Common use of Operating Adjustments Clause in Contracts

Operating Adjustments. (a) Subject to all other provisions of this Agreement, all benefits and obligations of any kind and nature relating to the operation of the Assets conveyed pursuant to this Agreement, including without limitation maintenance, development, operating and capital costs, government incentives, royalties and other burdens, and proceeds from the sale of production (except in the case of gas that is not dedicated to specific sales contracts or other arrangements, where the adjustment will be based on the weighted average price received by Vendor for such gas produced after the Effective Date from the province in which the gas is sold and referred to by Vendor as Vendor's "Corporate Pool Price"), whether accruing, payable or paid and received or receivable, shall be adjusted between the Parties as of the Effective Date in accordance with generally accepted accounting principles. Notwithstanding the generality of the foregoing, the following principles shall apply to adjustments made under this article: (i) all costs incurred in connection with work performed or goods and services provided in respect of the Assets will be deemed to have accrued as of the date the work was performed or the goods and services were provided, regardless of the time those costs became payable; (ii) advances, cash calls and deposits by the Vendor for operations pertaining to the Assets will be adjusted under this Article, or replaced by Purchaser, and, if adjusted, will be transferred to, and be for the benefit of the Purchaser; (iii) adjustments in respect of production, if any, shall be made in favour of Vendor in respect of production beyond the wellhead at or before the Effective Date and in favour of Purchaser in respect of all other production; (iv) the adjustments shall constitute an increase or decrease, as the case may be, to the Cash Purchase Price and to the amount allocated to the Petroleum and Natural Gas Rights; (v) all surface and mineral lease payments and all taxes shall be apportioned on a per diem basis as of the Effective Date; (vi) Vendor shall report all net revenue received or accrued between the Effective Date and Closing Date as its own, for income tax purposes. Adjustments in favour of the Vendor shall be made in an amount equal to the income taxes payable on the Assets' operating income (being field revenue less royalties and operating costs), from the Effective Date until Closing Time at the deemed rate of twenty five (25%) percent of operating income; (vii) there will be no adjustments for royalty tax credits or other similar incentives that accrue to a Party because of financial or organizational attributes specific to it, other than gas cost allowances (or similar cost allowances); and (viii) Vendor has hired Third Party auditors and accountants to prepare a financial audit of the Assets such that Purchaser may be able to comply with any security exchange commission requirements in the United States of America applicable to the closing of the transactions contemplated by this agreement. The Third Party costs and expenses attributable to such audit conducted by Vendor shall be added to the statement of adjustments set out hereunder for Purchaser's account. Vendor confirms that such adjustment is approximately Twenty Five Thousand ($25,000) Dollars plus any additional work requested by Purchaser after October 1, 2011. (b) Vendor shall, no later than the date which is three (3) Business days prior to the Closing Time, provide Purchaser with a written statement of all such adjustments to be made at Closing, and shall cooperate with Purchaser to enable Purchaser to verify the accuracy of such statement. For the purposes of such interim adjustment, Vendor may use, where necessary, good faith estimates for revenues, expenses and capital items. No further adjustments or payments shall be made after Closing until the final statement of adjustments is concluded, which shall occur within 180 days of the Closing Time. The intention of the Parties is that final settlement shall occur by way of the final statement of adjustments, however, it is recognized that adjustments may be made from time to time thereafter, including royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments. Other than as expressly set out hereunder otherwise, any payments required to be made by one Party to the other as a result of such final adjustment or under the terms of this Agreement, shall be made within thirty (30) Business Days of the receipt of a request for the same and both Parties covenant to make any and all payments within such time period. (c) To the extent that a Party believes that an additional adjustment must be made after the final statement of adjustments has been concluded, written notice of the requested adjustment, with reasonable particulars, shall be given to the other Party and the Party receiving such notice shall have the opportunity to review the same. Subject to a dispute as to the adjustment, the Party required to make a payment pursuant to the adjustment shall make a payment to the other Party within a period of thirty (30) Business Days from the date of receipt of such request. (d) The periods for seeking a remedial order contemplated in clause 3(1) of the Xxxxxxxxxxx Xxx, XXX 0000, c. L-12, as amended, for any claim (as defined in the said Act) arising in connection with this Agreement, including the adjustments set out in this Article shall, notwithstanding sub-clauses 3(1)(a) and (b) of the said Act, be four (4) years after the claim arose. (e) During the Audit Period, both Parties may audit the books, records and accounts of the other respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to the Party subject to the audit, at such Party's offices during its normal business hours, and shall be conducted at the sole expense of the Party initiating such audit. Any claims of discrepancies disclosed by such audit shall be made in writing to the Party being audited within the Audit Period and such Party shall respond in writing to any claims of discrepancies within the Audit Period. To the extent that the Parties are unable to resolve any outstanding claims of discrepancies disclosed by such audit within the Audit Period, such audit exceptions may, at a Parties sole option, be resolved by arbitration pursuant to the Arbitration Act of Alberta using one arbitrator mutually chosen by the Parties. (f) In the event of a sale of the Assets, or a portion thereof, after the Closing Time, by Purchaser to a Third Party, the Purchaser shall ensure that the covenants relating to the post Closing adjustment process are fully and completely assigned in writing to such Third Party with the written consent of the Vendor, not to be unreasonably withheld (the "Novation"). The Purchaser shall remain solely liable for the collection of any amounts or the payment obligations of any monies under this Agreement (the "Post Closing Financial Obligations") to Vendor until such time as the Novation has been fully executed as noted above. In addition, Purchaser shall indemnify Vendor from and against, all Losses suffered, sustained, paid or incurred by Vendor which arise out of the Post Closing Financial Obligations, until the full execution of the Novation as noted above. Notwithstanding the Novation, Purchaser shall remain solely liable for and shall continue to maintain its obligations and covenants to Vendor hereunder for such time period prior to the effective date of the Novation. (g) The collection of overpayments or the payment of underpayments, as the case may be, arising as a consequence of royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments relating to the Assets that: (i) pertain to the period prior to the Closing Time and for which audit queries are outstanding at the Closing Time; or (ii) that occur within four (4) years after the Closing Time; shall be the initial responsibility of Purchaser, on its behalf and on behalf of the Vendor. If Purchaser collects overpayments or is liable to make a payment for an underpayment, and either Vendor is entitled to such overpayment or a portion thereof, or for which underpayment Vendor is liable in whole or in part, Purchaser shall, within thirty (30) days of such collection or liability for payment of such amounts, prepare a written and detailed statement of all such adjustments and deliver such statement to Vendor. Within thirty (30) Business Days of receipt of such statement, such adjustments shall be settled by payment to or by Vendor and Purchaser, as the case may be. (h) Payments of lessor royalties, relating to the production months prior to the Closing Time for which production revenue has been received by Vendor shall be paid by Vendor, either before or after the Closing Time, and will be dealt with by way of the statement of adjustments described herein for those production months between the Effective Date and the Closing Time. (i) After Closing, the Purchaser shall make commercially reasonable efforts to assist Vendor in collecting any monies under the joint accounts pertaining to the Assets which may be due and owing to Vendor from third parties and joint interest partners with respect to the Assets and operations thereon. (j) From the Effective Date until the Closing Time, Vendor, where operator, shall be entitled to retain all overhead recoveries earned pursuant to any Title Document(s), and the adjustments in favour of Vendor under this Article shall include any and all such overhead chargeable and recovered by Vendor for this time period. (k) Any amount owing to a Party by the other Party hereunder after Closing and remaining unpaid shall bear interest, compounded and computed monthly at the rate of two (2%) percent above the Prime Rate, from the day that amount was due to be paid until the day it is paid, regardless of whether the Party has given the other Party prior notice of the accrual of interest hereunder. (l) After Closing, if Vendor is required or elects to make any payments on Purchaser's behalf, in relation to the Assets and pertaining to the time period after the Effective Date, Vendor shall be entitled to cash call or joint interest xxxx Purchaser for such amounts, in addition to the mechanism under this Article 7, and Purchaser shall promptly pay Vendor such cash call or joint interest xxxxxxxx within three (3) Business Days of receipt thereof. (m) In addition to any rights now or hereafter granted or available to a Party ("Affected Party") in law, equity or otherwise, and not by way of limitation of any such rights, in the event of a failure by a Party (the "Defaulting Party") to pay any amounts due and owing under this Agreement to the Affected Party, any Affected Party shall have the right (and is hereby authorized by the Defaulting Party) at any time and from time to time to set-off and to apply against any indebtedness owing by such Affected Party to the Defaulting Party under any other agreements, joint interest xxxxxxxx, cash calls, advances or otherwise, any and all amounts owing by the Defaulting Party to such Affected Party under this Agreement.

Operating Adjustments. (a) Subject to all other provisions of this Agreement, all benefits and obligations of any kind and nature relating to the operation of the Assets conveyed pursuant to this Agreement, including without limitation maintenance, development, operating and capital costs, government incentives, royalties and other burdens, and actual proceeds from the sale of production (except in however, based on the case of gas weighted average price received by Vendor for its Petroleum Substances that is not dedicated to specific sales contracts or other arrangements, where the adjustment will be based on the weighted average price received by Vendor for such gas arrangements and produced after the Effective Date from the province in which the gas is Petroleum Substances are sold and referred to by Vendor as Vendor's "Corporate Pool Price"), whether accruing, payable or paid and received or receivable, shall be adjusted between the Parties as of the Effective Date in accordance with generally accepted accounting principles. Notwithstanding the generality of the foregoingFor greater certainty, the following principles shall apply to adjustments made under this article: (i) all costs incurred in connection with work performed or goods and services provided in respect of the Assets will be deemed to have accrued as of the date the work was performed or the goods and services were provided, regardless of the time those costs became payable; (ii) advances, cash calls and deposits by the Vendor for operations pertaining to the Assets will be adjusted under this Article, or replaced by Purchaser, and, if adjusted, will be transferred to, and be for the benefit of the Purchaser; (iii) adjustments in respect of production, if any, shall be made in favour of Vendor in respect of production beyond the wellhead at or before the Effective Date and in favour of Purchaser in respect of all other production; (iv) the . The adjustments shall constitute an increase or decrease, as the case may be, to the Cash Purchase Price and to the amount allocated to the Petroleum and Natural Gas Rights; (v) all surface and mineral lease payments and all taxes shall be apportioned on a per diem basis as of the Effective Date; (vi) . Vendor shall report provide to Purchaser within a reasonable time prior to the Closing Time a written statement of all net revenue received or accrued between such adjustments, including estimates if actuals are not yet available for the time period after the Effective Date and Closing Date as its own, for income tax purposes. Adjustments in favour of the Vendor shall be made in an amount equal to the income taxes payable on the Assets' operating income (being field revenue less royalties and operating costs), from the Effective Date until Closing Time at the deemed rate of twenty five (25%) percent of operating income; (vii) there will be no adjustments for royalty tax credits or other similar incentives that accrue to a Party because of financial or organizational attributes specific to it, other than gas cost allowances (or similar cost allowances); and (viii) Vendor has hired Third Party auditors and accountants to prepare a financial audit of the Assets such that Purchaser may be able to comply with any security exchange commission requirements in the United States of America applicable to the closing of the transactions contemplated by this agreement. The Third Party costs and expenses attributable to such audit conducted by Vendor shall be added to the statement of adjustments set out hereunder for Purchaser's account. Vendor confirms that such adjustment is approximately Twenty Five Thousand ($25,000) Dollars plus any additional work requested by Purchaser after October 1, 2011. (b) Vendor shall, no later than the date which is three (3) Business days prior to the Closing Time, provide Purchaser with a written statement of all such adjustments to be made at Closing, and shall cooperate with Purchaser to enable Purchaser to verify the accuracy of such statement. For the purposes of such interim adjustment, Vendor may use, where necessary, good faith estimates for revenues, expenses and capital items. No further adjustments Adjustments not settled or payments shall be made after Closing until the final statement of adjustments is concluded, which shall occur within 180 days of the Closing Time. The intention of the Parties is that final settlement shall occur by way of the final statement of adjustments, however, it is recognized that adjustments may be made from time to time thereafter, including royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments. Other than as expressly set out hereunder otherwise, any payments required to be made by one Party to the other as a result of such final adjustment or under the terms of this Agreement, shall be made within thirty (30) Business Days of the receipt of a request for the same and both Parties covenant to make any and all payments within such time period. (c) To the extent that a Party believes that an additional adjustment must be made after the final statement of adjustments has been concluded, written notice of the requested adjustment, with reasonable particulars, shall be given to the other Party and the Party receiving such notice shall have the opportunity to review the same. Subject to a dispute as to the adjustment, the Party required to make a payment pursuant to the adjustment shall make a payment to the other Party within a period of thirty (30) Business Days from the date of receipt of such request. (d) The periods for seeking a remedial order contemplated in clause 3(1) of the Xxxxxxxxxxx Xxx, XXX 0000, c. L-12, as amended, for any claim (as defined in the said Act) arising in connection with this Agreement, including the adjustments set out in this Article shall, notwithstanding sub-clauses 3(1)(a) and (b) of the said Act, be four (4) years after the claim arose. (e) During the Audit Period, both Parties may audit the books, records and accounts of the other respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to the Party subject to the audit, at such Party's offices during its normal business hours, and shall be conducted at the sole expense of the Party initiating such audit. Any claims of discrepancies disclosed by such audit shall be made in writing to the Party being audited within the Audit Period and such Party shall respond in writing to any claims of discrepancies within the Audit Period. To the extent that the Parties are unable to resolve any outstanding claims of discrepancies disclosed by such audit within the Audit Period, such audit exceptions may, at a Parties sole option, be resolved by arbitration pursuant to the Arbitration Act of Alberta using one arbitrator mutually chosen by the Parties. (f) In the event of a sale of the Assets, or a portion thereof, after the Closing Time, by Purchaser to a Third Party, the Purchaser shall ensure that the covenants relating to the post Closing adjustment process are fully and completely assigned in writing to such Third Party with the written consent of the Vendor, not to be unreasonably withheld (the "Novation"). The Purchaser shall remain solely liable for the collection of any amounts or the payment obligations of any monies under this Agreement (the "Post Closing Financial Obligations") to Vendor until such time as the Novation has been fully executed as noted above. In addition, Purchaser shall indemnify Vendor from and against, all Losses suffered, sustained, paid or incurred by Vendor which arise out of the Post Closing Financial Obligations, until the full execution of the Novation as noted above. Notwithstanding the Novation, Purchaser shall remain solely liable for and shall continue to maintain its obligations and covenants to Vendor hereunder for such time period incorrectly settled prior to the effective date of the Novation. (g) The collection of overpayments or the payment of underpayments, as the case may be, arising as a consequence of royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments relating to the Assets that: (i) pertain to the period prior to the at Closing Time and for which audit queries are outstanding at the Closing Time; or (ii) that occur within four (4) years after the Closing Time; shall be the initial responsibility of Purchaser, on its behalf and on behalf of the Vendor. If Purchaser collects overpayments or is liable to make a payment for an underpayment, and either Vendor is entitled to such overpayment or a portion thereof, or for which underpayment Vendor is liable in whole or in part, Purchaser shall, within thirty (30) days of such collection or liability for payment of such amounts, prepare a written and detailed statement of all such adjustments and deliver such statement to Vendor. Within thirty (30) Business Days of receipt of such statement, such adjustments shall be settled by payment to or by Vendor and Purchaser, as the case may be, as soon as practicable after Closing. The intention of the Parties is that final settlement shall occur within 180 days following the Closing Time. No adjustments shall be made after 1 year from the Closing Time unless written notice of the requested adjustment, with reasonable particulars, is given within 1 year from the Closing Time, provided however that adjustments arising as a consequence of Crown royalty audits, joint venture audits, and facility operating agreement 13 month adjustments are not subject to the 1 year limit. (hb) Payments of lessor royalties, relating to the production months prior to the Closing Time for which production revenue has been received by Vendor shall be paid by Vendor, either before or after the Closing Time, and will be dealt with by way of the statement of adjustments described herein for those production months between the Effective Date and the Closing Time. (i) After Closing, the Purchaser shall make commercially reasonable efforts to assist Vendor in collecting any monies under the joint accounts pertaining to the Assets which may be due and owing to Vendor from third parties and joint interest partners with respect to the Assets and operations thereon. (jc) From the Effective Date until the Closing Time, Vendor, where operator, operator shall be entitled to retain all overhead recoveries earned pursuant to any Title Document(s), and the adjustments in favour of Vendor under this Article shall include any and all such overhead chargeable and recovered by Vendor for this time periodVendor. (kd) Any amount owing The Parties agree that Purchaser shall book and report for tax accounting and tax filing purposes all revenue, expenses capital items, income or losses pertaining and accruing to a Party the Assets from the Effective Date forward since the effective time of the closing of these transactions occurred on the Effective Date. Purchaser will indemnify Vendor for any claims, liabilities, actions, proceedings, demands, losses, costs, penalties, income taxes, fines, damages and expenses suffered by or sustained by Vendor and pertaining to any failure by Purchaser to file and report such income taxes after the Effective Date or arising from any disagreement or audits relating to such tax reporting by the other Party hereunder after Closing applicable governmental authorities including the Canada Customs and remaining unpaid Revenue Agency. Other than as set out herein, there shall bear interest, compounded and computed monthly at the rate of two (2%) percent above the Prime Rate, from the day that amount was due to be paid until the day it is paid, regardless of whether the Party has given the other Party prior notice of the accrual of interest hereunderno further adjustments for income taxes. (le) After Closing, if Vendor is required or elects Each party has the right to make any payments on Purchaser's behalf, in relation audit the accounting records of the other relating to the Assets and pertaining to the time period after the Effective Date, Vendor shall be entitled to cash call or joint interest xxxx Purchaser for such amounts, adjustments made in addition to the mechanism under accordance with this Article 7. Written notice of an audit request shall be provided by the initiating Party to the other and shall provide reasonable notice of such audit, and Purchaser in order that the Party being audited may prepare for the same. Any discrepancies mutually agreed to by the Parties shall promptly pay Vendor such cash call or joint interest xxxxxxxx be paid by the Party owing additional funds within three five (35) Business Days of receipt thereof. (m) such agreement. In addition the case of a disagreement between the Parties relating to any rights now or hereafter granted or available to the results of the audit, a Party may submit the matter to arbitration in accordance with the Arbitration Act ("Affected Party") in law, equity or otherwise, and not by way of limitation of any such rights, in the event of a failure by a Party (the "Defaulting Party") to pay any amounts due and owing under this Agreement to the Affected Party, any Affected Party shall have the right (and is hereby authorized by the Defaulting Party) at any time and from time to time to set-off and to apply against any indebtedness owing by such Affected Party to the Defaulting Party under any other agreements, joint interest xxxxxxxx, cash calls, advances or otherwise, any and all amounts owing by the Defaulting Party to such Affected Party under this AgreementAlberta).

Operating Adjustments. (a) Subject to all other provisions of this Agreementthe Agreement (including, without limitation, sections 6.1, 6.2, 6.3, 6.5 and 6.6), all other benefits and obligations of any kind and nature relating to the operation of the Assets conveyed pursuant to this the Agreement, excluding income taxes but otherwise including without limitation maintenance, development, operating and capital costs, government incentives, royalties and other burdens, and proceeds from the sale of production (except in the case of gas that is not dedicated to specific sales contracts or other arrangements, where the adjustment will be based on the weighted average price received by Vendor for such gas produced after the Effective Date from the province in which the gas is sold and referred to by Vendor as Vendor's "Corporate Pool Price")production, whether accruing, payable or paid and received or receivable, shall be adjusted between the Parties as of the Effective Date in accordance with generally accepted accounting principles. Notwithstanding the generality of the foregoingFor greater certainty, the following principles items to be considered shall apply to adjustments made under this articleinclude, without limitation, matters such as: (ia) all costs Verifiable lease operating expenses incurred in connection with work performed or goods by Seller and services provided in respect of the Assets will be deemed to have accrued as of the date the work was performed or the goods and services were provided, regardless of the time those costs became payable; (ii) advances, cash calls and deposits by the Vendor for operations pertaining attributable to the Assets will be adjusted under this Article, or replaced by Purchaser, and, if adjusted, will be transferred to, and be for the benefit of the Purchaser; (iii) adjustments in respect of production, if any, shall be made in favour of Vendor in respect of production beyond the wellhead at or before period between the Effective Date and in favour of Purchaser in respect of all other productionthe Closing; (ivb) Value of inventory, net of taxes, using the adjustments shall constitute an increase actual price received for the sale of such product in the month following the sale, or decreaseif no sales have taken place, as using a price based on the case may be, to average field price of other operations in that area in the Cash Purchase Price and to month immediately following the amount allocated to the Petroleum and Natural Gas Rightssale; (vc) all surface Revenues received and mineral lease payments and all taxes shall be apportioned on a per diem basis as of attributable to the period after the Effective Date; (vid) Vendor shall report all net revenue received or accrued between the Effective Date and Closing Date as its ownSuspense amounts held, for income tax purposes. Adjustments in favour of the Vendor shall be made in an amount equal to the income taxes payable on the Assets' operating income (being field revenue less royalties and operating costs), from the Effective Date until Closing Time at the deemed rate of twenty five (25%) percent of operating incomeif any; (viie) there will be no adjustments Any liability or claim pursuant to any audit by partners (JIB), net profit interest owners or regulatory authorities for the prior periods; (f) Any claim for prior periods as a result of lawsuit for royalty tax credits not paid, including legal costs; (g) Any claim that is made due to prior period revision of production allocations; (h) Unpaid ad valorem, property or other similar incentives that accrue taxes attributable to a Party because of financial or organizational attributes specific the Assets prior to it, other than gas cost allowances (or similar cost allowances)the Effective Date; and (viiii) Vendor has hired Third Party auditors All other revenues, expenses and accountants to prepare other adjustments as are customarily taken into account after a financial audit closing involving the purchase and sale of oil and gas properties when the effective time of the Assets such that Purchaser may be able to comply with any security exchange commission requirements in the United States of America applicable to purchase and sale precedes the closing of the transactions contemplated by this agreementpurchase and sale. The Third Party costs and expenses attributable to such audit conducted by Vendor Purchaser shall be added provide to the statement of adjustments set out hereunder for Purchaser's account. Vendor confirms that such adjustment is approximately Twenty Five Thousand Seller no less than five ($25,0005) Dollars plus any additional work requested by Purchaser after October 1, 2011. (b) Vendor shall, no later than the date which is three (3) Business days prior to the Closing Time, provide Purchaser with Date a written statement of all such adjustments to be made at Closing, and shall cooperate with Purchaser the Seller to enable Purchaser the Seller to verify the accuracy of such statement. For the purposes of such interim adjustment, Vendor may use, where necessary, good faith estimates for revenues, expenses and capital items. No further adjustments Adjustments not settled or payments incorrectly settled prior to or at Closing shall be made settled by payment to or by the Seller and the Purchaser, as the case may be, without interest, as soon as practicable after Closing until the final statement of adjustments is concluded, which shall occur within 180 days of the Closing TimeClosing. The intention of the Parties is that final settlement shall occur by way of the final statement of adjustments, however, it is recognized that adjustments may be made from time to time thereafter, including royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments. Other than as expressly set out hereunder otherwise, any payments required to be made by within one Party to the other as a result of such final adjustment or under the terms of this Agreement, shall be made within thirty hundred twenty (30120) Business Days of the receipt of a request for the same and both Parties covenant to make any and all payments within such time period. (c) To the extent that a Party believes that an additional adjustment must be made after the final statement of adjustments has been concluded, written notice of the requested adjustment, with reasonable particulars, shall be given to the other Party and the Party receiving such notice shall have the opportunity to review the same. Subject to a dispute as to the adjustment, the Party required to make a payment pursuant to the adjustment shall make a payment to the other Party within a period of thirty (30) Business Days from the date of receipt of such request. (d) The periods for seeking a remedial order contemplated in clause 3(1) of the Xxxxxxxxxxx Xxx, XXX 0000, c. L-12, as amended, for any claim (as defined in the said Act) arising in connection with this Agreement, including the adjustments set out in this Article shall, notwithstanding sub-clauses 3(1)(a) and (b) of the said Act, be four (4) years after the claim arose. (e) During the Audit Period, both Parties may audit the books, records and accounts of the other respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to the Party subject to the audit, at such Party's offices during its normal business hours, and shall be conducted at the sole expense of the Party initiating such audit. Any claims of discrepancies disclosed by such audit shall be made in writing to the Party being audited within the Audit Period and such Party shall respond in writing to any claims of discrepancies within the Audit Period. To the extent that the Parties are unable to resolve any outstanding claims of discrepancies disclosed by such audit within the Audit Period, such audit exceptions may, at a Parties sole option, be resolved by arbitration pursuant to the Arbitration Act of Alberta using one arbitrator mutually chosen by the Parties. (f) In the event of a sale of the Assets, or a portion thereof, after days following the Closing Time, by Purchaser to a Third Party, the Purchaser shall ensure that the covenants relating to the post Closing adjustment process are fully and completely assigned in writing to such Third Party with the written consent of the Vendor, not to be unreasonably withheld (the "Novation"). The Purchaser shall remain solely liable for the collection of any amounts or the payment obligations of any monies under this Agreement (the "Post Closing Financial Obligations") to Vendor until such time as the Novation has been fully executed as noted above. In addition, Purchaser shall indemnify Vendor from and against, all Losses suffered, sustained, paid or incurred by Vendor which arise out of the Post Closing Financial Obligations, until the full execution of the Novation as noted above. Notwithstanding the Novation, Purchaser shall remain solely liable for and shall continue to maintain its obligations and covenants to Vendor hereunder for such time period prior to the effective date of the NovationDate. (g) The collection of overpayments or the payment of underpayments, as the case may be, arising as a consequence of royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments relating to the Assets that: (i) pertain to the period prior to the Closing Time and for which audit queries are outstanding at the Closing Time; or (ii) that occur within four (4) years after the Closing Time; shall be the initial responsibility of Purchaser, on its behalf and on behalf of the Vendor. If Purchaser collects overpayments or is liable to make a payment for an underpayment, and either Vendor is entitled to such overpayment or a portion thereof, or for which underpayment Vendor is liable in whole or in part, Purchaser shall, within thirty (30) days of such collection or liability for payment of such amounts, prepare a written and detailed statement of all such adjustments and deliver such statement to Vendor. Within thirty (30) Business Days of receipt of such statement, such adjustments shall be settled by payment to or by Vendor and Purchaser, as the case may be. (h) Payments of lessor royalties, relating to the production months prior to the Closing Time for which production revenue has been received by Vendor shall be paid by Vendor, either before or after the Closing Time, and will be dealt with by way of the statement of adjustments described herein for those production months between the Effective Date and the Closing Time. (i) After Closing, the Purchaser shall make commercially reasonable efforts to assist Vendor in collecting any monies under the joint accounts pertaining to the Assets which may be due and owing to Vendor from third parties and joint interest partners with respect to the Assets and operations thereon. (j) From the Effective Date until the Closing Time, Vendor, where operator, shall be entitled to retain all overhead recoveries earned pursuant to any Title Document(s), and the adjustments in favour of Vendor under this Article shall include any and all such overhead chargeable and recovered by Vendor for this time period. (k) Any amount owing to a Party by the other Party hereunder after Closing and remaining unpaid shall bear interest, compounded and computed monthly at the rate of two (2%) percent above the Prime Rate, from the day that amount was due to be paid until the day it is paid, regardless of whether the Party has given the other Party prior notice of the accrual of interest hereunder. (l) After Closing, if Vendor is required or elects to make any payments on Purchaser's behalf, in relation to the Assets and pertaining to the time period after the Effective Date, Vendor shall be entitled to cash call or joint interest xxxx Purchaser for such amounts, in addition to the mechanism under this Article 7, and Purchaser shall promptly pay Vendor such cash call or joint interest xxxxxxxx within three (3) Business Days of receipt thereof. (m) In addition to any rights now or hereafter granted or available to a Party ("Affected Party") in law, equity or otherwise, and not by way of limitation of any such rights, in the event of a failure by a Party (the "Defaulting Party") to pay any amounts due and owing under this Agreement to the Affected Party, any Affected Party shall have the right (and is hereby authorized by the Defaulting Party) at any time and from time to time to set-off and to apply against any indebtedness owing by such Affected Party to the Defaulting Party under any other agreements, joint interest xxxxxxxx, cash calls, advances or otherwise, any and all amounts owing by the Defaulting Party to such Affected Party under this Agreement.

Operating Adjustments. (a) Subject to all other provisions of this Agreement, all revenues and benefits and expenditures and obligations of any kind and nature relating to the ownership, operation and development of the Assets conveyed pursuant to this Agreement, including without limitation maintenance, development, operating and capital costs, government incentivesincentives and administration fees, royalties and other burdens, and proceeds from the sale of production (except in the case of gas that is not dedicated to specific sales contracts or other arrangements, where the adjustment will be based on the weighted average price received by Vendor for such gas produced after the Effective Date from the province in which the gas is sold and referred to by Vendor as Vendor's "Corporate Pool Price"), whether accruing, payable or paid and received or receivable, shall be adjusted between the Parties as of the Effective Date Adjustment Date, on an accrual basis, in accordance with generally accepted accounting principles. Notwithstanding the generality of the foregoing, the following principles shall apply to adjustments made under this articleprovided that: (ia) all rentals and similar payments and all property taxes, freehold mineral taxes and other similar taxes (excluding taxes based on income, net revenue or capital) paid, payable or levied on or in respect of the Assets, the ownership thereof or Petroleum Substances produced therefrom or allocated thereto shall be adjusted and apportioned between the Vendor and Purchaser on a per diem basis as of the Adjustment Date; (b) no adjustments shall be made on account of any royalty tax credits or other similar incentives that accrue to the benefit of either Party; (c) all costs incurred in connection with relating to any work performed or goods and services provided in respect of the Assets will be deemed to have accrued as of the date the work was performed or the goods and services were provided, regardless of the time at which those costs became payablebecome payable or are paid; (iid) advancesall overhead recoveries, cash calls operator's fees and deposits similar amounts received or receivable by Vendor as operator of any Assets shall be adjusted and apportioned between the Vendor for operations pertaining and Purchaser on a per diem basis as of the Adjustment Date; and (e) any revenues related to the Assets will that are received by Vendor from and after the Adjustment Date shall be adjusted under this Article, or replaced held by Purchaser, and, if adjusted, will be transferred to, and be Vendor as bare legal trustee for the benefit of the Purchaser until such amounts are adjusted, as provided for herein or are paid to Purchaser; (iii) . For greater certainty, adjustments in respect of production, if any, shall be made in favour of Vendor in respect of all production beyond the wellhead wellhead, including but not limited to inventory volumes stored in tanks or in line fill at or before the Effective Adjustment Date and in favour of Purchaser in respect of all other production; (iv) the adjustments . The Parties shall constitute an increase or decrease, as the case may be, agree on inventory levels to the Cash Purchase Price and be attributed to the amount allocated to the Petroleum and Natural Gas Rights; (v) all surface and mineral lease payments and all taxes shall be apportioned on a per diem basis as of the Effective Date; (vi) Vendor shall report all net revenue received or accrued between the Effective Date and Closing Date as its own, for income tax purposes. Adjustments in favour of the Vendor shall be made in an amount equal to the income taxes payable if such volumes were not measured on the Assets' operating income (being field revenue less royalties and operating costs), from the Effective Date until Closing Time at the deemed rate of twenty five (25%) percent of operating income; (vii) there will be no adjustments for royalty tax credits or other similar incentives that accrue Adjustment Date. Purchaser shall provide to a Party because of financial or organizational attributes specific to it, other than gas cost allowances (or similar cost allowances); and (viii) Vendor has hired Third Party auditors and accountants to prepare a financial audit of the Assets such that Purchaser may be able to comply with any security exchange commission requirements in the United States of America applicable to the closing of the transactions contemplated by this agreement. The Third Party costs and expenses attributable to such audit conducted by Vendor shall be added to the statement of adjustments set out hereunder for Purchaser's account. Vendor confirms that such adjustment is approximately Twenty Five Thousand ($25,000) Dollars plus any additional work requested by Purchaser after October 1, 2011. (b) Vendor shall, no later than the date which is three (3) 5 Business days Days prior to the Closing Time, provide Purchaser with Time a written statement of all such adjustments to be made at Closing, and shall cooperate with Purchaser Vendor to enable Purchaser Vendor to verify the accuracy of such statement. For the purposes of such interim adjustment, Vendor may use, where necessary, good faith estimates for revenues, expenses and capital items. No further adjustments or payments The net adjustment purchase to this section shall be made after paid at Closing until the final statement of adjustments is concluded, which shall occur within 180 days of the Closing Time. The intention of the Parties is that final settlement shall occur by way of the final statement of adjustments, however, it is recognized that adjustments may be made from time to time thereafter, including royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments. Other than as expressly set out hereunder otherwise, any payments required to be made by one Party an adjustment to the other as a result of such final adjustment Purchase Price. Adjustments not settled or under the terms of this Agreement, shall be made within thirty (30) Business Days of the receipt of a request for the same and both Parties covenant to make any and all payments within such time period. (c) To the extent that a Party believes that an additional adjustment must be made after the final statement of adjustments has been concluded, written notice of the requested adjustment, with reasonable particulars, shall be given to the other Party and the Party receiving such notice shall have the opportunity to review the same. Subject to a dispute as to the adjustment, the Party required to make a payment pursuant to the adjustment shall make a payment to the other Party within a period of thirty (30) Business Days from the date of receipt of such request. (d) The periods for seeking a remedial order contemplated in clause 3(1) of the Xxxxxxxxxxx Xxx, XXX 0000, c. L-12, as amended, for any claim (as defined in the said Act) arising in connection with this Agreement, including the adjustments set out in this Article shall, notwithstanding sub-clauses 3(1)(a) and (b) of the said Act, be four (4) years after the claim arose. (e) During the Audit Period, both Parties may audit the books, records and accounts of the other respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to the Party subject to the audit, at such Party's offices during its normal business hours, and shall be conducted at the sole expense of the Party initiating such audit. Any claims of discrepancies disclosed by such audit shall be made in writing to the Party being audited within the Audit Period and such Party shall respond in writing to any claims of discrepancies within the Audit Period. To the extent that the Parties are unable to resolve any outstanding claims of discrepancies disclosed by such audit within the Audit Period, such audit exceptions may, at a Parties sole option, be resolved by arbitration pursuant to the Arbitration Act of Alberta using one arbitrator mutually chosen by the Parties. (f) In the event of a sale of the Assets, or a portion thereof, after the Closing Time, by Purchaser to a Third Party, the Purchaser shall ensure that the covenants relating to the post Closing adjustment process are fully and completely assigned in writing to such Third Party with the written consent of the Vendor, not to be unreasonably withheld (the "Novation"). The Purchaser shall remain solely liable for the collection of any amounts or the payment obligations of any monies under this Agreement (the "Post Closing Financial Obligations") to Vendor until such time as the Novation has been fully executed as noted above. In addition, Purchaser shall indemnify Vendor from and against, all Losses suffered, sustained, paid or incurred by Vendor which arise out of the Post Closing Financial Obligations, until the full execution of the Novation as noted above. Notwithstanding the Novation, Purchaser shall remain solely liable for and shall continue to maintain its obligations and covenants to Vendor hereunder for such time period incorrectly settled prior to the effective date of the Novation. (g) The collection of overpayments or the payment of underpayments, as the case may be, arising as a consequence of royalty audits, Crown royalty audits, joint venture audits, plant equalizations, and facility operating agreement 13-month adjustments relating to the Assets that: (i) pertain to the period prior to the at Closing Time and for which audit queries are outstanding at the Closing Time; or (ii) that occur within four (4) years after the Closing Time; shall be the initial responsibility of Purchaser, on its behalf and on behalf of the Vendor. If Purchaser collects overpayments or is liable to make a payment for an underpayment, and either Vendor is entitled to such overpayment or a portion thereof, or for which underpayment Vendor is liable in whole or in part, Purchaser shall, within thirty (30) days of such collection or liability for payment of such amounts, prepare a written and detailed statement of all such adjustments and deliver such statement to Vendor. Within thirty (30) Business Days of receipt of such statement, such adjustments shall be settled by payment to or by Vendor and Purchaser, as the case may be. (h) Payments , as soon as practicable after Closing. The intention of lessor royaltiesthe Parties is that final settlement shall occur within 180 days following Closing, relating but it is recognized that adjustments may be made after that time. No adjustments shall be made after one year from Closing unless written notice of the requested adjustment, with reasonable particulars, is given within one year from Closing, provided however that adjustments arising as a consequence of Crown royalty audits, joint venture audits or thirteenth month adjustments for gas plant throughput and gas cost allowance for the Assets are not subject to the production months prior one year limit. Petroleum substances beyond the wellhead at the Adjustment Date and surplus items such as tubing and casing stored on the Lands which are not charged to the Closing Time for which production revenue has been received by Vendor shall be paid by Vendor, either before or after the Closing Time, and will be dealt with by way of the statement of adjustments described herein for those production months between the Effective Date and the Closing Time. (i) After Closing, the Purchaser shall make commercially reasonable efforts to assist Vendor in collecting any monies under the joint accounts pertaining to the Assets which may be due and owing to Vendor from third parties and joint interest partners account with respect to the Assets and operations thereon. (j) From the Effective Date until the Closing Time, Vendor, where operator, shall be entitled to retain all overhead recoveries earned pursuant to any Title Document(s), and the adjustments in favour Lands do not comprise part of Vendor under this Article shall include any and all such overhead chargeable and recovered by Vendor for this time period. (k) Any amount owing to a Party by the other Party hereunder after Closing and remaining unpaid shall bear interest, compounded and computed monthly at the rate of two (2%) percent above the Prime Rate, from the day that amount was due to be paid until the day it is paid, regardless of whether the Party has given the other Party prior notice of the accrual of interest hereunder. (l) After Closing, if Vendor is required or elects to make any payments on Purchaser's behalf, in relation to the Assets and pertaining shall be removed by Vendor as soon as possible. For greater certainty the Parties agree all disputes will be adjusted and remedied prior to the time period after the Effective Date, Vendor final settlement which shall be entitled to cash call or joint interest xxxx Purchaser for such amounts, in addition to the mechanism under this Article 7, and Purchaser shall promptly pay Vendor such cash call or joint interest xxxxxxxx occur within three (3) Business Days of receipt thereof180 days following Closing. (m) In addition to any rights now or hereafter granted or available to a Party ("Affected Party") in law, equity or otherwise, and not by way of limitation of any such rights, in the event of a failure by a Party (the "Defaulting Party") to pay any amounts due and owing under this Agreement to the Affected Party, any Affected Party shall have the right (and is hereby authorized by the Defaulting Party) at any time and from time to time to set-off and to apply against any indebtedness owing by such Affected Party to the Defaulting Party under any other agreements, joint interest xxxxxxxx, cash calls, advances or otherwise, any and all amounts owing by the Defaulting Party to such Affected Party under this Agreement.