This Asset Purchase Agreement involves
Title: ASSET SALE AGREEMENT
Governing Law: California Date: 6/8/2007
Industry: Oil Well Services and Equipment Sector: Energy
ASSET SALE AGREEMENT
Dated as of April 1, 2007
SILVER STAR ENERGY, INC.
ARCHER EXPLORATION, INC
ASSET SALE AGREEMENT
LIST OF EXHIBITS
Hood - Franklin Gas Field (Oil & Gas Land Map)
List of Leases
List of Wells
Bill of Sale
Assignment and Assumption of Agreements
Litigation of Claims
Non Compliant Permits
Defaulted Leases, Contracts, Taxes
Consents and Preferential Rights
ASSET SALE AGREEMENT
ASSET SALE AGREEMENT
THIS ASSET SALE AGREEMENT (“Agreement”), made as of the ____ day of April, between SILVER STAR ENERGY, INC., a Nevada corporation (“Seller”), with a place of business at 9595 Wilshire Blvd. #900 Beverly Hills, CA 90212; and ARCHER EXPLORATION, INC., a Nevada corporation (“Buyer”), with a place of business at 1701 Westwind Dr., Suite 125, Bakersfield, California 93301.
Seller desires to sell to Buyer and Buyer desires to purchase from Seller on the terms and conditions set forth in this Agreement those certain oil and gas interests, operating rights, real property, personal property, fixtures and improvements located on the Seller’s real property or leasehold interest and associated assets located in Sacramento County, California. Accordingly, in consideration of the mutual promises contained herein, the mutual benefits to be derived by each party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:
Sale and Purchase of Assets .
Assets to be Sold . Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase and receive at “Closing” all of Seller’s right, title and interest in and to the following:
The oil and gas leases, surface leases and royalties in and to the Hood - Franklin Field generally depicted as to location on the map identified as Exhibit A hereto and more particularly described on the attached “List of Leases” identified as Exhibit B; (collectively, “Property”);
All oil and gas wells, salt water disposal wells, water wells, injection wells and other wells (collectively “Wells”) located on the Property described on Exhibit C entitled Wells Transferred;
All equipment, machinery, tanks, fixtures, flowlines, roads, pipelines, pole lines, appurtenances, materials, improvements, and other real, personal, and mixed property (collectively “Personal Property”) located on or used in the operations of or relating to the production on the Property described on Exhibit D entitled Personal Property Transferred;
All natural gas, casinghead gas, drip gasoline, natural gasoline, natural gas liquids, condensate products, crude oil and other hydrocarbons, whether gaseous or liquid, produced from or allocable to the Property after the Effective Date (“Hydrocarbons”);
All contracts, permits, road use agreements, rights-of-way, easements, licenses, servitudes and agreements relating to the Property, Personal Property and Wells, or the ownership or operation thereof, or the production, treatment, sale, storage or disposal of the Hydrocarbons, water, or substances associated therewith, together with all rights, obligations, privileges, and benefits of Seller hereunder (“Applicable Contracts”) arising on or after the Effective Date described on Exhibit E entitled Applicable Contracts Transferred;
Originals (if in the possession of Seller or its affiliates, and with a set of copies to be maintained by Seller) of all of the files, records, information and materials relating to the Property, Wells, Personal Property, Hydrocarbons and Applicable Contracts, owned by Seller and which Seller is not prohibited from transferring to Buyer by law or existing contractual relationship (collectively, “Records”), including, without limitation: (i) lease, land and title records (including abstracts of title, title opinions, certificates of title, title curative documents, division orders, and division order files) (“Land Files”), (ii) the Applicable Contracts; (iii) geophysical, geological, engineering and other technical data, if any, relating to the Wells and Property; and (iv) all well, environmental, and production files (the “Well Files”);
All franchises, licenses, permits, approvals, consents, certificates and other authorizations and other rights granted by governmental authorities that relate to the Property or the ownership or operation of any thereof (“Permits”) described on Exhibit F entitled Permits Transferred; and
The Property, Wells, Personal Property, Hydrocarbons, Applicable Contracts, Records, and Permits, are hereinafter collectively referred to as the “Assets.”
Exclusions and Reservations . There are no Assets or possessions related to the Hood – Franklin Gas Field excluded from this transaction.
Closing . “Closing” shall mean the date on which the Purchase Price is paid to Seller and the conveyance instruments referred to in Section 9 are delivered to Buyer. Closing shall occur at office of California Escrow Company located at 1100 Mohawk, Bakersfield, California, on May 1, 2007, at 9:00 a.m. Pacific Standard Time, unless otherwise agreed to in writing by the parties.
Effective Date . The effective date of the sale (“Effective Date”) shall be as of 7:00 a.m. Pacific Standard Time on April 1, 2007.
Transfer Date . The “Transfer Date” of the sale shall be the same time and date of the Closing.
Purchase Price, Payment and Allocations .
Purchase Price . Buyer at Closing shall pay to Seller, as consideration for the Assets, a purchase price (“Purchase Price”) of $3,100,000.00.
The amount of $100.00 will be paid at the opening of the escrow account and will serve as the “Earnest Money Deposit”.
The balance of the Purchase Price, that being $3,099,900, will be paid to Seller at the Closing.
Escrow fees are to be split equally by Buyer and Seller and are not to be considered a part of the purchase price.
Allocations . Buyer and Seller herein agree upon the allocation of the Purchase Price among the Assets (the “Allocated Values”). The Allocated Values are: (a) 2.0% for the surface Assets; (b) 98.0% for the oil and gas Assets; and (c) 0.0% for the Building. The Seller and the Buyer each agree to file IRS Form 8594 and all tax returns in accordance with the Allocated Values.
Closing Statement .
Escrow Company shall deliver to Buyer and Seller not less than one (1) business day before the Transfer Date a statement (“Closing Statement”) setting forth all cost and revenues from operations prior to the Effective Date.
Buyer shall prepare and deliver to Escrow Company a statement (“Closing Statement”) setting forth and reconciling the actual expenses and revenues attributable to the period prior to the Effective Date. The Closing Statement shall be prepared in accordance with customary accounting principles used in the oil and gas industry.
Arbitration of Closing Statement . IF SELLER AND BUYER CANNOT AGREE UPON THE CLOSING STATEMENT, THE BAKERSFIELD OFFICE OF A MUTUALLY AGREED UPON ACCOUNTING FIRM SHALL BE DESIGNATED TO ACT AS AN ARBITRATOR AND TO DECIDE ALL POINTS OF DISAGREEMENT WITH RESPECT TO THE FINAL SETTLEMENT STATEMENT, SUCH DECISION TO BE BINDING ON BOTH PARTIES. IF SUCH FIRM IS UNWILLING OR UNABLE TO SERVE IN SUCH CAPACITY, SELLER AND BUYER SHALL ATTEMPT TO, IN GOOD FAITH, DESIGNATE ANOTHER ACCEPTABLE PERSON AS THE SOLE ARBITRATOR UNDER THIS SECTION 6. IF THE PARTIES ARE UNABLE TO AGREE UPON THE DESIGNATION OF A PERSON AS SUBSTITUTE ARBITRATOR, THEN SELLER OR BUYER, OR BOTH OF THEM, MAY IN WRITING REQUEST THE JUDGE OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA SENIOR IN TERM OF SERVICE TO APPOINT THE SUBSTITUTE ARBITRATOR. THE ARBITRATION SHALL BE CONDUCTED PURSUANT TO THE TERMS OF SECTION 32.1.
Payment . Within five (5) business days after the agreement of Seller and Buyer on the Closing Statement or after the decision of the arbitrator, Buyer or Seller, as the case may be, shall promptly make a cash payment to the other equal to the sums as may be found to be due in the Closing Statement. Thereafter, additional proceeds received by or expenses paid by either Seller or Buyer for or on behalf of the other shall be settled by invoicing the other party for expenses paid or remitting to the other party any proceeds received within 10 days of receipt of such invoice.
Sales Tax and Use Taxes . Buyer shall be responsible for all sales, use, transfer and similar taxes arising out of the sale of the Assets. Upon request of Seller, Buyer shall provide evidence of payment of such taxes and shall hold harmless Seller from same in accordance with this Section. If Buyer holds a direct payment permit which is valid at the time of the Closing, Buyer shall assume all responsibility for remitting to the appropriate taxing authority the state and local sales and use taxes due, and shall provide Seller with any exemption certificates or other documentation required under applicable law in lieu of paying Seller the taxes due. Buyer shall hold harmless and shall indemnify Seller for any sales or use taxes assessed against Seller by any taxing authority in respect of this sale, including the amounts of any penalties, interest and attorneys’ fee, unless such penalties, interest or attorney’s fees accrue through the sole fault or negligence of Seller. Any reasonable legal expenses incurred by Seller to reduce or avoid any of the aforementioned taxes, shall be paid or reimbursed by Buyer. Buyer shall make timely payment of any taxes required to be paid by it hereunder subject to any dispute or contest by Buyer with any taxing authority related to such taxes.
Sale and Transfer of Ownership .
Assets Sold As Is . SUBJECT TO THE TERMS OF THIS AGREEMENT, THE ASSETS TO BE CONVEYED BY SELLER TO BUYER SHALL BE CONVEYED “AS IS, WHERE IS” PURSUANT TO EXHIBITS G, H AND I (I.E., THE QUITCLAIM DEED, THE BILLS OF SALE, AND THE ASSIGNMENT AND ASSUMPTION OF AGREEMENTS, RESPECTIVELY), AND ACCORDING TO THE REQUIREMENTS OF ANY FEDERAL, STATE OR LOCAL AGENCY.
Assets Sold Subject to All Servitudes . Seller shall deliver the Assets to Buyer on the Transfer Date subject to the reservations, limitations, conditions and restrictions in existence on the Effective Date and contained in this Agreement and the instruments of conveyance referenced herein.
Notices and Consents. Buyer shall be responsible for obtaining all necessary governmental and contractual consents, and providing all required notices in a timely fashion. Seller agrees, at Buyer’s request, to assist Buyer in obtaining such consents.
Deliveries at Closing .
Buyer shall deliver to Seller at or before Closing the following:
The Purchase Price;
Duplicate original Assignments and Assumption of Agreements, as attached as Exhibit I , concerning the Property, Wells, Hydrocarbons, Applicable Contracts and Permits duly executed by Buyer; and
Such other instruments or documents as Seller may reasonably request of Buyer to consummate the transaction contemplated herein.
Seller shall deliver to Buyer at Closing the following:
Original Quitclaim Deed, attached as Exhibit G , in favor of Buyer conveying the Property duly executed and acknowledged by Seller, which will be recorded by Buyer at Buyer’s expense;
Bill of Sale, attached as Exhibit H , in favor of Buyer conveying the Personal Property located on the Property and the Records, duly executed by Seller;
Duplicate original Assignments and Assumption of Agreements, attached as Exhibit I , concerning the Property, Wells, Hydrocarbons, Applicable Contracts and Permits duly executed by Seller;
Such other instruments or documents as Buyer may reasonably request of Seller to consummate the transaction contemplated herein.
Seller’s Conditions Precedent to Closing . The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to each of the following conditions:
Buyer shall have performed and complied with all terms of this Agreement required to be performed or complied with by Buyer prior to Closing and shall not otherwise be in breach;
No action or proceeding by or before any governmental authority shall have been instituted or threatened (and not subsequently dismissed, settled or otherwise terminated) which might restrain, prohibit or invalidate any of the transactions contemplated by this Agreement.
Buyer shall have delivered the funds and documents described in Section 9.1(a); and
The representations and warranties of Buyer contained in this Agreement shall be true and accurate in all material respects on the Closing Date as though made on and as of such date.
Buyer’s Conditions Precedent to Closing . The obligations of Buyer to consummate the transactions contemplated by this Agreement are subject to each of the following conditions:
Seller shall have performed and complied with all terms of this Agreement required to be performed or complied with by Seller prior to Closing and shall not otherwise be in breach;
No material failure of Seller’s title to the Property or failure of the parties to secure a material consent necessary for Buyer to acquire Seller’s Assets pursuant to this Agreement shall have occurred;
Seller shall have delivered the documents described in Section 9.1(b);
Seller shall deliver all assets free and clear of all encumbrances; and
The representations and warranties of Seller contained in this Agreement shall be true and accurate in all material respects on the Closing Date as though made on and as of such date.
Representations and Warranties of Seller.
Seller represents and warrants to Buyer as follows:
Organization . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and is duly qualified to transact business in California and in each jurisdiction where the nature and extent of its business and properties require the same in order for it to perform its obligations under this Agreement.
Authority and Authorization . Seller has full corporate power and authority to carry on its business as presently conducted, to execute, deliver and comply with the terms and provisions of this Agreement and to perform all of its obligations under this Agreement.
Enforceability . This Agreement has been duly executed and delivered on behalf of Seller and constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws relating to or affecting the enforcement of creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). At the Closing all documents and instruments required hereunder to be executed and delivered by Seller shall be duly executed and delivered and shall constitute legal, valid and binding obligations of Seller enforceable in accordance with their terms.
Litigation and Claims . Except as is set forth on Exhibit J Litigation and Claims or except for those items which would not have a Material Adverse Effect (a) no claim, demand, filing, investigation, administrative proceeding, action, suit or other legal proceeding is pending for which Seller has been personally served or received written notice of or for which Seller has actual knowledge of, or, to Seller’s Knowledge as defined herein, threatened, with respect to the Assets or the ownership or operation of any thereof, other than proceedings relating to the oil and gas industry generally and as to which Seller is not a named party; (b) no written notice from any governmental authority has been received by Seller (i) claiming any violation or repudiation of the Assets or any violation of any law, rule, regulation, ordinance, order, decision or decree of any governmental authority (ii) requiring any work, repairs, construction, alterations, installations, remediation, response, removal or abatement actions or restoration in connection with or related to the Assets or the ownership or operation of any thereof. As used in this Agreement, “Material Adverse Effect” shall mean a material adverse effect on the title, condition or use of the Assets or results of operations from the Assets taken as a whole.
Seller agrees to indemnify and hold Buyer harmless, including reasonable legal fees and costs, in the event that any Litigation or Claim is made in relation to this transaction or the Assets involved, whether currently known or unknown, or filed and or made at any time prior to one year from the date of this Asset Sales Agreement.
Compliance with Permits . Except as is set forth on Exhibit K entitled Noncompliance with Permits or except for those items which would not have a Material Adverse Effect, to Seller’s Knowledge (and without imputing constructive knowledge of any laws, rules, regulations, ordinances, orders, decisions and decrees): Permits with regard to the ownership or operation of the Assets have been obtained and maintained in effect and no violations exist in respect to such Permits.
Non default of Oil and Gas Leases, Contracts and Taxes . Except as is set forth on Exhibit L Defaulted Leases, Contracts and Taxes or except for those items which would not have a Material Adverse Effect, to Seller’s Knowledge (and without imputing constructive knowledge of any laws, rules, regulations, ordinances, orders, decision and decrees):
the oil and gas leases related to the Property are in full force and effect, no notice of default or demands have been received by Seller, and to Seller’s Knowledge all costs incurred in connection with the operation of the Assets have been fully paid and discharged in accordance with the terms of payment therefore, including rentals and royalties;
no default exists under the Applicable Contracts related to the Property; and
all taxes related to the Property and Building have been paid except those taxes which are non delinquent or are being contested in good faith by the Seller, as shown on Exhibit M entitled Unpaid Taxes.
Consents and Preferential Rights . Except as described in Exhibit N , entitled Consents to Assignments and Preferential Purchase Rights, the Assets are not subject to any consents to assignments or preferential rights to purchase.
Clear Title. Title to all assets is free and clear of all encumbrances.
Representations and Warranties of Buyer .
Buyer represents and warrants to Seller as follows:
Organization . Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, and is duly qualified to transact business in California and in each jurisdiction where the nature and extent of its business and properties require the same in order for it to perform its obligations under this Agreement.
Authority and Authorization . Buyer has full corporate power and authority to carry on its business as presently conducted, to execute, deliver and comply with the terms and provisions of this Agreement, and to perform its obligations under this Agreement.
Enforceability . This Agreement has been duly executed and delivered on behalf of Buyer and constitutes the legal, valid and binding obligation of Buyer enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency or other laws relating to or affecting the enforcement of creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). At the Closing all funds, documents and instruments required hereunder to be executed and delivered by Buyer shall be duly executed and delivered and shall constitute legal, valid and binding obligations of Buyer enforceable in accordance with their terms.
Financial Condition. Buyer has the financial resources to perform its obligations and consummate the transactions contemplated under this Agreement.
Title Matters .
Asset Title Review . Seller shall make available until Closing for Buyer’s review, such title information and abstracts as may then be available in Seller’s files. Seller also agrees to provide originals to Buyer of all documents, reports, or similar information, if available, in Seller’s files, which document and evidence Seller’s ownership of the real property and working interest portions of the Assets being conveyed hereunder, as well as copies of any contracts, agreements or similar documents which benefit or obligate Seller as to the Assets or the production there from, i.e., production purchase contracts with third parties including accounting records thereto. Seller shall not perform any additional title work, and any existing abstracts and title opinions will not be made current by Seller. NO WARRANTY OF ANY KIND IS MADE BY SELLER AS TO THE COMPLETENESS OR ACCURACY OF INFORMATION SO SUPPLIED, and Buyer agrees that any conclusions drawn there from shall be the result of its own independent review and judgment .
Limited Warranty of Title . The title to the Assets shall be subject to all matters appearing of record or that can be ascertained by an inspection thereof and shall be conveyed to Buyer without any warranty of title, express or implied, except that Seller will warrant clear title, for its interests in the Property, to Buyer against any action by any party claiming an interest in the Property or any part thereof by, through or under the Seller. The cost of title insurance, if requested by the Buyer, shall be borne by Buyer.
No Warranty as to Records . Buyer acknowledges the Records are transferred without warranty or representation as to accuracy or completeness. In no event shall the Seller have any liability whatsoever with respect to the use of or reliance on the Land Files and Well Files .
Right-of-Way Reservation . Buyer’s title shall be subject to all easements and rights-of-way of any kind or nature standing in the name of, reserved by or granted by Seller, Seller’s predecessors, subsidiaries or affiliates, any predecessor, subsidiary or affiliate, any predecessor, subsidiary or affiliate, related to the Assets, whether or not such rights appear of record and whether or not identifiable by inspection of the real property. Buyer’s title shall also be subject to all equipment, pipelines, power lines and other facilities used in association with such easements and rights-of-way.
Operation of the Assets Prior to Closing . From the date hereof until Closing, Seller, if within its reasonable power to do so: (1) shall not create any lien, security interest or other encumbrance with respect to its interest in the Assets or enter into any agreement for the sale, disposition or encumbrance of any of its interest in the Assets, or dedicate, sell, encumber or, witho