Exhibit 2.1
MEMBERSHIP INTEREST PURCHASE
AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE
AGREEMENT (this “ Agreement ”) is made and
entered into effective as of the 30 th day of June, 2005, by and among CKB
LIMITED PARTNERSHIP, an Oklahoma limited partnership (“
CKB ”), JEROLD WILSON, LP, an Oklahoma limited
partnership (“ Wilson ”), and BRONCO DRILLING
COMPANY, L.L.C., an Oklahoma limited liability company (“
Bronco ”). CKB, Wilson and Bronco may be separately
referred to in this Agreement as a “ Party ” or
collectively as the “ Parties ”.
WITNESSETH
:
WHEREAS, CKB and Wilson presently
own fifty-six percent (56%) of the issued and outstanding
membership interests and units in STRATA DRILLING, L.L.C., an
Oklahoma limited liability company (“ Drilling
”), and STRATA PROPERTY, L.L.C., an Oklahoma limited
liability company (“ Property ”);
WHEREAS, Bronco desires to acquire
from CKB and Wilson, and CKB and Wilson desire to sell to Bronco,
all of their respective membership interests and units in Drilling
and Property, subject to the terms and conditions described in this
Agreement.
NOW, THEREFORE, in consideration of
the mutual covenants and agreements described in this Agreement,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
1. SALE OF MEMBERSHIP
INTERESTS . Subject to the terms and conditions of this
Agreement, CKB and Wilson agree to sell, assign and transfer to
Bronco, and Bronco agrees to acquire and purchase from CKB and
Wilson, all of their respective membership interests and units in:
(i) Drilling, which represents fifty-six percent (56%) of the
issued and outstanding membership interests and units in Drilling,
together with any and all rights, privileges and interests
resulting from, associated with or arising from such interests and
units (collectively, the “ Drilling Interests
”); and (ii) Property, which represents fifty-six percent
(56%) of the issued and outstanding membership interests and units
in Property, together with any and all rights, privileges and
interests resulting from, associated with or arising from such
interests and units (collectively, the “ Property
Interests ”, with the Drilling Interests being
collectively referred to as the “ Membership Interests
”).
2. PURCHASE PRICE . The
aggregate purchase price to be paid by Bronco to CKB and Wilson for
the Membership Interests (the “ Purchase Price
”) shall be Thirteen Million Nine Hundred Sixty-eight
Thousand Seven Hundred Ninety-eight and 62/100 Dollars
($13,968,768.62), decreased by the amounts set forth in Section 5.8
paid by Bronco and/or Drilling after the Closing Date toward the
cost of constructing Rig #3 (as hereafter defined), which amount
shall be paid as follows at Closing (as hereafter defined) and
allocated in accordance with Section 6.2 :
2.1 Cash at Closing . Bronco
shall pay to CKB and Wilson in cash or certified funds at Closing
the amount of Six Million Nine Hundred Sixty-eight Thousand Seven
Hundred Ninety-eight and 62/100 Dollars ($6,968,768.62) (the
“Cash Purchase Price”), allocated in accordance with
Section 6.2.
2.2 Self Adjusting Promissory
Note . Bronco shall execute and deliver to CKB and Wilson at
Closing non-negotiable self adjusting promissory notes (the
“Non-Cash Purchase Price”) totaling up to an amount not
to exceed Seven Million and No/100 Dollars ($7,000,000.00) (the
“Notes”), in the form of Exhibits B and C
attached hereto, along with Security Agreement (the “Security
Agreement”), in the form of Exhibits D attached
hereto, giving CKB and Wilson a prior perfected security interest
in and to Rig #3, defined herein, and any other collateral security
documents reasonably requested by CKB and Wilson to secure the
indebtedness created by the Note with Rig #3 (collectively, the
“Loan Documents”), allocated in accordance with Section
6.2.
3. PURCHASE OF RESTRICTED
INTERESTS . Bronco understands the Membership Interests are
being respectively sold, assigned and transferred under an
exemption from registration provided by the Securities Act of 1933,
as amended (the “ Act ”), and by applicable
state securities acts, and warrants and represents to CKB and
Wilson that the Membership Interests being acquired are solely for
its own account for investment purposes only, and are not being
purchased with a view to, or for the resale, distribution,
subdivision or fractionalization thereof, and that Bronco must bear
the economics associated with the acquired Membership Interests for
an indefinite period of time because such interests cannot be
resold or otherwise transferred unless subsequently registered
under the Act, or unless an exemption from registration is
available. Further, Bronco acknowledges and understands that any
certificate that may be issued to Bronco evidencing the Membership
Interests will bear substantially the following legend:
The units represented by this
Certificate have not been registered under the United States
Securities Act of 1933 (the “ Act ”) or
registered or qualified under any state securities laws and are
“restricted securities” as that term is defined in Rule
144 under the Act. The units may not be offered for sale, sold or
otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from
registration under the Act or state securities laws, the
availability of which is to be established to the satisfaction of
[Property or Drilling]. In addition, the rights and obligations of
the holder of this Certificate, and the ability of the holder to
transfer the units represented by this Certificate, are subject to
the approval of the Members of [Property or Drilling] and other
restrictions, terms and conditions of the [Operating Agreement of
Property or Amended and Restated Operating Agreement of Drilling],
a copy of which can be obtained from [Property or Drilling] upon
written request.
4. REPRESENTATIONS AND WARRANTIES
OF CKB AND WILSON . CKB and Wilson hereby, jointly and
severally, represent and warrant to Bronco that the following
statements are true and correct as of the date of this Agreement
and will be true and correct as of the Closing Date.
4.1 Representations and
Warranties of CKB and Wilson .
(a) Organization . CKB and
Wilson are limited partnerships duly organized, validly existing
and in good standing under the laws of the State of Oklahoma and
are duly registered or qualified to do business and in good
standing in each jurisdiction in which the nature of its respective
business or properties requires such registration or qualification,
except
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where the failure to so register or
qualify would have a Material Adverse Effect (defined below). C.
Keith Barr, Trustee of the C. Keith Barr Revocable Trust u/a/d
November 25, 1998 (the “Barr Trust”) and Jerold Wilson
are the general partners of CKB and Wilson,
respectively.
(b) Authority . CKB and
Wilson and their respective general partners have full power and
authority to execute and deliver, and to perform its respective
duties and obligations under, this Agreement and each other
agreement, document and instrument to be executed or delivered by
CKB or Wilson contemplated by this Agreement (“ Seller
Documents ”). The execution and delivery of, the
performance of its respective obligations under, and the
consummation of the transactions contemplated by, this Agreement
and any Seller Document, have been duly authorized by all necessary
action on the part of CKB and Wilson and their respective general
partners and limited partners. This Agreement is, and the Seller
Documents will constitute, the legal, valid and binding obligation
of CKB and Wilson and is, and the Seller Documents will be,
enforceable against such Party in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditors’
rights generally and except that the availability of equitable
remedies, including specific performance, may be subject to the
discretion of the court before which any proceeding may be
brought.
(c) No Conflicts; Consents .
The execution and delivery of this Agreement and each Seller
Document and the consummation of the transactions contemplated by
this Agreement and the Seller Documents will not: (i) violate or
conflict with any provision of the organizational documents, as
amended, of CKB or Wilson or of their respective general partners;
(ii) violate or conflict with any constitution, statute,
regulation, rule, injunction, judgment, order, permit, decree,
ruling, charge, or other restriction of any government,
governmental agency, court or arbitrator to which CKB or Wilson, or
their respective general partners, the Membership Interests or
their respective assets are subject; (iii) conflict with, result in
a breach of, constitute a default under (or with notice or the
lapse of time or both could result in a breach of or constitute a
default), result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any
notice or consent under any agreement, contract, lease, license,
instrument, or other arrangement to which CKB or Wilson, or their
respective general partners, is a party or bound or to which any of
their respective assets are subject; (iv) that could result in the
creation or imposition of any lien, security interest or
encumbrance in, to or on the Membership Interests or any asset of
CKB or Wilson, or their respective general partners; or (v) require
CKB or Wilson to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency, creditor or other third party in order to
consummate the transactions contemplated by this Agreement or the
Seller Documents.
(d) Litigation . There are no
claims, demands, filings, hearings, notices of violation,
proceedings, notices or demand letters, investigations,
administrative proceedings, civil, criminal or other actions,
litigation, suits, mediations, arbitrations or other legal
proceedings pending or threatened against CKB or Wilson, or their
respective general partners, relating to, involving or affecting
the Membership Interests or that would seek to question, delay,
prevent or materially impair the ability of CKB or Wilson, or their
respective general partners, to perform their respective duties or
obligations under, or to consummate the transactions contemplated
by, this Agreement.
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(e) Title . CKB and Wilson
are the lawful and record owner of, and have good and marketable
title to, the Membership Interests, free and clear of all liens,
restrictions, claims, charges, security interests and encumbrances
(contractual or otherwise) of any kind, nature or type
whatsoever.
(f) Assets Other than Real
Property Interests . Set forth in Schedule 4.1(f)(i)
hereto is a complete list of all items of tangible personal
property owned by Drilling and/or Property as of the Closing Date,
not including the Excluded Assets. Set forth in Schedule
4.1(f)(ii ) hereto is a complete list of all items of tangible
personal property owned by Drilling and/or Property prior to the
Closing Date, and that, as of the Closing Date (as hereafter
defined), shall be transferred by Drilling and/or Property to CKB,
Wilson or an entity designated prior to the Closing Date by CKB and
Wilson (collectively, the “ Excluded Assets ”).
On or prior to the Closing Date, subject to the rights of the
Members of Property and Drilling (including, without limitation,
rights to distributions) and other restrictions, terms and
conditions of the Operating Agreement of Property or Amended and
Restated Operating Agreement of Drilling, as each may have been
amended through the Closing Date, CKB and Wilson shall have the
right, at their own expense and at their own risk, to withdraw all
of the Excluded Assets from Drilling and Property.
(g) Retained Liabilities .
CKB and Wilson shall be responsible for and shall pay any and all
liabilities, including, but not limited to, accounts payables,
payroll and payroll tax liabilities of Drilling and Property
incurred prior to the period ending as of 10:00 p.m. Central
Standard Time on Sunday, July 17, 2005 (the “Cut-off
Date”).
(h) Taxes . CKB and Wilson
have duly and timely filed all tax returns and reports required to
be filed by such Party prior to the date of this Agreement
(collectively, the “ Returns ”) and have duly
and timely paid all taxes that have been incurred or are due and
payable pursuant to such Returns or pursuant to any assessment with
respect to taxes in such jurisdictions, whether or not in
connection with such Returns. No deficiency or proposed adjustment
which has not been settled or otherwise resolved for any amount of
tax has been proposed, asserted or assessed by any taxing authority
against CKB or Wilson. There is no action, suit, taxing authority
proceeding, or audit now in progress, pending or threatened against
CKB or Wilson, and there are no liens for taxes (other than for
current taxes not yet due and payable) against such
Party.
(i) No Pending Transactions .
Except for this Agreement and except for the restrictions, terms
and conditions of the Operating Agreement of Property or Amended
and Restated Operating Agreement of Drilling, as each may have been
amended through the Closing Date, which has been previously
provided to Bronco, neither CKB nor Wilson are a party to or bound
by (1) any agreement, undertaking, commitment, Contract to sell,
transfer, or otherwise dispose of any equity interest in Drilling
or Property nor (2) any other Contract with respect to any equity
securities of Property or Drilling.
(j) Solvency . No insolvency
proceedings of any character, including, without limitation,
bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or involuntary, involving CKB
or Wilson (or any of their respective general or limited partners)
as a debtor are pending, or to CKB and Wilson’s knowledge,
threatened, and neither
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CKB nor Wilson (or any of their
respective general or limited partners) has made any assignment for
the benefit of creditors or taken any action with a view to, or
which would constitute the basis for the institution of, any such
insolvency proceedings. After giving effect to the transactions
contemplated by this Agreement (i) the fair market value of the
assets retained by each of CKB and Wilson will exceed the amount
that will be required to be paid on or in respect of the existing
debts and other liabilities (including contingent liabilities)
retained by each of CKB and Wilson as they mature, (ii) the assets
of each of CKB and Wilson will not constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted, including the capital needs of each of CKB and Wilson,
(iii) neither CKB nor Wilson intends to incur debts beyond its
ability to pay such debts as they mature, (iv) neither CKB nor
Wilson have made any conveyance or transfer and has not incurred
any obligation with any intent to hinder, delay or defraud any of
its creditors or any other entity or person, and (v) CKB and Wilson
acknowledge that the transactions contemplated by this Agreement
have been entered into on terms which are commercially
reasonably.
4.2 Representations and
Warranties Regarding Drilling and Property .
(a) Organization . Each of
Drilling and Property is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of Oklahoma and has all requisite limited liability
company power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, to
own or use the properties and assets that it purports to own or use
and to perform all of its obligations under the Material Contracts
(as defined herein). Each of Drilling and Property is duly
qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the
failure to be so qualified and in good standing would not,
individually or in the aggregate, have a Material Adverse Effect.
True, correct and complete copies of the charter documents and
operating agreements of each of Drilling and Property have been
furnished to Bronco and such documents reflect all amendments made
thereto at any time prior to the date of this Agreement. For all
purposes herein, “ Material Adverse Effect ”
shall mean any state or states of fact, condition or conditions,
event or events, circumstance or circumstances, change or changes,
or effect or effects that individually or in the aggregate
(including, without limitation, an aggregate combination of one or
more of the foregoing whether or not related to each other or
involving or affecting the same or different representations,
warranties and/or covenants) are materially adverse to (a) the
business, condition (financial or otherwise), results of operations
or prospects of the business or the assets of Drilling and Property
or (b) the ability of CKB or Wilson to, or their respective general
partners, consummate the transactions contemplated by this
Agreement.
(b) No Conflicts; Consents .
The execution and delivery of this Agreement and each Seller
Document and the consummation of the transactions contemplated by
this Agreement and the Seller Documents will not: (i) violate or
conflict with any provision of the organizational documents, as
amended, of Drilling or Property; (ii) violate or conflict with any
constitution, statute, regulation, rule, injunction, judgment,
order, permit, decree, ruling, charge, or other restriction of any
government, governmental agency, court or arbitrator to which
Drilling or Property or their respective assets are subject; (iii)
conflict with, result in a breach of, constitute a default under
(or with notice or the lapse of time or both could result in a
breach of
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or constitute a default), result in
the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice or consent
under any agreement, contract, lease, license, instrument, or other
arrangement to which Drilling or Property is a party or bound or to
which any of their respective assets are subject; (iv) that could
result in the creation or imposition of any lien, security interest
or encumbrance in, to or on the Real Property (defined below) or
any other asset of Drilling or Property; or (v) require Drilling or
Property to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or
governmental agency, creditor or other third party in order to
consummate the transactions contemplated by this Agreement or the
Seller Documents.
(c) Compliance with Laws and
Permits . To the knowledge of CKB and Wilson, Drilling and
Property have conducted their respective business so as to
materially comply with, and are in material compliance with, all
applicable laws, rules and regulations, of all applicable
governmental authorities, including, without limitation, any
applicable laws, rules, regulations, ordinances, codes, orders,
judgments or decrees as to hiring, employment, environmental,
health and/or safety matters, the noncompliance with which could
have a Material Adverse Effect. To their knowledge, each of
Drilling and Property has all of the licenses, permits and other
governmental authorizations required for the operation of the
business of Drilling and Property as conducted as of the date of
this Agreement (the “ Permits ”), each of which
is identified on Schedule 4.2(c) .
(d) Financial Statements and
Books and Records .
(i) CKB and Wilson have delivered to
Bronco copies of the May 31, 2005 balance sheet of Drilling and
Property, as attached hereto as Schedule 4.2(d) (the “
Balance Sheet ”). The Balance Sheet fairly presents
the financial position of Drilling and Property as of its date and
has been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. The books and records of
Drilling and Property are complete and correct in all material
respects.
(ii) CKB and Wilson have delivered
to Bronco copies of income statements of Drilling and Property for
the 12-month periods ended December 31, 2004 and 2003 (or such
portion of such periods as Property was in existence) and for the
five-month periods ended May 30, 2005 and 2004, as attached hereto
as Schedule 4.2(d) (the “ Income Statements
”). The Income Statements fairly present the results of
operations of Drilling and Property for the periods covered thereby
and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis, except as
otherwise noted therein and, with respect to the interim Income
Statements, except for footnotes and for normal year-end
adjustments the effect of which, in the aggregate, would not be
material.
(iii) Except as set forth in
Schedule 4.2(d) , neither Drilling nor Property has any
liability or obligation of any kind or nature (fixed or contingent)
that is required to be reflected on a Balance Sheet or described in
the accompanying footnotes, in accordance with generally accepted
accounting principles, which is not reflected, reserved against or
disclosed in the Balance Sheets and accompanying footnotes,
except
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for customary accounts payable and
accrued business expenses incurred since May 31, 2005 in the
ordinary and customary course of business.
(e) Absence of Certain Changes or
Events . Except as set forth in Schedule 4.2(e) , since
May 31, 2005, neither Drilling nor Property has (a) suffered any
damage, destruction or casualty loss adversely affecting the assets
or the business of Drilling or Property; (b) incurred or discharged
any obligation or liability or entered into any other transaction
except in the ordinary course of business; (c) suffered any change
in its business, financial condition or in its relationship with
its suppliers, customers, distributors, lessors, licensors,
licensees or other third parties; (d) increased the rate or terms
of compensation or benefits payable to or to become payable by it
to its directors, officers or employees or increased the rate or
terms of any bonus, pension or other employee benefit plan covering
any of its directors, officers or employees; (e) incurred any
indebtedness for borrowed money; (f) forgiven or canceled any
indebtedness owing to it or waived any claims or rights of value,
(g) sold, leased, licensed or otherwise disposed of any of its
assets; (h) created or assumed any mortgage, lien security interest
or other encumbrance on any of the assets or Real Property; (i)
entered into, amended or terminated any Material Contract or
Permits; (j) suffered any Material Adverse Effect; or (k) committed
pursuant to a legally binding agreement to do any of the
foregoing.
(f) Membership Interest . The
authorized, issued and outstanding equity interest of Drilling and
Property and any other subsidiary of Drilling and Property and the
legal owner of such equity interest is set forth on Schedule
4.2(f) hereto (“ Equity Interests ”). The
Drilling Interests represent fifty-six percent (56%) of the issued
and outstanding membership interests and units in Drilling, and the
Property Interests represent fifty-six percent (56%) of the issued
and outstanding membership interests and units in Property. All of
the issued and outstanding Equity Interest: (a) have been duly
authorized and are validly issued and fully paid, (b) were issued
in compliance with all applicable state and federal securities
laws, (c) were not issued in breach of any (i) options, warrants,
convertible securities, exchangeable securities, subscription
rights, conversion rights, exchange rights, or other Contracts that
could require a person to issue any of its equity interests or to
sell any equity interests it owns in another person; (ii) other
securities convertible into, exchangeable or exercisable for, or
representing the right to subscribe for any equity interest of a
person or owned by a person; (iii) statutory pre-emptive rights or
other pre-emptive rights; and (iv) stock appreciation rights,
phantom stock, profit participation, or other similar rights
(“ Commitments ”), and (d) are held of record by
the respective owners as set forth in Schedule 4.2(f ). No
additional Commitments will arise in connection with the
consummation of the transactions contemplated by this Agreement.
There are no Contracts with respect to the voting, transfer or
issuance of the Equity Interests. Neither Drilling nor Property are
obligated to redeem or otherwise acquire any of its outstanding
Equity Interests.
(g) Indebtedness .
Schedule 4.2(g) sets forth a complete and accurate list and
description of all instruments or other documents relating to any
direct or indirect indebtedness for borrowed money of Drilling or
Property, including any loan agreements, indentures, mortgages,
pledges, hypothecations, deeds of trust, conditional sale or title
retention agreements, security agreements, equipment financing
obligations or guaranties, or other sources of contingent liability
in respect of any indebtedness or obligations to any other person,
or letters of intent or commitment letters with respect to same as
well as indebtedness by way of
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lease-purchase arrangements,
guarantees, undertakings on which others rely in extending credit
and all conditional sales contracts, chattel mortgages and other
security arrangements with respect to personal property used or
owned by Drilling or Property (collectively “
Indebtedness ”). Bronco has requested, and CKB and
Wilson have made available to Bronco a true, correct, and complete
copy of each of the items listed on Schedule 4.2(g)
.
(h) Real Property . Set forth
in Schedule 4.2(h) hereto is a complete and accurate
description of each parcel of real property owned by Drilling or
Property (“ Real Property ”), including any
leases, easements, covenants, rights of way or similar
restrictions, and Drilling and Property does not own, lease nor
occupy any other real property. Drilling or Property, as the case
may be, has good and indefeasible fee simple title to the Real
Property, free and clear of any order, security interest, contract,
arrangement, letter of intent, promise, obligation, right,
instrument, document, or other similar understanding, whether
written or oral (“ Contract ”), easement,
covenant, community property interest, equitable interest, right of
first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership (“
Encumbrances ”) except for special assessments not yet
delinquent and recorded easements or covenants which do not impair
the current use, occupancy, value, or the marketability of title of
the Real Property. There are no pending or threatened actions (or
any basis therefor) relating to the property or other matters
affecting adversely the current use, occupancy, or value of the
Real Property. Except as set forth in Schedule 4.2(h) , the
buildings and all fixtures and improvements located on the Real
Property are in good operating condition, ordinary wear and tear
excepted. Drilling and Property, as the case may be, has received
all permits, licenses, certificates, approvals, consents, notices,
waivers, franchises, registrations, filings, or other similar
authorizations required by any applicable law, governmental body or
Contract, required in connection with the ownership or operation of
the Real Property and all facilities thereon. Drilling and Property
are not in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to
the operation of such properties, the violation of which may have a
Material Adverse Effect, and Drilling or Property have not received
any notice of violation with which it has not complied or is not
taking steps to comply. Copies of all such notices and permits are
attached hereto as Schedule 4.2(h) .
(i) Title to Assets .
Drilling or Property has good and indefeasible title to all of the
assets, properties and rights that it owns or purports to own, free
and clear of all Encumbrances, except Permitted Liens. Drilling or
Property has a valid leasehold interest or a royalty-free license
to all of the assets, properties and rights that it leases or
licenses or purports to lease or license. As used in this
Agreement, the term “ Permitted Liens ” shall
mean and include (i) those exceptions to title to the pr
