Common use of Assets Affected by Defective Interests Clause in Contracts

Assets Affected by Defective Interests. In determining which portions of the Assets are Defective Interests, it is the intent of the parties to include, when possible, only that portion of the Assets affected by the defect. If the Allocated Value of Defective Interests cannot be determined directly from Exhibit D because the Defective Interests constitute a property included within, but not totally comprising, the Assets to which the Allocated Value relates, then the value attributable to the Defective Interest shall be determined based upon the following criteria: a. If the Defective Interest is a privilege or lien upon an Asset, then the value attributable to the Defective Interest is the amount necessary to be paid to remove fully the privilege or lien from the affected Asset. b. If the Defective Interest asserted is that the Net Revenue Interest attributable to a Well is less than that stated in Exhibit “B”, then the value attributable to the Defective Interest is the product of the Allocated Value attributed to such Asset, multiplied by a fraction, the numerator of which is the difference between the Net Revenue Interest applicable thereto set forth in Exhibit “B” and the actual Net Revenue Interest, and the denominator of which is the applicable Net Revenue Interest stated in Exhibit “B”. c. If the Defective Interest represents an obligation, encumbrance, burden or charge upon the affected Asset (including any increase in Working Interest for which there is not a proportionate increase in Net Revenue Interest) and for which the economic detriment to Buyer is unliquidated, the value attributable to the Defective Interest shall be determined by taking into account the Allocated Value of the affected Asset, the portion of the Asset comprising the Defective Interest, the legal effect of the Defective Interest, and the potential discounted economic effect of the Defective Interest over the life of the affected Asset. d. If the Defective Interest is a consent to assign that cannot be obtained and that is required in order for the assignment from Buyer to Seller of any portion of the Assets subject thereto to be effective, then the value attributable to the Defective Interest is the Allocated Value (or portion thereof) attributable to the affected Assets. e. If a Defective Interest does not adversely affect an Asset throughout the entire productive life of such Asset, such fact shall be taken into account in determining the value attributable to the Defective Interest. f. The value attributable to a Defective Interest shall be determined without duplication of any costs or losses included in another Defective Interest hereunder. If the value of the Defective Interest cannot be calculated based upon the criteria in 5.05(a) through (f), above, then Buyer and Seller shall each make a good faith attempt to agree upon a reduction in the Allocated Value. If Buyer and Seller cannot reach agreement upon a reduction in the Allocated Value, then the Chief Executive Officers of Buyer and Seller shall confer and make a good faith attempt to reach agreement. If the CEOs fail to reach agreement upon a reduction in the Allocated Value, then Buyer and Seller shall make a good faith attempt to resolve the issue at mediation, before a mutually agreeable mediator, with all costs of mediation split equally between Buyer and Seller, and with such mediation to last not longer than one (1) day. If, after satisfying all of the requirements set forth above, Buyer and Seller still have not reached agreement, then that part of the Assets to which an Allocated Value has been assigned on Exhibit D of which such Defective Interest forms a part shall be excluded from the Assets to be purchased by Buyer hereunder and the Purchase Price shall be reduced in accordance with Section 2.02 hereof by an amount equal to the Allocated Value thereof.

Assets Affected by Defective Interests. In determining which portions of the Assets are Defective Interests, it is the intent of the parties to include, when possible, only that portion of the Assets affected by the defect. If the Allocated Value of Defective Interests cannot be determined directly from Exhibit D because the Defective Interests constitute a property included within, but not totally comprising, the Assets to which the Allocated Value relates, then the value attributable to the Defective Interest Value shall be determined based upon the following criteria: a. If the Defective Interest is a privilege or lien upon an Asset, then the value attributable to the Defective Interest Value is the amount necessary to be paid to remove fully the privilege or lien from the affected Asset. b. If the Defective Interest asserted is that the Net Revenue Interest attributable to a Well is less than that stated in Exhibit “B”, then the value attributable to the Defective Interest Value is the product of the Allocated Value attributed to such Asset, multiplied by a fraction, the numerator of which is the difference between the Net Revenue Interest applicable thereto set forth in Exhibit “B” and the actual Net Revenue Interest, and the denominator of which is the applicable Net Revenue Interest stated in Exhibit “B”. c. If the Defective Interest represents an obligation, encumbrance, burden or charge upon the affected Asset (including any increase in Working Interest for which there is not a proportionate increase in Net Revenue Interest) and for which the economic detriment to Buyer is unliquidated, the value attributable to the Defective Interest Value shall be determined by taking into account the Allocated Value of the affected Asset, the portion of the Asset comprising the Defective Interest, the legal effect of the Defective Interest, and the potential discounted economic effect of the Defective Interest over the life of the affected Asset. d. If the Defective Interest is a consent to assign that cannot be obtained and that is required in order for the assignment from Seller to Buyer to Seller of any portion of the Assets subject thereto to be effectiveeffective as between Seller and Buyer, then the value attributable to the Defective Interest Value is the Allocated Value (or portion thereof) attributable to the affected Assets. e. If a Defective Interest does not adversely affect an Asset throughout the entire productive life of such Asset, such fact shall be taken into account in determining the value attributable to the Defective InterestInterest Value. f. The value attributable to a Defective Interest Value shall be determined without duplication of any costs or losses included in another Defective Interest hereunder. If the value of the Defective Interest Value cannot be calculated based upon the criteria in 5.05(aSection 5.04(a) through (f), above, then Buyer and Seller shall each make a good faith attempt to agree upon a reduction in the Allocated Value. If Buyer and Seller cannot reach agreement upon a reduction in the Allocated Value, then the Chief Executive Officers of Buyer and Seller shall confer and make a good faith attempt to reach agreement. If the CEOs fail to reach agreement upon a reduction in the Allocated Value, then Buyer and Seller shall make a good faith attempt to resolve the issue at mediation, before a mutually agreeable mediator, with all costs of mediation split equally between Buyer and Seller, and with such mediation to last not longer than one (1) day. If, after satisfying all of the requirements set forth above, Buyer and Seller still have not reached agreement, then that part of the Assets to which an Allocated Value has been assigned on Exhibit D of which such Defective Interest forms a part matter shall be excluded from the Assets to be purchased decided by Buyer hereunder and the Purchase Price shall be reduced an Independent Expert in accordance with Section 2.02 hereof by an amount equal to the Allocated Value thereof5.05.