Common use of Environmental Defect and Title Defect Values Clause in Contracts

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Title Defect, Optionee and Optionor shall use their best efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“Environmental or Title Defect Value”). In determining the Value of an Environmental or Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases and xxxxx, or other Assets, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defect. The following guidelines shall be followed by the Parties in establishing the Value of any Environmental or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect if (a) the validity of the claim is agreed to by the Parties, (b) proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement for Environmental Defects and Title Defects: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests for the affected property, then the Title Defect Value shall be the amount of the reduction or increase as the case may be. (b) If the Environmental or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the Defect. (c) If the Environmental or Title Defect represents an obligation or burden upon the affected property for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value shall be the sum necessary to compensate Optionee at Closing for the adverse economic effect which the Environmental or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the Defect, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value of the Leases, lands, xxxxx and other Assets affected by the Environmental or Title Defect; (2) the productive status of the affected Asset (i.e., proved developed producing, etc.) and the present value of the future income expected to be produced therefrom; (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the Environmental or Title Defect. (d) If the Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to Optionee, or if the validity of the claim as to an Environmental or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee at Closing. If the value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee at Closing shall be adjusted by an amount being the average of Optionor’s and Optionee’s good faith estimates of the value thereof. In either case, Optionor and Optionee shall each have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to mediation and arbitration in accordance with the dispute resolution procedures set forth in Exhibit “P.” After the expiration of said ninety (90) day period the right to refer the matter to mediation and arbitration shall terminate. Subject to the terms of Exhibit “P”, the decision of the arbitrator regarding any Environmental or Title Defect Dispute shall be final as between the Parties.

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Title Defect, Optionee Buyer and Optionor Seller shall use their best efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“Environmental or Title Defect Value”). Notwithstanding anything to the contrary set forth herein, the Environmental or Title Defect Value and any related adjustment to the Purchase Price shall in no event exceed the Allocated Value of the affected Asset. In determining the Value of an Environmental or Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases leases and xxxxx, or other Assets, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defect. The following guidelines shall be followed by the Parties in establishing the Value of any Environmental or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect the Purchase Price if (a) the validity of the claim is agreed to by the Parties, (b) proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement agreement for Environmental Defects and Title Defects , and (ii) application of the Aggregate Defect Basket requirement as set forth in Section 7.4 for Environmental and Title Defects: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests that shown on Exhibit “B” for the affected property, then the Title Defect Value Purchase Price shall be the amount of the reduction proportionately reduced or increase increased as the case may be. (b) If the Environmental or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the Defect. (c) If the Environmental or Title Defect represents an obligation or burden upon the affected property for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Purchase Price shall be the sum necessary to compensate Optionee Buyer at Closing for the adverse economic effect which the Environmental or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the Defect, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leasesleases, lands, xxxxx and other Assets affected by the Environmental or Title Defect; (2) the productive status of the affected Asset (i.e., proved developed producing, etc.) and the present value of the future income expected to be produced therefrom; (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the Environmental or Title Defect. (d) If the Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to OptioneePurchase Price, or if the validity of the claim as to an Environmental or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee Purchase Price at Closing. If the value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee Purchase Price at Closing shall be adjusted by an amount being the average of Optionor’s and OptioneeSeller’s good faith estimates estimate of the value thereof. In either case, Optionor and Optionee Buyer shall each have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to mediation and arbitration in accordance with the dispute resolution procedures set forth in Exhibit “P.I.” After the expiration of said ninety (90) day period the right to refer the matter to mediation and arbitration shall terminate. Subject to the terms of Exhibit “PI”, the decision of the arbitrator regarding any Environmental or Title Defect Dispute shall be final as between the Parties, provided in no event shall the value of the disputed Environmental or Title Defect exceed the Allocated Value of the affected Asset.

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Title Defect, Optionee Buyer and Optionor Seller shall use their best efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“"ENVIRONMENTAL OR TITLE DEFECT VALUE"). Notwithstanding anything to the contrary set forth herein, the Environmental or Title Defect Value”)Value and any related adjustment to the Purchase Price shall in no event exceed the Allocated Value of the affected Asset. In determining the Value of an Environmental or Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases leases and xxxxxwells, or other Assets, whether an whetxxx xn undivided interest, separate interest or otherwise, materially and adversely affected by the Defect. The following guidelines shall be followed by the Parties in establishing the Value of any Environmental or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect the Purchase Price if (a) the validity of the claim is agreed to by the Parties, (b) proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement agreement for Environmental Defects and Title Defects , and (ii) application of the Aggregate Defect Basket requirement as set forth in Section 7.4 for Environmental and Title Defects: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests that shown on Exhibit "B" for the affected property, then the Title Defect Value Purchase Price shall be the amount of the reduction proportionately reduced or increase increased as the case may be. (b) If the Environmental or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the Defect. (c) If the Environmental or Title Defect represents an obligation or burden upon the affected property for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Purchase Price shall be the sum necessary to compensate Optionee Buyer at Closing for the adverse economic effect which the Environmental or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the Defect, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leasesleases, lands, xxxxx wells and other Assets affected xxxxcted by the Environmental or Title Defect; (2) the productive status of the affected Asset (i.e., proved developed producing, etc.) and the present value of the future income expected to be produced therefrom; (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the Environmental or Title Defect. (d) If the Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to OptioneePurchase Price, or if the validity of the claim as to an Environmental or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee Purchase Price at Closing. If the value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee Purchase Price at Closing shall be adjusted by an amount being the average of Optionor’s and Optionee’s Seller's good faith estimates estimate of the value thereof. In either case, Optionor and Optionee Buyer shall each have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to mediation and arbitration in accordance with the dispute resolution procedures set forth in Exhibit “P.” After the expiration of said ninety (90) day period the right to refer the matter to mediation and arbitration shall terminate. "I." Subject to the terms of Exhibit “P”"I", the decision of the arbitrator regarding any Environmental or Title Defect Dispute shall be final as between the Parties, provided in no event shall the value of the disputed Environmental or Title Defect exceed the Allocated Value of the affected Asset.

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental Defect and/or a Title Defect under Section 7.1 or Title DefectSection 8.2, Optionee respectively, Buyer and Optionor Seller shall in good faith use their best reasonable efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on (the provisions herein (“Environmental or Title Defect Value”). Notwithstanding anything to the contrary set forth herein, the Defect Value for any Title Defect and any related adjustment to the Purchase Price shall in no event exceed the Allocated Value of the affected Asset. In determining the Defect Value of an Environmental Defect or a Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases and xxxxx, or other Assets, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defectsuch defect. The following guidelines shall be followed by the Parties in establishing the Defect Value of any Environmental Defect or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect the Purchase Price if (a) the validity of the claim is agreed to by the Parties, (b) Parties and proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles individual thresholds as set forth in this Agreement for Environmental Defects and Title Defects, and (ii) application of the Defect Baskets requirement as set forth in Section 7.4 for Environmental Defects and Title Defects: (a) If the Title Defect is based on a difference in Net Revenue Interest, net revenue interest mineral acres or expense interest from the Designated Interests that shown on Exhibit “A” or Exhibit “B” for the affected propertyAssets, then the Title Defect Value Purchase Price shall be reduced based on the amount of difference between interest identified on the reduction or increase as applicable exhibit and the case may beapplicable defect. (b) If the Environmental Defect or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the DefectAsset. (c) If the Environmental Defect or Title Defect represents an obligation or burden upon the affected property Assets for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Purchase Price shall be the sum necessary to compensate Optionee Buyer at Closing for the estimated adverse economic effect which the Environmental Defect or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the DefectAssets, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leases, lands, xxxxx and other Assets affected by the an Environmental Defect or a Title Defect; (2) the productive status economic assumptions Buyer utilized in the determination of the affected Asset (i.e., proved developed producing, etc.) and the present value Allocated Value of the future income expected to be produced therefrom;Asset, including prices, forecasts, production, reserves, discount factors or other relevant information; and (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the cost to remediate or otherwise resolve an Environmental or Title Defect. (d) If the Defect Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to OptioneePurchase Price, or if the validity of the claim as to an Environmental Defect or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to dispute or if the Cash Payment or a payment by Optionor to Optionee at Closing. If the value Defect Value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee Purchase Price at Closing shall be adjusted by an amount being the average of Optionor’s and OptioneeBuyer’s good faith estimates estimate of the value thereofDefect Value subject to Section 7.4. In either case, Optionor and Optionee case Buyer or Seller shall each have the right, right exercisable within ninety thirty (9030) days after the Closing Date, Date to refer the disputed matter to mediation arbitration, and such disputed matter shall be exclusively and finally resolved pursuant to this Section 8.4. There shall be a single arbitrator, (i) for Title matters shall be a title attorney, in good standing, with at least ten (10) years’ experience in oil and gas title involving properties in the regional area in which the Assets are located or (ii) for Environmental matters shall be an environmental attorney, in good standing, with at least ten (10) years’ experience in environmental matters involving oil and gas properties in the regional area in which the Assets are located, which shall be selected by mutual agreement of Buyer and Seller within fifteen (15) - 26 - Business Days after Buyer’s referral of the disputed matter to arbitration under this Section 8.4, and absent such agreement, by the International Institute for Conflict Prevention & Resolution (“CPR”) (the “Defect Arbitrator”). The Defect Arbitrator shall not have been employed by or performed services to either Seller or Buyer for a period five (5) years prior to the Closing Date. The arbitration proceeding shall be held in Houston, Texas and shall be conducted in accordance with the Rules for Non-Administered Arbitration (the “Rules”) of CPR (but need not be administered by the CPR), to the extent such rules do not conflict with the terms of this Section. The Defect Arbitrator’s determination shall be made within fifteen (15) Business Days after submission of the matters in dispute resolution procedures and shall be final and binding upon both Parties, without right of appeal. In making his determination, the Defect Arbitrator shall be bound by the rules set forth in Exhibit “P.” After this Section 8.4 and may consider such other matters as in the expiration opinion of said ninety (90) day period the right Defect Arbitrator are necessary or helpful to refer the matter to mediation and arbitration shall terminatemake a proper determination. Subject to the terms of Exhibit “P”Additionally, the decision Defect Arbitrator may consult with and engage disinterested third parties to advise the arbitrator, including, without limitation, petroleum or environmental engineers. The Defect Arbitrator shall act as an expert for the limited purpose of determining the arbitrator regarding any specific disputed Environmental or Title Defect Dispute and Environmental or Title Defect Value submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter. Seller and Buyer shall be final as between each bear its own legal fees and other costs of presenting its case. Each Party shall bear one-half of the Partiescosts and expenses of the Defect Arbitrator, including any costs incurred by the Defect Arbitrator that are attributable to such third party consultation. Within ten (10) days after the Defect Arbitrator delivers written notice to Buyer and Seller of his award with respect to the specific disputed Environmental or Title Defect and Environmental or Title Defect Value, Buyer shall pay to Seller the amount, if any, so awarded by the Defect Arbitrator to Seller. (e) OPTION TO TERMINATE

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Defect and/or a Title Defect, Optionee Buyer and Optionor Seller shall use their best efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“Environmental or Title Defect Value”). Notwithstanding anything to the contrary set forth herein, the Defect Value and any related adjustment to the Purchase Price shall in no event exceed the Allocated Value of the affected Scheduled Interest. In determining the Defect Value of an Environmental Defect or a Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases and xxxxx, or other AssetsScheduled Interests, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defectdefect. The following guidelines shall be followed by the Parties in establishing the Defect Value of any Environmental Defect or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect the Purchase Price if (a) the validity of the claim is agreed to by the Parties, (b) Parties and proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement for Environmental Defects and Title Defects, and (ii) application of the Aggregate Defect Basket requirement as set forth in Section 7.4 for Environmental Defects and Title Defects: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests that shown on Exhibit “C” for the affected propertyScheduled Interest, then the Title Defect Value Purchase Price shall be the amount of the reduction proportionately reduced or increase increased as the case may be. (b) If the Environmental Defect or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect defect from the propertyScheduled Interest, or (2) the decrease in the fair market value (determined as set forth below) of the Asset Scheduled Interest as a result of the Defectdefect. (c) If the Environmental Defect or Title Defect represents an obligation or burden upon the affected property Scheduled Interest for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Purchase Price shall be the sum necessary to compensate Optionee Buyer at Closing for the adverse economic effect which the Environmental Defect or Title Defect will have on the affected propertyScheduled Interest. This sum shall be the lesser of (1) the cost of remediating the Defectdefect, or (2) the decrease in the fair market value (determined as set forth below) of the Asset Scheduled Interest as a result of the Defectdefect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leases, lands, xxxxx and other Assets Scheduled Interest affected by the Environmental or Title Defect; (2) the productive status of the affected Asset Scheduled Interest (i.e., proved developed producing, etc.) and the net present value of the future income expected to be produced therefrom; (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the Environmental Defect or Title Defect. (d) If the Defect Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to OptioneePurchase Price, or if the validity of the claim as to an Environmental Defect or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee Purchase Price at Closing. If the value Defect Value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee Purchase Price at Closing shall be adjusted by an amount being the average of Optionor’s and OptioneeSeller’s good faith estimates estimate of the value thereofDefect Value. In either case, Optionor and Optionee Buyer shall each have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to mediation and arbitration in accordance with the dispute resolution procedures set forth in Exhibit “P.” After the expiration of said ninety (90) day period the right to refer the matter to mediation and arbitration shall terminateSection 18.2. Subject to the terms of Exhibit “P”Section 18.2, the decision of the arbitrator regarding any dispute as to the validity or Defect Value of an Environmental Defect or a Title Defect Dispute shall be final as between the Parties, provided in no event shall the Defect Value of the disputed Environmental Defect or Title Defect exceed the Allocated Value of the affected Scheduled Interest.

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Defect and/or a Title Defect, Optionee Buyer and Optionor Seller shall in good faith use their best reasonable efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“Environmental or Title Defect Value”). In determining the Value of an Environmental or Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases and xxxxx, or other Assets, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defect. The following guidelines shall be followed by the Parties in establishing the Value of any Environmental or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect if (a) the validity of the claim is agreed to by the Parties, (b) proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement for Environmental Defects and Title Defects: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests that shown on Exhibit “B” for the affected propertyAssets, then the Title Defect Value thePurchase Price shall be the amount of the reduction or increase as the case may beproportionately reduced. (b) If the Environmental Defect or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the DefectAsset. (c) If the Environmental Defect or Title Defect represents an obligation or burden upon the affected property Assets for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Purchase Price shall be the sum necessary to compensate Optionee Buyer at Closing for the adverse economic effect which the Environmental Defect or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the DefectAssets, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leases, lands, xxxxx and other Assets affected by the Environmental or a Title Defect; (2) the productive status economic assumptions the Buyer utilized in the determination of the affected Asset (i.e., proved developed producing, etc.) and the present value Allocated Value of the future income expected to be produced therefrom;Asset, including prices, forecasts, production, reserves, discount factors or other relevant information; and (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the cost to remediate an Environmental or Title Defect. (d) If the Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to Optionee, or if the validity of the claim as to an Environmental or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee at Closing. If the value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee at Closing shall be adjusted by an amount being the average of Optionor’s and Optionee’s good faith estimates of the value thereof. In either case, Optionor and Optionee shall each have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to mediation and arbitration in accordance with the dispute resolution procedures set forth in Exhibit “P.” After the expiration of said ninety (90) day period the right to refer the matter to mediation and arbitration shall terminate. Subject to the terms of Exhibit “P”, the decision of the arbitrator regarding any Environmental or Title Defect Dispute shall be final as between the Parties.

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Defect and/or a Title Defect, Optionee Buyer and Optionor Seller shall in good faith use their best reasonable efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“Environmental or Title Defect Value”). Notwithstanding anything to the contrary set forth herein, the Defect Value for any Title Defect and any related adjustment to the Purchase Price shall in no event exceed the Allocated Value of the affected Asset. In determining the Defect Value of an Environmental Defect or a Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases and xxxxx, Assets or other Assets, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defectdefect. The following guidelines shall be followed by the Parties in establishing the Defect Value of any Environmental Defect or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect the Purchase Price if (a) the validity of the claim is agreed to by the Parties, (b) Parties and proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement for Environmental Defects and Title Defects, and (ii) application of the Aggregate Defect Basket requirement as set forth in Section 7.4 for Environmental Defects and Title Defects: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests that shown on Exhibit “B” for the affected propertyAssets, then the Title Defect Value Purchase Price shall be the amount of the reduction or increase as the case may beproportionately reduced. (b) If the Environmental Defect or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the DefectAsset. (c) If the Environmental Defect or Title Defect represents an obligation or burden upon the affected property Assets for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Purchase Price shall be the sum necessary to compensate Optionee Buyer at Closing for the adverse economic effect which the Environmental Defect or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the DefectAssets, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leases, lands, xxxxx and other Assets affected by the Environmental or a Title Defect; (2) the productive status economic assumptions the Buyer utilized in the determination of the affected Asset (i.e., proved developed producing, etc.) and the present value Allocated Value of the future income expected to be produced therefrom;Asset, including prices, forecasts, production, reserves, discount factors or other relevant information; and (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the cost to remediate an Environmental or Title Defect. (da) If the Defect Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to OptioneePurchase Price, or if the validity of the claim as to an Environmental Defect or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee Purchase Price at Closing. If the value Defect Value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee Purchase Price at Closing shall be adjusted by an amount being the average of Optionor’s and OptioneeSeller’s good faith estimates estimate of the value thereofDefect Value. In either case, Optionor and Optionee case the Buyer shall each have the right, right exercisable within ninety thirty (9030) days after the Closing Date, Date to refer the disputed matter to mediation arbitration and such disputed matter shall be exclusively and finally resolved pursuant to this Section 8.4. There shall be a single arbitrator, (i) for Title matters shall be a title attorney, in good standing, with at least ten (10) years experience in oil and gas titles involving properties in the regional area in which the Properties are located or (ii) for Environmental matters shall be an environmental attorney, in good standing, with at least ten (10) years experience in environmental matters involving oil and gas properties in the regional area in which the Properties are located, which shall be selected by mutual agreement of Buyer and Seller within fifteen (15) Business Days after the end of the Cure Period, and absent such agreement, by the Dallas office of the American Arbitration Association (the “Defect Arbitrator”). The Defect Arbitrator shall not have been employed by or performed services to either the Seller or Buyer for a period five (5) years prior to the Closing Date. The arbitration proceeding shall be held in Dallas, Texas and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section. The Defect Arbitrator’s determination shall be made within fifteen (15) Business Days after submission of the matters in dispute resolution procedures and shall be final and binding upon both parties, without right of appeal. In making his determination, the Title Arbitrator shall be bound by the rules set forth in Exhibit “P.” After this Section 8.4 and may consider such other matters as in the expiration opinion of said ninety (90) day period the right Defect Arbitrator are necessary or helpful to refer the matter to mediation and arbitration shall terminatemake a proper determination. Subject to the terms of Exhibit “P”Additionally, the decision Defect Arbitrator may consult with and engage disinterested third parties to advise the arbitrator, including without limitation petroleum or environmental engineers. The Defect Arbitrator shall act as an expert for the limited purpose of determining the arbitrator regarding any specific disputed Environmental or Title Defect Dispute and Environmental or Title Defect Value submitted by either party and may not award damages, interest or penalties to either party with respect to any matter. Seller and Buyer shall be final as between each bear its own legal fees and other costs of presenting its case. Each party shall bear one-half of the Partiescosts and expenses of the Defect Arbitrator, including any costs incurred by the Defect Arbitrator that are attributable to such third party consultation. Within ten (10) days after the Defect Arbitrator delivers written notice to Buyer and Seller of his award with respect to the specific disputed Environmental or Title Defect and Environmental or Title Defect Value, (i) Buyer shall pay to Seller the amount, if any, so awarded by the Defect Arbitrator to Seller or (ii) Seller shall pay to Buyer the amount, if any, so awarded by the Defect Arbitrator to Buyer.

Environmental Defect and Title Defect Values. Upon timely delivery of notice of an Environmental or Defect and/or a Title Defect, Optionee Buyer and Optionor Seller shall in good faith use their best reasonable efforts to agree on the validity and value of the claim for the purpose of making any adjustment to the Purchase Price based on the provisions herein (“Environmental or Title "Defect Value”"). In determining the Value of an Environmental or Title Defect, it is the intent of the Parties to include, to the extent possible, only that portion of the lands, Leases and xxxxx, or other Assets, whether an undivided interest, separate interest or otherwise, materially and adversely affected by the Defect. The following guidelines shall be followed by the Parties in establishing the Value of any Environmental or Title Defect for the purpose of adjusting a Cash Payment or establishing an amount to be paid by Optionor to Optionee for such a Defect if (a) the validity of the claim is agreed to by the Parties, (b) proper notice has been timely given, and (c) subject to (i) application of the appropriate deductibles as set forth in this Agreement for Environmental Defects and Title Defects.: (a) If the Title Defect is based on a difference in net revenue interest or expense interest from the Designated Interests that shown on Exhibit "B" for the affected propertyAssets, then the Title Defect Value Stock Consideration portion of the Purchase Price shall be the amount of the reduction or increase as the case may beproportionately reduced. (b) If the Environmental Defect or Title Defect is liquidated in amount (for example, but not limited to, a lien, encumbrance, charge or penalty), then the Defect Value adjustment to the Stock Consideration portion of the Purchase Price shall be the lesser of (1) the sum necessary to be paid to the obligee to remove the Defect defect from the property, or (2) the decrease in the fair market value of the Asset as a result of the DefectAsset. (c) If the Environmental Defect or Title Defect represents an obligation or burden upon the affected property Assets for which the economic detriment is not liquidated but can be estimated with reasonable certainty as agreed to by the Parties, the Defect Value adjustment to the Stock Consideration based on the closing price of the Common Stock on the Closing Date shall be the sum necessary to compensate Optionee Buyer at Closing for the adverse economic effect which the Environmental Defect or Title Defect will have on the affected property. This sum shall be the lesser of (1) the cost of remediating the DefectAssets, or (2) the decrease in the fair market value of the Asset as a result of the Defect. The fair market value determination shall be made by the Parties in good faith taking into account all relevant factors, including, but not limited to, the following: (1) the value Allocated Value of the Leases, lands, xxxxx and other Assets affected by the Environmental or a Title Defect; (2) the productive status economic assumptions the Buyer utilized in the determination of the affected Asset (i.e., proved developed producing, etc.) and the present value Allocated Value of the future income expected to be produced therefrom;Asset, including prices, forecasts, production, reserves, discount factors or other relevant information; and (3) if the Title Defect represents only a possibility of title failure, the probability that such failure will occur; and (4) the economic effect of the cost to remediate an Environmental or Title Defect. (d) If the Value of the Environmental or Title Defect cannot be determined using the above guidelines, and if the Parties cannot otherwise agree on the amount of an adjustment to the Cash Payment or payment by Optionor to Optionee, or if the validity of the claim as to an Environmental or Title Defect cannot be agreed upon, then the Closing shall nevertheless include the Asset(s) affected thereby. If the validity of the claim is in dispute, there shall be no adjustment to the Cash Payment or a payment by Optionor to Optionee at Closing. If the value of the claim is in dispute, the Cash Payment or payment by Optionor to Optionee at Closing shall be adjusted by an amount being the average of Optionor’s and Optionee’s good faith estimates of the value thereof. In either case, Optionor and Optionee shall each have the right, exercisable within ninety (90) days after the Closing Date, to refer the disputed matter to mediation and arbitration in accordance with the dispute resolution procedures set forth in Exhibit “P.” After the expiration of said ninety (90) day period the right to refer the matter to mediation and arbitration shall terminate. Subject to the terms of Exhibit “P”, the decision of the arbitrator regarding any Environmental or Title Defect Dispute shall be final as between the Parties.