Notices of Title Defects. (i) If Purchaser discovers any Title Defect affecting any Asset, Purchaser shall notify Seller reasonably promptly, but no later than the expiration of the Examination Period, of such alleged Title Defect. To be effective, such notice must (A) be in writing, (B) be received by Seller prior to the expiration of the Examination Period, (C) describe the Title Defect in reasonable detail, (D) provide reasonable supporting documentation identifying the Title Defect, (E) identify the specific Asset or Assets affected by such Title Defect (including, with respect to a Company Lease, the Subject Formations affected thereby), and (F) include the value of such Title Defect as determined by Purchaser (such notice, a “Notice of Defective Interests”). Without limiting Purchaser’s rights under Article X with respect to a breach of the express representations in Section 7.1(f), Section 4.13 or Section 4.15, any matters that may otherwise constitute Title Defects, but of which Seller has not been specifically notified by Purchaser in accordance with the foregoing, shall be deemed to have been waived by Purchaser for all purposes and shall constitute Permitted Encumbrances. Purchaser shall also, promptly upon discovery, furnish Seller with written notice of any Title Benefit which is discovered by any of Purchaser’s or any of its Affiliates’ employees, title attorneys, landmen or other title examiners while conducting Purchaser’s due diligence with respect to the Assets during the Examination Period. (ii) Upon the receipt of a Notice of Defective Interests from Purchaser, Seller and Purchaser shall attempt to mutually agree on a resolution with respect to any alleged Title Defect. Seller shall have the option, but not the obligation, at the sole cost of Seller, to attempt to cure or remove any such Title Defect prior to the date that is ninety (90) days after the Closing (the “Cure Period”). (iii) Notwithstanding anything in Section 6.1 to the contrary, with Purchaser’s prior written consent (which consent shall be in Purchaser’s sole and total discretion), a cure (or a partial cure) may include (A) obtaining new leases to replace Allocated Value lost due to a Title Defect with respect to a Company Lease (“Replacement Acreage”), provided (1) such new leases cover lands in a governmental section in which the Company owns an interest and cover geologic depths that include all of the Subject Formation(s) being replaced, (2) if the Company is the operator with respect to the Company Lease(s) being replaced, then the Company must be the operator with respect to the new leases replacing each such Company Lease, (3) the value of the new leases must be equal to or greater than the per Net Acre Allocated Value of the Company Leases being replaced as to the applicable Subject Formations, where the value of the new leases shall be equal to the product of (X) the average per Net Acre Allocated Value of the Company Leases in the applicable section multiplied by (Y) the Net Acres associated with such new leases, (4) each new lease must have no less Net Revenue Interest as the Company Lease being replaced and the other terms and conditions of the new leases shall be substantially similar to the terms of the Company Leases being replaced, including substantially similar surface use restrictions (provided, as to duration, a lease with at least a remaining three year paid-up primary term (from the Execution Date) shall be deemed substantially similar to a Company Lease held by production), (5) Title Defects relating to a Net Revenue Interest deficiency shall be cured with new leases with a Net Revenue Interest sufficient to cure such Title Defect, (6) Title Defects relating to a Net Acre deficiency shall be replaced with new leases with Net Acres sufficient to cure such Title Defect and (7) Title Defects relating to excess Working Interest shall be replaced with new leases with Working Interests sufficiently low to cure such Title Defect, in each case as applicable, and/or (B) obtaining additional Net Acres or Net Revenue Interest in a Company Lease to replace Allocated Value lost due to a Title Defect (“Replacement Interests”) provided such Company Lease is located in the same governmental section in which the applicable Asset affected by the Title Defect is located. To the extent new leases or interests utilized as Replacement Acreage or Replacement Interests, respectively, contain interests in excess of the interest necessary to cure a given Title Defect, such excess interest shall be accounted for as a Title Benefit (but only to the extent otherwise meeting the requirements of Section 7.1(g) with respect to Title Benefits). (iv) Unless Seller and Purchaser agree otherwise, the value attributable to each Title Defect (the “Title Defect Value”) that is asserted by Purchaser in the Title Defect notices shall be determined based upon the criteria set forth below, without duplication: (A) If the Title Defect is a lien upon any Asset, the Title Defect Value is the amount necessary to be paid to remove the lien from the affected Asset. (B) If the Title Defect affecting a Company Lease causes the actual Net Acres covered by such Company Lease to be less than the Net Acres set forth on Annex B for such Company Lease, then the Title Defect Value shall be an amount equal to such difference in such Net Acres multiplied by the per Net Acre price as determined from the Allocated Value of the affected Subject Formations for such Company Lease. (C) If the Title Defect is that the Net Revenue Interest for a Company Lease is less than the Net Revenue Interest for such Company Lease as set forth on Annex B, then the Title Defect Value shall be an amount equal to the Allocated Value of the applicable Subject Formation for such Company Lease multiplied by the difference of (A) 1 minus (B) a fraction, the numerator of which is the actual Net Revenue Interest of such Company Lease and the denominator of which is Net Revenue Interest for such Company Lease as set forth on Annex B. (D) If the Title Defect is that the Net Revenue Interest for a Company Well is less than the Net Revenue Interest for such Company Well as set forth on Annex C, then the Title Defect Value shall be an amount equal to the Allocated Value for such Company Well multiplied by the difference of (A) 1 minus (B) a fraction, the numerator of which is the actual Net Revenue Interest of such Company Well and the denominator of which is the Net Revenue Interest for such Company Well as set forth on Annex C. (E) If a Title Defect is of a type not described in clauses “(A)” through “(D)” above, the Title Defect Value shall be determined by taking into account the Allocated Value of the Company Well or applicable Subject Formation of the Company Lease, the portion of the Company Well or Company Lease adversely affected by the Title Defect, the legal effect of the Title Defect, the potential discounted economic effect of the Title Defect over the life of the Company Well or Company Lease, the values placed upon the Title Defect by Purchaser and Seller and such other factors as are necessary to make a proper evaluation. (v) The Title Defect Value of a Title Defect shall be determined without duplication of any costs or losses included in another Title Defect Value hereunder. (vi) Notwithstanding anything herein to the contrary, in no event shall a Title Defect Value or claim under the special warranty of title set forth in Section 7.1(f) exceed the Allocated Value of the applicable Subject Formation of the Company Lease, Company Well or other Asset affected thereby.
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Sources: Securities Purchase Agreement (WPX Energy, Inc.), Securities Purchase Agreement (WPX Energy, Inc.)