Common use of Notice of Defect Clause in Contracts

Notice of Defect. 9.1 For the purposes of this Agreement: (a) references to a “Title Defect” shall be deemed to refer to any lien, encumbrance or other defect that causes Seller to be entitled to receive a Net Revenue Interest with respect to a Lease or Well less than the “Net Revenue Interest” set forth in Exhibit A for such Lease or Well, or that causes Seller to be obligated to bear a Working Interest with respect to a Lease or Well greater than the “Working Interest” set forth in Exhibit A for such Lease or Well, except for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or Well, and (b) references to an “Environmental Issue” shall be deemed to refer to any condition of the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000. If Buyer becomes aware prior to Closing of any Title Defect or Environmental Issue that a reasonably prudent operator would deem to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect or Environmental Issue but in no event later than the Claim Date referenced below, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To be asserted as a valid claim, any defect asserted pursuant to this section (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issue, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effective, the Claim Notice shall be in writing and shall include (i) a description of the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”), (iii) the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by the Title Defect Amount (as defined below) and proceed with Closing or (ii) retain the defective Property and reduce the Purchase Price by the Allocated Value of such Property and proceed to Closing, provided, however, that if the Purchase Price is reduced pursuant to this sentence by more than 10% either Party may terminate this Agreement.

Notice of Defect. 9.1 For If, during the purposes of this Agreement: (a) references Review Period, Purchaser determines that the Property is subject to a “Title "Defect” " (as defined herein in Section 5(d)), the Purchaser must give written notice to Seller of such Defect, the nature of the Defect, and furnish Seller Purchaser's basis for the assertion of such Defect. As soon as practical after such written notice, Seller shall use reasonable diligence to cure any such Defects. If Seller cannot cure any such Defects to the reasonable satisfaction of Purchaser, then Seller shall so notify Purchaser in writing. Thereafter, Seller and Purchaser shall use a good faith effort to agree on the Purchase Price adjustment for any such Defect which cannot be cured. Such adjustment shall be deemed to refer to any liendetermined in accordance with the following guidelines: (1) The Purchase Price shall be allocated among the various Leases in the proportion of the PDP fair market value of the Leases reported by Netherland Sewexx & Xssociates in its report dated October 21, encumbrance or other defect 1996, (the "Allocated Purchase Price"). (2) If the Defect is that causes Seller to be entitled to receive a Seller's Net Revenue Interest with respect to a Lease or Well ("NRI") for any Property is less than the “Net Revenue Interest” NRI for such Property as set forth in Exhibit A "A," then the allocated Purchase Price for such Lease or WellProperty shall be adjusted in the same proportion that the actual NRI for such property bears to the NRI shown in Exhibit "A." (3) If the Defect is a lien, encumbrance, or that causes Seller other charge upon the Property which is liquidated in amount, then the adjustment shall be the sum necessary to be obligated paid to bear a Working Interest with respect the obligee to a Lease or Well greater than remove the “Working Interest” set forth in Exhibit A for such Lease or Well, except Defect from the Property; If the Purchase Price adjustment for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or WellDefect cannot be determined, and (b) references to an “Environmental Issue” shall be deemed to refer to any condition the Seller and Purchaser cannot agree in good faith on the amount of the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either adjustment to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000. If Buyer becomes aware prior to Closing of any Title Defect or Environmental Issue that a reasonably prudent operator would deem to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect or Environmental Issue but in no event later than the Claim Date referenced below, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To be asserted as a valid claim, any defect asserted pursuant to this section (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issue, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effectivePrice, the Claim Notice shall be in writing and shall include Purchaser may (ia) a description of waive the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”), (iii) the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by the Title Defect Amount (as defined below) and proceed with Closing or (iib) retain exclude the defective affected Property and reduce the Purchase Price by the Allocated Value of such Property and proceed to Closing, provided, however, that if the Purchase Price is reduced pursuant to this sentence by more than 10% either Party may for such property, or (c) terminate this Agreement, in which event the Parties shall have no further rights or obligations under this Agreement.

Notice of Defect. 9.1 For the purposes of this Agreement: (a) references to a “Title DefectIssue” shall be deemed to refer to any lien, encumbrance or other defect that causes Seller to be entitled to receive a Net Revenue Interest with respect to a Lease or Well less than the “Net Revenue Interest” set forth in Exhibit A for such Lease or Well, or that causes Seller to be obligated to bear a Working Interest with respect to a Lease or Well greater than the “Working Interest” set forth in Exhibit A for such Lease or Well, except for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or Well, and (b) references to an “Environmental Issue” shall be deemed to refer to any condition of the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000obligation. If Buyer becomes aware prior to Closing of any Title Defect Issue or Environmental Issue that a Buyer reasonably prudent operator would deem deems sufficiently material as to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect Issue or Environmental Issue but in no event later than the Claim Date referenced belowIssue, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To If agreement cannot be asserted as a valid claim, any defect asserted pursuant to this section (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issuereached, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effective, the Claim Notice shall be in writing and shall include (i) a description of the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”), (iii) the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by the Title Defect Amount (as defined below) and proceed with Closing or (ii) retain the defective Property and reduce the Purchase Price by the Allocated Value of such Property and proceed to Closing, provided, however, that if the Purchase Price is reduced pursuant to this sentence by more than 10% either Party may terminate this Agreement.

Notice of Defect. 9.1 For If during the purposes of this Agreement: (a) references Review Period, Purchaser determines that the Property is subject to a “Title "Defect” " (as defined herein in Section 6(d)), the Purchaser must give written notice to Sellers of such Defect, the nature of the Defect, and furnish Sellers with Purchaser's basis for the assertion of such Defect. As soon as practical after such written notice, Sellers shall use reasonable diligence to cure any such Defects. If Sellers cannot cure any such Defects to the reasonable satisfaction of Purchaser, then Sellers shall so notify Purchase in writing. Thereafter, Sellers and Purchaser shall use a good faith effort to agree on the Purchase Price adjustment for any such Defect which cannot be cured. If the Sellers and Purchaser cannot agree in good faith on the amount of such a Purchase Price adjustment, such amount shall be deemed to refer to any lien, encumbrance or other defect determined in accordance with the following guidelines: (1) If the Defect is that causes Seller to be entitled to receive a Sellers' Net Revenue Interest with respect to a Lease or Well ("NRI") for any Property is less than the “Net Revenue Interest” NRI for such Property as set forth in Exhibit A "B-1," then the portion of the Purchase Price which Sellers and Purchaser may agree to be allocated to such Property, shall be adjusted in the same proportion that the actual NRI for such Lease or Wellproperty bears to the NRI shown in Exhibit "B-1." (2) If the Defect is a lien, encumbrance, or that causes Seller other charge upon the Property which is liquidated in amount, then the adjustment shall be the sum necessary to be obligated paid to bear a Working Interest with respect the obligee to a Lease or Well greater than remove the “Working Interest” set forth in Exhibit A for Defect from the Property; (3) If the Defect is curable, but not cured by Closing, and Sellers desire to continue to attempt to cure such Lease or WellDefect, except the Parties shall attempt to agree upon an amount to instruct the Escrow Agent (defined herein) to withhold at Closing, pursuant to the Escrow Agreement (defined herein); (4) If the Purchase Price adjustment for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or WellDefect cannot be determined, and (b) references to an “Environmental Issue” shall be deemed to refer to any condition the Sellers and Purchaser cannot agree in good faith on the amount of the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either adjustment to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000. If Buyer becomes aware prior to Closing of any Title Defect or Environmental Issue that a reasonably prudent operator would deem to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect or Environmental Issue but in no event later than the Claim Date referenced below, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To be asserted as a valid claim, any defect asserted pursuant to this section (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issue, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effectivePrice, the Claim Notice shall be in writing and shall include Purchaser may (ia) a description of waive the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”), (iii) the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by the Title Defect Amount (as defined below) and proceed with Closing or (iib) retain exclude the defective affected Property and reduce the Purchase Price based upon the value of the affected Property, as such value may be agreed upon by Sellers and Purchaser in good faith. In the Allocated Value further event the Parties are unable to agree in good faith upon the value of such the affected Property, then either party hereto, upon written notice to the other, may elect to terminate this Agreement. In the event exclusion of any affected Property and proceed or adjustment due to Closing, provided, however, that if Defect results in a reduction of more than twenty-five percent (25%) of the Purchase Price is reduced pursuant to this sentence by more than 10% Price, either Party may terminate this Agreement by delivery of written notice so indicating to the other Party. In the event this Agreement shall be so terminated, the Escrow Deposit (plus accrued interest) shall be returned to Purchaser, and the Parties hereto shall have no further rights or obligations under this Agreement.

Notice of Defect. 9.1 For If, during the purposes of this Agreement: (a) references Review Period, Purchaser determines that the Property is subject to a “Title "Defect” " (as defined herein in Section 5(d)), the Purchaser must give written notice to Seller of such Defect, the nature of the Defect, and furnish Seller Purchaser's basis for the assertion of such Defect. As soon as practical after such written notice, Seller shall use reasonable diligence to cure any such Defects. If Seller cannot cure any such Defects to the reasonable satisfaction of Purchaser, then Seller shall so notify Purchaser in writing. Thereafter, Seller and Purchaser shall use a good faith effort to agree on the Purchase Price adjustment for any such Defect which cannot be cured. Such adjustment shall be deemed to refer to any liendetermined in accordance with the following guidelines: (1) The Purchase Price shall be allocated among the various Leases in the proportion of the PDP fair market value of the Leases reported by Netherland Sewexx & Xssociates in its report dated October 21, encumbrance or other defect 1996, (the "Allocated Purchase Price"). (2) If the Defect is that causes Seller to be entitled to receive a Seller's Net Revenue Interest with respect to a Lease or Well ("NRI") for any Property is less than the “Net Revenue Interest” NRI for such Property as set forth in Exhibit A "A," then the allocated Purchase Price for such Lease or WellProperty shall be adjusted in the same proportion that the actual NRI for such property bears to the NRI shown in Exhibit "A." (3) If the Defect is a lien, encumbrance, or that causes Seller other charge upon the Property which is liquidated in amount, then the adjustment shall be the sum necessary to be obligated paid to bear a Working Interest with respect the obligee to a Lease or Well greater than remove the “Working Interest” set forth in Exhibit A for such Lease or Well, except Defect from the Property; If the Purchase Price adjustment for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or WellDefect cannot be determined, and the Seller and Purchaser cannot agree in good faith on the amount of the adjustment to the Purchase Price, the Purchaser may (a) waive the Defect and proceed with Closing, or (b) references to an “Environmental Issue” shall be deemed to refer to any condition of exclude the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000. If Buyer becomes aware prior to Closing of any Title Defect or Environmental Issue that a reasonably prudent operator would deem to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect or Environmental Issue but in no event later than the Claim Date referenced below, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To be asserted as a valid claim, any defect asserted pursuant to this section (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issue, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effective, the Claim Notice shall be in writing and shall include (i) a description of the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”), (iii) the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by the Title Defect Amount (as defined below) and proceed with Closing or (ii) retain the defective Property and reduce the Purchase Price by the Allocated Value of such Property and proceed to Closing, provided, however, that if the Purchase Price is reduced pursuant to this sentence by more than 10% either Party may 102 for such property, or (c) terminate this Agreement, in which event the Parties shall have no further rights or obligations under this Agreement.

Notice of Defect. 9.1 For If during the purposes of this Agreement: (a) references Review Period, Purchaser determines that the Property is subject to a “Title Defect” , Purchaser must give written notice to Sellers of such Defect, the nature of the Defect and furnish Sellers Purchaser's basis for the assertion of such Defect. As soon as practical after such written notice, but no later than (3) business days after the Review Period, Sellers and Purchaser shall meet and use a good faith effort to agree on the Purchase Price adjustment for such Defect. If Sellers and Purchaser cannot agree in good faith on the amount of such a Purchase Price adjustment, such amount shall be deemed determined in accordance with the following guidelines: (1) If the Defect is that a Seller's Net Revenue Interest ("NRI") for any Property is less than the NRI for such Property as set forth in Exhibit "A", then the portion of the Purchase Price for such Property, as determined by Schedule 2, shall be adjusted in the same proportion that the actual NRI bears to refer to any the NRI shown in Exhibit "A"; (2) If the Defect is a lien, encumbrance or other defect that causes Seller charge upon the Property which is liquidated in amount, then the adjustment shall be the sum necessary to be entitled paid to receive a Net Revenue Interest with respect the obligee to a Lease or Well less than remove the “Net Revenue Interest” Defect from the Property; (3) If the Defect is curable and Sellers desire to attempt to cure such Defect, the Purchase Price paid at Closing will be reduced as set forth herein; however, Sellers shall have a period of 60 days from and after Closing in Exhibit A which to cure such Defect. If Sellers are able to cure such Defect to the satisfaction of Purchaser within the 60 day period, Purchaser shall pay to Sellers a sum equal to the amount deducted from the Purchase Price for such Lease or Well, or that causes Seller to be obligated to bear a Working Interest with respect to a Lease or Well greater than Defect; and (4) If the “Working Interest” set forth in Exhibit A for such Lease or Well, except Purchase Price adjustment for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or Well, and (b) references to an “Environmental Issue” shall Defect cannot be deemed to refer to any condition of the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000. If Buyer becomes aware prior to Closing of any Title Defect or Environmental Issue that a reasonably prudent operator would deem to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect or Environmental Issue but in no event later than the Claim Date referenced below, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To be asserted as a valid claim, any defect asserted determined pursuant to this section clauses (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issue, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effective, the Claim Notice shall be in writing and shall include (i) a description of the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”1), (iii2) or (3) above, and Sellers and Purchaser cannot otherwise agree in good faith on the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence amount of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, adjustment to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by Price, Purchaser may (1) waive the Title Defect Amount (as defined below) and proceed with Closing or (ii2) retain exclude the defective affected Property and reduce the Purchase Price by based upon the Allocated Value value of such the affected Property and proceed as set forth in Schedule 2. In the event exclusion of the affected Property or adjustment due to Closing, provided, however, that if Defect results in a reduction of more than 20% of the Purchase Price is reduced pursuant to this sentence by more than 10% either Party Price, Purchaser may terminate this Agreement by delivery of written notice so indicating to Sellers, in which event this Agreement shall terminate, and the parties hereto shall have no further rights or obligations under this Agreement. Notwithstanding anything to the contrary herein, failure by Sellers to deliver the Consents (hereinafter defined) shall not be considered in the calculation of the 20% threshold set forth above.

Notice of Defect. 9.1 For If, during the purposes of this Agreement: (a) references Review Period, Purchaser determines that the Property is subject to a “Title "Defect” " (as defined herein in Section 5(d)), the Purchaser must give written notice to Seller of such Defect, the nature of the Defect, and furnish Seller Purchaser's basis for the assertion of such Defect. As soon as practical after such written notice, Seller shall use reasonable diligence to cure any such Defects. If Seller cannot cure any such Defects to the reasonable satisfaction of Purchaser, then Seller shall so notify Purchaser in writing. Thereafter, Seller and Purchaser shall use a good faith effort to agree on the Purchase Price adjustment for any such Defect which cannot be cured. Such adjustment shall be deemed to refer to any liendetermined in accordance with the following guidelines: (1) The Purchase Price shall be allocated among the various Leases in the proportion of the PDP fair market value of the Leases reported by Netherland Sewexx & Xssociates in its report dated October 21, encumbrance or other defect 1996, (the "Allocated Purchase Price"). (2) If the Defect is that causes Seller to be entitled to receive a Seller's Net Revenue Interest with respect to a Lease or Well ("NRI") for any Property is less than the “Net Revenue Interest” NRI for such Property as set forth in Exhibit A "A," then the allocated Purchase Price for such Lease or WellProperty shall be adjusted in the same proportion that the actual NRI for such property bears to the NRI shown in Exhibit "A." (3) If the Defect is a lien, encumbrance, or that causes Seller other charge upon the Property which is liquidated in amount, then the adjustment shall be the sum necessary to be obligated paid to bear a Working Interest with respect the obligee to a Lease or Well greater than remove the “Working Interest” set forth in Exhibit A for such Lease or Well, except Defect from the Property; If the Purchase Price adjustment for any such excess Working Interest accompanied by a proportionate increase in the Net Revenue Interest for such Lease or WellDefect cannot be determined, and the Seller and Purchaser cannot agree in good faith on the amount of the adjustment to the Purchase Price, the Purchaser may (a) waive the Defect and proceed with Closing, or (b) references to an “Environmental Issue” shall be deemed to refer to any condition of exclude the Leases, Lands, Wxxxx or Lease Property and Equipment that could reasonably be expected, under any applicable environmental or other law, either to require remediation efforts or to expose the owner of the Property to liability for any fine, penalty or other monetary obligation that exceeds $100,000. If Buyer becomes aware prior to Closing of any Title Defect or Environmental Issue that a reasonably prudent operator would deem to materially impact value of the Properties or operations and not incurred in the normal course of business, as such, require curative action prior to Closing, Buyer shall promptly notify Seller in writing of such Title Defect or Environmental Issue but in no event later than the Claim Date referenced below, and Buyer and Seller shall attempt to reach a good faith agreement on curative action, Purchase Price adjustment, indemnification or other appropriate steps. To be asserted as a valid claim, any defect asserted pursuant to this section (other than a lien or encumbrance arising by through or under Seller) must exceed an individual defect threshold of $1,000,000 per spacing unit (“Individual Defect Threshold”). To assert a claim of Title Defect or Environmental Issue, Buyer must deliver a claim notice of such Title defect or Environmental Issue (“Claim Notice”) on or before ten business days prior to Closing (such cut-off date being the “Claim Date”)). To be effective, the Claim Notice shall be in writing and shall include (i) a description of the alleged issue that is reasonably sufficient for Seller to determine the basis of the alleged issue, (ii) the Lease or Well adversely affected by the issue (each a “Defect Property”), (iii) the Allocated Value of each Defect Property, (iv) all documents upon which Buyer relies for its assertion of a defect, including, at a minimum, supporting documents reasonably necessary for Seller (as well as any title attorney, examiner, consultant or other representative hired or retained by Seller) to verify the existence of the alleged defect and (v) the amount by which Buyer reasonably believes the allocated value of each Defect Property is reduced by the alleged defect and the computations and information upon which Buyer’s belief is based, including any analysis by any title attorney, examiner, consultant or representative hired or retained by Buyer. Any claim not made by the Claim Date shall be deemed waived by Buyer. 9.2 Seller have the right, but not the obligation, to attempt, at its sole cost, to cure or remove on or before Closing any asserted defects each exceeding the Individual Defect Threshold for which Seller has timely received a Claim Notice as set forth below. In the event Seller is unable to cure any such defect prior to Closing and such defect is not waived by Buyer then Seller may elect to either (i) reduce the Purchase Price by the Title Defect Amount (as defined below) and proceed with Closing or (ii) retain the defective Property and reduce the Purchase Price by the Allocated Value of such Property and proceed to Closing, provided, however, that if the Purchase Price is reduced pursuant to this sentence by more than 10% either Party may terminate this Agreement.Price