana) On this the ___ day of March, 2002, before me, ______________, the undersigned officer, personally appeared Alex M. Cranberg, known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument and acknowledged he executed the same for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of March, 2002, within my jurisdiction, the within named Alex M. Cranberg, who acknowledged that he executed the above and foregoing instrument. (Oklahoma and Texas) This instrument was acknowledged before me on March __, 2002, by Alex M. Cranberg. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this _______ day of March, A. D. 2002. ---------------------------------------- Signature Printed Name: Title of officer: My commission or term of office expires on _______________. [SEAL] STATE OF __________ ) ) COUNTY/PARISH OF _______________ ) (Alabama) I, _______________ , a _______________ , hereby certify that Michael E. Johnson, whose name is signed to the foregoing agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he executed the same voluntarily on the day the same bears date. (Louisiana) On this the ___ day of March, 2002, before me, ______________, the undersigned officer, personally appeared Michael E. Johnson, known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument and acknowledged he executed the same for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of March, 2002, within my jurisdiction, the within named Michael E. Johnson, who acknowledged that he executed the above and foregoing instrument. (Oklahoma and Texas) This instrument was acknowledged before me on March __, 2002, by Michael E. Johnson. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this _______ day of March, A. D. 2002. ------------------------------------ Signature Printed Name: Title of officer: My commission or term of office expires on _______________. [SEAL] STATE OF __________ ) ) COUNTY/PARISH OF _______________ ) (Alabama) I, _______________ , a _______________ , hereby certify that David W. Berry, whose name is signed to the foregoing agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he executed the same voluntarily on the day the same bears date. (Louisiana) On this the ___ day of March, 2002, before me, ______________, the undersigned officer, personally appeared David W. Berry, known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument and acknowledged he executed the same for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of March, 2002, within my jurisdiction, the within named David W. Berry, who acknowledged that he executed the above and foregoing instrument. (Oklahoma and Texas) This instrument was acknowledged before me on March __, 2002, by David W. Berry. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this _______ day of March, A. D. 2002. -------------------------------------- Signature Printed Name: Title of officer: My commission or term of office expires on _______________. [SEAL] STATE OF __________ ) ) COUNTY/PARISH OF _______________ ) (Alabama) I, ___________________, hereby certify that Alex M. Cranberg whose name is signed to the foregoing conveyance, and who is known to me, acknowledged before me on this day that, being informed of the contents of the conveyance, he executed the same voluntarily on the day the same bears date. (Louisiana) On this ___ day of March, 2002, before me, ___________________, the undersigned officer, personally appeared Alex M. Cranberg, known to me or satisfactorily proven to be the person whose name is subscribed as president for Aspect Management Corporation which is manager for Aspect Energy, LLC, and acknowledged that he executed the same act of his limited liability company for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of March, 2002, within my jurisdiction, the within named Alex M. Cranberg, who acknowledged that he is president of Aspect Management Corporation which is manager for Aspect Energy, LLC and that in said representative capacity he executed the above and foregoing instrument, after first having been duly authorized so to do. (Oklahoma) This instrument was acknowledged before me on March __, 2002, by Alex M. Cranberg, as president of Aspect Management Corporation which is manager for Aspect Energy, LLC. (Texas) This instrument was acknowledged before me on March __, 2002, by Alex M. Cranberg, president of Aspect Management Corporation, as manager on behalf of Aspect Energy, LLC, a limited liability company. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this _______ day of March, A. D. 2002. ---------------------------------------- Signature Printed Name: Title of officer: My commission or term of office expires on _______________. [SEAL] ANNEX A ESCROW AGREEMENT Santos Americas and Europe Corporation ("Parent"), a Delaware corporation, the holders of outstanding common stock of Esenjay Exploration, Inc. (the "Company"), a Delaware corporation, to which this Escrow Agreement refers as "Stockholders" on the signature pages hereof (the "Stockholders") and ___________________________, as Escrow Agent ("Escrow Agent") hereby enter into this Escrow Agreement dated as of March ___, 2002 PRELIMINARY STATEMENT Parent and its subsidiary, ECM Acquisition Company ("Sub"), a Delaware corporation, have entered into an agreement dated as of March 17, 2002 with the Company (the "Acquisition Agreement"). On the terms and subject to the conditions the Acquisition Agreement contains, Parent will acquire the Company in a two-step transaction. The first step will be a tender offer by Sub for all the outstanding shares of the Company's common stock. The Stockholders collectively own approximately 52% of the shares of the Company's common stock issued and outstanding as of March 1, 2002. In order to induce Parent and Sub to enter into and thereafter perform their respective obligations under the Acquisition Agreement, the Stockholders have entered into a Stockholders Agreement dated as of March 17, 2002 (the "Stockholders Agreement") and an Option Agreement dated as of March 17, 2002 (the "Option Agreement"). AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: 1. Capitalized terms this Escrow Agreement uses, but does not define, have the meanings the Option Agreement or the Stockholders Agreement specifies. 2. Each Stockholder will deliver to Escrow Agent, against receipt therefor of the Escrow Agent, certificates registered in the name of that Stockholder, but endorsed in blank with signatures guaranteed, representing all that Stockholder's Subject Shares. Escrow Agent will hold and dispose of the certificates each Stockholder deposits with it hereunder in accordance with the terms hereof. 3. Each Stockholder hereby irrevocably appoints and designates Escrow Agent as the agent, representative and attorney-in-fact for and on behalf of that Stockholder to take any and all actions on behalf of that Stockholder to effect, in accordance with the Stockholders Agreement, a valid tender of that Stockholder's Subject Shares under and in accordance with the terms of the Offer. This power of attorney includes, without limitation, physical delivery of those certificates and the execution and delivery of a properly completed letter of transmittal and any other required documentation or instruments with respect thereto. If, prior to the acceptance for payment by Sub of Shares under the Offer, A-1 (1) (A) Parent terminates the Acquisition Agreement under Section 9.01(a)(3) thereof or (B) the Company terminates the Acquisition Agreement under Section 9.01(a)(4) thereof, and (2) Sub terminates the Offer, Parent will give written notice of that termination and the date of termination of the Offer to Escrow Agent and cause the certificates representing the Subject Shares of each Stockholder that have been tendered under the Offer to be redelivered to Escrow Agent for redeposit into escrow hereunder. Following that redeposit, Escrow Agent will hold those certificates in its custody hereunder until it disposes of those certificates in accordance with Section 4 below. 4. (a) If at any time during the Option Exercise Period Parent shall deliver to Escrow Agent written notice in the form of Exhibit 1 hereto of its exercise of the Purchase Options, together with immediately available funds in the aggregate amount of the Purchase Prices payable thereunder, Escrow Agent promptly will deliver the certificates representing all Subject Shares Parent has purchased on its exercise of the Purchase Options to Parent. Escrow Agent will, promptly following its receipt of those funds, deliver to each Stockholder, in accordance with that Stockholder's written wire transfer instructions, immediately available funds in the amount of the Purchase Price to which that Stockholder is entitled. (b) If during the Option Exercise Period Parent does not exercise the Purchase Options and purchase the Subject Shares subject thereto under Section 4(a), Escrow Agent promptly will deliver to each Stockholder following the expiration of the Option Exercise Period the certificates representing that Stockholder's Subject Shares. 5. Prior to the termination of this Escrow Agreement, Escrow Agent will vote all Subject Shares that it holds or has tendered under the Offer in accordance with the written instructions of Parent. 6. Escrow Agent may resign by mailing its written notice of that resignation to the Stockholders and Parent; provided, however, that this resignation will not be effective until Parent shall have appointed a successor Escrow Agent and that successor shall have executed an Escrow Agreement substantially in the form hereof. Any successor escrow agent must be a national or state bank authorized to exercise corporate trust powers, and having a combined capital and surplus of at least $100,000,000. Escrow Agent will receive reasonable compensation for its services hereunder which Parent will pay or cause to be paid. 7. Each of the Stockholders and Parent severally represents and warrants to the Escrow Agent that it has full right, power and authority to execute and deliver this Escrow Agreement. 8. All notices, requests, claims, demands and other communications hereunder must be in writing and will be given (and will be deemed to have been duly received if so given) by personal delivery or facsimile, by mail (registered or certified mail, postage prepaid, return receipt requested), or by means of electronic communications equipment (which is confirmed) to the respective parties as follows: A-2 If to Parent, to it at: 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy No.: (713) 229-1816 Email: james.dement@bakerbotts.com and If to a Stockholder, to that Stockholder's address set forth opposite that Stockholder's name on the signature pages hereto. If to Escrow Agent, to it at: ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- Attention: Corporate Trust Department 9. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement, it being understood that to be binding on any Stockholder, no other Stockholder need sign this Agreement and Parent need not sign the same counterpart. 10. Each Stockholder that is an Entity will require the successor to that Entity's business and assets substantially as an entirety, whether by merger, consolidation, sale of assets or other transaction, to assume in writing that Stockholder's obligations hereunder. 11. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY. A-3 IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be duly executed on the date below written. Dated: March __, 2002 SANTOS AMERICAS AND EUROPE CORPORATION By: ---------------------------------------- Kathleen A. Hogenson President ESCROW AGENT -------------------------------------------- By: ---------------------------------------- Name: Title: STOCKHOLDERS Aspect Resources, LLC 511 16th Street, Suite 300 By: Denver, Colorado 80202 ---------------------------------------- Alex M. Cranberg ASPECT ENERGY, LLC BY: ASPECT MANAGEMENT CORPORATION, MANAGER c/o Alex M. Cranberg BY: Aspect Resources, LLC ---------------------------------------- 511 16th Street, Suite 300 ALEX M. CRANBERG Denver, Colorado 80202 PRESIDENT Esenjay Exploration, Inc. 500 North Water, Suite 1100 Corpus Christi, Texas 78471 By: ---------------------------------------- Michael E. Johnson A-4 STOCKHOLDERS (continued) ESENJAY PETROLEUM CORPORATION c/o Michael E. Johnson Esenjay Exploration, Inc. 500 North Water, Suite 1100 By: Corpus Christi, Texas 78471 ---------------------------------------- Michael E. Johnson President Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: Houston, Texas 77002 ---------------------------------------- David W. Berry A-5 EXHIBIT 1 [Letterhead of Santos Americas and Europe Corporation] _______________, 200__ [ESCROW AGENT] (or any successor) Ladies and Gentlemen: We refer to the Escrow Agreement, dated March __, 2002 among the undersigned, the Stockholders signatory thereto and you, as Escrow Agent. We hereby exercise the option to purchase such Subject Shares referred to in that Escrow Agreement and deliver herewith the Purchase Prices therefor. Very truly yours, SANTOS AMERICAS AND EUROPE CORPORATION By: --------------------------------- Name: ---------------------------- Title: --------------------------- The undersigned, [Escrow Agent] (or successor), as Escrow Agent, acknowledges receipt of this and the Purchase Prices therefor. ------------------------------------- Escrow Agent EXHIBIT C DEFINITIONS This Exhibit is Exhibit C to the Agreement dated as of March 17, 2002 among Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc., each of which is a Delaware corporation (this "Agreement"). The following terms this Agreement uses have the meanings this Exhibit assigns to them. "Acquisition Proposal" means any inquiry, proposal or offer from any Person relating to: (1) any direct or indirect acquisition or purchase, other than the Offer and the Merger or any other Takeover Transaction by Parent or any Affiliate of Parent, by means of a Takeover Transaction or otherwise, of (A) a substantial amount of assets of any Company Entity or (B) 15% or more of any class of equity securities of any Company Entity; or (2) any other transaction the consummation of which reasonably (A) could be expected to impede, interfere with, prevent or materially delay the Offer or the Merger or (B) would be expected to dilute materially the benefits to Parent of the transactions this Agreement contemplates. "Affiliate" means, as to any specified Person, any other Person that, directly or indirectly through one or more intermediaries or otherwise, controls, is controlled by or is under common control with the specified Person. This definition uses "control" to mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through ownership of Capital Stock or other securities of that Person, by contract or otherwise. "Agreement" means this Agreement, including Exhibit C, the Schedules and the Company Disclosure Letter, as each of the same may be amended, modified or supplemented from time to time in accordance with the provisions hereof. "Anti-Parent Takeover Measure" means: (1) any measure having or purporting to have, in the event the Company terminates this Agreement under Section 9.01(a)(4), a deterrent effect on the ability of Parent or any Affiliate of Parent to consummate the Offer or otherwise effect a Takeover Transaction thereafter, including any "poison pill" rights plan, any provision in any Charter Document which imposes supermajority, class or series voting requirements or restricts or may otherwise adversely affect the ability of a holder of a majority of the shares of outstanding Common Stock to propose or effect action by the stockholders of the Company or any transaction with any Company Entity, including any provision in the terms of any class or series of Preferred Stock; and C-1 (2) any provision that at any time is any more restrictive than Section 6.02(a) on the ability of the Company and its Representatives to solicit, initiate or encourage, including by way of furnishing information, or to take any other action to facilitate, a Takeover Transaction by Parent or any Affiliate of Parent. "Applicable Baker Botts Office" means the office of Baker Botts L.L.P. located at 910 Louisiana Street, Houston, Texas 77002. "Applicable Filing Office" means the Secretary of State of the State of Delaware. "Appraisal Statute" means Section 262 of the DGCL. "Appropriate Delaware Court" means: (1) the Court of Chancery in and for New Castle County in the State of Delaware; or (2) if that court lacks subject-matter jurisdiction, any appropriate state or federal court in New Castle County, Delaware. "Benefit Plan" means each of the following which any Company Entity has maintained, is maintaining or is required to maintain or to which any Company Entity has contributed, is contributing or is required to contribute, in each case for the benefit of any present or former employee, officer or director of any Company Entity: (1) each "employee pension benefit plan" (as Section 3(2) of ERISA defines that term) (hereinafter, a "Pension Plan"); (2) each "employee welfare benefit plan" (as Section 3(1) of ERISA defines that term) (hereinafter, a "Welfare Plan"); and (3) each other arrangement, plan, policy, program or practice, written or oral relating to stock options, stock purchases, compensation, deferred compensation, bonuses, severance, fringe benefits or other employee benefits. "Capital Stock" means, with respect to: (1) any corporation, (A) any share, or any depositary receipt or other certificate representing any share, of any equity ownership interest in that corporation and (B) any other security possessing voting rights with respect to matters on which holders of the corporation's Capital Stock are entitled to vote; and (2) any other Entity, any share, membership or other percentage interest, unit of participation or other equivalent, however designated, of an equity interest in that Entity. C-2 "Certificate" means any stock certificate formerly representing Converted Shares as of the Effective Time. "Certificate of Merger" means the certificate of merger respecting the Merger which contains the information the DGCL requires to effect the Merger. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. "Charter Documents" means, with respect to any Entity at any time, in each case as amended, modified and supplemented at that time: (1) the articles or certificate of formation, incorporation or organization or the equivalent organizational documents, of that Entity; (2) the bylaws or limited liability company agreement or regulations, or the equivalent governing documents, of that Entity; and (3) each document setting forth the designation, amount and relative rights, limitations and preferences of any class or series of that Entity's Capital Stock. "Closing Date" has the meaning Section 2.04 specifies. "Code" means the Internal Revenue Code of 1986. "Common Stock" means the common stock, par value $.01 per share, of the Company. "Company" has the meaning first paragraph hereof specifies. "Company Board" means the board of directors of the Company, and references herein to the "whole" Company Board at any time are to the total authorized members of the Company Board at that time, including any vacancies. "Company Disclosure Letter" means the disclosure letter the Company delivered to Parent prior to the execution of this Agreement and in which the Company provided the information Article Four describes it as so providing and took exception to various of its representations and warranties in Article Four. "Company Entity" means at any time the Company or any Entity that is a Subsidiary of the Company at that time. "Company Financial Advisor" means Hibernia Southcoast Capital LLC. "Company Material Adverse Effect" means, with respect to the consequences of any fact or circumstance, including the occurrence or non-occurrence of any event, that the fact or circumstance has caused, is causing or reasonably could be expected to cause, C-3 directly, indirectly or consequentially, individually or in the aggregate with all other facts and circumstances qualified as to materiality, damage or loss to, including under Environmental Laws, any Company Entity or combination of Company Entities that is Material to the Company Entities. "Confidential Information" means, with respect to any Person, all trade secrets and other confidential, nonpublic or proprietary information of that Person, including information derived from reports, investigations, research, reserve studies, seismic or other geophysical or geological work, work in progress, codes, marketing and sales programs, customer lists, records relating to past production service provided to customers, capital expenditure projects, cost summaries, pricing formulae, contract analyses, financial information, projections, present and future business plans, confidential filings with any Governmental Authority and all other confidential, nonpublic concepts, methods of doing business, ideas, materials or information prepared or performed for, by or on behalf of that Person respecting any aspect of its business. "Converted Shares" means: (1) Shares that have converted into the right to receive the Merger Consideration under Section 3.01(a)(3); and (2) Dissenting Shares that will be deemed under Section 3.01(a)(4) to have so converted. "Credit Agreement" means the second amended and restated credit agreement dated as of August 13, 2001 between the Company and Deutsche Bank AG New York Branch, as in effect on the date hereof. "Current Audited Balance Sheet Date" means December 31, 2000. "Current Bonus Plan" means, collectively, the 2000 Bonus Pay Plan and the 2001 Bonus Pay Plan of the Company. "Current Audited Financial Statements" means the audited consolidated financial statements of the Company and its Subsidiaries as of the Current Audited Balance Sheet Date and for the period of two years then ended, including the notes thereto and the related audit report of Deloitte & Touche LLP. "DGCL" means the General Corporation Law of the State of Delaware. "Derivative Securities" of a specified Entity means any Capital Stock, debt security or other Indebtedness of the specified Entity or any other Person which is convertible into or exchangeable for, or any option, warrant or other right to acquire: (1) any unissued Capital Stock of the specified Entity; or (2) any Capital Stock of the specified Entity which that Entity issued and holds directly or indirectly as treasury Capital Stock. C-4 "D&O Insurance" means directors' and officers' liability insurance. "Dissenting Share" means any share of Common Stock issued and outstanding immediately prior to the Effective Time as to which its then holder of record then is entitled to an appraisal of its fair value under the Appraisal Statute. "Effective Time" means the time as of which the Merger becomes effective under the DGCL. "Eligible Securities" means equity or debt securities: (1) of which no Company Entity is an issuer; and (2) which are not convertible into, exchangeable for or exercisable to purchase or otherwise acquire any securities of which any Company Entity is an issuer. "Entity" means any sole proprietorship, corporation, partnership of any kind having a separate legal status, limited liability company, business trust, unincorporated organization or association, mutual company, joint stock company or joint venture. "Environmental Laws" means any and all Governmental Requirements relating to the environment or public or worker health or safety, including ambient air, surface water (including water management and runoff), land surface or subsurface strata, or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes (including Solid Wastes, Hazardous Wastes or Hazardous Substances) or noxious noise or odor into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, recycling, removal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes (including petroleum, petroleum distillates, asbestos or asbestos-containing material, volatile organic compounds and polychlorinated biphenyls). "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Affiliate" means, with respect to any specified Person at any time, any other Person, including an Affiliate of the specified Person, that is, or at any time within six years of that time was, a member of any ERISA Group of which the specified Person is or was a member at the same time. "ERISA Group" means any "group of organizations" within the meaning of Section 414(b), (c), (m) or (o) of the Code or any "controlled group" (as Section 4001(a)(14) of ERISA defines that term). "Exchange Act" means the Securities Exchange Act of 1934. "Expiration Date" means 12:00 midnight, New York City time, on the date on which the Offer will expire, which date will be: C-5 (1) the 20th business day from the Offer Commencement Date; or (2) such later date as Sub may designate in accordance with the Exchange Act: (A) with the prior written consent of the Company; or (B) without the prior written consent of the Company if Section 1.01(b) so permits. "Filed SEC Documents" means all SEC Documents filed with and publicly available for inspection by the SEC on its website prior to the date of this Agreement. "GAAP" means, as applied to any financial statements, generally accepted accounting principles and practices in the United States as in effect from time to time which: (1) have been concurred in by independent public accountants; and (2) have been or are applied on a basis consistent, except for changes concurred in by independent public accountants, with the most recent audited financial statements the Filed SEC Documents include. "Governmental Approval" means at any time any authorization, consent, approval, permit, franchise, certificate, license, implementing order or exemption of, or registration or filing with, any Governmental Authority, including any certification or licensing of a natural person to engage in a profession or trade or a specific regulated activity, at that time. "Governmental Authority" means: (1) any national, state, county, municipal or other government, domestic or foreign, or any agency, board, bureau, commission, court, department or other instrumentality of any such government; (2) any Person having the authority under any applicable Governmental Requirement to assess and collect Taxes for its own account; and (3) for purposes of Section 4.11, any arbitrator or mediator having the power to bind the parties to an arbitration or alternative dispute resolution proceeding. "Governmental Requirement" means at any time any obligation or requirement: (1) under any law including common law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, writ, edict, award, authorization or other requirement of any Governmental Authority in effect at that time; C-6 (2) included in any issued Governmental Approval at that time; or (3) resulting from binding arbitration or mediation at that time. "Independent Director" means: (1) any individual who: (A) is a director of the Company on the date of this Agreement; (B) is not an officer or employee of any Company Entity; and (C) has been designated by the Company Board by written notice to Parent as a director who will continue to serve as a member of the Company Board for purposes of this Agreement; or (2) If any individual clause (1) above describes as an Independent Director ceases to be a member of the Company Board for any reason, any individual who: (A) is not an officer, director, employee or Affiliate of any Company Entity or Parent or any of its Affiliates; and (B) is elected by the Company Board to fill the resulting vacancy. "IRCA" means the Immigration Reform and Control Act of 1986. "IRS" means the Internal Revenue Service. "LIP" means the "Esenjay Exploration, Inc. Long-Term Incentive Plan" as in effect on November 1, 1999 and on the date of this Agreement. "Material" means, as applied to any Person or the Company Entities, material to the business, operations, property or other assets, liabilities, financial condition, results of operations or prospects of that Person and its Subsidiaries considered as a whole or the Company Entities considered as a whole, as the case may be. "Merger" means the merger of Sub or its assignee permitted hereby with and into the Company: (1) on the terms and subject to the conditions this Agreement sets forth; or (2) if this Agreement has been earlier terminated and Sub thereafter consummates the Offer, on the terms and subject to the conditions that would have been applicable if this Agreement had remained in effect. "Merger Consideration" means the Offer consideration per Share Sub pays for Shares it purchases in the Offer, without interest. "Minimum Tender Condition" means the condition to the Offer that there shall be validly tendered and not properly withdrawn prior to the expiration of the Offer the number of Shares which, together with the Shares Sub, Parent and Parent's other direct and indirect Subsidiaries own, would represent at least a majority of all outstanding Shares on a fully diluted basis on the date of purchase. C-7 "Multiemployer Plan" means a "multiemployer plan," as Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of ERISA defines that term. "New Common Stock" means the common stock, per value $.001 per share, of the Surviving Corporation. "Offer" means the offer of Sub to purchase all outstanding Shares that Parent does not already own, directly or indirectly through its Subsidiaries, for: (1) the price of $2.84 per Share, net to the seller in cash and without interest thereon; or (2) such greater consideration per Share, if any, as Sub may, in its sole discretion, offer in the Offer Documents to pay for each of those Shares. "Offer Commencement Date" means the date on which Sub commences the Offer under Section 1.01(a). "Offer Conditions" means the conditions of the Offer which Exhibit D contains, as those conditions may be amended or supplemented from time to time: (1) in accordance with Section 1.01(b) until such time, if ever, as any party terminates this Agreement under Article Nine; and (2) if any party terminates this Agreement under Article Nine, in accordance with Section 1.01(a) after that termination. "Offer Documents" means the offer to purchase to be dated on or about the Offer Commencement Date of Sub and the related letter of transmittal and other documents ancillary to the Offering the Schedule TO includes as of the Offer Commencement Date, as those documents thereafter may be amended or supplemented from time to time. "Option" means any option to purchase Common Stock which has been granted under any of the Option Plans and remains outstanding on the date of this Agreement. "Option Agreement" means the option agreement dated the date of this Agreement in the form Exhibit B includes. "Option Grantors" means the Persons named as "Stockholders" by the Option Agreement. "Option Plan" means collectively the "Frontier Natural Gas Corporation Employee Option Plan -- 1997" and the LIP. "Parent" has the meaning the first paragraph hereof specifies. "Parent Entity" means Parent, Sub or any Entity that is a Subsidiary of Parent. C-8 "Paying Agent" means at any time the bank or trust company acting as Parent's paying agent at that time in connection with the exchange of Certificates for the Merger Consideration. "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" has the meaning the definition of "Benefit Plan" herein specifies. "Permitted Investments" means: (1) at the time of purchase or other acquisition by any Company Entity, (A) obligations issued or guaranteed by the United States of America with a remaining maturity not exceeding one year, (B) commercial paper with maturities of not more than 270 days and a published rating of not less than A-1 by S&P or P-1 by Moody's and (C) certificates of deposit and bankers' acceptances having maturities of not more than one year of any commercial bank or trust company if (1) that bank or trust company has a combined capital and surplus of at least $500,000,000 and (2) its unsecured long-term debt obligations, or those of a holding company of which it is a subsidiary, are rated not less than A- by S&P or A3 by Moody's; and (2) other extensions of credit made by any Company Entity to its customers in the ordinary course of its business and consistent with its past practices. "Person" means any natural person, Entity, estate, trust, union or employee organization or Governmental Authority or, for the purpose of the definition of "ERISA Affiliate," any trade or business. "Preferred Stock" means the preferred stock, par value $.01 per share, of the Company. "Prohibited Transaction" means any transaction either Section 4975 of the Code or Section 406 of ERISA prohibits and neither Section 4975 of the Code nor Section 408 of ERISA exempts. "Proprietary Rights" means: (1) patents, applications for patents and patent rights; (2) in each case, whether registered, unregistered or under pending registration, trademark rights, trade names, trade name rights, corporate names, C-9 business names, trade styles or dress, service marks and logos and other trade designations and copyrights; and (3) in the case of any Company Entity, all agreements relating to the technology, know-how or processes used or held for use in any business of any Company Entity. "Qualified Plans" has the meaning Section 4.09 specifies. "Relevant Representation" has the meaning Section 4.14 specifies. "RCRA" means the Resource Conservation and Recovery Act of 1976. "Reportable Event" means, with respect to any Pension Plan: (1) the occurrence of any of the events set forth in Section 4043(b) or (c) (other than a Reportable Event as to which the provision of 30 days' notice to the PBGC is waived under applicable regulations), 4062(e) or 4063(a) of ERISA with respect to that plan; (2) any event requiring any Company Entity to provide security to that plan under Section 401(a)(29) of the Code; or (3) any failure to make a payment Section 412(m) of the Code requires with respect to that plan. "Representatives" means, with respect to any Person, the directors, officers, employees, Affiliates, accountants, including independent certified public accountants, advisors, attorneys, consultants or other agents of that Person, or any other representatives of that Person or of any of those directors, officers, employees, Affiliates, accountants, advisors, attorneys, consultants or other agents. "Royalty" includes any payment attributable to any royalty, overriding royalty or other interest in oil and gas properties and payments any contractual arrangement or applicable Governmental Approval or Governmental Requirement may require which are attributable to the production of natural resources and owed to a federal, state or local Governmental Authority or otherwise, including all interest, penalties and additions imposed with respect to the amount of those payments. "Royalty Return" means, as originally filed or as thereafter amended, any federal, state or local declaration, form, information return, report, return or statement relating to Royalties. "Savings Plan" means Esenjay Employee Savings Plan as in effect on the date of this Agreement and since October 1, 1998. "Schedule 14D-9" means a Solicitation/Recommendation Statement on Exchange Act Schedule 14D-9 of the Company, as filing person, which contains, among other C-10 information respecting the Company and the Offer, the recommendations of the Company Board to which Section 1.02(b) refers, as originally filed with the SEC under the Exchange Act and, after that filing, as amended from time to time. "Schedule TO" means a Tender Offer Statement on Exchange Act Schedule TO of Parent and Sub, as filing persons, which contains, among other information and documents respecting Parent, Sub and the Offer, the Offer Documents, as originally filed with the SEC under the Exchange Act and, after that filing, as amended from time to time. "SEC" means the Securities and Exchange Commission. "SEC Documents" means at any time all forms, registration and other statements reports, schedules, exhibits and other documents relating to periods beginning or transactions or other events occurring on or after January 1, 1999 which the Exchange Act or the Securities Act has required the Company or any other Company Entity to file with the SEC at or prior to that time. "Section 203 Restrictions" means the provisions of Section 203 of the DGCL which impose conditions to or restrictions on "business combinations" by Delaware corporations with their "interested stockholders" (the quoted terms having the meanings Section 203 specifies). "Securities Act" means the Securities Act of 1933. "Severance Plan" means the Company's severance compensation plan known as the "Esenjay Exploration, Inc. Employee Incentive and Severance Protection Plan," as adopted effective as of February 21, 2001 and as thereafter amended, modified or supplemented prior to the date of this Agreement. "Shares" means at any time the outstanding shares of Common Stock. "Solid Wastes, Hazardous Wastes or Hazardous Substances" have the meanings ascribed to those terms in CERCLA, RCRA or any other Environmental Law applicable to the business or operations of any Company Entity which imparts a broader meaning to any of those terms than does CERCLA or RCRA. "Stockholders" means the Persons named as "Stockholders" by the Stockholders Agreement. "Stockholders Agreement" means the stockholders agreement dated the date of this Agreement in the form Exhibit A includes. "Sub" has the meaning the first paragraph hereof specifies. "Subsidiary" of any specified Person at any time means any Entity a majority of the Capital Stock of which the specified Person owns or controls at that time, directly or indirectly, through another Subsidiary of the specified Person. C-11 "Superior Takeover Proposal" means any bona fide written Acquisition Proposal from any Person relating to any direct or indirect purchase or other acquisition by any Person, other than Parent or an Affiliate of Parent, of the entire equity interest in the Company which that Person does not already own or the business and assets of the Company substantially as an entirety in a Takeover Transaction which: (1) is for a Takeover Consideration to the holders of the Common Stock and is otherwise on terms which the Company Board determines in the good faith of its members and on the basis of written advice of the Company Financial Advisor, and taking into account all legal, financial, regulatory and other aspects of that proposal and the Person making that proposal, would, if consummated, be more favorable, from a financial point of view, to those holders than the Offer and the Merger and is reasonably likely to be consummated without undue delay; and (2) does not include or otherwise provide for or contemplate, directly or indirectly, the adoption by any Company Entity of, or any commitment by any Company Entity to perform, any Anti-Parent Takeover Measure. "Surviving Corporation" means the corporation surviving the Merger. "Takeover Consideration" means: (1) cash; (2) Eligible Securities; or (3) any combination of cash and Eligible Securities. "Takeover Transaction" means any one of the following or any combination of one or more of the following in a series of related transactions: any merger, consolidation, business combination, sale of assets, tender or exchange offer, share exchange, conversion, recapitalization, redemption, liquidation, dissolution or similar transaction involving any Company Entity. "Tax" or "Taxes" means all net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges or assessments of any nature whatever imposed by any Governmental Requirement, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Termination Event" means, with respect to any Pension Plan: (1) any Reportable Event with respect to that plan which is likely to result in the termination of that plan; C-12 (2) the termination of, or the filing of a notice of intent to terminate, that plan or the treatment of any amendment to that plan as a termination under Section 4041(c) of ERISA; or (3) the institution of proceedings to terminate, or the appointment of a trustee to administer, that plan under Section 4042 of ERISA. "Termination Fee" means cash in the amount of $3,000,000. "TSIP" means the "Esenjay Exploration, Inc. Targeted Sales Incentive Plan" as in effect on February 21, 2001 and on the date of this Agreement. "Warrant" means any warrant to purchase or otherwise acquire Common Stock from the Company or any other Company Entity which has been created and is outstanding on the date of this Agreement. "Welfare Plan" has the meaning the definition of "Benefit Plan" herein specifies. End of Exhibit C C-13 EXHIBIT D OFFER CONDITIONS This Exhibit is Exhibit D to the Agreement dated as of March 17, 2002 among Santos Americas and Europe Corporation, ECM Acquisition Company and Esenjay Exploration, Inc., each of which is a Delaware corporation (the "Agreement"). Capitalized terms this Exhibit uses, but does not define, have the meanings the Agreement specifies. Notwithstanding any other term of the Offer or the Agreement, Sub will not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Exchange Act Rule 14e-l(c), which relates to Sub's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer, to pay for, and may postpone the acceptance for payment of and payment for, Shares tendered, and, except as the Agreement otherwise provides, terminate the Offer as to any Shares not then paid for if there shall not have been validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would satisfy the Minimum Tender Condition. Moreover, notwithstanding any other term of the Offer or the Agreement, Sub will not be required to commence the Offer, accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer, with or without the consent of the Company as the Agreement provides, or if, at any time on or after the date of the Agreement and before the acceptance of Shares for payment or the payment therefor, any of the following conditions exists: (a) there shall be pending any suit, action or proceeding by any Governmental Authority, or pending any suit, action or proceeding that has a reasonable likelihood of success by any other Person: (1) seeking to restrain, prohibit or make illegal or materially more costly the making or consummation of the Offer or the Merger or any other transactions contemplated by the Agreement (collectively, the "Transactions"); (2) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Affiliates of any material portion of the business or assets of the Company, Parent or any of their respective Affiliates, or to compel the Company, Parent or any of their respective Affiliates to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective Affiliates, as a result of the Offer, the Merger or any other Transaction; (3) seeking to impose limitations that in the aggregate are material on the ability of Parent or Sub or any Affiliate of Parent to acquire or hold, or exercise full rights of ownership of, any Shares, including the right to vote the Shares purchased or otherwise acquired by it on all matters properly presented to the stockholders of the Company; D-1 (4) seeking to prohibit Parent or any of its Affiliates from effectively controlling in any material respect the business or operations of the Company; or (5) that otherwise reasonably could be expected to have a Company Material Adverse Effect; (b) any statute, rule, regulation, legislation, interpretation, judgment, order or injunction shall be enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (1) Parent, the Company or any of their respective Affiliates or (2) the Offer, the Merger or any other Transaction, in either case by any Governmental Authority that is reasonably likely to result, directly or indirectly, in any of the consequences to which paragraph (a) above refers; (c) (1) it shall have been publicly disclosed, or Parent shall have otherwise learned, that beneficial ownership, determined for the purposes of this paragraph under Exchange Act Rule l3d-3, of more than 15% of the Shares has been acquired by another Person that is not a Stockholder or (2) the Company Board or any committee thereof shall have: (A) withdrawn or modified the approval or recommendation of the Company Board of the Offer, including by amendment of the Schedule 14D-9, in a manner adverse to Parent or Sub; (B) approved or recommended to the stockholders of the Company an Acquisition Proposal, determined that an Acquisition Proposal is a Superior Takeover Proposal or announced its intention to enter into an agreement with respect to an Acquisition Proposal; (C) approved or recommended that the stockholders of the Company tender their Shares into any tender offer or exchange offer that is an Acquisition Proposal or is related thereto; or (D) resolved to do any of the foregoing; (d) the Company shall have breached any of its representations and warranties in the Agreement prior to their termination which (1) are qualified as to materiality or a Company Material Adverse Effect or (2) are not so qualified if, as a result of all breaches thereof, a Company Material Adverse Effect has occurred or reasonably could be expected to occur; (e) there shall have occurred any changes, conditions, events or developments that have had, or reasonably could be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (f) there shall have occurred or been threatened: D-2 (1) any material change in Australian currency exchange rates relative to United States currency exchange rates or a suspension of, or limitation on, the markets therefor; (2) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (3) any limitations, whether or not mandatory, by any government or governmental authority, domestic, foreign or supranational, on, or other event that might affect the extension of credit by banks or other lending institutions; (g) the Company shall have breached in any material respect any material agreement or covenant of the Company under the Agreement; (h) the Parent shall not have received environmental site assessment reports from each of (1) Cornerstone Environmental Services, Inc., covering 12 of the Company's operating wells and (2) Anderson Environmental Services, Inc., covering the Company's remaining operating wells, in each case in form and substance satisfactory to Parent in its sole discretion; (i) the auditor's report to the audited consolidated financial statements of the Company for the year ended December 31, 2001, shall have contained any reservation, qualification or non-standard disclosure; or (j) the Agreement shall have been terminated in accordance with its terms; in each case which, and regardless of the circumstances giving rise to any such condition, including any action or inaction by Parent or any of its Affiliates, makes it inadvisable, in the good-faith judgment of Parent, to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Sub and Parent. Sub or Parent may assert any of those conditions regardless of the circumstances giving rise thereto or may waive any of those conditions in whole or in part at any time and from time to time in its sole discretion; provided, however, that the Minimum Tender Condition may not be waived without the prior written consent of the Company. The failure by Parent, Sub or any other Affiliate of Parent at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that may be asserted at any time and from time to time. Any determination by Parent with respect to the foregoing conditions will be final and binding on all parties. End of Exhibit D D-3 EX-99.D2 11 h95090tex99-d2.txt STOCKHOLDER AGREEMENT DATED MARCH 17, 2002 EXHIBIT d(2) STOCKHOLDERS AGREEMENT Santos Americas and Europe Corporation ("Parent"), a Delaware corporation, and the holders of outstanding common stock of Esenjay Exploration, Inc. (the "Company"), a Delaware corporation, to which this Agreement refers to as "Stockholders" on the signature pages hereof (the "Stockholders") hereby enter into this Agreement dated as of March 17, 2002. PRELIMINARY STATEMENT Parent and its subsidiary, ECM Acquisition Company ("Sub"), a Delaware corporation, propose to enter into an agreement dated as of March 17, 2002 with the Company (the "Acquisition Agreement"). On the terms and subject to the conditions the Acquisition Agreement contains, Parent proposes to acquire the Company in a two-step transaction. The first step would be a tender offer by Sub for all the outstanding shares of the Company's common stock, and the second step would be a follow-on merger between Sub and the Company in which the Company would become the surviving corporation. The board of directors of the Company has: o determined that Parent's proposed tender offer and merger are fair to and in the best interests of the Company's stockholders; o declared the agreement of merger the Acquisition Agreement contains advisable and resolved to recommend that the holders of the Company's common stock accept that offer and adopt that agreement of merger; and o authorized the Company to enter into the Acquisition Agreement. The Stockholders collectively own approximately 53% of the shares of the Company's common stock issued and outstanding as of March 1, 2002. In order to induce Parent and Sub to enter into and thereafter perform their respective obligations under the Acquisition Agreement, the Stockholders are entering into this Agreement. AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: Section 1. Definitions. (a) In this Agreement: (1) the "Original Shares" of a Stockholder means the number of shares of Common Stock which appears opposite that Stockholder's name on the signature pages hereof; and 1 (2) the "Subject Shares" of a Stockholder means that Stockholder's Original Shares together with: (A) all shares of Common Stock or other Capital Stock, all Derivative Securities, including any preferred stock purchase rights, and all other properties or rights, including any phantom securities, to which that Stockholder hereafter becomes entitled by reason of any dividend or other distribution the Company pays or makes in respect of the Common Stock or any other class or series of its Capital Stock; (B) all properties, securities and rights to which that Stockholder becomes entitled by reason of any split, combination or reclassification of the Common Stock or any other Capital Stock of the Company or any issuance by the Company in respect or lieu of or in substitution for shares of its Capital Stock; and (C) all properties, securities and rights of any type to which clause (2)(A) or (B) of this definition refers which that Stockholder purchases or otherwise acquires after the date hereof from the Company or any other Person. (b) Capitalized terms this Agreement uses, but does not define, have the meanings the Acquisition Agreement specifies. References herein to "this Agreement" are to this Agreement as it may be amended, modified or supplemented from time to time hereafter in writing by each party against which another party seeks to enforce that amendment, modification or supplement. Section 2. Tender of Subject Shares. (a) Each Stockholder will (1) effect a valid tender under and in accordance with the terms of the Offer, as soon as practicable after the Offer Commencement Date and in no event later than prior to the initially scheduled Expiration Date, of all that Stockholder's Subject Shares and (2) not withdraw or attempt to withdraw those tendered Subject Shares from the Offer until after the first to occur of (A) the termination of the Acquisition Agreement by the Company under Section 9.01(a)(4) thereof or (B) a termination of the Offer in accordance with its terms prior to the purchase by Sub of any Shares thereunder. Any tender of Subject Shares by a Stockholder in accordance with this Section 2 must include the physical delivery of certificates representing those Subject Shares and the execution and delivery of a properly completed letter of transmittal with respect thereto. (b) If the Subject Securities of a Stockholder include property, securities or rights that Sub has not amended the Offer to include, this Section 2 will not require that Stockholder to tender, and Sub will not be required to amend the Offer to include, any property, securities or rights not so included. Section 3. Voting of Subject Shares. (a) If the agreement of merger the Acquisition Agreement contains is duly submitted to the stockholders of the Company for their approval or disapproval, each Stockholder will duly and properly vote all that Stockholder's Subject Shares entitled to vote on that matter in favor of the adoption of that agreement. 2 (b) If any action or agreement is duly submitted to the stockholders of the Company which, if taken or effected, reasonably could be expected to (1) result in a breach of any representation, warranty, covenant or other agreement of the Company in or under the Acquisition Agreement, or (2) prevent, impede, interfere with, delay or postpone the consummation of the Offer or the Merger, including any Acquisition Proposal, each Stockholder will duly and properly vote all that Stockholder's Subject Shares entitled to vote on that matter against the taking of that action or the effecting of that agreement. (c) If any action by the stockholders or the Company to which Section 3(a) or (b) refers is sought to be taken by written consent in lieu of a meeting of those stockholders, each Stockholder will give or withhold that Stockholder's consent thereto to the same effect as if that action were presented for approval or disapproval at such a meeting. (d) Each Stockholder: (1) hereby irrevocably grants to, and appoints, Kathy Hogenson and Peter Robinson, or either of them, in their respective capacities as officers of Parent or Sub, and any individual who hereafter succeeds to any such office, and each of them individually, that Stockholder's proxy and attorney-in-fact, with full power of substitution, for and in the name, place and stead of that Stockholder, to vote that Stockholder's Subject Shares in accordance with this Section 3; (2) represents that any proxies that Stockholder has heretofore given in respect of any of that Stockholder's Subject Shares are not irrevocable and hereby revokes all such proxies and agrees to give all notices required to evidence that revocation; (3) acknowledges that Stockholder's understanding that Parent is entering into the Acquisition Agreement in reliance on that Stockholder's execution and delivery of this Agreement and affirms that Stockholder is granting the irrevocable proxy this Section 3 contains in connection with Parent's execution and delivery of the Acquisition Agreement and to secure the performance by that Stockholder of that Stockholder's obligations hereunder; (4) affirms that that irrevocable proxy is coupled with an interest and may not be revoked under any circumstances; and (5) ratifies all that the proxies and attorneys-in-fact designated by that proxy lawfully may do or cause to be done in their several capacities as such and confirms that that proxy is intended to be irrevocable under the applicable Delaware law. 3 Section 4. No Inconsistent Arrangements. Each Stockholder agrees that, except as the Acquisition Agreement and this Agreement otherwise provide or contemplate, that Stockholder will not: (1) sell, transfer, pledge, assign or otherwise dispose of (collectively, "Transfer"), for value, by gift or otherwise, or consent to or permit any Transfer of, any of that Stockholder's Subject Shares or any interest therein; (2) enter into any contract, option or other agreement or understanding respecting any such Transfer; (3) grant any proxy, power-of-attorney or other authorization respecting those Subject Shares; (4) deposit into a voting trust, or enter into a voting agreement respecting, any of those Subject Shares; or (5) take any other action that reasonably could be expected in any way to restrict, limit or interfere with the performance by that Stockholder of that Stockholder's obligations hereunder or with the consummation of the Offer or the Merger. Section 5. Waiver of Appraisal Rights. Each Stockholder hereby waives all rights of appraisal or dissent that Stockholder has under the DGCL with respect to the Merger. Section 6. Treatment of Confidential Information. (a) Each of Michael E. Johnson, David W. Berry and David B. Christofferson (the "Receiving Stockholders"), severally and not jointly with any other Person, acknowledges that he has or may have had in the past, currently has and in the future may have access to Confidential Information of the Company Entities and Parent and its Affiliates. Each Receiving Stockholder, severally and not jointly with any other Person, agrees that he will keep confidential and not use, directly or indirectly, for his own benefit or the benefit of any business of any Person other than the Company Entities and Parent and its Affiliates, all that Confidential Information that Receiving Stockholder has or hereafter obtains and, except with the specific prior written consent of Parent, will not disclose that Confidential Information to any Person except (1) Representatives of Parent and (2) his own Representatives, provided that these Representatives, other than counsel, agree to the confidentiality provisions of this Section 6; provided, however, that, for purpose of this Section 6(a), Confidential Information a Receiving Stockholder has does not include such information as: (1) becomes known to the public generally through no fault of that Receiving Stockholder; (2) is required to be disclosed by law or the order of any Governmental Authority under color of law, provided, that prior to the disclosure by that Receiving Stockholder of any information under this clause (2), that Receiving Stockholder will give prior written notice thereof to Parent and provide Parent with the opportunity to contest that disclosure; or 4 (3) that Receiving Stockholder reasonably believes is required to be disclosed in connection with the defense of a lawsuit against that Receiving Stockholder. In the event of a breach or threatened breach by any Receiving Stockholder of the provisions of this Section 6 with respect to any Confidential Information, Parent or the Company will be entitled to an injunction restraining that Receiving Stockholder from disclosing, in whole or in part, that Confidential Information. Nothing herein shall be construed as prohibiting Parent or the Company from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. (b) Because of (1) the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Section 6(a) and (2) the immediate and irreparable damage that would be caused to Parent or the Company for which it would have no other adequate remedy, each of the Receiving Stockholders agrees that Parent or the Company may enforce the provisions of Section 6(a) by injunctions and restraining orders against each of them who breaches any of those provisions. Section 7. Representations and Warranties. Each Stockholder represents and warrants to Parent that, as applied solely to that Stockholder, all the following representations and warranties in this Section 7 are as of the date of this Agreement, and will be immediately prior to Sub's payment for that Stockholder's Subject Shares, true and correct: (1) the Stockholder: (A) is the record and beneficial owner of, and has good and marketable title to, the Stockholder's Original Shares and, as of the date Sub consummates the Offer, all other Subject Shares the Stockholder hereafter acquires, in each case free and clear of any "adverse claim," as the applicable Uniform Commercial Code defines that term, or other lien or encumbrance; and (B) has and will have, with respect to the Original Shares, and will have, with respect to all other Subject Shares the Stockholder hereafter acquires, the sole right to Transfer and direct the voting of those securities; (2) except as this Agreement or the Option Agreement otherwise provides, none of the Original Shares is, and none of the other Subject Shares the Stockholder hereafter acquires will be, subject to any voting trust, voting agreement or other agreement, arrangement or restriction respecting the Transfer or voting of any of those securities; (3) the Stockholder has the full power, legal capacity and authority to execute, deliver and perform the Stockholder's obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as that enforceability may be: 5 (A) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (B) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law; (4) if the Stockholder is an Entity, the Stockholder has obtained, in accordance with all applicable Governmental Requirements and its Charter Documents, all approvals and the taking of all actions necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement; (5) if the Stockholder is acting otherwise than in his individual capacity, whether as an executor or a guardian or in any other fiduciary or representative capacity, all actions on the part of the Stockholder and all other Persons, including any court, necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement have been duly taken; (6) the Stockholder's execution, delivery and performance in accordance with its terms of this Agreement and the effectuation of the transactions this Agreement contemplates do not and will not: (A) violate or conflict with any Governmental Requirement; (B) breach or constitute a default under any agreement or instrument to which the Stockholder is a party or by which the Stockholder or any Subject Shares the Stockholder owns is bound; (C) result in the creation or imposition of, or afford any Person the right to obtain, any lien upon any Subject Shares the Stockholder owns, or upon any revenues, income or profits of the Stockholder therefrom; or (D) if the Stockholder is an Entity, violate the Stockholder's Charter Documents; and (7) no litigation is pending or, to the knowledge of the Stockholder, threatened to which the Stockholder is or may become a party which: (A) questions or involves the validity or enforceability of any of the Stockholder's obligations under this Agreement; or (B) seeks, or reasonably could be expected to seek, (1) to prevent or delay the consummation by the Stockholder of the transactions this Agreement contemplates the Stockholder will consummate or (2) damages in connection with any such consummation. 6 Section 8. Several Nature of Obligations. The obligations of each Stockholder under this Agreement are several and not joint, or joint and several, with the obligations of any other Stockholder under this Agreement. Section 9. Termination of Various Obligations. The obligations of each Stockholder under Sections 2, 3, 4 and 5, and the irrevocable proxy each Stockholder has granted in Section 3, will terminate on the first to occur of the termination of the Acquisition Agreement by the Company under Section 9.01(a)(4) thereof or the termination by Sub of the Offer without purchasing any Shares thereunder. The obligations of each Receiving Stockholder under Section 6 will terminate on the termination by Sub of the Offer without purchasing any Shares thereunder, but, except for termination on that occurrence, will continue in accordance with its terms notwithstanding any termination of the Acquisition Agreement. Section 10. Notices. All notices and other communications hereunder must be in writing and will be deemed given if delivered personally, telecopied or otherwise sent by means of electronic communications equipment (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as it has specified by like notice): (1) if to Parent, to it at 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy: (713) 229-1816 Email: james.dement@bakerbotts.com and (2) if to a Stockholder, to the address set forth opposite that Stockholder's name on the signature pages hereto. Section 11. Construction and Interpretation. (a) This Agreement uses the words "herein," "hereof" and "hereunder" and words of similar import to refer to this Agreement 7 as a whole and not to any provision of this Agreement, and the word "Section" refers to a Section of this Agreement, unless it otherwise specifies. This Agreement uses the word "party" to refer to any original signatory hereto and its permitted successors and assigns under Section 15. (b) Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter. (c) The word "including," and, with correlative meaning, the word "include," means including, without limiting the generality of any description preceding that word, and the words "shall" and "will" are used interchangeably and have the same meaning. (d) The language this Agreement uses will be deemed to be the language the parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any party. (e) This Agreement includes captions for convenience of reference only, and these captions do not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. Section 12. Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective as to any Stockholder when two or more counterparts have been signed by that Stockholder and Parent and delivered to each other, it being understood that to be binding on any Stockholder, no other Stockholder need sign this Agreement and Parent need not sign the same counterpart. Section 13. Entire Agreement; No Third Party Beneficiaries. This Agreement: (1) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; and (2) except as Section 6 otherwise provides, is not intended to confer on any Person other than the parties any rights or remedies hereunder. Section 14. Publicity. (a) Each Stockholder hereby agrees that Parent and any of its Affiliates may publish and disclose in the Offer Documents and the information statement Section 7.01(c) of the Acquisition Agreement contemplates, and any other documents Parent or Sub files with the SEC in connection with the Offer or the Merger, the identity and ownership of Subject Shares by that Stockholder and the nature of that Stockholder's commitments, agreements and understandings under this Agreement. (b) Except as any applicable Governmental Requirement or the rules of the National Association of Securities Dealers, Inc. otherwise require, for so long as this Agreement is in effect, no Stockholder will, or will permit any of its Affiliates to, issue or cause the publication of any press release or other public announcement with respect to the transactions 8 this Agreement contemplates without the consent of Parent, which consent Parent will not unreasonably withhold. Section 15. Assignment. This Agreement and the rights, interests or obligations of the parties hereunder may not be assigned by any Stockholder, whether by operation of law or otherwise, without the prior written consent of Parent. Subject to the preceding sentence, this Agreement will be binding on, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Section 16. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY. Section 17. Exercise of Rights and Remedies. Except as this Agreement otherwise provides, no delay or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default hereunder by any other party will impair any such right, power or remedy, nor will it be construed, deemed or interpreted as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any waiver of any single breach or default be construed, deemed or interpreted as a waiver of any other breach or default hereunder occurring before or after that waiver. Section 18. Reformation and Severability. If any provision of this Agreement is invalid, illegal or unenforceable, that provision will, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties as expressed herein, and if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. Section 19. Remedies Cumulative. No right, remedy or election any provision of this Agreement gives will be deemed exclusive, but each will be cumulative with all other rights, remedies and elections available at law or in equity. Section 20. Enforcement. Each Stockholder agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, Parent will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement in the Appropriate Delaware Court, this being in addition to any other remedy to which Section 6, law or equity entitles Parent or any of its Affiliates. Each Stockholder will: (1) submit itself to the personal jurisdiction of the Appropriate Delaware Court with respect to any dispute that arises out of this Agreement or any transaction this Agreement contemplates; (2) not attempt to deny or defeat that personal jurisdiction by motion or other request for leave from any such court; and 9 (3) not bring any action relating to this Agreement or any transaction this Agreement contemplates in any court other than the Appropriate Delaware Court. 10 The parties have signed this Agreement as of the date first written above. SANTOS AMERICAS AND EUROPE CORPORATION By: /s/ KATHLEEN A. HOGENSON ------------------------------- Kathleen A. Hogenson President STOCKHOLDERS No. of Original Shares: 48,000 Aspect Resources, LLC 511 16th Street, Suite 300 By: /s/ ALEX M. CRANBERG Denver, Colorado 80202 ------------------------------- Alex M. Cranberg ASPECT ENERGY, LLC BY: ASPECT MANAGEMENT CORPORATION, MANAGER No. of Original Shares: 4,729,456 c/o Alex M. Cranberg BY: /s/ ALEX M. CRANBERG Aspect Resources, LLC ------------------------------- 511 16th Street, Suite 300 ALEX M. CRANBERG Denver, Colorado 80202 PRESIDENT No. of Original Shares: 132,754 Esenjay Exploration, Inc. 500 North Water, Suite 1100 By: /s/ MICHAEL E. JOHNSON Corpus Christi, Texas 78471 ------------------------------- Michael E. Johnson ESENJAY PETROLEUM CORPORATION No. of Original Shares: 4,896,415 c/o Michael E. Johnson Esenjay Exploration, Inc. By: /s/ MICHAEL E. JOHNSON 500 North Water, Suite 1100 ------------------------------- Corpus Christi, Texas 78471 Michael E. Johnson President STOCKHOLDERS (continued) No. of Original Shares: 202,297 Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: /s/ DAVID W. BERRY Houston, Texas 77002 --------------------------------- David W. Berry No. of Original Shares: 0 Aspect Resources, LLC 511 16th Street, Suite 300 By: /s/ ALEX B. CAMPBELL Denver, Colorado 80202 --------------------------------- Alex B. Campbell No. of Original Shares: 14,000 Pollicoff, Smith & Remel One Greenway Plaza, Suite 300 By: /s/ JEFFREY B. POLLICOFF Houston, Texas 77046 --------------------------------- Jeffrey B. Pollicoff No. of Original Shares: 12,000 Randall & Dewey Incorporated 16800 Greenspoint Park Drive, Suite 380S By: /s/ JACK P. RANDALL --------------------------------- Houston, Texas 77060 Jack P. Randall No. of Original Shares: 12,000 Smith International Inc. 16740 E. Hardy Street By: /s/ HOBART A. SMITH Houston, Texas 77032 --------------------------------- Hobart A. Smith No. of Original Shares: 12,470 Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: /s/ DAVID B. CHRISTOFFERSON Houston, Texas 77002 --------------------------------- David B. Christofferson No. of Original Shares: 12,000 110 Ocean Way By: /s/ WILLIAM D. DODGE Corpus Christi, Texas 78411 --------------------------------- William D. Dodge EX-99.D3 12 h95090tex99-d3.txt OPTION AGREEMENT DATED MARCH 17, 2002 EXHIBIT d(3) OPTION AGREEMENT Santos America and Europe Corporation ("Parent"), a Delaware corporation, and the holders of outstanding common stock of Esenjay Exploration, Inc. (the "Company"), a Delaware corporation, to which this Agreement refers to as "Stockholders" on the signature pages hereof (the "Stockholders") hereby enter into this Agreement dated as of March 17, 2002. PRELIMINARY STATEMENT Parent and its subsidiary, ECM Acquisition Company ("Sub"), a Delaware corporation, propose to enter into an agreement dated as of March 17, 2002 with the Company (the "Acquisition Agreement"). On the terms and subject to the conditions the Acquisition Agreement contains, Parent proposes to acquire the Company in a two-step transaction. The first step would be a tender offer by Sub for all the outstanding shares of the Company's common stock, and the second step would be a follow-on merger between Sub and the Company in which the Company would become the surviving corporation. The board of directors of the Company has: o determined that Parent's proposed tender offer and merger are fair to and in the best interests of the Company's stockholders; o declared the agreement of merger the Acquisition Agreement contains advisable and resolved to recommend that the holders of the Company's common stock accept that offer and adopt that agreement of merger; and o authorized the Company to enter into the Acquisition Agreement. The Stockholders collectively own approximately 52% of the shares of the Company's common stock issued and outstanding as of March 1, 2002. In order to induce Parent and Sub to enter into and thereafter perform their respective obligations under the Acquisition Agreement, the Stockholders are entering into this Agreement. AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: Section 1. Definitions. (a) In this Agreement: (1) the "Original Shares" of a Stockholder means the number of shares of Common Stock which appears opposite that Stockholder's name on the signature pages hereof; and (2) the "Subject Shares" of a Stockholder means that Stockholder's Original Shares together with: 1 (A) all shares of Common Stock or other Capital Stock, all Derivative Securities, including any preferred stock purchase rights, and all other properties or rights, including any phantom securities, to which that Stockholder hereafter becomes entitled by reason of any dividend or other distribution the Company pays or makes in respect of the Common Stock or any other class or series of its Capital Stock; (B) all properties, securities and rights to which that Stockholder becomes entitled by reason of any split, combination or reclassification of the Common Stock or any other Capital Stock of the Company or any issuance by the Company in respect or lieu of or in substitution for shares of its Capital Stock; and (C) all properties, securities and rights of any type to which clause (2)(A) or (B) of this definition refers which that Stockholder purchases or otherwise acquires after the date hereof from the Company or any other Person. (b) Capitalized terms this Agreement uses, but does not define, have the meanings the Acquisition Agreement specifies. References herein to "this Agreement" are to this Agreement as it may be amended, modified or supplemented from time to time hereafter in writing by each party against which another party seeks to enforce that amendment, modification or supplement. Section 2. Option To Purchase Subject Shares. (a) Each Stockholder hereby grants to Parent an irrevocable option (each such option, a "Purchase Option") to purchase from that Stockholder at any time during the Option Exercise Period all that Stockholder's Subject Shares at a total cash option exercise price equal to the product of (1) the total number of that Stockholder's Original Shares multiplied by (2) $2.84 (each such price, a "Purchase Price"). (b) In this Section 2, "Option Exercise Period" means, if Parent becomes entitled to, and does, terminate the Acquisition Agreement under Section 9.01(a)(3) thereof or the Company becomes or purports to become entitled to, and does or purportedly does, terminate this Agreement under Section 9.01(a)(4) thereof, the period of 30 days beginning the date of that termination or purported termination; provided, however, that if the Offer Commencement Date shall have previously occurred, that 30-day period will begin on the next day following the date Sub terminates the Offer without having purchased any Shares thereunder. (c) Parent must exercise each Purchase Option in whole only and must exercise all Purchase Options at the same time. To exercise the Purchase Options, Parent must deliver to each Stockholder a written notice of Parent's intention to effect that exercise, and the closing of the purchase of the Subject Shares subject to the Purchase Options will take place: (1) in accordance with the escrow arrangement Section 2(d) describes below or, if for any reason that escrow arrangement and the deposit thereunder of the Subject Shares has not occurred when Parent exercises the Purchase Options, (2) in the office of Baker Botts LLP in Houston, Texas. 2 In the latter case, Parent will designate in that notice the date and time of the closing, which date may be the next day after Parent has delivered that notice. At that closing, Parent will pay in respect of each Purchase Option the Purchase Price payable under that Purchase Option against delivery of the certificates representing the Subject Shares subject to that Purchase Price, duly endorsed for transfer to Parent. (d) Each Stockholder agrees to deposit as promptly as possible (1) certificates representing all of that Stockholder's Subject Shares, duly endorsed in blank with signatures guaranteed, and (2) an irrevocable power of attorney with Bank of America, Bank of New York or such other party as may be mutually agreed upon by the Parent and the Stockholders, as escrow agent (the "Escrow Agent") under an escrow agreement substantially in the form of Annex A with such changes therein, if any, as the Escrow Agent may require or as Parent and the Stockholders may agree (the "Escrow Agreement"). The irrevocable power of attorney shall authorize the Escrow Agent to effect a valid tender of such Subject Shares under and in accordance with the terms of the Offer, pursuant to the terms of the Stockholders Agreement. This shall include, without limitation, physical delivery of such certificates and the execution and delivery of a properly completed letter of transmittal and any other required documentation or instruments with respect thereto. If any Stockholder withdraws its tendered Subject Shares from the Offer in accordance with the terms of the Stockholders Agreement, the Escrow Agent shall hold such Subject Shares in escrow until Parent exercises its Purchase Option with respect thereto or the Option Exercise Period has otherwise ended. When that escrow is established (the "Escrow"), the Purchase Options may be exercised in accordance with this Section 2, by delivery to the Escrow Agent of a notice in the form of Exhibit 1 to the Escrow Agreement and the Purchase Prices thereunder. Section 3. Limitation on Competition. (a) Each Stockholder agrees, severally and not jointly with any other Person, that that Stockholder will not, during the period beginning on the date hereof and ending on the first anniversary of the date hereof (the "Non-Compete Period"), directly or indirectly, for any reason, for that Stockholder's own account or on behalf of or together with any other Person: (1) acquire or enter into an agreement to acquire, directly or through direct or indirect ownership or contract rights with respect to a Person, including without limitation whether as principal, agent, stockholder, partner, joint venturer, employer, employee or in any other capacity, any interest (an "Interest") of any kind or character in the lands or in the minerals on or under said lands whatsoever located within the Non-Compete Area (as Annex B defines that term), whether by means of lease, purchase, assignment, trade, sublease, easement, farmout, or any other form of acquisition, including any merger with or acquisition of stock or ownership interests in any other Person; or (2) call on or otherwise solicit, directly or indirectly through any Person, any natural person who is at that time employed by the Company in any managerial capacity with the purpose or intent of attracting that person from the employ of the Company. Notwithstanding the foregoing, any Stockholder may own and hold as a passive investment up to 10% of the outstanding Capital Stock of a competing Entity. In the event that a Stockholder 3 acquires an Interest in the Non-Compete Area during the Non-Compete Period, that Stockholder (the "Acquiring Stockholder") must promptly notify Parent in writing of that acquisition, including a full description of the acquired Interest and the rights, obligations and duties with respect thereto, accompanied by a copy of any acquisition agreement and any other relevant documents. Within 30 days following that acquisition, the Acquiring Stockholder will convey, transfer and assign all its rights, titles, and interests in the Interest so acquired to the Company without consideration. (b) Because of (1) the difficulty of measuring economic losses to Parent or the Company as a result of any breach by a Stockholder of that Stockholder's covenants in Section 3(a) and (2) the immediate and irreparable damage that could be caused to Parent or the Company for which it would have no other adequate remedy, each Stockholder agrees that Parent or the Company may enforce the provisions of Section 3(a) by injunctions and restraining orders against that Stockholder if that Stockholder breaches any of those provisions. The breaching Stockholder will be responsible for, and Parent and the Company will be entitled to receive reimbursement of, all costs of enforcing their rights under this Section 3, including reasonable attorney's fees. (c) The parties each agree that Sections 3(a) and (b) impose a reasonable restraint on the Stockholders in light of the activities and business of Parent and the Company on the date hereof and the current business plans of the Company and Parent and its Affiliates. (d) The covenants in this Section 3 are severable and separate, and the unenforceability of any specific covenant in this Section 3 is not intended by any party to, and will not, affect the provisions of any other covenant in this Section 3. If any court of competent jurisdiction determines that the scope, time or territorial restrictions Section 3(a) sets forth are unreasonable as applied to any Stockholder, the parties, including that Stockholder, acknowledge their mutual intention and agreement that those restrictions be enforced to the fullest extent the court deems reasonable, and thereby will be reformed to that extent as applied to that Stockholder and any other Stockholders similarly situated. (e) All the covenants in this Section 3 are intended by each party to be, and will be construed as, an agreement independent of any other provision in this Agreement. It is specifically agreed that the time periods Section 3(a) specifies will be computed in the case of each Stockholder by excluding from that computation any time during which that Stockholder is in violation of any provision of Section 3(a). The covenants this Section 3 contains will not be affected by any breach of any other provision hereof by any party. (f) Each Stockholder, severally and not jointly with any other Person, hereby agrees that this Section 3 is a material and substantial part of the transactions the Acquisition Agreement contemplates. 4 Section 4. Representations and Warranties. Each Stockholder represents and warrants to Parent that, as applied solely to that Stockholder, all the following representations and warranties in this Section 4 are as of the date of this Agreement, and will be immediately prior to Sub's payment for that Stockholder's Subject Shares, true and correct: (1) the Stockholder: (A) is the record and beneficial owner of, and has good and marketable title to, the Stockholder's Original Shares and, as of the date Sub consummates the Offer, all other Subject Shares the Stockholder hereafter acquires, in each case free and clear of any "adverse claim," as the applicable Uniform Commercial Code defines that term, or other lien or encumbrance; and (B) has and will have, with respect to the Original Shares, and will have, with respect to all other Subject Shares the Stockholder hereafter acquires, the sole right to Transfer and direct the voting of those securities; (2) except as the Stockholders Agreement otherwise provides, none of the Original Shares is, and none of the other Subject Shares the Stockholder hereafter acquires will be, subject to any voting trust, voting agreement or other agreement, arrangement or restriction respecting the Transfer or voting of any of those securities; (3) the Stockholder has the full power, legal capacity and authority to execute, deliver and perform the Stockholder's obligations under this Agreement. This Agreement constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as that enforceability may be: (A) limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; and (B) subject to general principles of equity, regardless of whether that enforceability is considered in a proceeding in equity or at law; (4) if the Stockholder is an Entity, the Stockholder has obtained, in accordance with all applicable Governmental Requirements and its Charter Documents, all approvals and the taking of all actions necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement; (5) if the Stockholder is acting otherwise than in his individual capacity, whether as an executor or a guardian or in any other fiduciary or representative capacity, all actions on the part of the Stockholder and all other Persons, including any court, necessary for the authorization, execution, delivery and performance by the Stockholder of this Agreement have been duly taken; 5 (6) the Stockholder's execution, delivery and performance in accordance with its terms of this Agreement and the effectuation of the transactions this Agreement contemplates do not and will not: (A) violate or conflict with any Governmental Requirement; (B) breach or constitute a default under any agreement or instrument to which the Stockholder is a party or by which the Stockholder or any Subject Shares the Stockholder owns is bound; (C) result in the creation or imposition of, or afford any Person the right to obtain, any lien upon any Subject Shares the Stockholder owns, or upon any revenues, income or profits of the Stockholder therefrom; or (D) if the Stockholder is an Entity, violate the Stockholder's Charter Documents; and (7) no litigation is pending or, to the knowledge of the Stockholder, threatened to which the Stockholder is or may become a party which: (A) questions or involves the validity or enforceability of any of the Stockholder's obligations under this Agreement; or (B) seeks, or reasonably could be expected to seek, (1) to prevent or delay the consummation by the Stockholder of the transactions this Agreement contemplates the Stockholder will consummate or (2) damages in connection with any such consummation. Section 5. Several Nature of Obligations. The obligations of each Stockholder under this Agreement are several and not joint, or joint and several, with the obligations of any other Stockholder under this Agreement. Section 6. Termination of Certain Obligations. The obligations of each Stockholder under Sections 2 and 3 will terminate on the expiration of an Option Exercise Period during which Parent has not exercised its Purchase Options, but, except for termination on that occurrence, will continue in accordance with its terms notwithstanding any termination of the Acquisition Agreement. The obligations of each Stockholder under Section 3 will, if they have not terminated earlier in accordance with the preceding sentence, terminate at 5:00 p.m., Denver, Colorado time, on March 17, 2003. Section 7. Notices. All notices and other communications hereunder must be in writing and will be deemed given if delivered personally, telecopied or otherwise sent by means of electronic communications equipment (which is confirmed) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as it has specified by like notice): 6 (1) if to Parent, to it at 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy: (713) 229-1816 Email: james.dement@bakerbotts.com and (2) if to a Stockholder, to the address set forth opposite that Stockholder's name on the signature pages hereto. Section 8. Construction and Interpretation. (a) This Agreement uses the words "herein," "hereof" and "hereunder" and words of similar import to refer to this Agreement as a whole and not to any provision of this Agreement, and the words "Section" and "Annex" refer to a Section of or Annex to this Agreement, unless it otherwise specifies. This Agreement uses the word "party" to refer to any original signatory hereto and its permitted successors and assigns under Section 12. (b) Whenever the context so requires, the singular number includes the plural and vice versa, and a reference to one gender includes the other gender and the neuter. (c) The word "including," and, with correlative meaning, the word "include," means including, without limiting the generality of any description preceding that word, and the words "shall" and "will" are used interchangeably and have the same meaning. (d) The language this Agreement uses will be deemed to be the language the parties have chosen to express their mutual intent, and no rule of strict construction will be applied against any party. (e) This Agreement includes captions for convenience of reference only, and these captions do not constitute a part of this Agreement for any other purpose or in any way affect the meaning or construction of any provision of this Agreement. 7 Section 9. Counterparts. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement and will become effective as to any Stockholder when two or more counterparts have been signed by that Stockholder and Parent and delivered to each other, it being understood that to be binding on any Stockholder, no other Stockholder need sign this Agreement and Parent need not sign the same counterpart. Section 10. Entire Agreement; Third Party Beneficiaries. This Agreement: (1) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof; and (2) except as Sections 3 and 4 otherwise provide, is not intended to confer on any Person other than the parties any rights or remedies hereunder. Section 11. Publicity. (a) Each Stockholder hereby agrees that Parent and any of its Affiliates may publish and disclose in the Offer Documents and the information statement Section 7.01(c) of the Acquisition Agreement contemplates, and any other documents Parent or Sub files with the SEC in connection with the Offer or the Merger, the identity and ownership of Subject Shares by that Stockholder and the nature of that Stockholder's commitments, agreements and understandings under this Agreement. (b) Except as any applicable Governmental Requirement or the rules of the National Association of Securities Dealers, Inc. otherwise require, for so long as this Agreement is in effect, no Stockholder will, or will permit any of its Affiliates to, issue or cause the publication of any press release or other public announcement with respect to the transactions this Agreement contemplates without the consent of Parent, which consent Parent will not unreasonably withhold. Section 12. Assignment; Assumption. (a) This Agreement and the rights, interests or obligations of the parties hereunder may not be assigned by any Stockholder, whether by operation of law or otherwise, without the prior written consent of Parent. Parent may assign its rights and interest hereunder against any Stockholder to any of its Affiliates, and any such assignee Affiliate may reassign those rights and interests to any other Affiliate of Parent, without the consent of that Stockholder, but any other such assignment to any other Person will require the prior written consent of that Stockholder, which consent that Stockholder will not unreasonably withhold. Subject to the preceding sentence, this Agreement will be binding on, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. (b) Each Stockholder that is an Entity will require the successor to that Entity's business and assets substantially as an entirety, whether by merger, consolidation, sale of assets or other transaction, to assume in writing that Stockholder's obligations hereunder. Section 13. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS 8 THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY; PROVIDED, HOWEVER, THAT SECTION 3 AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. Section 14. Exercise of Rights and Remedies. Except as this Agreement otherwise provides, no delay or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default hereunder by any other party will impair any such right, power or remedy, nor will it be construed, deemed or interpreted as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor will any waiver of any single breach or default be construed, deemed or interpreted as a waiver of any other breach or default hereunder occurring before or after that waiver. Section 15. Reformation and Severability. If any provision of this Agreement is invalid, illegal or unenforceable, that provision will, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties as expressed herein, and if such a modification is not possible, that provision will be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby. Section 16. Remedies Cumulative. No right, remedy or election any provision of this Agreement gives will be deemed exclusive, but each will be cumulative with all other rights, remedies and elections available at law or in equity. Section 17. Enforcement. Each Stockholder agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, Parent will be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the provisions of this Agreement in the Appropriate Court, this being in addition to any other remedy to which Section 3, law or equity entitles Parent or any of its Affiliates. Each Stockholder will: (1) submit itself to the personal jurisdiction of the Appropriate Court with respect to any dispute that arises out of this Agreement or any transaction this Agreement contemplates; (2) not attempt to deny or defeat that personal jurisdiction by motion or other request for leave from any such court; and (3) not bring any action relating to this Agreement or any transaction this Agreement contemplates in any court other than the Appropriate Court. In this Section 17, "Appropriate Court" means: (1) in the case of any dispute that arises under this Agreement or any transaction this Agreement contemplates, other than under Section 3 and the conduct that Section contemplates, the Appropriate Delaware Court; and 9 (2) in the case of any dispute that arises under Section 3 or any conduct to which that Section relates, the civil district courts located in Harris County, Texas. Section 18. Further Assurances. At the request of Parent, each Stockholder will duly execute and deliver to Parent a signature page hereto together with the notarization of that Stockholder's signature by an appropriate notary public and such other documents as, in the good-faith judgment of Parent, are reasonably necessary or advisable to carry out more effectively other provisions and purposes of Section 3. 10 The parties have signed this Agreement as of the date first written above. SANTOS AMERICAS AND EUROPE CORPORATION By: /s/ KATHLEEN A. HOGENSON ---------------------------------- Kathleen A. Hogenson President STOCKHOLDERS No. of Original Shares: 48,000 Aspect Resources, LLC 511 16th Street, Suite 300 By: /s/ ALEX M. CRANBERG Denver, Colorado 80202 ---------------------------------- Alex M. Cranberg ASPECT ENERGY, LLC BY: ASPECT MANAGEMENT CORPORATION, MANAGER No. of Original Shares: 4,729,456 c/o Alex M. Cranberg Aspect Resources, LLC BY: /s/ ALEX M. CRANBERG 511 16th Street, Suite 300 ---------------------------------- Denver, Colorado 80202 ALEX M. CRANBERG PRESIDENT No. of Original Shares: 132,754 Esenjay Exploration, Inc. 500 North Water, Suite 1100 Corpus Christi, Texas 78471 By: /s/ MICHAEL E. JOHNSON --------------------------------- Michael E. Johnson STOCKHOLDERS (continued) ESENJAY PETROLEUM CORPORATION No. of Original Shares: 4,896,415 c/o Michael E. Johnson Esenjay Exploration, Inc. By: /s/ MICHAEL E. JOHNSON 500 North Water, Suite 1100 ---------------------------------- Corpus Christi, Texas 78471 Michael E. Johnson President No. of Original Shares: 202,297 Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: /s/ DAVID W. BERRY Houston, Texas 77002 ---------------------------------- David W. Berry STATE OF TEXAS ) ) COUNTY/PARISH OF HARRIS ) (Alabama) I, Ann T. Stone, a notary public, in and for the above mentioned county and state, hereby certify that Michael E. Johnson, whose name as president, of Esenjay Petroleum Corporation, a corporation, is signed to the foregoing agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he, as such officer and with full authority, executed the same voluntarily for and as the act of such corporation. (Louisiana) On this the 20th day of March, 2002, before me, Ann T. Stone, the undersigned officer, personally appeared Michael E. Johnson who acknowledged himself to be the president of Esenjay Petroleum Corporation, a corporation, and that he, as such president, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as president. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this 20th day of March, 2002, within my jurisdiction, the within named Michael E. Johnson, who acknowledged that he is president of Esenjay Petroleum Corporation, a Delaware corporation, and that for and on behalf of the corporation, and as its act and deed he executed the above and foregoing instrument, after first having been duly authorized by the corporation so to do. (Oklahoma) This instrument was acknowledged before me on March 20, 2002, by Michael E. Johnson, as president of Esenjay Petroleum Corporation. (Texas) This instrument was acknowledged before me on March 20, 2002, by Michael E. Johnson, president of Esenjay Petroleum Corporation, a Delaware corporation, on behalf of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 20th day of March, A. D. 2002. /s/ Ann T. Stone ---------------------------------- Signature Printed Name: Ann T. Stone Title of officer: Notary Public My commission or term of office expires on 9/5/05. [SEAL] STATE OF COLORADO ) ) COUNTY/PARISH OF DENVER ) (Alabama) I, Linda F. McGrath, a notary public, hereby certify that Alex M. Cranberg, whose name is signed to the foregoing agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he executed the same voluntarily on the day the same bears date. (Louisiana) On this the 19th day of March, 2002, before me, Linda F. McGrath, the undersigned officer, personally appeared Alex M. Cranberg, known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument and acknowledged he executed the same for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this 19th day of March, 2002, within my jurisdiction, the within named Alex M. Cranberg, who acknowledged that he executed the above and foregoing instrument. (Oklahoma and Texas) This instrument was acknowledged before me on March 19, 2002, by Alex M. Cranberg. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 19th day of March, A. D. 2002. /s/ Linda F. McGrath ---------------------------------------- Signature Printed Name: Linda F. McGrath Title of officer: My commission or term of office expires on 6/15/03. [SEAL] STATE OF TEXAS ) ) COUNTY/PARISH OF HARRIS ) (Alabama) I, Ann T. Stone, a notary public, hereby certify that Michael E. Johnson, whose name is signed to the foregoing agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he executed the same voluntarily on the day the same bears date. (Louisiana) On this the 20th day of March, 2002, before me, Ann T. Stone, the undersigned officer, personally appeared Michael E. Johnson, known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument and acknowledged he executed the same for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this 20th day of March, 2002, within my jurisdiction, the within named Michael E. Johnson, who acknowledged that he executed the above and foregoing instrument. (Oklahoma and Texas) This instrument was acknowledged before me on March 20, 2002, by Michael E. Johnson. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 20th day of March, A. D. 2002. /s/ Ann T. Stone ------------------------------------ Signature Printed Name: Ann T. Stone Title of officer: Notary Public My commission or term of office expires on 9/5/05. [SEAL] STATE OF TEXAS ) ) COUNTY/PARISH OF HARRIS ) (Alabama) I, Ann T. Stone, a notary public, hereby certify that David W. Berry, whose name is signed to the foregoing agreement, and who is known to me, acknowledged before me on this day that, being informed of the contents of the agreement, he executed the same voluntarily on the day the same bears date. (Louisiana) On this the 20th day of March, 2002, before me, Ann T. Stone, the undersigned officer, personally appeared David W. Berry, known to me or satisfactorily proven to be the person whose name is subscribed to the within instrument and acknowledged he executed the same for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this 20th day of March, 2002, within my jurisdiction, the within named David W. Berry, who acknowledged that he executed the above and foregoing instrument. (Oklahoma and Texas) This instrument was acknowledged before me on March 20, 2002, by David W. Berry. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 20th day of March, A. D. 2002. /s/ Ann T. Stone -------------------------------------- Signature Printed Name: Ann T. Stone Title of officer: Notary Public My commission or term of office expires on 9/5/05. [SEAL] STATE OF COLORADO ) ) COUNTY/PARISH OF DENVER ) (Alabama) I, Linda F. McGrath, hereby certify that Alex M. Cranberg whose name is signed to the foregoing conveyance, and who is known to me, acknowledged before me on this day that, being informed of the contents of the conveyance, he executed the same voluntarily on the day the same bears date. (Louisiana) On this 19th day of March, 2002, before me, Linda F. McGrath, the undersigned officer, personally appeared Alex M. Cranberg, known to me or satisfactorily proven to be the person whose name is subscribed as president for Aspect Management Corporation which is manager for Aspect Energy, LLC, and acknowledged that he executed the same act of his limited liability company for the purposes therein contained. (Mississippi) Personally appeared before me, the undersigned authority in and for the said county and state, on this 19th day of March, 2002, within my jurisdiction, the within named Alex M. Cranberg, who acknowledged that he is president of Aspect Management Corporation which is manager for Aspect Energy, LLC and that in said representative capacity he executed the above and foregoing instrument, after first having been duly authorized so to do. (Oklahoma) This instrument was acknowledged before me on March 19, 2002, by Alex M. Cranberg, as president of Aspect Management Corporation which is manager for Aspect Energy, LLC. (Texas) This instrument was acknowledged before me on March 19, 2002, by Alex M. Cranberg, president of Aspect Management Corporation, as manager on behalf of Aspect Energy, LLC, a limited liability company. IN WITNESS WHEREOF, I have hereunto set my hand and official seal this 19th day of March, A. D. 2002. /s/ Linda F. McGrath ---------------------------------------- Signature Printed Name: Linda F. McGrath Title of officer: My commission or term of office expires on 6-15-03. [SEAL] ANNEX A ESCROW AGREEMENT Santos Americas and Europe Corporation ("Parent"), a Delaware corporation, the holders of outstanding common stock of Esenjay Exploration, Inc. (the "Company"), a Delaware corporation, to which this Escrow Agreement refers as "Stockholders" on the signature pages hereof (the "Stockholders") and ___________________________, as Escrow Agent ("Escrow Agent") hereby enter into this Escrow Agreement dated as of March ___, 2002 PRELIMINARY STATEMENT Parent and its subsidiary, ECM Acquisition Company ("Sub"), a Delaware corporation, have entered into an agreement dated as of March 17, 2002 with the Company (the "Acquisition Agreement"). On the terms and subject to the conditions the Acquisition Agreement contains, Parent will acquire the Company in a two-step transaction. The first step will be a tender offer by Sub for all the outstanding shares of the Company's common stock. The Stockholders collectively own approximately 52% of the shares of the Company's common stock issued and outstanding as of March 1, 2002. In order to induce Parent and Sub to enter into and thereafter perform their respective obligations under the Acquisition Agreement, the Stockholders have entered into a Stockholders Agreement dated as of March 17, 2002 (the "Stockholders Agreement") and an Option Agreement dated as of March 17, 2002 (the "Option Agreement"). AGREEMENT In consideration of the premises and the covenants and other undertakings this Agreement contains, the parties, intending to be legally bound hereby, agree as follows: 1. Capitalized terms this Escrow Agreement uses, but does not define, have the meanings the Option Agreement or the Stockholders Agreement specifies. 2. Each Stockholder will deliver to Escrow Agent, against receipt therefor of the Escrow Agent, certificates registered in the name of that Stockholder, but endorsed in blank with signatures guaranteed, representing all that Stockholder's Subject Shares. Escrow Agent will hold and dispose of the certificates each Stockholder deposits with it hereunder in accordance with the terms hereof. 3. Each Stockholder hereby irrevocably appoints and designates Escrow Agent as the agent, representative and attorney-in-fact for and on behalf of that Stockholder to take any and all actions on behalf of that Stockholder to effect, in accordance with the Stockholders Agreement, a valid tender of that Stockholder's Subject Shares under and in accordance with the terms of the Offer. This power of attorney includes, without limitation, physical delivery of those certificates and the execution and delivery of a properly completed letter of transmittal and any other required documentation or instruments with respect thereto. If, prior to the acceptance for payment by Sub of Shares under the Offer, A-1 (1) (A) Parent terminates the Acquisition Agreement under Section 9.01(a)(3) thereof or (B) the Company terminates the Acquisition Agreement under Section 9.01(a)(4) thereof, and (2) Sub terminates the Offer, Parent will give written notice of that termination and the date of termination of the Offer to Escrow Agent and cause the certificates representing the Subject Shares of each Stockholder that have been tendered under the Offer to be redelivered to Escrow Agent for redeposit into escrow hereunder. Following that redeposit, Escrow Agent will hold those certificates in its custody hereunder until it disposes of those certificates in accordance with Section 4 below. 4. (a) If at any time during the Option Exercise Period Parent shall deliver to Escrow Agent written notice in the form of Exhibit 1 hereto of its exercise of the Purchase Options, together with immediately available funds in the aggregate amount of the Purchase Prices payable thereunder, Escrow Agent promptly will deliver the certificates representing all Subject Shares Parent has purchased on its exercise of the Purchase Options to Parent. Escrow Agent will, promptly following its receipt of those funds, deliver to each Stockholder, in accordance with that Stockholder's written wire transfer instructions, immediately available funds in the amount of the Purchase Price to which that Stockholder is entitled. (b) If during the Option Exercise Period Parent does not exercise the Purchase Options and purchase the Subject Shares subject thereto under Section 4(a), Escrow Agent promptly will deliver to each Stockholder following the expiration of the Option Exercise Period the certificates representing that Stockholder's Subject Shares. 5. Prior to the termination of this Escrow Agreement, Escrow Agent will vote all Subject Shares that it holds or has tendered under the Offer in accordance with the written instructions of Parent. 6. Escrow Agent may resign by mailing its written notice of that resignation to the Stockholders and Parent; provided, however, that this resignation will not be effective until Parent shall have appointed a successor Escrow Agent and that successor shall have executed an Escrow Agreement substantially in the form hereof. Any successor escrow agent must be a national or state bank authorized to exercise corporate trust powers, and having a combined capital and surplus of at least $100,000,000. Escrow Agent will receive reasonable compensation for its services hereunder which Parent will pay or cause to be paid. 7. Each of the Stockholders and Parent severally represents and warrants to the Escrow Agent that it has full right, power and authority to execute and deliver this Escrow Agreement. 8. All notices, requests, claims, demands and other communications hereunder must be in writing and will be given (and will be deemed to have been duly received if so given) by personal delivery or facsimile, by mail (registered or certified mail, postage prepaid, return receipt requested), or by means of electronic communications equipment (which is confirmed) to the respective parties as follows: A-2 If to Parent, to it at: 10111 Richmond Avenue Suite 500 Houston, Texas 77042 Attention: Kathleen A. Hogenson Telecopy No.: (713) 986-4216 Email: kathy.hogenson@santos.com With a copy, which will not constitute notice for purposes hereof, to: Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Attention: James DeMent Telecopy No.: (713) 229-1816 Email: james.dement@bakerbotts.com and If to a Stockholder, to that Stockholder's address set forth opposite that Stockholder's name on the signature pages hereto. If to Escrow Agent, to it at: ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- Attention: Corporate Trust Department 9. This Agreement may be executed in two or more counterparts, all of which will be considered one and the same agreement, it being understood that to be binding on any Stockholder, no other Stockholder need sign this Agreement and Parent need not sign the same counterpart. 10. Each Stockholder that is an Entity will require the successor to that Entity's business and assets substantially as an entirety, whether by merger, consolidation, sale of assets or other transaction, to assume in writing that Stockholder's obligations hereunder. 11. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF THAT WOULD CAUSE THE LAWS OF ANY OTHER JURISDICTION TO APPLY. A-3 IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be duly executed on the date below written. Dated: March __, 2002 SANTOS AMERICAS AND EUROPE CORPORATION By: ---------------------------------------- Kathleen A. Hogenson President ESCROW AGENT -------------------------------------------- By: ---------------------------------------- Name: Title: STOCKHOLDERS Aspect Resources, LLC 511 16th Street, Suite 300 By: Denver, Colorado 80202 ---------------------------------------- Alex M. Cranberg ASPECT ENERGY, LLC BY: ASPECT MANAGEMENT CORPORATION, MANAGER c/o Alex M. Cranberg BY: Aspect Resources, LLC ---------------------------------------- 511 16th Street, Suite 300 ALEX M. CRANBERG Denver, Colorado 80202 PRESIDENT Esenjay Exploration, Inc. 500 North Water, Suite 1100 Corpus Christi, Texas 78471 By: ---------------------------------------- Michael E. Johnson A-4 STOCKHOLDERS (continued) ESENJAY PETROLEUM CORPORATION c/o Michael E. Johnson Esenjay Exploration, Inc. 500 North Water, Suite 1100 By: Corpus Christi, Texas 78471 ---------------------------------------- Michael E. Johnson President Esenjay Exploration, Inc. 500 Dallas, Suite 2920 By: Houston, Texas 77002 ---------------------------------------- David W. Berry A-5 EXHIBIT 1 [Letterhead of Santos Americas and Europe Corporation] _______________, 200__ [ESCROW AGENT] (or any successor) Ladies and Gentlemen: We refer to the Escrow Agreement, dated March __, 2002 among the undersigned, the Stockholders signatory thereto and you, as Escrow Agent. We hereby exercise the option to purchase such Subject Shares referred to in that Escrow Agreement and deliver herewith the Purchase Prices therefor. Very truly yours, SANTOS AMERICAS AND EUROPE CORPORATION By: --------------------------------- Name: ---------------------------- Title: --------------------------- The undersigned, [Escrow Agent] (or successor), as Escrow Agent, acknowledges receipt of this and the Purchase Prices therefor. ------------------------------------- Escrow Agent -----END PRIVACY-ENHANCED MESSAGE-----