Common use of Purchase Price Adjustments for Title Defects Clause in Contracts

Purchase Price Adjustments for Title Defects. (a) No adjustment to the Purchase Price for Title Defects (other than Liens) shall be made unless and until the aggregate of all Title Defect Amounts exceeds one percent of the Purchase Price, and then only to the extent and in the amount that the aggregate of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible). (b) Buyer shall give Seller written notice of any Title Defect promptly after the discovery of such Title Defect but in no event later than September 19, 2008. Such notice shall be in writing and shall include: (x) a description of the Title Defect, (y) the Allocated Value of the Well or location affected by the Title Defect, and (z) the Title Defect Amount determined in good faith by the Buyer. With respect to a Well or location subject to a Title Defect, the amount by which such Well or location is impaired as a result of the existence of one or more Title Defects shall be the “Title Defect Amount”, which amount shall be determined as follows: (i) The Title Defect Amount with respect to a Well or location shall be determined by taking into consideration the Allocated Value of the Well or location subject to such Title Defect, the portion of the Well or location subject to such Title Defect, and the legal effect of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value of such Well or location without such Title Defect (taking into account the portion of the Allocated Value of the relevant Well or location). (c) Notwithstanding anything herein to the contrary, if Seller does not cure a Title Defect on or prior to the Closing, Seller shall have the option, by notice in writing to Buyer on or before the Closing, to (i) keep the Well or location affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or location, (ii) take no remedial or corrective action with respect to the Title Defect, in which event Seller agrees to indemnify Buyer against all costs and expenses that Buyer may incur in connection with same, (iii) convey the Well or location affected by the Title Defect to Buyer and, subject to Section 8.2(a), reduce the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”). (d) If Seller determines (or should Buyer, in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is greater than the Net Revenue Interest set forth in Schedule I, then the parties agree that the Cash Consideration shall be increased in an amount equal to the Allocated Value for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancy.

Purchase Price Adjustments for Title Defects. (a) No adjustment Buyer may, by delivery of written notice to the Purchase Price for Title Defects (other than Liens) shall be made unless and until the aggregate of all Title Defect Amounts exceeds one percent Seller of the Purchase Price, and then only to the extent and in the amount that the aggregate existence of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible). (b) Buyer shall give Seller written notice of any Title Defect promptly after the discovery of such Title Defect but in no event later than September 19, 2008. Such notice shall be in writing and shall include: (x) a description of the Title Defect, (y) request reduction of the purchase price for the Interest affected. Any such notice by Buyer shall include appropriate evidence to substantiate its position and shall be delivered to Seller on or before May 10, 1998. In the event any such notice is not timely delivered, Buyer shall thereafter have no right to claim a Title Defect; provided, however, Buyer shall retain its right to claim breaches of the special warranty of title contained in Section 22 hereof and the Assignment and ▇▇▇▇ of Sale delivered at Closing. Seller shall have until May 15, 1998, to cure any Title Defects. In the event Seller is unable to cure a Title Defect, Buyer and Seller shall meet and use their best efforts to agree on the validity of the claim and the amount of any required purchase price adjustment utilizing the Allocated Value for the Interest as set forth on Exhibit "A-1". In determining any required purchase price adjustment, it is the intent of the Well or location parties to include, when possible, only that portion of the Interest adversely affected by the Title Defect, and (z) the Title Defect Amount determined in good faith by the Buyer. With respect to a Well or location subject to a Title Defect, the amount by which such Well or location is impaired as a result of the existence of one or more Title Defects shall be the “Title Defect Amount”, which amount shall be determined as follows: (i) The Title Defect Amount with respect to a Well or location shall be determined by taking into consideration the Allocated Value of the Well or location subject to such Title Defect, the portion of the Well or location subject to such Title Defect, and the legal effect of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value of such Well or location without such Title Defect (taking into account the portion of the Allocated Value of the relevant Well or location). (c) Notwithstanding anything herein to the contrary, if Seller does not cure a Title Defect on or prior to the Closing, Seller shall have the option, by notice in writing to Buyer on or before the Closing, to (i) keep the Well or location affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or locationInterest cannot be determined directly from Exhibit "A-1" because the Title Defect is included within, but does not totally comprise, the Interest to which the Allocated Value relates, Buyer and Seller shall attempt to agree on a proportionate reduction of the Allocated Value. In the event the parties cannot mutually agree on the amount of a purchase price adjustment, Buyer shall have the right to (iii) take no remedial or corrective action accept the Interest with respect to the Title Defect, in which event Seller agrees or (ii) terminate this Agreement as to indemnify Buyer against all costs and expenses that Buyer may incur in connection with same, (iii) convey the Well or location Interest affected by the Title Defect to Buyer and, subject to Section 8.2(a), reduce the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (and receive a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”). (d) If Seller determines (or should Buyer, in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is greater than the Net Revenue Interest set forth in Schedule I, then the parties agree that the Cash Consideration shall be increased in an amount purchase price adjustment equal to the Allocated Value for the relevant Well multiplied by affected Interest (iii) Buyer and Seller shall have the percentage increase right to terminate this Agreement in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancyits entirety.

Purchase Price Adjustments for Title Defects. (a) No adjustment Buyer may, by delivery of written notice to Sellers of the Purchase Price existence of an alleged Title Defect, request reduction of the purchase price for Title Defects (other than Liens) shall be made unless and until the aggregate of all Interest affected. The Title Defect Amounts exceeds one percent of the Purchase Price, and then only to the extent and in the amount that the aggregate of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible). (b) Buyer shall give Seller written notice of any Title Defect promptly after the discovery of such Title Defect but in no event later than September 19, 2008. Such notice shall be in writing and shall include: (x) a description clearly indicate the nature of the Title Defect, (y) the Allocated Value Interest to which it relates, an explanation of the Well Title Defect including the supporting legal theories, the allocated value of the Interest as to which all or location some portion of which is affected by the Title Defect, and (z) the amount by which Buyer believes the value of the affected Interest has been reduced because of the Title Defect Amount determined in good faith by Defect, with the computation and information upon which Buyer's belief is based. With respect to In determining whether a Well or location subject to portion of an Interest contains a Title Defect, it is the amount by which such Well or location is impaired as a result intent of the existence parties to include, when possible, only that portion of one such Interest materially and adversely affected. If the value properly allocated to a Title Defect cannot be determined directly from Exhibit "B" because the Title Defect is included within, but does not totally comprise, the Interest to which the allocated value relates, Buyer and Sellers shall attempt, where feasible, to proportionately reduce the allocated value in Exhibit "B". (b) The Title Defect notice by Buyer shall be delivered to Sellers on or more before 5:00 p.m., March 13, 1997, except that Buyer shall, to the extent reasonably practicable and in addition to the Title Defect notice, notify Sellers immediately as it becomes aware of Title Defects while performing its due diligence review of the Interests. In the event any such notice is not timely delivered, all Title Defects shall be deemed waived for all purposes and Buyer shall thereafter have no right to claim Title Defects; and in the “event the Title Defect Amount”notice is timely delivered, which amount all Title Defects not claimed in such notice shall be determined as follows: (i) The deemed waived for all purposes. Sellers shall have the right, but not the obligation, to attempt to cure any alleged Title Defect Amount with respect prior to a Well Closing. In the event Sellers are unable or location shall be determined by taking into consideration the Allocated Value of the Well or location subject unwilling to such cure an alleged Title Defect, Buyer and Sellers shall meet and use their reasonable efforts to agree on the portion validity of the Well or location subject to such Title Defect, and the legal effect claim of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value amount of any required purchase price adjustment. In evaluating the significance of a fact, circumstance or condition for purposes of determining an alleged Title Defect, due consideration shall be given to the length of time that the particular Lease has been producing hydrocarbon substances and whether such Well fact, circumstance or location without such Title Defect (taking into account the portion condition is of the Allocated Value type expected to be encountered in the area involved, and is usual and customarily acceptable to reasonable and prudent persons engaged in the business of the relevant Well or location)ownership, development, and operation of oil and gas properties with knowledge of all of the facts and appreciation of their legal significance. (c) Notwithstanding anything herein to In the contraryevent the parties cannot mutually agree on a purchase price adjustment for an alleged Title Defect, if Seller does not cure a Title Defect on or prior to the Closing, Seller Buyer shall have the option, by notice in writing to Buyer on or before the Closing, right to (i) keep proceed to Closing and accept the Well Interest with the alleged Title Defect with no purchase price adjustment, or location (ii) terminate this Agreement as to the Interest affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or location, (ii) take no remedial or corrective action with respect to the Title Defect, in which event Seller agrees to indemnify Buyer against all costs and expenses that Buyer may incur in connection with same, (iii) convey the Well or location affected by the alleged Title Defect to Buyer andand receive a purchase price adjustment for such Interest as set forth in Exhibit "B", subject to Section 8.2(a)or, reduce where feasible, the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”)proportionate allocated value. (d) There shall be no purchase price adjustment for Title Defects unless the aggregate total of all purchase price adjustments for Title Defects exceeds $200,000.00. (e) If Seller determines (or should Buyer, Buyer shall determine that Sellers' net revenue interests in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is Interests are greater than the Net Revenue Interest Interests set forth in Schedule Ion Exhibit "B", then the parties agree that the Cash Consideration Buyer shall notify Sellers and Sellers shall be increased in an amount equal entitled to the Allocated Value for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancya mutually agreeable purchase price adjustment.

Purchase Price Adjustments for Title Defects. (a) No adjustment Buyer may, by delivery of written notice to Seller of the Purchase Price existence of an alleged Title Defect, request reduction of the purchase price for Title Defects (other than Liens) shall be made unless and until the aggregate of all Interest affected. The Title Defect Amounts exceeds one percent of the Purchase Price, and then only to the extent and in the amount that the aggregate of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible). (b) Buyer shall give Seller written notice of any Title Defect promptly after the discovery of such Title Defect but in no event later than September 19, 2008. Such notice shall be in writing and shall include: (x) a description clearly indicate the nature of the Title Defect, (y) the Allocated Value Interest to which it relates, an explanation of the Well Title Defect including the supporting legal theories, the allocated value of the Interest as to which all or location some portion of which is affected by the Title Defect, and (z) the amount by which Buyer believes the value of the affected Interest has been reduced because of the Title Defect Amount determined in good faith by Defect, with the computation and information upon which Buyer's belief is based. With respect to In determining whether a Well or location subject to portion of an Interest contains a Title Defect, it is the amount by which such Well or location is impaired as a result intent of the existence parties to include, when possible, only that portion of one or more Title Defects shall be such Interest materially and adversely affected. If the “value properly allocated to a Title Defect Amount”, which amount shall cannot be determined as follows:directly from Exhibit "B" because the Title Defect is included within, but does not totally comprise, the Interest to which the allocated value relates, Buyer and Seller shall attempt, where feasible, to proportionately reduce the allocated value in Exhibit "B". (ib) The Title Defect Amount with respect to a Well or location notice by Buyer shall be determined by taking into consideration delivered to Seller on or before the Allocated Value Termination Date (as hereinafter defined), except that Buyer shall, to the extent reasonably practicable and in addition to the Title Defect notice, notify Seller immediately as it becomes aware of Title Defects while performing its due diligence review of the Well Interests. Title Defect for which notice is not delivered on or location subject before the Termination Date shall be deemed waived for all purposes, and Buyer shall thereafter have no right to such claim Title Defects for which notice has not been so provided; and in the event any Title Defect notice is timely delivered, all other Title Defects relating to the same Interest which are not claimed on or before the Termination Date shall be deemed waived for all purposes. Seller shall have the right, but not the obligation, to attempt to cure any alleged Title Defect prior to Closing. In the event Seller is unable or unwilling to cure an alleged Title Defect, Buyer and Seller shall meet and use their reasonable efforts to agree on the portion validity of the Well or location subject to such Title Defect, and the legal effect claim of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value amount of any required adjustment to the Base Purchase Price. In evaluating the significance of a fact, circumstance or condition for purposes of determining an alleged Title Defect, due consideration shall be given to the length of time that the particular Lease has been producing hydrocarbon substances and whether such Well fact, circumstance or location without such Title Defect (taking into account the portion condition is of the Allocated Value type expected to be encountered in the area involved, and is usual and customarily acceptable to reasonable and prudent persons engaged in the business of the relevant Well or location)ownership, development, and operation of oil and gas properties with knowledge of all of the facts and appreciation of their legal significance. (c) Notwithstanding anything herein In the event the parties cannot mutually agree on an adjustment to the contrary, if Seller does not cure a Title Defect on or prior to the Closing, Seller shall have the option, by notice in writing to Buyer on or before the Closing, to (i) keep the Well or location affected by the Base Purchase Price for an alleged Title Defect, either Buyer or Seller shall give the other written notice of intention to refer the matter to a mutually agreeable third party independent reservoir engineer (the "Determiner") to resolve the dispute in which light of all relevant circumstances. In the event Seller and Buyer are unable to agree within five (5) business days after receipt of such Well or location notice, then the matter shall become an Excluded Asset be so referred and the Cash Consideration amount of the appropriate adjustment to the Base Purchase Price shall be determined solely by the Determiner. The parties shall submit all relevant information available to the Determiner within fifteen (15) days after the date of such referral and may submit position papers on the subject to the Determiner within such period, but not thereafter. Both parties shall be bound by the decision of the Determiner. The Base Purchase Price shall be reduced by the Allocated Value of amount agreed upon by the affected Well parties or locationestablished by the Determiner, (ii) take no remedial or corrective action with respect to as the Title Defect, in which event Seller agrees to indemnify Buyer against all costs case may be. The fees and expenses that of such third party determination shall be borne equally by Buyer may incur in connection with same, (iii) convey the Well or location affected by the Title Defect to Buyer and, subject to Section 8.2(a), reduce the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”)and Seller. (d) If Seller determines There shall be no adjustment to the Base Purchase Price for Title Defects unless the aggregate total of all adjustments to the Base Purchase Price for Title Defects exceeds FIFTY THOUSAND DOLLARS (or should Buyer$50,000) and thereafter, only to the extent of such excess. (e) In the event that Buyer shall determine that Seller's Net Revenue Interests in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is Interests are greater than the Net Revenue Interest Interests set forth in Schedule Ion Exhibit "B", then the parties agree that the Cash Consideration Buyer shall notify Seller and Seller shall be increased in an amount equal entitled to a mutually agreeable upward adjustment to the Allocated Value for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancyBase Purchase Price.

Purchase Price Adjustments for Title Defects. (ai) No Not later than five (5) Business Days after actual receipt of any Title Defect Notice, the parties shall enter into good faith negotiations and attempt to agree on whether such claimed matters constitute a Title Defect for the purposes of this Agreement and/or the appropriate downward adjustment to the Purchase Price for in connection therewith; provided, however, there shall be no downward adjustment to the Purchase Price as the result of Title Defects (other than Liens) shall be made unless and until the aggregate agreed value of all Title Defect Amounts exceeds one percent of the Purchase Price, and then only Defects asserted by Purchaser in a timely manner prior to the extent and Closing exceeds $30,000 and, unless such threshhold is exceeded, Purchaser shall have no right, notwithstanding any provision of this Agreement to the contrary, to terminate this Agreement. If the parties have not reached a written agreement on any such matters within three (3) Business Days after the commencement of such negotiations, then, subject to the proviso in the amount that immediately preceding sentence, either Sellers or Purchaser may terminate this Agreement by notice in writing to Purchaser or Sellers, as the aggregate of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible)case may be. (bii) Buyer If all issues to be determined pursuant to this Section 5(e) have not been determined at least two (2) Business Days prior to the Closing Date, then at the election of either Sellers or Purchaser, subject in all respects to the termination rights under Section 10(a), the Closing Date shall give Seller written notice of any Title Defect promptly after the discovery of be deferred until all such Title Defect issues have been determined in accordance with this Section 5(e), but in no event later longer than September 19ten (10) days, 2008. Such notice and all subsequent dates and required activities having reference to the Closing Date shall be in writing and shall include: correspondingly deferred. (xiii) a description Subject to the provisions of the Title Defect, (y) the Allocated Value of the Well or location affected by the Title Defect, and (z) the Title Defect Amount determined in good faith by the Buyer. With respect to a Well or location subject to a Title Defect, the amount by which such Well or location is impaired as a result of the existence of one or more Title Defects shall be the “Title Defect Amount”, which amount shall be determined as follows: subsection (i) The Title Defect Amount of this Section 5(e), with respect to a Well any Title Defect that any Seller elects not to cure or location shall be determined by taking into consideration that any Seller fails to cure prior to the Allocated Value of the Well or location subject to such Title DefectClosing, the portion of the Well or location subject Purchase Price allocable to such Seller shall be reduced by the amount determined with respect to such Title Defect, and the legal effect Defect pursuant to subsection (i) of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in this Section 8.2(b)(i5(e), the Title Defect Amount shall be an amount equal unless Purchaser or Sellers elect(s) to the difference between the value terminate this Agreement pursuant to subsection (iv) of the Well or location affected by such Title Defect with such Title Defect and the value of such Well or location without such Title Defect (taking into account the portion of the Allocated Value of the relevant Well or locationthis Section 5(e). (civ) Notwithstanding anything contained herein to the contrary, if Seller does not cure other than the proviso appearing in the first sentence of subsection (i) of this Section 5(e), in the event that any Title Defect that is asserted in a Title Defect on or Notice is not cured prior to the Closing, Seller shall have the optionresolved pursuant to subsection (i) of this Section 5(e), or waived in writing by Purchaser, Purchaser or Sellers may terminate this Agreement by notice in writing to Buyer on Purchaser or before Sellers, as the Closing, to (i) keep the Well or location affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or location, (ii) take no remedial or corrective action with respect to the Title Defect, in which event Seller agrees to indemnify Buyer against all costs and expenses that Buyer case may incur in connection with same, (iii) convey the Well or location affected by the Title Defect to Buyer and, subject to Section 8.2(a), reduce the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”)be. (d) If Seller determines (or should Buyer, in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is greater than the Net Revenue Interest set forth in Schedule I, then the parties agree that the Cash Consideration shall be increased in an amount equal to the Allocated Value for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancy.

Purchase Price Adjustments for Title Defects. (a) No adjustment to the Purchase Price for Except as provided in Section 5.10(b) below, if, as a part of Buyer’s due diligence review, Title Defects are presented to Seller and Seller is unable (other than Liensor unwilling) shall be made unless and until the aggregate of all Title Defect Amounts exceeds one percent of the Purchase Price, and then only to the extent and in the amount that the aggregate of cure such Title Defect Amounts exceeds one percent Defects prior to Closing, then: (i) Buyer and Seller shall, with respect to each Interests affected by such matters, attempt to agree upon an appropriate adjustment of the Purchase Price to account for such matters; and (it being expressly agreed that ii) with respect to Interests as to which Buyer and Seller are unable to agree upon an adjustment for an asserted Title Defect, such one percent is a deductible)Interests will be excluded from the transaction contemplated hereby and the Purchase Price will be reduced by the Allocated Value attributed to such Interest on Exhibit A-6. (b) Buyer shall give Seller written notice of any If an asserted Title Defect promptly after reflects (or Seller otherwise determines) that Seller’s share of Hydrocarbons produced and saved from the discovery Leases comprising an Interest is less than, or greater than, the decimal share set forth as the Net Revenue Interest on Exhibit A-2 or causes Seller to be obligated to pay a share of such Title Defect but costs of operations greater than the percentage share of Working Interest set forth on Exhibit A-2 (without at least a proportionate increase in no event later than September 19, 2008. Such notice the corresponding Net Revenue Interest) then the Purchase Price for the Interest shall be in writing and shall include: (x) a description of adjusted downward, or upward as the Title Defectcase may be, (y) proportionately, by multiplying the Allocated Value of such Interest by a fraction (A) the Well or location affected by numerator of which is the Title Defect, amount of the actual Net Revenue Interest and (zB) the Title Defect Amount determined in good faith by denominator of which is the Buyer. With Net Revenue Interest set forth on Exhibit A-2. (c) If the aggregate Purchase Price reduction (or increase) with respect to a Well or location subject to a Title Defect, which would result from the amount by which above provided for procedure does not exceed $100,000, no adjustment shall me made for such Well or location is impaired Title Defect, and the Interest affected thereby will not be excluded as a result of the existence of one or more Title Defects shall be the “Title Defect Amount”, which amount shall be determined as follows: (i) The Title Defect Amount with respect to a Well or location shall be determined by taking into consideration the Allocated Value of the Well or location subject to such Title Defect. If the Purchase Price reduction (or increase) which would result from the above provided for procedure, as applied to all Title Defects for which an adjustment is to be made, does not exceed $2,500,000, then no adjustment of the Purchase Price shall occur, and none of the Interests which would be otherwise excluded by such procedure shall be excluded. If the Purchase Price reduction (or increase) which would result from the above provided for procedure exceeds $2,500,000, the portion of the Well or location subject to such Title Defect, and the legal effect of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount Purchase Price shall equal the Allocated Value for the relevant Well or location multiplied be adjusted by the percentage amount by which such reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value of such Well or location without such Title Defect (taking into account the portion of the Allocated Value of the relevant Well or location). (c) Notwithstanding anything herein to the contrary, if Seller does not cure a Title Defect on or prior to the Closing, Seller shall have the option, by notice in writing to Buyer on or before the Closing, to (i) keep the Well or location affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or location, (ii) take no remedial or corrective action with respect to the Title Defect, in which event Seller agrees to indemnify Buyer against all costs and expenses that Buyer may incur in connection with same, (iii) convey the Well or location affected by the Title Defect to Buyer and, subject to Section 8.2(a), reduce the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”). (d) If Seller determines (or should Buyer, in the course of Buyer’s Title Review, determineincrease) that Seller’s Net Revenue Interest in a Well or location is greater than the Net Revenue Interest set forth in Schedule I, then the parties agree that the Cash Consideration shall be increased in an amount equal to the Allocated Value for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancyexceeds $2,500,000.

Purchase Price Adjustments for Title Defects. For purposes of this Section --------------------------------------------- 4, the term Interests or Interest shall also include any non-producing interval or undeveloped location specifically identified in Exhibit "B". (a) No adjustment Buyer may, by delivery of written notice to Seller of the Purchase Price existence of an alleged Title Defect, request reduction of the purchase price for Title Defects (other than Liens) shall be made unless and until the aggregate of all Interest affected. The Title Defect Amounts exceeds one percent of the Purchase Price, and then only to the extent and in the amount that the aggregate of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible). (b) Buyer shall give Seller written notice of any Title Defect promptly after the discovery of such Title Defect but in no event later than September 19, 2008. Such notice shall be in writing and shall include: (x) a description clearly indicate the nature of the Title Defect, (y) the Allocated Value Interest to which it relates, an explanation of the Well Title Defect including the supporting legal theories, the allocated value of the Interest as to which all or location some portion of which is affected by the Title Defect, and (z) the amount by which Buyer believes the value of the affected Interest has been reduced because of the Title Defect Amount determined in good faith by Defect, with the computation and information upon which Buyer's belief is based. With respect to In determining whether a Well or location subject to portion of an Interest contains a Title Defect, it is the amount by which such Well or location is impaired as a result intent of the existence parties to include, when possible, only that portion of one such Interest materially and adversely affected. If the value properly allocated to a Title Defect cannot be determined directly from Exhibit "B" because the Title Defect is included within, but does not totally comprise, the Interest to which the allocated value relates, Buyer and Seller shall attempt, where feasible, to proportionately reduce the allocated value in Exhibit "B". (b) The Title Defect notice by Buyer shall be delivered to Seller on or more before November 18, 2002. In the event any such notice is not timely delivered, all Title Defects shall be deemed waived for all purposes and Buyer shall thereafter have no right to claim Title Defects; and in the “event the Title Defect Amount”notice is timely delivered, which amount all Title Defects not claimed in such notice shall be determined as follows: (i) The deemed waived for all purposes. Seller shall have the right, but not the obligation, to attempt to cure any alleged Title Defect Amount with respect prior to a Well Closing. In the event Seller is unable or location shall be determined by taking into consideration the Allocated Value of the Well or location subject unwilling to such cure an alleged Title Defect, Buyer and Seller shall meet and use their reasonable efforts to agree on the portion validity of the Well or location subject to such Title Defect, and the legal effect claim of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value amount of any required purchase price adjustment. In evaluating the significance of a fact, circumstance or condition for purposes of determining an alleged Title Defect, due consideration shall be given to the length of time that the particular Lease has been producing hydrocarbon substances and whether such Well fact, circumstance or location without such Title Defect (taking into account the portion condition is of the Allocated Value type expected to be encountered in the area involved, and is usual and customarily acceptable to reasonable and prudent persons engaged in the business of the relevant Well or location)ownership, development, and operation of oil and gas properties with knowledge of all of the facts and appreciation of their legal significance. (c) Notwithstanding anything herein to In the contraryevent the parties cannot mutually agree on a purchase price adjustment for an alleged Title Defect, if Seller does not cure a Title Defect on or prior to the Closing, Seller Buyer shall have the option, by notice in writing to Buyer on or before the Closing, right to (i) keep proceed to Closing and accept the Well Interest with the alleged Title Defect with no purchase price adjustment, or location (ii) terminate this Agreement as to the Interest affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or location, (ii) take no remedial or corrective action with respect to the Title Defect, in which event Seller agrees to indemnify Buyer against all costs and expenses that Buyer may incur in connection with same, (iii) convey the Well or location affected by the alleged Title Defect to Buyer andand receive a purchase price adjustment for such Interest as set forth in Exhibit "B", subject to Section 8.2(a)or, reduce where feasible, the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”)proportionate allocated value. (d) If Seller determines There shall be no purchase price adjustment for Title Defects unless the aggregate total of all purchase price adjustments for Title Defects exceeds THREE HUNDRED EIGHTY THOUSAND DOLLARS (or should Buyer$380,000) (which amount is a threshold, not a deductible). (e) In the event that Buyer shall determine that Seller's net revenue interests in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is Interests are greater than the Net Revenue Interest Interests set forth in Schedule Ion Exhibit "B", then the parties agree that the Cash Consideration Buyer shall notify Seller and Seller shall be entitled to a mutually agreeable purchase price adjustment; provided however, there shall be no purchase price adjustment related to such increase unless the aggregate total of all purchase price adjustments for the increases to Seller's increased Net Revenue Interests in an the Interests exceeds THREE HUNDRED EIGHTY THOUSAND DOLLARS ($380,000) (which amount equal is a threshold, not a deductible). Any increase to the Allocated Value Base Purchase Price provided for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except this Section 4(e) shall be determined independently of any decrease to the extent Base Purchase Price due to any Title Defect, and such amounts shall not be netted one against the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancyother.

Purchase Price Adjustments for Title Defects. (a) No adjustment Buyer may, by delivery of written notice to Seller of the Purchase Price existence of an alleged Title Defect, request reduction of the purchase price for Title Defects (other than Liens) shall be made unless and until the aggregate of all Interest affected. The Title Defect Amounts exceeds one percent of the Purchase Price, and then only to the extent and in the amount that the aggregate of such Title Defect Amounts exceeds one percent of the Purchase Price (it being expressly agreed that such one percent is a deductible). (b) Buyer shall give Seller written notice of any Title Defect promptly after the discovery of such Title Defect but in no event later than September 19, 2008. Such notice shall be in writing and shall include: (x) a description clearly indicate the nature of the Title Defect, (y) the Allocated Value Interest to which it relates, an explanation of the Well Title Defect including the supporting legal theories, the allocated value of the Interest as to which all or location some portion of which is affected by the Title Defect, and (z) the amount by which Buyer believes the value of the affected Interest has been reduced because of the Title Defect Amount determined in good faith by Defect, with the computation and information upon which Buyer's belief is based. With respect to In determining whether a Well or location subject to portion of an Interest contains a Title Defect, it is the amount by which such Well or location is impaired as a result intent of the existence parties to include, when possible, only that portion of one such Interest materially and adversely affected. If the value properly allocated to a Title Defect cannot be determined directly from Exhibit "B" because the Title Defect is included within, but does not totally comprise, the Interest to which the allocated value relates, Buyer and Seller shall attempt, where feasible, to proportionately reduce the allocated value in Exhibit "B". (b) The Title Defect notice by Buyer shall be delivered to Seller on or more before April 18, 1997. In the event any such notice is not timely delivered, all Title Defects shall be deemed waived for all purposes and Buyer shall thereafter have no right to claim Title Defects; and in the “event the Title Defect Amount”notice is timely delivered, which amount all Title Defects not claimed in such notice shall be determined as follows: (i) The deemed waived for all purposes. Seller shall have the right, but not the obligation, to attempt to cure any alleged Title Defect Amount with respect prior to a Well Closing. In the event Seller is unable or location shall be determined by taking into consideration the Allocated Value of the Well or location subject unwilling to such cure an alleged Title Defect, Buyer and Seller shall meet and use their reasonable efforts to agree on the portion validity of the Well or location subject to such Title Defect, and the legal effect claim of such Title Defect on the Well or location affected thereby; provided, however, that: (A) if such Title Defect is in the nature of Seller’s Net Revenue Interest in a Well or location being less than the Net Revenue Interest set forth in Schedule I and the Working Interest remains the same, then the Title Defect Amount shall equal the Allocated Value for the relevant Well or location multiplied by the percentage reduction in such Net Revenue Interest as a result of such Title Defect or (B) if such Title Defect is in the nature of a Lien, then the Title Defect Amount shall equal the amount required to fully discharge such Lien; and (ii) If the Title Defect results from any matter not described in Section 8.2(b)(i), the Title Defect Amount shall be an amount equal to the difference between the value of the Well or location affected by such Title Defect with such Title Defect and the value amount of any required purchase price adjustment. In evaluating the significance of a fact, circumstance or condition for purposes of determining an alleged Title Defect, due consideration shall be given to the length of time that the particular Lease has been producing hydrocarbon substances and whether such Well fact, circumstance or location without such Title Defect (taking into account the portion condition is of the Allocated Value type expected to be encountered in the area involved, and is usual and customarily acceptable to reasonable and prudent persons engaged in the business of the relevant Well or location)ownership, development, and operation of oil and gas properties with knowledge of all of the facts and appreciation of their legal significance. (c) Notwithstanding anything herein to In the contraryevent the parties cannot mutually agree on a purchase price adjustment for an alleged Title Defect, if Seller does not cure a Title Defect on or prior to the Closing, Seller Buyer shall have the option, by notice in writing to Buyer on or before the Closing, right to (i) keep proceed to Closing and accept the Well Interest with the alleged Title Defect with no purchase price adjustment, or location (ii) terminate this Agreement as to the Interest affected by the Title Defect, in which event such Well or location shall become an Excluded Asset and the Cash Consideration shall be reduced by the Allocated Value of the affected Well or location, (ii) take no remedial or corrective action with respect to the Title Defect, in which event Seller agrees to indemnify Buyer against all costs and expenses that Buyer may incur in connection with same, (iii) convey the Well or location affected by the alleged Title Defect to Buyer andand receive a purchase price adjustment for such Interest as set forth in Exhibit "B", subject to Section 8.2(a)or, reduce where feasible, the Cash Consideration by the relevant Title Defect Amount, or (iv) attempt to cure such defect (a “Post-Closing Title Defect”) prior to December 31, 2008 (the “Cure Period”)proportionate allocated value. (d) If Seller determines There shall be no purchase price adjustment for Title Defects unless the aggregate total of all purchase price adjustments for Title Defects exceeds SEVEN HUNDRED SEVENTEEN THOUSAND AND FIVE HUNDRED DOLLARS (or should Buyer, $717,500). (e) In the event that Buyer shall determine that Seller's net revenue interests in the course of Buyer’s Title Review, determine) that Seller’s Net Revenue Interest in a Well or location is Interests are greater than the Net Revenue Interest Interests set forth in Schedule Ion Exhibit "B", then the parties agree that the Cash Consideration Buyer shall notify Seller and Seller shall be increased in an amount equal entitled to the Allocated Value for the relevant Well multiplied by the percentage increase in such Net Revenue Interest, except to the extent the Working Interest increases. Buyer shall give Seller written notice of any such title discrepancy it discovers promptly after the discovery of such title discrepancya mutually agreeable purchase price adjustment.