EXHIBIT (a)(6)
October 3, 2000
Mr. Xxxxx Xxxxx
Chairman
Esenjay Exploration Company, Inc.
000 Xxxxxx Xxxxxx.
One Xxxxx Center, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Dear Xx. Xxxxx:
This agreement sets forth our mutual understanding concerning technical and
transaction services to be provided by Xxxxxxx & Xxxxx, Inc. ("R&D") in
connection with the strategic initiative of Esenjay Exploration Company, Inc.
("Esenjay").
1. Scope of Work. R&D will provide technical and transaction advisory services
to assist Xxxxxxx in generating, evaluating, negotiating and concluding
opportunities involving the sale, exchange or merger of the common stock or
assets of Esenjay (the "Properties"), or the acquisition of strategic-scale oil
and gas assets or companies. For purposes of this Agreement, a Strategic
Transaction will include any transaction involving the Properties, or an
acquisition of oil and gas assets or companies valued at $20 million or greater.
Any transaction resulting from an agreement or letter of intent with Xxxxxxx
Exploration Company, Carrizo Oil & Gas, Inc. or Edge Petroleum Corporation,
however, will not be a Strategic Transaction. Such a transaction, plus
acquisitions of oil and gas assets or companies valued at less than $20 million,
will be considered Excluded Transactions.
2. Services.
a) Technical - R&D will provide technical services that are specifically
approved in writing by Xxxxxxx. R&D will review and organize Xxxxxxx's pertinent
files for inspection by prospective purchasers. R&D will prepare geologic,
engineering, commercial, operations and economic evaluations of the Properties
for use in estimating market values. R&D will prepare pertinent data summaries
for inclusion in confidential offering materials and will assemble supplemental
data sets encompassing detailed accounting, contractual and technical
information to be furnished to prospective purchasers, the form and content of
which will be subject to Xxxxxxx's approval. R&D will assist in operating a data
room to accommodate
prospective purchasers will provide geologic, engineering or other manpower
support to assist these entities in reviewing and evaluating the data provided.
As pertinent updated data becomes available, R&D will summarize it and
distribute it to process participants. R&D will provide similar technical
evaluations and market value estimates of merger candidates or oil and gas
assets to assist Xxxxxxx in concluding Strategic or Excluded Transactions.
b) Marketing - R&D will assess the marketability of the Properties, make
specific packaging recommendations, develop a marketing strategy and propose a
competitive process. R&D will prepare confidential offering materials, the form
and content of which will be subject to Xxxxxxx's approval. As requested by
Xxxxxxx, R&D will review Xxxxxxx's draft confidentiality and purchase and sale
agreements. R&D will identify prospective purchasers and screen interested
buyers. R&D will arrange and conduct executive level meetings to determine buyer
interest. R&D will distribute offering materials, schedule data room visits,
respond to purchaser information requests, maintain contact with prospective
purchasers and establish and maintain an appropriate competitive atmosphere. As
requested by Xxxxxxx, R&D will evaluate offers received, assist in negotiating
preliminary and definitive agreements and help Xxxxxxx resolve due diligence
issues.
3. Term. The Initial Term of this Agreement shall be for three (3) months from
October 1, 2000 through December 31, 2001. Thereafter it will be extended
month-to-month unless and until either party notifies the other in writing of
its cancellation.
4. Cost Reimbursement. Esenjay will reimburse R&D upon submission of invoices
supported by appropriate documentation, for its reasonable out-of-pocket
expenses, exclusive of overhead and salaries, specifically and directly incurred
on Xxxxxxx's behalf.
5. Compensation.
a) Advisory Xxx - Xxxxxxx will pay R&D an advisory fee of one hundred fifty
thousand dollars ($150,000) upon the execution of this agreement.
b) Transaction Fee - Esenjay will pay R&D a Transaction Fee, if during the Term
of this Agreement, or within six (6) months following the termination hereof,
Xxxxxxx enters into an agreement or letter of intent with any company executing
a confidentiality agreement related to scope of work contemplated by this
Agreement. Esenjay shall, upon the closing of such sale, exchange or merger
transaction pay to R&D in cash in accordance with the table below.
Transaction Incremental
Value Transaction Fee
----------- ---------------
Up to $56.7MM............. 0.75 percent
More than $56.7MM......... 0.75 percent of the entire amount
plus three fourths of 1.5 percent of
the amount over $56.7MM
For the purposes of illustration, a Transaction Fee for a transaction with a
"Transaction Value" of $95MM would be calculated as follows:
(0.0075*95MM)+[0.015*0.75*(95MM-56.7MM)]=$712,500+$430,875=$1,143,375.
Transaction Value is defined as the sale price, exchange value or merger value
presented to and approved by the Esenjay Board of Directors for the Properties
sold, exchanged or merged under this agreement.
Esenjay will pay R&D two hundred thousand dollars ($200,000) in addition to the
advisory stated in paragraph 5a), if during the Term of this Agreement, or
within six (6) months following the termination hereof, Xxxxxxx enters into an
agreement or letter of intent with any company not executing a confidentiality
agreement related to scope of work contemplated by this Agreement but that was
contacted by R&D or received marketing material prepared by R&D or marketing
material on whose preparation R&D advised. This payment will be made when the
contemplated transaction is closed.
Xxxxxxx will approve in writing the companies that R&D contacts. This approval
will not be unreasonably withheld. If Xxxxxxx does not approve the company
contact and concludes a transaction under conditions not described in the above
paragraph, Xxxxxxx will pay no transaction fee.
c) Technical Fees - Technical Fees for services provided by R&D to Esenjay will
be accumulated for the actual hours spent on such activities according to the
following schedule.
$/Hour
Project Vice President 100
Engineer hours 90
Geologist hours 90
Operations Specialist hours 65
Commercial Analyst/Technician hours 45
Data Room Manager hours 20
Such charges will be based solely on professional and technical hours required
for the task and requested by Xxxxxxx. There will be no hourly charges for
supervisory or secretarial time. R&D will maintain accurate records of technical
fees and submit a monthly informational invoice to Esenjay. Technical fees will
not exceed one hundred thousand dollars ($100,000.00) without the prior
permission of Esenjay.
Technical Fees will be payable by Xxxxxxx to R&D in cash if (i) Esenjay
concludes its strategic initiative through one or more Excluded Transactions, or
(ii) Esenjay terminates its strategic initiative without concluding any
Strategic Transaction.
6. Indemnification. The parties acknowledge that the data used by R&D has been
provided by Xxxxxxx to perform technical and marketing services with the
understanding that (i) R&D will disclaim all warranties, both express and
implied, to the prospective purchasers reviewing the
data, and (ii) although R&D will use reasonable efforts to assemble the data in
an appropriate form for independent evaluation by the prospective purchasers,
consistent with industry custom and standards, R&D cannot guarantee the
sufficiency or accuracy of the data, and (iii) because R&D has not been engaged
to verify the accuracy of the data or the Properties that the data represents
due to the voluminous amounts of information required to do so within the
schedule agreed upon by the parties, R&D's responsibilities for the data are
limited as further expressed in the indemnities below.
In consideration of the engagement of R&D pursuant to this Agreement
(hereinafter referred to as "Engagement"), Xxxxxxx agrees to defend, indemnify
and hold harmless R&D and its affiliates, officers, directors, employees,
consultants and agents (hereinafter referred to collectively as "R&D") from and
against any and all claims, losses, damages, causes of action, suits and
liability of every kind, including reasonable attorneys' fees and other costs of
litigation (hereinafter referred to collectively as "Claims") arising out of
such Engagement. However, Xxxxxxx will not be liable for any Claims that result
directly from R&D's gross negligence, willful misconduct or intentional
misrepresentation, in which case R&D will defend, indemnify and hold harmless
Esenjay and its affiliates, officers, directors, employees, consultants and
agents (hereinafter referred to collectively as "Esenjay") from and against any
and all claims, losses, damages, causes of action, suits and liability of every
kind, including reasonable attorneys' fees and other costs of litigation
(hereinafter referred to collectively as "Claims") arising out of such
Engagement.
7. Publicity. The parties agree that should Esenjay sell the Properties as a
result of the efforts of R&D pursuant to this Agreement, R&D may advertise the
services in a form agreed to by Esenjay.
8. Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Texas.
If this Agreement accurately represents your understanding of the terms and
conditions of these services, please execute below, keeping one original for
your files and returning the second to R&D.
Very truly yours,
/s/ XXXXXXX X. XXXXX
Xxxxxxx X. Xxxxx
Agreed and Accepted this 9th day of October, 2000 by
Esenjay Exploration Company, Inc.
/s/ XXXXX X. XXXXX (Signature)
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Xxxxx X. Xxxxx (Name)
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Chairman (Title)
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