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Exhibit 10.16
ASSET SALE AGREEMENT
________________________________________________
Dated as of April 1, 2007
between
SILVER STAR ENERGY, INC.
and
ARCHER EXPLORATION, INC
1
ASSET SALE AGREEMENT
LIST OF EXHIBITS
LETTER
TITLE
A
Hood - Franklin Gas Field (Oil & Gas
Land Map)
B
List of Leases
C
List of Wells
D
Personal Property
E
Contracts Transferred
F
Permits
G
Quitclaim Deed
H
Bill of Sale
I
Assignment and Assumption of Agreements
J
Litigation of Claims
K
Non Compliant Permits
L
Defaulted Leases, Contracts, Taxes
M
Unpaid Taxes
N
Consents and Preferential Rights
2
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.
RECITALS
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:
1.
Sale and Purchase of Assets .
1.1
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:
(a)
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”);
(b)
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;
(c)
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;
(d)
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”);
(e)
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;
(f)
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”);
(g)
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
(h)
The Property, Wells, Personal Property,
Hydrocarbons, Applicable Contracts, Records, and Permits, are
hereinafter collectively referred to as the
“Assets.”
1.2
Exclusions and Reservations .
There are no Assets or possessions related to the Hood
– Franklin Gas Field excluded from this transaction.
2.
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.
3.
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.
4.
Transfer Date . The
“Transfer Date” of the sale shall be the same time and
date of the Closing.
5.
Purchase Price, Payment and
Allocations .
5.1
Purchase Price . Buyer at
Closing shall pay to Seller, as consideration for the Assets, a
purchase price (“Purchase Price”) of
$3,100,000.00.
(a)
The amount of $100.00 will be paid at the
opening of the escrow account and will serve as the
“Earnest Money Deposit”.
(b)
The balance of the Purchase Price, that being
$3,099,900, will be paid to Seller at the Closing.
(c)
Escrow fees are to be split equally by Buyer and
Seller and are not to be considered a part of the purchase
price.
5.2
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.
6.
Accounting .
6.1
Closing Statement .
(a)
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.
(b)
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.
6.2
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.
6.3
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.
7.
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.
8.
Sale and Transfer of Ownership .
8.1
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.
8.2
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.
8.3
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.
9.
Closing .
9.1
Deliveries at Closing .
(a)
Buyer shall deliver to Seller at or before Closing
the following:
(i)
The Purchase Price;
(ii)
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
(iii)
Such other instruments or documents as Seller
may reasonably request of Buyer to consummate the transaction
contemplated herein.
(b)
Seller shall deliver to Buyer at Closing the
following:
(i)
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;
(ii)
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;
(iii)
Duplicate original Assignments and Assumption of
Agreements, attached as Exhibit I , concerning the
Property, Wells, Hydrocarbons, Applicable Contracts and Permits
duly executed by Seller;
(iv)
Such other instruments or documents as Buyer may
reasonably request of Seller to consummate the transaction
contemplated herein.
9.2
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:
(a)
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;
(b)
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.
(c)
Buyer shall have delivered the funds and
documents described in Section 9.1(a); and
(d)
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.
9.3
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:
(a)
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;
(b)
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;
(c)
Seller shall have delivered the documents
described in Section 9.1(b);
(d)
Seller shall deliver all assets free and clear
of all encumbrances; and
(e)
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.
10.
Representations and Warranties of
Seller.
Seller represents and warrants to Buyer as
follows:
10.1
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.
10.2
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.
10.3
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.
10.4
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.
(a)
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.
10.5
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.
10.6.
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):
(a)
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;
(b)
no default exists under the Applicable Contracts
related to the Property; and
(c)
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.
10.7
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.
10.8
Clear Title. Title to all
assets is free and clear of all encumbrances.
11.
Representations and Warranties of
Buyer .
Buyer represents and warrants to Seller as
follows:
11.1
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.
11.2
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.
11.3
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.
11.4
Financial Condition. Buyer
has the financial resources to perform its obligations and
consummate the transactions contemplated under this
Agreement.
12.
Title Matters .
12.1
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 simil
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