Acquisition Agreement

EXHIBIT 10-9


================================================================================


ACQUISITION AGREEMENT


among


AMERAC ENERGY CORPORATION,
AS BUYER,


POWELL RESOURCES, INC.,


and


THE OTHER
SHAREHOLDERS NAMED HEREIN,


AS SELLERS


and


RIDGEPOINTE RESOURCES, INC.,


FREMONT ENERGY CORPORATION.,


and


FREMONT PETROLEUM CORPORATION


January 5, 1996


================================================================================


TABLE OF CONTENTS


ARTICLE I PURCHASE AND SALE............................ 1
1.1 The Purchase and Sale............................... 1
1.2 Purchase Consideration.............................. 2
1.3 Deposit............................................. 2
1.4 Intercompany Transactions........................... 2
1.5 Adjustments to Initial Purchase Consideration....... 3
1.6 Preliminary Settlement Statement.................... 5
1.7 Final Accounting.................................... 5
1.8 No Registration; Legends............................ 6
1.9 Power of Attorney and Custody Agreement............. 6
1.10 Closing............................................. 6
1.11 Certification Under Treasury Regulations............ 7
1.12 Allocated Values.................................... 7


ARTICLE II DUE DILIGENCE EXAMINATION;
TITLE AND ENVIRONMENTAL MATTERS.............. 7
2.1 Principal Definitions............................... 7
2.2 Access 11
2.3 Environmental Assessments and Defects............... 11
2.4 Defects and Related Adjustments..................... 14
2.5 Preferential Purchase Rights and Consents to Assign. 16
2.6 Interest Additions.................................. 17
2.7 Casualty Loss....................................... 18
2.8 Arbitration......................................... 18


ARTICLE III REPRESENTATIONS AND WARRANTIES
OF SELLING SHAREHOLDERS...................... 19
3.1 Existence and Power................................. 19
3.2 Authorization....................................... 20
3.3 Governmental Authorization.......................... 20
3.4 Subsidiaries........................................ 20
3.5 Non-Contravention................................... 20
3.6 Binding Effect...................................... 21
3.7 Ownership of Fremont Common Stock and Ridgepointe
Common Stock........................................ 21
3.8 Accredited Investor................................. 22
3.9 Capitalization of Fremont and Ridgepointe........... 22
3.10 Financial Statements................................ 22
3.11 No Material Adverse Change.......................... 23
3.12 No Undisclosed Liabilities.......................... 23
3.13 Legal Compliance.................................... 23
3.14 Tax Returns and Taxes............................... 24
3.15 Financial Advisor Fees.............................. 25
3.16 Litigation.......................................... 25
3.17 Insurance........................................... 25
3.18 Employee Liabilities................................ 25


3.19 Books and Records................................... 25
3.20 Assets 25
3.21 Intellectual Property Rights........................ 26
3.22 Leases and Wells.................................... 26
3.23 Marketing........................................... 27
3.24 Applicable Contracts................................ 27
3.25 Pooling, Unitization, and Communitization Agreements 27
3.26 Operating Agreements................................ 28
3.27 Environmental Matters............................... 28
3.28 Plugging and Abandonment............................ 29
3.29 Disbursement of Proceeds............................ 29
3.30 Certain Agreements; Payouts......................... 29
3.31 Information......................................... 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AMERAC..... 29
4.1 Corporate Existence and Power....................... 29
4.2 Corporate Authorization............................. 30
4.3 Governmental Authorization.......................... 30
4.4 Subsidiaries........................................ 30
4.5 Non-Contravention................................... 30
4.6 Binding Effect...................................... 30
4.7 Capitalization...................................... 30
4.8 SEC Filings......................................... 31
4.9 Legal Compliance.................................... 31
4.10 Litigation.......................................... 31


ARTICLE V GENERAL COVENANTS............................ 31
5.1 Access to Information............................... 31
5.2 Reasonable Best Efforts............................. 31
5.3 Public Announcements................................ 32
5.4 Notification of Certain Matters..................... 32
5.5 Confidential Information............................ 32
5.6 Certain Tax Matters................................. 33


ARTICLE VI COVENANTS OF SELLING SHAREHOLDERS............ 34
6.1 Conduct of Business of Fremont and Ridgepointe...... 34
6.2 Oil and Gas Operations.............................. 36
6.3 Other Offers........................................ 37
6.4 Imbalances.......................................... 37
6.5 Employee Matters.................................... 38
6.6 Office Lease........................................ 38


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6.7 Expenses............................................ 38
6.8 Records............................................. 38
6.9 Contract Operations Service Agreement; Ancillary
Agreements.......................................... 38
ARTICLE VII COVENANTS OF AMERAC.......................... 38
7.1 Contract Operations Service Agreement; Ancillary
Agreements.......................................... 38
7.2 Federal Income Tax Refund........................... 39
7.3 Bonding Requirements................................ 39
ARTICLE VIII INDEMNIFICATION.............................. 39
8.1 Indemnities of Selling Shareholders................. 39
8.2 Indemnities of Amerac............................... 40
8.3 Notice of Claims; Defense; Settlement............... 40


ARTICLE IX CONDITIONS TO THE OBLIGATIONS TO CLOSE....... 41
9.1 Conditions to Amerac Obligations.................... 41
9.2 Conditions to the Selling Shareholders' Obligations. 43


ARTICLE X TERMINATION.................................. 44
10.1 Termination......................................... 44
10.2 Effect of Termination............................... 44


ARTICLE XI MISCELLANEOUS................................ 45
11.1 Notices............................................. 45
11.2 Survival............................................ 46
11.3 Amendments; No Waivers.............................. 46
11.4 Successors and Assigns.............................. 47
11.5 Entire Agreement.................................... 47
11.6 Governing Law....................................... 47
11.7 Execution by Fremont and Ridgepointe................ 47
11.8 Counterparts........................................ 47


Schedule 1.01 - Ownership of Purchased Stock;
Allocation of Adjusted Purchase Consideration Schedule 2.3(a) - Environmental Claims Schedule 3.17 - Fremont/Ridgepointe Insurance Schedule 3.23 - Matters Relating to Hydrocarbon Marketing Schedule 3.26 - Matters Relating to Operating Agreements Schedule 3.27 - Environmental Matters Schedule 3.30 - Certain Agreements; Payout Schedule 4.7 - Amerac Capitalization Matters


iii


Page
----


EXHIBITS


Title Exhibit - ----- -------


Evaluated Interests (Including Material Evaluated Interests) ...... A


Form of Escrow Agreement .......................................... B


Form of Legend .................................................... C


Form of Custody Agreement ......................................... D


Form of Amended and Restated Power of Attorney .................... E


Form of Accredited Investor Certificate ........................... F


Matters to be Covered by Opinions of Kirk & Chaney ................ G


Matters to be Covered by Opinion of Jackson & Walker, L.L.P. ...... H


Form of Contract Operations Services Agreement .................... I


Form of Registration Rights Agreement ............................. J


Form of Area of Interest Agreement ................................ K


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ACQUISITION AGREEMENT


This ACQUISITION AGREEMENT ("Agreement") is dated as of January 5, 1996, and is among AMERAC ENERGY CORPORATION, a Delaware corporation ("Amerac"), POWELL RESOURCES, INC., an Oklahoma corporation ("Powell"), THE LANGSTROTH FAMILY LIMITED I, a Florida limited partnership (the "Partnership"), and the persons who have executed and delivered this Agreement and who are designated as "Other Selling Shareholders" on the signature pages hereto (the "Other Selling Shareholders"; together with Powell and the Partnership, the "Selling Shareholders"). This Agreement has also been executed by RIDGEPOINTE RESOURCES, INC., an Oklahoma corporation ("Ridgepointe"), FREMONT ENERGY CORPORATION, an Oklahoma corporation ("Fremont"), and FREMONT PETROLEUM CORPORATION, an Oklahoma corporation ("FPC") for the limited purposes set forth hereinafter.


W I T N E S S E T H :
--------------------


WHEREAS, Powell and Ridgepointe each owns the number of issued and outstanding shares of common stock, par value $.01 per share, of Fremont ("Fremont Common Stock") set forth opposite such party's name in Section I of Schedule 1.01 hereto; and - -------------


WHEREAS, each of Fremont and the Selling Shareholders currently owns the number of issued and outstanding shares of common stock, par value $.50 per share, of Ridgepointe ("Ridgepointe Common Stock") set forth opposite such Selling Shareholder's name in Section II of Schedule 1.01 hereto under the
------------- caption "Current Ownership"; and


WHEREAS, the Selling Shareholders desire to sell, and Amerac desires to purchase from the Selling Shareholders, all of the shares of Fremont Common Stock not owned by Ridgepointe and all of the shares of Ridgepointe Common Stock owned, or to be owned at Closing (as defined in Section 1.10), by the Selling Shareholders for the consideration and on the terms set forth herein.


NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, the parties hereto hereby agree as follows:


ARTICLE I
PURCHASE AND SALE
-----------------


1.1 The Purchase and Sale. Upon the terms and subject to the conditions
--------------------- of this Agreement, at the Closing, each Selling Shareholder shall sell, assign, transfer, and deliver to Amerac, and Amerac shall purchase and acquire from each Selling Shareholder, that number of shares of Fremont Common Stock and Ridgepointe Common Stock owned by such Selling Shareholder and set forth opposite such Selling Shareholder's name in Sections I and II of Schedule 1.01
------------- hereto.


1.2 Purchase Consideration. The consideration (the "Initial Purchase
---------------------- Consideration") to be paid by Amerac for all of the issued and outstanding Ridgepointe Common Stock and all of the issued and outstanding Fremont Common Stock not owned by Ridgepointe (collectively, the "Purchased Stock") shall be $7,640,000.00, consisting of an aggregate of (a) that number of shares of common stock, par value $.05 per share, of Amerac ("Amerac Common Stock") with a value equal to $640,000.00 based upon the average of the closing prices in the over- the-counter market as reported by the National Quotation Bureau, Incorporated, for Amerac Common Stock during the thirty (30) Business Days (as defined hereinafter) immediately preceding the fifth (5th) Business Day prior to the Closing Date (as defined in Section 1.10) (the "Amerac Shares"), and (b) $7,000,000.00 in cash (the "Initial Cash Amount"). The Initial Purchase Consideration shall be subject to adjustment in accordance with the provisions of Section 1.5, and as so adjusted, shall be referred to hereinafter as the "Adjusted Purchase Consideration." For purposes of this Agreement, the term "Business Days" means any day on which the New York Stock Exchange is open for trading.


1.3 Deposit. Concurrently with the execution of this Agreement, Amerac
------- has deposited in escrow with Bank One, Texas, National Association ("Bank"), as escrow agent, pursuant to an Escrow Agreement in the form attached hereto as
Exhibit B, the sum of $350,000.00, such sum representing five percent (5%) of - --------- the Initial Cash Amount (the "Deposit"). Subject to the provisions of this Section 1.3, following the Closing, all or a portion of the Deposit may be retained in escrow and applied and disbursed in accordance with the provisions of Sections 2.3, 2.4, and/or 2.7, as applicable. To the extent that any portion of the Deposit is not thus retained in escrow at the Closing, such portion of the Deposit shall be applied to the payment of the Adjusted Purchase Consideration at the Closing. If this Agreement is terminated, other than by reason of a breach of this Agreement by Amerac, Amerac and the Selling Shareholders shall deliver to Bank a written notice instructing Bank to pay to Amerac the Deposit, plus all accrued interest thereon. If the Selling Shareholders believe that Amerac has breached this Agreement, and such breach is grounds for termination in accordance with the provisions hereof, the Selling Shareholders shall provide to Amerac written notice setting forth the particulars of the alleged breach. If Amerac is unable to remedy the alleged breach, and the Selling Shareholders elect to terminate this Agreement as the result thereof, Amerac and the Selling Shareholders shall deliver to Bank a joint notice instructing Bank to pay to the Selling Shareholders the Deposit, plus all accrued interest thereon; provided, however, that if Amerac disputes the alleged breach, the Selling Shareholders and Amerac shall submit such dispute to arbitration in accordance with the procedures set forth in Section 2.8. If such a dispute is submitted to arbitration, Amerac and the Selling Shareholders, or either of them, shall provide to Bank written notice of such fact that identifies the nature of the dispute and the arbitrator selected and that instructs Bank to disburse the Deposit and all accrued interest thereon in accordance with instructions to be delivered to Bank by the arbitrator following the issuance of the arbitrator's decision. Any such notice delivered unilaterally by Amerac or the Selling Shareholders shall also be delivered to the other party, and proof of the delivery of such notice shall be provided to Bank.


1.4 Intercompany Transactions. The Selling Shareholders shall cause all
------------------------- intercompany loan accounts and accounts receivable between the Selling Shareholders and any of their respective parents, subsidiaries, or other affiliates, on the one hand, and Fremont and


2


Ridgepointe, on the other hand (including, without limitation, all accounts receivable owed to Fremont as to which Fremont Exploration, Inc. ("FEI"), is the account debtor), to be settled immediately prior to the Closing. In addition, immediately prior to the Closing, the Selling Shareholders shall cause: (a) Fremont to sell all of the Ridgepointe Common Stock owned by Fremont, as reflected in Section II of Schedule 1.01 under the caption "Current Ownership,"
------------- to Powell and Thomas O. Goldsworthy, in the proportions of fifty percent (50%) to each party; (b) Fremont and Ridgepointe to pay all contingent compensation, severance, and other distributions that Fremont and/or Ridgepointe are obligated to pay to their respective officers and employees as the result of the transactions contemplated in this Agreement; and (c) Fremont to sell to FPC all of the issued and outstanding shares of common stock, par value $.01 per share, of Fremont Resources, Inc. ("FRI"), a wholly owned subsidiary of Fremont. No later than three (3) Business Days prior to the Closing, the Selling Shareholders shall provide to Amerac documentation reflecting the full payment and/or cancellation of all such intercompany accounts and the consummation of all such transactions.


1.5 Adjustments to Initial Purchase Consideration. The Initial Purchase
--------------------------------------------- Consideration shall be adjusted pursuant to the following adjustments to the Initial Cash Amount:


(a) The Initial Cash Amount shall be adjusted upward by the following:


(i) the amount of the value of all merchantable oil and liquid
hydrocarbons attributable to the Oil and Gas Properties (as defined in
Section 2.1(g)) in storage or existing in stock tanks above the pipeline
connection on or before November 1, 1995, at 7:00 a.m., Central Standard
Time (the "Engineering Date"), the value to be based upon the contract
price in effect as of the Engineering Date (or the market value, if there
is no contract price, determined as of the Engineering Date), less amounts
payable as royalties, overriding royalties, and other burdens upon such
production and severance taxes deducted by the purchaser of such
production;


(ii) the amount of all direct expenditures and costs and prepaid
costs and expenses attributable to the Oil and Gas Properties and other
assets of Fremont and Ridgepointe incurred and actually paid by or on
behalf of Fremont and/or Ridgepointe in the ordinary course of owning and
operating the Oil and Gas Properties and such other assets and that are
attributable to the period of time from the Engineering Date through the
Closing Date, including, without limitation, (A) costs and expenses
---------
incurred and paid by Fremont during such period in connection with the
drilling and completion of the Lady Jon No. 2 Well, to the extent such
costs and expenses are attributable to the undivided five percent (5%)
working interest of Fremont therein, (B) royalties, overriding royalties,
and other similar burdens on production, (C) rentals, shut-in well
payments, and other lease maintenance payments, (D) ad valorem, property,
excise, severance, production taxes, and any other taxes (exclusive of
income taxes) based upon or measured by the ownership of the Oil and Gas
Properties or other assets of Fremont and Ridgepointe, the production of
hydrocarbons, or the receipt of proceeds therefrom, and (E) overhead and
other charges and


3


expenses billed by or to Fremont under applicable operating agreements,
including operating agreements under which Fremont serves as Operator,
relating to the Oil and Gas Properties, including, without limitation,
expenses paid by Fremont on behalf of third parties and to which Fremont is
entitled to reimbursement under such operating agreements, but exclusive of
--------- --
(X) the general administrative and office overhead expenses of Fremont,
FRI, and Ridgepointe, (Y) expenses incurred by Fremont, Ridgepointe, or the
Selling Shareholders relating to the evaluation of Fremont, Ridgepointe,
and their assets for sale, the solicitation of buyers therefor, and the
negotiation and consummation of the transactions contemplated in this
Agreement, and (Z) expenses incurred by the Selling Shareholders in
connection with the remediation of Environmental Claims (as defined in
Section 2.1(c)) pursuant to Section 2.3, the acquisition of curative with
respect to Defects (as defined in Section 2.4) pursuant to Section 2.4, and
the repair of any Casualty (as defined in Section 2.7) pursuant to Section
2.7;


(iii) the amount of all accounts receivable (A) as to which
neither FEI, FPC, FRI, any Selling Shareholder, nor any other parent,
subsidiary, or other affiliate of Fremont, Ridgepointe, or any Selling
Shareholder is the account debtor, (B) that, as of October 31, 1995, were
not outstanding more than ninety (90) days past the due date expressed in
the related invoice; (C) that are bona fide, valid, and legally enforceable
obligations of the parties thereto or the account debtor in respect
thereof; and (D) that are reflected as current assets on the Interim
Fremont Financial Statements (as defined in Section 3.10(a)), net of the
related reserves for doubtful accounts;


(iv) the amount of any increases provided for in Section 2.6;


(v) the amount of the cash bond posted and maintained by Fremont
with the City of Stockton, Kansas; and


(vi) any other amounts provided for elsewhere in this Agreement
or otherwise agreed upon by the Selling Shareholders and Amerac.


(b) The Initial Cash Amount shall be adjusted downward by the following:


(i) the gross proceeds received by Fremont from the sale of
hydrocarbons produced from or allocable to the Oil and Gas Properties
between the Engineering Date and the Closing Date, plus the gross proceeds
received by Fremont and Ridgepointe with respect to any other assets of
either of such parties between the Engineering Date and the Closing Date,
including, without limitation, proceeds received from the sale or
disposition of any of the Oil and Gas Properties, but exclusive of (A) the
---------
proceeds to be received by Fremont from the sale prior to the Closing of
all of its shares of Ridgepointe Common Stock to Powell and Thomas O.
Goldsworthy, and (B) the proceeds to be received by Fremont from the sale
prior to the Closing of all of the issued and outstanding shares of common
stock of FRI to FPC;


4


(ii) an amount equal to all unpaid ad valorem, property,
production, severance, and similar taxes and assessments (exclusive of
income taxes) based upon or measured by the ownership of the Oil and Gas
Properties and the other assets of Fremont and Ridgepointe, the production
of hydrocarbons, or the receipt of proceeds therefrom, which taxes and
assessments became due and payable or accrued prior to the Engineering Date
and that are unpaid as of the Closing Date;


(iii) all undischarged liabilities and debt of Fremont and
Ridgepointe in existence as of the Closing Date;


(iv) all amounts paid by Amerac to discharge any liability or
debt of Fremont and/or Ridgepointe on or prior to the Closing Date;


(v) the amounts of all contingent compensation, severance, and
other distributions paid to the officers and employees of Fremont and
Ridgepointe as the result of the transactions contemplated in this
Agreement for which Fremont and/or Ridgepointe are responsible under
applicable agreements and that are not discharged in full prior to the
Closing;


(vi) reductions provided for in Sections 2.3, 2.4, 2.7, and 6.4;
and


(vii) any other amount provided for elsewhere in this Agreement
or otherwise agreed upon by the Selling Shareholders and Amerac.


(c) All adjustments to the Initial Cash Amount provided for in this Agreement shall be calculated in accordance with generally accepted accounting principles, consistently applied ("GAAP").


1.6 Preliminary Settlement Statement. Not less than three (3) Business
-------------------------------- Days prior to the Closing, the Selling Shareholders shall prepare and submit to Amerac for review a draft settlement statement (the "Preliminary Settlement Statement") that shall set forth each estimated adjustment to be made to the Initial Cash Amount in accordance with Section 1.5 based upon information available as of the date of preparation of such Preliminary Settlement Statement, and calculate the preliminary Adjusted Purchase Consideration to be paid at Closing. In addition, the Preliminary Settlement Statement shall also set forth the amounts to be placed in escrow as the result ...