Common use of Defect Amount Clause in Contracts

Defect Amount. The Defect Amount resulting from a Defect shall be the amount by which the value of the affected Defect Property or the value of the Business, whichever is greater, is reasonably reduced as a result of the existence of such Defect and shall be determined in accordance with the following terms and conditions: (a) if Buyer and Parent agree on the Defect Amount, then that amount shall be the Defect Amount; (b) if an Environmental Defect, the reasonable cost necessary to investigate, Remediate and take any corrective action in the most cost-effective manner, incorporating the least stringent clean-up standards that, based upon the use classification of the subject Property or the Tupelo Property, as applicable, are allowed under applicable Environmental Law and using the least costly methods that are allowed under applicable Environmental Law, and for Environmental Defects not involving clean-up of contamination, the reasonable cost necessary to investigate, Remediate and take corrective action; (c) if a Title Defect is a Lien that is undisputed and liquidated in amount, then the Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Defect Property; (d) if a Title Defect represents an obligation or Lien upon or other defect in title to the Defect Property of a type not described above, the Defect Amount shall be determined by taking into account the portion of the Defect Property affected by the Title Defect, the legal effect of the Title Defect, the reasonably estimated potential economic effect of the Title Defect over the life of the Defect Property, the values and estimated cost to cure placed upon the Title Defect by Buyer and Parent and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, the Defect Amount shall not be greater than the reasonable cost and expense of curing such Title Defect; (e) if a Title Defect relates to an ownership gap in a right-of-way included in the Property, the Defect Amount shall be the reasonable estimated costs and expenses necessary to cure such gap, or alternatively, to construct an alternative route for the pipeline system around such gap, including the cost of acquiring any necessary real property right-of-way and related capital expenditures; (f) the Defect Amount with respect to a Defect Property shall be determined without duplication of any costs or losses included in another Defect Amount hereunder; and (g) in determining the Defect Amount attributable to the Centrahoma JV, the Defect Amount shall be multiplied by 60% to reflect Seller’s ownership interest in Centrahoma JV.

Defect Amount. The Defect Amount resulting from a Defect shall be the amount by which the value of the affected Defect Property or the value of the Business, whichever is greater, is reasonably reduced as a result of the existence of such Defect and shall be determined in accordance with the following terms and conditions: (a) if Buyer and Parent Seller agree on the Defect Amount, then that amount shall be the Defect Amount; (b) if an Environmental Defect, the reasonable cost necessary to investigate, Remediate and take any corrective action in the most cost-effective manner, incorporating the least stringent clean-up standards that, based upon the use classification of the subject Property or the Tupelo Property, as applicable, are allowed under applicable Environmental Law and using the least costly methods that are allowed under applicable Environmental Law, and for Environmental Defects not involving clean-up of contamination, the reasonable cost necessary to investigate, Remediate and take corrective action; (c) if a Title Defect is a Lien that is undisputed and liquidated in amount, then the Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Defect Property; (d) if a Title Defect represents an obligation or Lien upon or other defect in title to the Defect Property of a type not described above, the Defect Amount shall be determined by taking into account the portion of the Defect Property affected by the Title Defect, the legal effect of the Title Defect, the reasonably estimated potential economic effect of the Title Defect over the life of the Defect Property, the values and estimated cost to cure placed upon the Title Defect by Buyer and Parent Seller and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, the Defect Amount shall not be greater than the reasonable cost and expense of curing such Title Defect; (e) if a Title Defect relates to an ownership gap in a right-of-way included in the Property, the Defect Amount shall be the reasonable estimated costs and expenses necessary to cure such gap, or alternatively, to construct an alternative route for the pipeline system around such gap, including the cost of acquiring any necessary real property right-of-way and related capital expenditures;; and (f) the Defect Amount with respect to a Defect Property shall be determined without duplication of any costs or losses included in another Defect Amount hereunder; and (g) in determining the Defect Amount attributable to the Centrahoma JV, the Defect Amount shall be multiplied by 60% to reflect Seller’s ownership interest in Centrahoma JV.

Defect Amount. The If Seller has not cured a Title Defect Amount resulting from a or Environmental Defect shall be within the Cure Period for such Title Defect or Environmental Defect as provided above, then the amount by which the value of the affected Defect Property or the value of the Business, whichever is greater, is reasonably reduced as a result of the existence of such Title Defect and (the “Title Defect Amount”) or Environmental Defect (the “Environmental Defect Amount”) (each such amount, a “Defect Amount”) shall be determined in accordance with the following terms and conditionsas follows: (ai) if Buyer and Parent Seller agree in writing on the Title Defect AmountAmount for a Title Defect, then that amount shall be the Title Defect Amount, and if Buyer and Seller agree in writing on the Environmental Defect Amount for an Environmental Defect, that amount shall be the Environmental Defect Amount; (bii) if an Environmental Defect, the reasonable cost necessary to investigate, Remediate and take any corrective action in the most cost-effective manner, incorporating the least stringent clean-up standards that, based upon the use classification of the subject Property or the Tupelo Property, as applicable, are allowed under applicable Environmental Law and using the least costly methods that are allowed under applicable Environmental Law, and for Environmental Defects not involving clean-up of contamination, the reasonable cost necessary to investigate, Remediate and take corrective action; (c) if a Title Defect is a Lien that is undisputed and liquidated in amountother than a Permitted Encumbrance, then the Title Defect Amount for such Title Defect shall be the amount necessary to be paid to remove such Lien; (iii) if the Title Defect from represents a discrepancy whereby the Net Revenue Interest for any Unit that a Company is entitled to receive is less than the Net Revenue Interest stated in Exhibit D-1 or Exhibit D-2 with respect to such Unit as provided in clause (ii) of the definition of “Defensible Title,” then the Title Defect PropertyAmount, which shall not exceed the Allocated Value for such Unit shall as provided be the product of (x) the Allocated Value of such Unit, multiplied by (y) a fraction, the numerator of which is the amount by which the Net Revenue Interest stated in Exhibit D-1 or Exhibit D-2 with respect to such Unit exceeds the actual Net Revenue Interest with respect to such Unit, and the denominator of which is the Net Revenue Interest stated in Exhibit D-1 or Exhibit D-2 with respect to such Unit; provided, that if the Title Defect does not affect the Unit throughout its entire productive life, the Title Defect Amount determined under this Section 2.9(e)(iii) shall be reduced to take into account the applicable time period only; (div) if a the Title Defect represents an a discrepancy whereby a Company is obligated to bear greater than the percentage or percentages set forth in Exhibit D-1 or Exhibit D-2 with respect to any Unit as such Company’s Working Interest in such Unit (unless there is a corresponding increase in such Company’s Net Revenue Interest in any such Unit) as provided in clause (ii) of the definition of “Defensible Title”, then the Title Defect Amount, which shall not exceed the Allocated Value for such Unit, shall be (x) the Allocated Value of such Unit, multiplied by (y) a fraction, the numerator of which is the amount by which the Working Interest stated in Exhibit D-1 or Exhibit D-2 exceeds the actual Working Interest with respect to such Unit, and the denominator of which is the percentage obligation stated in Exhibit D-1 or Lien upon Exhibit D-2 with respect to such Unit; provided, that if the Title Defect does not affect the Unit throughout its entire productive life, the Title Defect Amount determined under this Section 2.9(e)(iv) shall be reduced to take into account the applicable time period only; (v) for Environmental Defects, the Environmental Defect Amount is the amount necessary to remediate such Environmental Defect, by satisfying the obligations required to address any breach of Environmental Laws and any Remediation regarding the Environmental Obligation giving rise to such Environmental Defect, in the most cost effective manner reasonably available for continuation of the current use of the Lease or other defect Unit; (vi) if the Title Defect is that the sum of the aggregate Net Mineral Acres covered by a Lease of Lavaca is less than the Net Mineral Acres shown for such Lease in title Exhibit C-2 (the difference being the “Deficiency Acres”), then the Title Defect Amount, which shall not exceed the Allocated Value for such Lease of Lavaca, shall be the product of (x) the Allocated Value for such Lease multiplied by (y) a fraction, the numerator of which is the number of Deficiency Acres (less, to the Defect Property extent applicable, any otherwise Deficiency Acres that are acres included in any portion of a type Lease that has been pooled or unitized for purposes of developing any Unit) for such Lease and the denominator of which is the Net Mineral Acres shown for such Lease in Exhibit C-2; (vii) if the Title Defect is a Special Warranty Title Defect and relates solely to depths other than the Eagle Ford Formation, then the Title Defect Amount, which shall not described aboveexceed the Allocated Value for such Lease of Lavaca or such Unit, will be the reduction in value of the relevant Lease of Lavaca or Unit resulting from such Title Defect; provided, that, if the Title Defect does not affect the Unit throughout its entire productive life, the Title Defect Amount determined under this Section 2.9(e)(vii) shall be reduced to take into account the applicable time period only; (viii) if the Title Defect arises due to a Company’s inability to participate in any additional oil and/or gas well that could otherwise have been drilled to, completed in, and produced from the Eagle Ford Formation on lands in that Unit if the Company had not lost the right to drill any such well to, complete each such well in, and produce each such well from the Eagle Ford Formation because of the failure of any Person to timely drill, complete and produce any well in that Unit, then the Title Defect Amount shall be determined by taking into account the portion reduction in value of the Defect Property affected by the Title Defect, the legal effect of the Title Defect, the reasonably estimated potential economic effect of the Title Defect over the life of the Defect Property, the values and estimated cost to cure placed upon the Title Defect by Buyer and Parent and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, the Defect Amount shall not be greater than the reasonable cost and expense of curing relevant Unit resulting from such Title Defect; (eix) if a notwithstanding anything to the contrary in this Section 2.9, the Title Defect relates Amounts shall not exceed (x) with respect to an ownership gap in a right-of-way included in the Propertyeach Unit, the Defect Amount shall be Allocated Value for such Unit and (y) with respect to each Lease of Lavaca, the reasonable estimated costs and expenses necessary to cure Allocated Value for such gap, or alternatively, to construct an alternative route for the pipeline system around such gap, including the cost of acquiring any necessary real property right-of-way and related capital expenditures;Lease; and (fx) the Defect Amount with respect to a Title Defect Property or Environmental Defect shall be determined without duplication of any costs or losses included in another any other Title Defect Amount or Environmental Defect Amount hereunder; and (g) in determining the Defect Amount attributable to the Centrahoma JV, the Defect Amount shall be multiplied by 60% to reflect Seller’s ownership interest in Centrahoma JV.