Title Defect Amount. The amount by which the Allocated Value of the affected Title Defect Property is reduced as a result of the existence of a Title Defect shall be the “Title Defect Amount” and shall be determined in accordance with the following terms and conditions: (i) if Buyer and Seller’s Representative agree on the Title Defect Amount, then that amount shall be the Title Defect Amount; (ii) if the Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Property; (iii) if (A) the Title Defect represents a discrepancy between (1) any Seller’s Net Revenue Interest with respect to any Target Formation for any Tract or with respect to any Well and (2) such Seller’s Net Revenue Interest with respect to such Target Formation for such Tract or with respect to such Well as set forth in Exhibits A-2 or A-1, as applicable, and (B) such Seller’s Working Interest with respect to such Target Formation for such Tract or with respect to such Well is less than such Seller’s Working Interest with respect to such Target Formation for such Tract or with respect to such Well as set forth in Exhibits A-2 or A-1, as applicable, in the same proportion to such Net Revenue Interest decrease, then the Title Defect Amount shall be the product of (x) the Allocated Value of such Title Defect Property, multiplied by (y) a fraction, the (I) numerator of which is the Net Revenue Interest decrease with respect to such Target Formation for such Tract or with respect to such Well, and (II) denominator of which is the Net Revenue Interest with respect to such Target Formation for such Tract or with respect to such Well as set forth in Exhibits A-2 or A-1, as applicable; (iv) if (A) the Title Defect for any Tract is the actual failure of a Seller to own the represented Net Acres with respect to any Target Formation for such Tract as shown under the column titled “Seller Net Acres” on Exhibit A-2 throughout the duration of the productive life of such Tract, and (B) such Title Defect does not have an adverse impact on the Allocated Value of the remainder of such Tract, then the Title Defect Amount will be the product of (x) the Allocated Value of such Title Defect Property, multiplied by (y) a fraction, the (I) numerator of which is the positive difference between the (a) Net Acres with respect to such Target Formation for such Tract as shown under the column titled “Seller Net Acres” on Exhibit A-2, and (b) actual Net Acres held by such Seller with respect to such Target Formation for such Tract, and (II) denominator of which is the Net Acres with respect to such Target Formation for such Tract as shown under the column titled “Seller Net Acres” on Exhibit A-2; provided that, if a Seller’s ownership of any applicable Net Acres in any applicable Target Formation set forth on Exhibit A-2 for any Tract identified on Exhibit A-2 covers less than the full vertical interval in such applicable Target Formation under such Tract, then the Title Defect Amount shall be the product of (1) the Allocated Value of such Net Acres for such applicable Target Formation multiplied by (2) a fraction, the numerator of which is the thickness (in feet) of the vertical interval of such applicable Target Formation under such Tract not covered by such Seller’s ownership of such Net Acres and the denominator of which is the thickness (in feet) of the full vertical interval of such applicable Target Formation under such Tract for such Net Acres; (v) if the Title Defect represents an obligation, Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the reasonably anticipated economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller’s Representative, and such other reasonable factors as are customarily utilized in the oil and gas industry to make a proper evaluation; (vi) the Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder; (vii) if a Title Defect does not affect a Title Defect Property throughout the entire remaining productive life of such Title Defect Property, such fact shall be taken into account in determining the Title Defect Amount; (viii) for purposes of Section 13.2(i) only, all Title Defects with respect to any Well or Tract that are attributable to (A) the interests of more than one Seller hereunder, or (B) more than one Target Formation shall, in each case, all be aggregated together for purposes of determining the Title Defect Amount with respect to the applicable Title Defect Property; (ix) notwithstanding anything to the contrary in this Agreement, if a Title Defect results in a Seller not having Defensible Title to a Lease as well as any corresponding Tract, the Purchase Price shall be reduced only one time with respect to either the Lease or the Tract and in no event shall Buyer be entitled to claim a Title Defect Amount with respect to both a Lease and a Tract for such Title Defect; and (x) notwithstanding anything to the contrary in this Article XIII, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any single Title Defect Property shall not exceed the Allocated Value of such Title Defect Property and no Title Defect Amount shall be asserted by Buyer with respect to any Well or Tract except as to (A) presently producing formations in any Well, or (B) the Target Formations in any Tract.
Appears in 1 contract
Title Defect Amount. The amount by which the Allocated Value of the affected If Seller elects not to cure any such Title Defect Property or is reduced as a result of the existence of a unable to cure any such Title Defect shall be prior to the Cure Deadline as provided above, then the amount of each such Title Defect (the “Title Defect Amount” and ”) shall be determined in accordance with the following terms and conditionsas follows:
(i) if Buyer and Seller’s Representative Seller agree in writing on the Title Defect Amount, then that amount shall be the Title Defect Amount;
(ii) if the Title Defect is an Encumbrance a Lien that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Propertysuch Lien;
(iii) if (A) the Title Defect represents a negative discrepancy between (1A) any Seller’s the actual Net Revenue Interest with respect to any Acres for the Target Formation Zone for any Tract or with respect to any Well and (2) such Seller’s Net Revenue Interest with respect to such Target Formation for such Tract or with respect to such Well as set forth in Exhibits A-2 or A-1, as applicable, a Development Property and (B) such Seller’s Working Interest with respect to such the Net Acres for the Target Formation Zone for such Tract or with respect to such Well is less than such Seller’s Working Interest with respect to such Target Formation for such Tract or with respect to such Well Development Property as set forth in Exhibits A-2 on Annex A-1 or A-1Annex A-3, as applicable, in the same proportion to such Net Revenue Interest decrease, then the Title Defect Amount shall be the product of (x) the Allocated Value of such Title Defect Property, Development Property multiplied by (y) a fraction, fraction (1) the (I) numerator of which is the Net Revenue Interest decrease with respect to absolute value of the amount of such Target Formation for such Tract or with respect to such Well, discrepancy and (II2) the denominator of which is the Net Revenue Interest with respect to such Acres for the Target Formation Zone for such Tract or with respect to such Well Development Property as set forth in Exhibits A-2 on Annex A-1 or A-1Annex A-3, as applicable; provided that, (I) if a Title Defect results in a discrepancy as to some, but not all of the Target Zone for a Development Property, the Title Defect Amount for such Title Defect shall be determined by taking into account the partiality of such Title Defect and (II) if the Net Acre discrepancy pertains to a Development Property that is located partially within and partially outside of the boundaries of one or more Units for a Well or Unit Well Location, the fraction described in clause (y) above will be calculated based solely upon the Net Acre discrepancy for the portion of the Development Property located outside of the boundary of such Unit(s); and provided further that, if a Title Defect does not affect the applicable Development Property throughout its entire life, such Title Defect Amount determined pursuant to this Section 3.1(f)(iii) shall be reduced to take into account the applicable time period only;
(iv) if the Title Defect represents a negative discrepancy between (A) the Title Defect actual Net Revenue Interest for any Tract is a Well (as to the actual failure of currently producing formation) or a Seller Unit Well Location (as to own the represented Net Acres with respect to any Target Formation for such Tract as shown under the column titled “Seller Net Acres” on Exhibit A-2 throughout the duration of the productive life of such TractZone), and (B) the Net Revenue Interest set forth on Annex A-2 for such Title Defect does not have an adverse impact Well or on Annex A-6 for Unit Well Location, as applicable, (the Allocated Value of the remainder of such Tract“Scheduled NRI”), then the Title Defect Amount will shall be the product of (x) the Allocated Value of such Title Defect PropertyWell or Unit Well Location, as applicable, multiplied by (y) a fraction, the (I) numerator of which is the positive difference between the (a) Net Acres with respect to such Target Formation for such Tract as shown under the column titled “Seller Net Acres” on Exhibit A-2, and (b) actual Net Acres held by such Seller with respect to such Target Formation for such Tract, and (II) denominator of which is the Net Acres with respect to such Target Formation for such Tract as shown under the column titled “Seller Net Acres” on Exhibit A-2; provided that, if a Seller’s ownership of any applicable Net Acres in any applicable Target Formation set forth on Exhibit A-2 for any Tract identified on Exhibit A-2 covers less than the full vertical interval in such applicable Target Formation under such Tract, then the Title Defect Amount shall be the product of fraction (1) the Allocated Value of such Net Acres for such applicable Target Formation multiplied by (2) a fraction, the numerator of which is the thickness (in feet) absolute value of the vertical interval amount of such applicable Target Formation under such Tract not covered by such Seller’s ownership of such Net Acres discrepancy and (2) the denominator of which is the thickness (in feet) of the full vertical interval of such applicable Target Formation under such Tract Scheduled NRI for such Net AcresWell or Unit Well Location, as applicable; provided that if the Title Defect does not affect the applicable Well or Unit Well Location, as applicable, throughout its entire productive life, the Title Defect Amount determined pursuant to this Section 3.1(f)(iv) shall be reduced to take into account the applicable time period only;
(v) if the Title Defect represents an obligation, Encumbrance encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect affected Well, Unit Well Location or Development Property, as applicable, the portion of the Title Defect Property Well, Unit Well Location or Development Property, as applicable, (or any associated Oil & Gas Interests, including the depths) affected by the Title Defect, the legal effect of the Title Defect, the reasonably anticipated potential economic effect of the Title Defect over the life of the Title Defect affected Well, Unit Well Location or Development Property, the values placed upon the Title Defect by Buyer and Seller’s Representativeas applicable, and such other reasonable factors as are customarily utilized in the oil and gas industry necessary to make a proper evaluation;
(vi) notwithstanding anything to the contrary in this Article 3, the sum of all Title Defect Amounts with respect to any particular Well, Unit Well Location or Development Property shall not exceed the Allocated Value of such Well, Unit Well Location or Development Property; and
(vii) the Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses Losses included in another Title Defect Amount hereunder;
(vii) , or for which Buyer otherwise receives credit in the calculation of the Purchase Price; provided, however, that if a Title Defect does not affect a Title Defect affecting any Development Property throughout the entire remaining productive life of such Title Defect Propertyfor which an Allocated Value is set forth on Annex A-1 or Annex A-3, such fact shall be taken into account in determining the Title Defect Amount;
(viii) for purposes of Section 13.2(i) onlyas applicable, all Title Defects with respect to also affects any Well or Tract that are attributable to Unit Well Location for which an Allocated Value is set forth on Annex A-2 or Annex A-6, as applicable, (A) the interests of more than one Seller hereunder, or (B) more than one Target Formation shall, in each case, all be aggregated together for purposes of determining the any Title Defect Amount adjustment be determined separately with respect to the applicable each individual Title Defect Property;
(ix) notwithstanding anything to Property affected by the contrary in this Agreement, if a Title Defect results in a Seller not having Defensible and (B) any Title to a Lease as well as any corresponding Tract, the Purchase Price shall be reduced only one time Defect adjustment with respect to either a Development Property shall be limited only to the portion of the Leases or Fee Minerals that are located outside of the boundaries of the Unit of a Well or a Unit Well Location, and correspondingly, the Title Defect adjustment for any Lease or Fee Mineral will not include any portion of the Lease or Fee Mineral located within the Tract and in no event shall Buyer be entitled to claim a Title Defect Amount with respect to both a Lease and a Tract for such Title Defect; and
(x) notwithstanding anything boundaries of or contributing to the contrary in this Article XIII, the aggregate Title Defect Amounts attributable to the effects Unit of all Title Defects upon any single Title Defect Property shall not exceed the Allocated Value of such Title Defect Property and no Title Defect Amount shall be asserted by Buyer with respect to any a Well or Tract except as to (A) presently producing formations in any Well, or (B) the Target Formations in any Tracta Unit Well Location.
Appears in 1 contract