AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

BRONCO DRILLING COMPANY, INC.,

BDC ACQUISITION COMPANY,

and

EAGLE WELL SERVICE, INC.,

and

KIM L. SNELL,

DAVID WHITE,

KIM SNELL REVOCABLE TRUST, AS RESTATED AND AMENDED ON

SEPTEMBER 20, 2006, KIM SNELL AND JAMIE B. SNELL, CO-TRUSTEES,

2006 SNELL FAMILY IRREVOCABLE TRUST, UNDER AGREEMENT DATED

OCTOBER 30, 2006, JAMIE B. SNELL, TRUSTEE,

SNELL FAMILY CHARITABLE REMAINDER UNITRUST, UNDER AGREEMENT

DATED OCTOBER 30, 2006, KIM L. SNELL, TRUSTEE

DATED AS OF JANUARY 9, 2007

TABLE OF CONTENTS

 

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered as of this 9th day of January, 2007 (the “ Effective Date ”), by and among Bronco Drilling Company, Inc., a Delaware corporation (“ Purchaser ”), BDC Acquisition Company, a Kansas corporation (“ Merger Sub ”), Eagle Well Service, Inc., a Kansas corporation (the “ Company ”), Kim L. Snell, a resident of Liberal, Kansas and beneficiary of the Snell Revocable Trust (“ Snell ”), David White, a resident of Bowie, Texas (“ White ”), Kim Snell Revocable Trust, as restated and amended under agreement dated September 20, 2006, Kim L. Snell and Jamie B. Snell, Co-Trustees (“ Snell Revocable Trust ”), 2006 Snell Family Irrevocable Trust, under agreement dated October 30, 2006, Jamie B. Snell, Trustee (“ Snell Family Trust ”), Snell Family Charitable Remainder Unitrust, under agreement dated October 30, 2006, Kim L. Snell, Trustee (“ Snell Charitable Trust ”) (White, Snell Revocable Trust, Snell Family Trust and Snell Charitable Trust are collectively referred to here in as the “ Company Stockholders ”). Purchaser, Merger Sub, Company Stockholders, Snell and the Company are sometimes referred to herein as the “ Parties .”

RECITALS

A. The Boards of Directors of Purchaser, Merger Sub and the Company have each determined that it is in the best interests of their respective stockholders for Purchaser to acquire the Company upon the terms and subject to the conditions set forth herein.

B. In furtherance of such acquisition, the Boards of Directors of Purchaser, Merger Sub and the Company have each approved the merger of Merger Sub with and into the Company (the “ Merger ”) in accordance with the Kansas General Corporation Code and upon the terms and subject to the conditions set forth herein.

C. For U.S. federal income tax purposes, the Parties intend that (a) the Merger will qualify as a reorganization within the meaning of section 368(a) of the Code, (b) this Agreement will constitute a “plan of reorganization” within the meaning of Treasury Regulation 1.368-2(g) and (e) and (c) Purchaser, Merger Sub and the Company will each be a party to such reorganization within the meaning of section 368(b) of the Code.

D. The Parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger provided for in this Agreement and also to prescribe various conditions to such Merger.

AGREEMENT

NOW, THEREFORE, in consideration of the recitals and the mutual covenants and agreements set forth in this Agreement, the Parties hereby agree as follows:

 

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ARTICLE 1

DEFINITIONS

1.1 Defined Terms. As used in this Agreement, each of the following terms has the meaning given in this Section 1.1 or in the Sections referred to below:

“ Affiliate ” means, with respect to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with such Person.

“ Agreement ” means this Agreement and Plan of Merger, as amended, supplemented or modified from time to time.

“ Business Day ” means a day of the year on which banks are not required or authorized to close in Wichita, Kansas.

“ Cash Consideration ” has the meaning set forth in Section 2.4.1.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any successor statutes and any regulations promulgated thereunder.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation and Liability Information System List.

“Certificate of Merger” means that certain Certificate of Merger to be dated as of the Closing Date in form and substance as agreed between the Parties.

“ Closing ” means the closing and consummation of the transactions contemplated by this Agreement.

“ Closing Date ” means the Effective Date.

“Closing Transactions” means the consummation of the Merger in accordance with the terms of this Agreement, including deliveries of the various certificates, instruments, payments, and documents referred to in this Agreement.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Company ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Company Bank Credit Agreements ” means any and all Promissory Notes/Security Agreements and related documents between the Company or any of its affiliates, as borrower and Bank of Beaver City as lender including but not limited to those set forth on Schedule 1.1(a) of the Seller Disclosure Schedule .

 

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“ Company Certificate ” means a certificate representing shares of Company Common Stock.

“ Company Common Stock ” means the common stock, par value $100 per share, of the Company.

“ Company Employee Benefit Plans ” has the meaning specified in Section 4.2.13(a).

“ Company Financial Statements ” means the audited financial statements (including the related notes) as of July 31, 2006 and the unaudited financial statements (including related notes) as of November 30, 2006 as attached as Schedule 1.1(b) of the Seller Disclosure Schedule .

“ Company Permits ” has the meaning specified in Section 4.2.16.

“ Company Representative ” means any director, officer, employee, agent, advisor (including legal, accounting and financial advisors) or other representative of Company.

“ Company Stockholders ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Company Stock Option ” means an option to acquire shares of Company Common Stock.

“ Confidentiality Agreement ” means the letter agreement dated August 15, 2006, between Company and Purchaser relating to Company’s furnishing of information to Purchaser in connection with Purchaser’s evaluation of the possibility of acquiring Company.

“ Damages ” shall mean all reasonable amounts paid or incurred relating to any and all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in settlements, liabilities, obligations, taxes, Liens, losses, expenses and fees including court costs and reasonable attorneys fees and expenses.

“ Debt ” means, for any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all indebtedness of such Person on which interest charges are customarily paid or accrued, (d) all Guarantees of such Person, (e) the unfunded or unreimbursed portion of all letters of credit issued for the account of such Person, (f) the present value of all obligations in respect of leases that are capitalized on the books and records of such Person, (g) any obligation of such Person representing the deferred purchase price of property or services purchased by such Person other than trade payables incurred in the ordinary course of business and which are not more than ninety (90) days past invoice date, (h) any indebtedness, liability or obligation secured by a Lien

 

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on the assets of such Person whether or not such indebtedness, liability or obligation is otherwise non-recourse to such Person, and (i) all liability of such Person as a general partner or joint venturer for obligations of the nature described in (a) through (h) preceding.

“ Deductible Amount ” shall be $25,000.

“ Effective Date ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Effective Time ” has the meaning set forth in Section 2.1.

“ Employees ” has the meaning set forth in Section 4.2.12.

“ Environmental Law ” means any law, common law, ordinance, regulation or policy of any Governmental Authority, as well as any order, decree, permit, judgment or injunction issued, promulgated, approved, or entered thereunder, relating to the environment, health and safety, Hazardous Material (including, without limitation, the use, handling, transportation, production, disposal, discharge or storage thereof), industrial hygiene, the environmental conditions on, under, or about any real property owned, leased or operated at any time by Company including, without limitation, soil, groundwater, and indoor and ambient air conditions or the reporting or remediation of environmental contamination. Environmental Laws include, without limitation, the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the Rivers and Harbors Act of 1899, as amended, the Safe Drinking Water Act, as amended, CERCLA, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, the Occupational Safety and Health Act, as amended, the Hazardous Materials Transportation Act, as amended, and any other federal, state and local law whose purpose is to conserve or protect human health, the environment, wildlife or natural resources.

“ Equipment ” has the meaning set forth in Section 4.2.22.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time and the regulations promulgated thereunder.

“ Escrow Agent ” means Fidelity Bank, Wichita, Kansas or another federally insured financial institution selected by Purchaser.

“ Escrow Agreement ” shall mean the Escrow Agreement the form of which to be agreed upon by Escrow Agent, Company Stockholders and Purchaser regarding the handling of the Escrow Amount.

“ Escrow Amount ” shall be $2,500,000 ($1,000,000 of which shall be in cash from the Cash Consideration and $1,500,000 of which shall be in the form of shares of Purchaser Common Stock from the Stock Consideration and shall be held back from the total consideration to be paid to the Snell Trusts pursuant to this Agreement).

 

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“ GAAP ” means generally accepted accounting principles, as recognized by the U.S. Financial Accounting Standards Board (or any generally recognized successor).

“ Governmental Action ” means any authorization, application, approval, consent, exemption, filing, license, notice, registration, permit or other requirement of, to or with any Governmental Authority.

“ Governmental Authority ” means any national, state, county or municipal government, domestic or foreign, any agency, board, bureau, commission, court, department or other instrumentality of any such government.

“ Guaranty ” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions, by “comfort letter” or other similar undertaking of support of otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that, the term “Guaranty” shall not include endorsements for collection or deposit in the ordinary course of business. For purposes of this Agreement, the amount of any Guaranty shall be the maximum amount that the guarantor could be legally required to pay under such Guaranty.

“ Hazardous Material ” means (a) any “hazardous substance,” as defined by CERCLA; (b) any “hazardous waste” or “solid waste,” in either case as defined by the Resource Conservation and Recovery Act, as amended; (c) any solid, hazardous, dangerous or toxic chemical, material, waste or substance, within the meaning of and regulated by any Environmental Law; (d) any asbestos-containing materials in any form or condition; (e) any polychlorinated biphenyls in any form or condition; (f) petroleum, petroleum hydrocarbons, or any fraction or byproducts thereof; or (g) any air pollutant which is so designated by the U.S. Environmental Protection Agency as authorized by the Clean Air Act, as amended.

“ Indemnifying Parties ” has the meaning specified in Section 7.1.

“ Investment ” in any Person means any investment, whether by means of securities purchase (whether by direct purchase from such Person or from an existing holder of securities of such Person), loan, advance, extension of credit, capital contribution or otherwise, in or to such Person,

 

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the Guaranty of any Debt or other obligation of such Person, or the subordination of any claim against such Person to other Debt or other obligation of such Person; provided that, “Investments” shall not include advances made to employees of such Person for reasonable travel, entertainment and similar expenses incurred in the ordinary course of business.

“ IRS ” means the Internal Revenue Service.

“ KGCC ” has the meaning specified in Section 2.1.

“ Leases ” means the leases between the Company and Grace Properties, LLC and Wes Cornelius on terms acceptable to Purchaser with respect to the properties identified on Schedule 1.1(c) of the Seller Disclosure Schedule .

“ Lien ” means any lien, mortgage, security interest, pledge, deposit, restriction, burden, encumbrance, rights of a vendor under any title retention or conditional sale agreement, or lease or other arrangement substantially equivalent thereto.

“ Material Adverse Effect ” means (a) when used with respect to Company, a result or consequence that would materially adversely affect, individually or taken as a whole, the condition (financial or otherwise), results of operations or business of Company or the aggregate value of Company’s assets, would materially impair the ability of Company to own, hold, develop and operate its assets, or would impair Company’s ability to perform its obligations hereunder or consummate the transactions contemplated hereby or prevent or materially delay the performance of this Agreement; and (b) when used with respect to Purchaser, a result or consequence that would materially adversely affect its ability to perform its obligations hereunder or consummate the transactions contemplated hereby or prevent or materially delay the performance of this Agreement.

“ Material Agreement ” means any written or oral agreement, contract, commitment, or understanding to which a Person is a party, by which such Person is directly or indirectly bound, or to which any assets of such Person may be subject, involving consideration with a total value in excess of $50,000 (i) which is not cancelable by such Person upon notice of thirty (30) days or less without liability for further payment other than nominal penalty, (ii) pursuant to which such Person acquires any material portion of the equipment, raw materials, supplies or services used or consumed by such Person in the operation of its business (unless such equipment, raw materials, supplies or services are readily available to such Person from other sources on comparable terms), (iii) pursuant to which such Person derives any material part of its revenues, (iv) to perform drilling services or workover services, or (v) which is otherwise material to operations or assets of the Company.

“ Merger ” has the meaning specified in Recital B.

“ Merger Consideration ” has the meaning specified in Section 2.4.

“ Merger Sub ” has the meaning set forth in the introductory paragraph of this Agreement.

 

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“ Merger Value ” has the meaning set forth in Section 2.4.

“ Party(ies) ” has the meaning set forth in the introductory paragraph of this Agreement.

“ Person ” means any natural person, corporation, company, limited or general partnership, joint stock company, joint venture, association, limited liability company, limited liability partnership, trust, bank, trust company, land trust, business trust or other entity or organization, whether or not a Governmental Authority.

“ Purchaser ” has the meaning set forth in the introductory paragraph of this Agreement. For clarification, the term “Purchaser” is used in this Agreement simply for convenience. Under no circumstances shall the term “Purchaser” be used to refer to a sale or taxable transaction.

“ Purchaser Common Stock ” means the common stock of the Purchaser.

“ Purchaser Confidential Information ” means any information concerning the businesses and affairs of Purchaser and its subsidiaries that is not already generally available to the public.

“ Purchaser Disclosure Schedule ” means the Purchaser Disclosure Schedule attached hereto.

“ Purchaser Representative ” means any director, officer, employee, agent, advisor (including legal, accounting and financial advisors), Affiliate or other representative of Purchaser or its subsidiaries.

“ Responsible Officer ” means, with respect to any corporation, the Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer or any Vice President of such corporation.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ SEC” has the meaning set forth in Section 2.4.2.

“ Seller Disclosure Schedule ” means the Seller Disclosure Schedule attached hereto and any documents listed on such Seller Disclosure Schedule and expressly incorporated therein by reference.

“ Snell ” has the meaning set forth in the introductory paragraph hereto.

“ Snell Charitable Trust ” has the meaning set forth in the introductory paragraph hereto.

 

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“ Snell Charitable Trust Subscription Agreement ” means a subscription agreement to be completed and executed by Snell Charitable Trust and Purchaser at Closing in a form to be agreed upon by the Parties.

“ Snell Family Trust ” has the meaning set forth in the introductory paragraph hereto.

“ Snell Family Trust Subscription Agreement ” means a subscription agreement to be completed and executed by Snell Family Trust and Purchaser at Closing in a form to be agreed upon by the Parties.

“ Snell Revocable Trust ” has the meaning set forth in the introductory paragraph hereto.

“ Snell Revocable Trust Subscription Agreement ” means a subscription agreement to be completed and executed by Snell Revocable Trust and Purchaser at Closing in a form to be agreed upon by the Parties.

“ Snell Trusts ” means the Snell Revocable Trust, the Snell Family Trust and the Snell Charitable Trust.

“ Stock Consideration ” has the meaning set forth in Section 2.4.2.

“ Tax Returns ” has the meaning specified in Section 4.2.15.

“ Tax ” or “ Taxes ” means taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including income, gross receipts, ad valorem, value added, excise, real or personal property, asset, sales, use, federal royalty, license, payroll, transaction, capital, net worth and franchise taxes, estimated taxes, withholding, employment, social security, workers compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes or other governmental taxes imposed or payable to the United States or any state, local or foreign governmental subdivision or agency thereof, and in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax, including penalties for the failure to file any Tax Return or report.

“ Third Party ” means any Person other than Company, Purchaser or a Company Stockholder.

“ Third-Party Consent ” means the consent or approval of any Person other than Company, Purchaser or a Company Stockholder.

“Transaction Documents” means all agreements required to perform the transactions contemplated by this Agreement.

“White” has the meaning set forth in the introductory paragraph hereto.

 

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“ White Subscription Agreement ” means the subscription agreement to be completed and executed by White and Purchaser at Closing in a form to be agreed upon by the Parties.

1.2 References and Titles . All references in this Agreement to Exhibits, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any Articles, Sections, subsections or other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof. The words “ this Agreement ,” “ herein ,” “ hereby ,” “ hereunder ” and “ hereof ,” and words of similar import, refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The words “ this Article ,” “ this Section ” and “ this subsection ,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words occur. The word “ or ” is not exclusive, and the word “ including ” (in its various forms) means including without limitation. Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.

As used in the representations and warranties contained in this Agreement, (1) the phrase “ to the knowledge ” of the representing Party, to the extent such Party is a corporation, shall mean the Responsible Officers of such representing Party, individually or collectively, either (a) know that the matter being represented and warranted is true and accurate or (b) have no reason, after reasonable inquiry, to believe that the matter being represented and warranted is not true and accurate, (2) the phrase “to the knowledge” of the representing Party, to the extent such representing party is Snell or White, shall mean Snell or White, individually or collectively, either (a) know that the matter being represented and warranted is true and accurate or (b) have no reason, after reasonable inquiry, to believe that the matter being represented and warranted is not true and accurate, and (3) the phrase “ to the knowledge ” of the representing Party, to the extent such Party is a trust, shall mean that trustees of such representing Party, individually or collectively, either (a) know that the matter being represented and warranted is true and accurate or (b) have no reason, after reasonable inquiry, to believe that the matter being represented and warranted is not true and accurate.

ARTICLE 2

MERGER

2.1 Merger. Subject to the terms and conditions set forth in this Agreement, and in accordance with the Kansas General Corporation Code (the “ KGCC ”), at the Effective Time, the Merger Sub will be merged with and into the Company. Following the Merger, the separate corporate existence of the Merger Sub will cease and the Company will continue as a corporation governed by the laws of the State of Kansas. The Merger will become effective when the Certificate of Merger is filed with the Secretary of State of the State of Kansas or at such later time as the Parties may agree upon and is set forth in the Certificate of Merger (the “ Effective Time ”).

 

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2.2 Effects of the Merger.

2.2.1 Generally. The Merger will have the effect set forth in this Agreement and the applicable provisions of the KGCC. Without limiting the generality of the foregoing, at the Effective Time, all properties, rights, privileges, powers and franchises of the Company and Merger Sub will vest in the Company and all debts, liabilities, and duties of the Merger Sub and the Company will become the debts, liabilities, and duties of the Company.

2.2.2 Articles of Incorporation . The articles of incorporation of the Company in effect at the Effective Time will be the articles of incorporation of the Company as the surviving corporation of the Merger, from and after the Effective Time until amended in accordance with applicable law.

2.2.3 Bylaws . The bylaws of the Merger Sub in effect at the Effective Time will be the bylaws of the Company as the surviving corporation of the Merger, from and after the Effective Time until amended in accordance with applicable law.

2.2.4 Directors and Officers . From and after the Effective Time, until successors are duly elected or appointed in accordance with applicable law (or their earlier death, resignation or removal), the directors of Merger Sub at the Effective Time will be the directors of the Company as the surviving corporation of the Merger and the officers of the Company at the Effective Time will be the officers of the Company as the surviving corporation of the Merger.

2.3.  Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, Merger Sub, the Company or the Company Stockholders:

(a) Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time will be cancelled and extinguished and be converted automatically into the right to receive the Merger Consideration in the manner provided in Section 2.4 immediately below, upon surrender of the certificate representing such share of Company Common Stock.

(b) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time will be cancelled and extinguished and be converted automatically into the right to receive one newly and validly issued, fully paid and nonassessable share of common stock of the Company as the surviving corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall continue to evidence ownership of such shares of capital stock of the Company as the surviving corporation.

 

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2.4 Merger Consideration. For purposes of this Agreement, the value of all outstanding Company Common Stock is Twenty Million Nine Hundred Thousand Dollars ($20,900,000) (the “ Merger Value ”). At the Closing, Purchaser shall pay the Merger Value to the Company Stockholders in the following manner (“ Merger Consideration ”):

2.4.1 Cash Consideration . Cash in the amount of $2,500,000 (the “ Cash Consideration ”) less $1,000,000 of the Escrow Amount by certified funds or wire transfer of same day funds to an account or accounts as previously designated by the Company Stockholders (other than White) in writing to Purchaser; and

2.4.2 Stock Consideration . 1,070,390 shares of Purchaser Common Stock (the “ Stock Consideration ”). The shares shall be distributed among the Company Stockholders as set forth on Exhibit A.

There shall be no holding period for or restrictions affecting each Company Stockholder’s right to transfer its portion of the Stock Consideration except for those restrictions arising under any applicable securities laws or any requirements to maintain continuity of proprietary interest as a result of a tax-free reorganization under the Code or Treasury Regulations or related case law and those restrictions created by or otherwise imposed on Company Stockholders other than by Purchaser. As soon as reasonably possible after the Closing and after Purchaser shall have gathered, received and/or compiled all information required to be disclosed in Form S-3 within the timeframes allowed pursuant to Item 9.01 of Form 8-K, Purchaser, if it is Form S-3 eligible, agrees to use its best efforts to file with the U.S. Securities and Exchange Commission (the “ SEC ”), at its sole cost and expense, a Form S-3 registration statement registering the Stock Consideration. Company Stockholders must provide the Purchaser with all information regarding Company Stockholders that is necessary to complete the registration statement. Once the registration statement has been declared effective by the SEC, Purchaser will use its commercially reasonable efforts to keep the registration statement effective until (a) all shares of Stock Consideration have been sold thereunder or (b) the Stock Consideration is eligible for resale by Company Stockholders under Rule 144 of the Securities Act, whichever shall occur first. Purchaser shall at its reasonable discretion have the right to delay the filing and/or suspend the effectiveness of the registration statement or otherwise suspend Company Stockholders’ right to sell the Stock Consideration if Purchaser determines that (a) making the filing or failing to suspend the registration statement and/or making of offers and sales thereunder would be injurious or otherwise detrimental to Purchaser or would require the premature disclosure of a business transaction or other material event or (b) the registration statement contains a material misstatement or omission.

2.4.3. Closing Payment . At Closing, the Merger Consideration will be paid as follows:

(a) the Escrow Amount by delivery to the Escrow Agent pursuant to the terms of the Escrow Agreement; and

 

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(b) the balance payable in Cash Consideration and Stock Consideration to the Company Stockholders pursuant to this Section 2.4 and as set forth on Exhibit A.

2.4.4 No Further Ownership Rights in Company Stock . All amounts paid and to be paid to Company Stockholders in accordance with the terms of this Agreement will be deemed to constitute full satisfaction of all rights pertaining to the shares of Company Common Stock, and, as of Closing, the Company Stockholders shall have no further rights with respect to any shares of Company Common Stock.

ARTICLE 3

CLOSING TRANSACTIONS

3.1 Closing Deliveries . The Closing shall take place on the Closing Date at 10:00 a.m. at the offices of Hinkle Elkouri Law Firm L.L.C., 301 N. Main, Suite 2000, Wichita, Kansas 67202, or at such time and place as is agreed by Purchaser and Company Stockholders. At the Closing, unless waived in writing by the Parties:

3.1.1 Company Stockholders’ Deliveries . Company Stockholders, Snell and/or the Company, as the case may be, shall deliver (or have delivered) to Purchaser all of the following (dated as of the Closing Date, except as otherwise indicated):

(a) All original consents, certificates, or other documents which Purchaser has determined are necessary or desirable to consummate the Closing Transactions;

(b) The Certificate of Merger executed by the Company;

(c) Certificates, dated not earlier than the tenth (10 ^th ) Business Day prior to the Closing Date, duly issued by the appropriate Governmental Authorities in the State of Kansas and such other states in which Company is doing business, showing that the Company is validly existing and in good standing in the State of Kansas and such other states;

(d) Certificates of the Secretary of the Company certifying that attached to such certificate is a true and complete copy of (a) the Company’s Articles of Incorporation, as amended through and in effect on the Closing Date, (b) the Company’s Bylaws, as amended through and in effect on the Closing Date, and (c) the Company’s resolutions of Board of Directors and all of its stockholders authorizing and approving the execution, delivery, and performance of this Agreement and the Transaction Documents to which the Company is a Party and consummation of the transaction contemplated by this Agreement and the Transaction Documents to which the Company is a Party;

 

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(e) An opinion of counsel to the Company and Company Stockholders, in a form agreed to by the Company and Purchaser;

(f) Evidence of resignation of all of the directors and officers of Company, as requested by Purchaser;

(g) All information and documentation as requested by Purchaser from the lender that is a party to the Company Bank Credit Agreements and any other necessary consents related to other Debt of Company to evidence termination of all security documents filed with respect to the Company and its assets (including any assets transferred to the Company from any affiliated entity);

(h) White shall execute and deliver the White Subscription Agreement;

(i) Snell Revocable Trust shall execute and deliver the Snell Revocable Trust Subscription Agreement;

(j) Snell Family Trust shall execute and deliver the Snell Family Trust Subscription Agreement;

(k) Snell Charitable Trust shall execute and deliver the Snell Charitable Trust Subscription Agreement;

(l) Evidence acceptable to Purchaser that R&R Rentals, LLC has transferred all of its assets (including but not limited to those assets identified on Schedule 4.2.22 of the Seller Disclosure Schedule ) free and clear of any Lien and for good, valuable and sufficient consideration received from the Company;

(m) Stock certificates representing all the Company Common Stock;

(n) Agreement and acknowledgement of Eagle Energy Services, L.L.C., The Water Boys, Inc., and R&R Rentals, LLC that the Company owes no amount or liabilities to any of such entities.

(o) Company Stockholders shall execute and deliver the Escrow Agreement.

(p) Snell shall execute and deliver the Snell Employment Agreement.

(q) Leases executed by Grace Properties, LLC and Wes Cornelius (as applicable) and termination of lease between R&R Rentals, LLC and Grace Properties, LLC with respect to or related to property leased by the Company from Grace Properties, LLC.

 

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(r) Termination of Consulting Agreement dated April 17, 2006 between the Company and DB Co., LLC.

(s) Evidence of payoff to The Bank of Beaver City of loan #9391 in the payoff amount of $437,119.70.

(t) Such other documents, instruments, agreements, and certificates as Purchaser may reasonably request in connection with the consummation of the transactions contemplated by this Agreement.

3.1.2 Purchaser Deliveries . Purchaser shall deliver (or have delivered) to the Company Stockholders (except as otherwise indicated) all of the following (dated as of the Closing Date, except as otherwise indicated):

(a) The Certificate of Merger executed by Merger Sub;

(b) Certificate, dated not earlier than the tenth (10 ^th ) Business Day prior to the Closing Date, of the Secretary of State of the State of Kansas stating that Merger Sub is in good standing or has comparable active status in such state;

(c) Certificate, dated not earlier than the tenth (10 ^th ) Business Day prior to the Closing Date, of the Secretary of State of the State of Delaware stating that Purchaser is in good standing or has comparable active status in Delaware.

(d) Escrow Amount to Escrow Agent;

(e) Escrow Agreement;

(f) the Snell Employment Agreement executed by Purchaser;

(g) the Merger Consideration.

3.1.3 Reasonable Efforts . The Company, Company Stockholders, and Purchaser shall use all reasonable efforts to take all such actions as may be necessary or appropriate in order to effectuate the Closing as promptly as practicable. If at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement all of the Parties shall use all reasonable efforts to take all such lawful and necessary action.

3.1.4 Stock Certificates . Each holder of certificates representing Company Common Stock is surrendering to Purchaser such certificates of Company Common Stock, duly endorsed in blank or accompanied by duly executed stock powers, representing the number of shares of Company Common Stock held by such Company Stockholders.

 

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3.1.5 Certificate of Merger . The Company and Merger Sub will file the executed Certificate of Merger with the Secretary of State of the State of Kansas.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF

SNELL AND COMPANY STOCKHOLDERS

4.1 Company Stockholders’ and Snell’s Representations Regarding Snell and Company Stockholders . As a material inducement to Purchaser and Merger Sub to enter into this Agreement and consummate the Closing Transactions each Company Stockholder and Snell, jointly and severally, hereby represent and warrant to Purchaser as follows:

4.1.1 Authority and Enforceability . Each Company Stockholder and Snell have the requisite power and authority and legal capacity, as applicable, to enter into and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each Company Stockholder and Snell and constitutes a valid and binding obligation of each Company Stockholder and Snell enforceable against each Company Stockholder and Snell in accordance with its terms.

4.1.2 No Violations . The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance by such Company Stockholder and Snell with the provisions hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time or both) under, give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation of any Lien on any of the properties or assets of such Company Stockholder or Snell under any provision of (i) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or other agreement or instrument applicable to such Company Stockholder or Snell, or (ii) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 4.2.4 are duly and timely obtained or made, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such Company Stockholder or Snell or his respective properties or assets.

4.1.3 Title to Shares . Each Company Stockholder owns the Company Common Stock issued and outstanding as set forth beside such Company Stockholder’s name in Schedule 4.1.3 of the Seller Disclosure Schedule . Company Stockholders own all of the issued and outstanding shares of Company Common Stock and there are no other equity interests including Common Stock Options, preferred stock, warrants or any convertible securities of the Company outstanding. Each Company Stockholder is (and at the Closing will be) the sole record and beneficial owner of, and upon consummation of the transactions contemplated hereby Purchaser will acquire the number of shares of Company Common Stock set forth opposite the name of such Company Stockholder on Schedule 4.1.3 of the Seller Disclosure Schedule , free and clear of all Liens, other than (i) those that may arise by virtue of any actions taken by or on behalf of Purchaser or its Affiliates or (ii) restrictions on transfer that may be imposed by federal or state securities laws.

 

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4.1.4 Exempt Offering . Each Company Stockholder is an “accredited investor” (as defined in Rule 501(a) under the Securities Act) and acknowledges that the Purchaser is offering to transfer the Stock Consideration to Company Stockholders pursuant to the exemption from registration provided in Regulation D, Rule 506 under Section 4(2), of the Securities Act. Each Company Stockholder also acknowledges that the shares of Purchaser Common Stock each Company Stockholder will receive as Stock Consideration are not registered under the Securities Act or registered or qualified for sale under any state securities law and cannot be resold without registration under, or an exemption from the Securities Act. Each Company Stockholder has read and understands the form of subscription agreement delivered to Company Stockholder by Purchaser and acknowledges that Purchaser is requiring each Company Stockholder to execute and deliver to Purchaser in substantially