Common use of Properties; Oil and Gas Matters Clause in Contracts

Properties; Oil and Gas Matters. (a) All major items of operating equipment owned or leased by the Company or its subsidiaries are, in the aggregate, in a state of repair so as to be adequate in all material respects for reasonably prudent operations in the areas in which they are operated, except as would not, individually or in the aggregate, have a Company Material Adverse Effect. (b) Except for goods and other property sold, used or otherwise disposed of since the dates of the respective Company Reserve Reports (defined in clause (c) below) in the ordinary course of business or reflected as having been sold, used or otherwise disposed of in the Company SEC Reports, as of the date hereof, the Company and its subsidiaries have good and defensible title to, or valid leases or contractual rights to, all equipment and other personal property used or necessary for use in the operation of its Oil and Gas Properties in the manner in which such properties were operated prior to the date hereof. For purposes of this Agreement, “Oil and Gas Properties” means direct and indirect interests in and rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests; all interests in rights with respect to oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons (collectively, “Hydrocarbons”) and other minerals or revenues therefrom, all contracts in connection therewith and claims and rights thereto (including all oil and gas leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions; all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and all interests in equipment and machinery (including xxxxx, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing.

Properties; Oil and Gas Matters. (a) All major items of operating equipment owned or leased by the Company Pinnacle or its subsidiaries Subsidiaries in connection with the operation of its Oil and Gas Properties are, in the aggregate, in a state of repair so as to be adequate in all material respects for reasonably prudent operations in the areas in which they are operated, except as would nothave not had and are not reasonably likely to have, individually or in the aggregate, have a Company Pinnacle Material Adverse Effect. (b) Except for goods and other property sold, used or otherwise disposed of since the dates of the respective Company Pinnacle Reserve Reports (defined in clause (c) below) in the ordinary course of business or reflected as having been sold, used or otherwise disposed of in the Company Pinnacle SEC Reports, as of the date hereofof this Agreement, the Company Pinnacle and its subsidiaries Subsidiaries have good and defensible title to, or valid leases or contractual rights to, all equipment and other personal property used or necessary for use in the operation of its Oil and Gas Properties in the manner in which such properties were operated prior to the date hereof. For purposes of this Agreement, “Oil and Gas Properties” means direct and indirect interests in and rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests; all interests in rights with respect to oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons (collectively, “Hydrocarbons”) and other minerals or revenues therefrom, all contracts in connection therewith and claims and rights thereto (including all oil and gas leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions; all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and all interests in equipment and machinery (including xxxxxwxxxx, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing. (c) Except for property sold or otherwise disposed of since the dates of the respective Pinnacle Reserve Reports in the ordinary course of business or reflected as having been sold or otherwise disposed of in Pinnacle SEC Reports, as of the date of this Agreement, Pinnacle and its Subsidiaries have good and defensible title to all Oil and Gas Properties forming the basis for the reserves reflected in the reserve reports of Netherland, Sxxxxx & Associates, Inc. (“NSAI”) relating to Pinnacle interests referred to therein as of December 31, 2006 and in the internal reserve reports prepared by Pinnacle and furnished to Quest (the “Pinnacle Reserve Reports”), and in each case as attributable to interests owned by Pinnacle and its Subsidiaries, free and clear of any liens, except: (a) liens reflected in the Reserve Reports or in Pinnacle SEC Documents filed prior to the date of this Agreement, and (b) such imperfections of title, easements, liens, government or tribal approvals or other matters and failures of title as, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. Except as has not had and is not reasonably likely to have, individually or in the aggregate, a Pinnacle Material Adverse Effect, all material proceeds from the sale of hydrocarbons produced from the Oil and Gas Properties of Pinnacle and its Subsidiaries are being received by them in a timely manner and are not being held in suspense for any reason. To Pinnacle’s knowledge, the gross and net undeveloped acreage of Pinnacle and its Subsidiaries as most recently reported in a Pinnacle SEC Report was correct in all material respects as of the date of such Pinnacle SEC Report, and there have been no changes in such gross and net undeveloped acreage since such date which have had or are reasonably likely to have a Pinnacle Material Adverse Effect. (d) The leases and other agreements pursuant to which Pinnacle and its Subsidiaries lease or otherwise acquire or obtain operating rights affecting any real or personal property given value in Pinnacle Reserve Reports are in good standing, valid and effective, and the rentals due by Pinnacle or any of its Subsidiaries to any lessor of any such oil and gas leases have been properly paid, except in each case as, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. Pinnacle and its Subsidiaries have paid all royalties, overriding royalties and other burdens on production due by Pinnacle and its Subsidiaries with respect to their Oil and Gas Properties, except for any non-payment of which, individually or in the aggregate, has not had and is not reasonably likely to have a Pinnacle Material Adverse Effect. (e) For the purposes of this Agreement, “good and defensible title” means title that is free from reasonable doubt to the end that a reasonable person engaged in the business of purchasing and owning, developing, and operating producing oil and gas properties in the geographical areas in which they are located, with knowledge of all of the material facts and their legal bearing, would be willing to accept the same in a transaction involving interests of comparable magnitude to those of Pinnacle or Quest reflected in Pinnacle Reserve Reports or the Quest Reserve Reports, respectively, taken as a whole, which title (i) entitles Pinnacle or Quest, as the case may be (or their respective Subsidiaries), to receive a percentage of the hydrocarbons produced, saved and marketed from the respective oil, gas and mineral lease, unit or well throughout the duration of the productive life of such lease, unit or well, which is not less than the “net revenue interest” shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, for such lease, unit or well, except for decreases in connection with those operations in which Pinnacle or Quest (or their respective Subsidiaries), as applicable, may be or hereafter become a non-consenting co-owner; (ii) obligates Pinnacle or Quest (or their respective Subsidiaries), as the case may be, to bear a percentage of the costs and expenses associated with the ownership, operation, maintenance and repair of any oil, gas and mineral lease, unit or well which is not greater than the “working interest” shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, with respect to such lease, unit or well, without increase throughout the life of such lease, unit or well other than (x) increases accompanied by at least a proportionate interest in the net revenue interest, (y) increases reflected in the Pinnacle Reserve Report or the Quest Reserve Report, as applicable, and (z) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements that are accompanied by at least a proportionate increase in the net revenue interest. (f) All information (excluding assumptions and estimates but including the statement of the percentage of reserves from the oil and gas wxxxx and other interests evaluated therein to which Pinnacle or its Subsidiaries are entitled and the percentage of the costs and expenses related to such wxxxx or interests to be borne by Pinnacle or its Subsidiaries) supplied to NSAI, in each case relating to Pinnacle interests referred to in Pinnacle Reserve Reports as of December 31, 2006, by or on behalf of Pinnacle and its Subsidiaries that was material to such firms’ estimates of proved oil and gas reserves attributable to the Oil and Gas Properties of Pinnacle and its Subsidiaries in connection with the preparation of Pinnacle Reserve Reports was (at the time supplied or as modified or amended prior to the issuance of Pinnacle Reserve Reports) to Pinnacle’s knowledge accurate in all material respects and Pinnacle has no knowledge of any material errors in such information that existed at the time of such issuance. (g) Except as has not had and is not reasonably likely to have, individually or in the aggregate, a Pinnacle Material Adverse Effect, all Oil and Gas Properties operated by Pinnacle or its Subsidiaries have been operated in accordance with reasonable, prudent oil and gas field practices and in compliance with the applicable oil and gas leases and applicable law. (h) Neither Pinnacle nor any of its Subsidiaries has produced hydrocarbons from its Oil and Gas Properties in excess of regulatory allowables or other applicable limits on production that could result in curtailment of production from any such property, except any such violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. (i) Except as set forth in Section 5.27(i) of the Pinnacle Disclosure Letter, none of the material Oil and Gas Properties of Pinnacle or any of its Subsidiaries is subject to any preferential purchase, consent or similar right which would become operative as a result of the transactions contemplated by this Agreement. (j) None of the Oil and Gas Properties of Pinnacle or any of its Subsidiaries are subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code. (k) Attached as Section 5.27(k) of the Pinnacle Disclosure Letter is a schedule of all remaining costs and expenses for the plugging and abandonment by Pinnacle of wxxxx for which Pinnacle is liable pursuant to any Applicable Law or contract, which schedule is true and correct as of its date.

Properties; Oil and Gas Matters. (a) All major items of operating equipment owned or leased by the Company Pinnacle or its subsidiaries Subsidiaries in connection with the operation of its Oil and Gas Properties are, in the aggregate, in a state of repair so as to be adequate in all material respects for reasonably prudent operations in the areas in which they are operated, except as would nothave not had and are not reasonably likely to have, individually or in the aggregate, have a Company Pinnacle Material Adverse Effect. (b) Except for goods and other property sold, used or otherwise disposed of since the dates of the respective Company Pinnacle Reserve Reports (defined in clause (c) below) in the ordinary course of business or reflected as having been sold, used or otherwise disposed of in the Company Pinnacle SEC Reports, as of the date hereofof this Agreement, the Company Pinnacle and its subsidiaries Subsidiaries have good and defensible title to, or valid leases or contractual rights to, all equipment and other personal property used or necessary for use in the operation of its Oil and Gas Properties in the manner in which such properties were operated prior to the date hereof. For purposes of this Agreement, “Oil and Gas Properties” means direct and indirect interests in and rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests; all interests in rights with respect to oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons (collectively, “Hydrocarbons”) and other minerals or revenues therefrom, all contracts in connection therewith and claims and rights thereto (including all oil and gas leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions; all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and all interests in equipment and machinery (including xxxxxwxxxx, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing. (c) Except for property sold or otherwise disposed of since the dates of the respective Pinnacle Reserve Reports in the ordinary course of business or reflected as having been sold or otherwise disposed of in Pinnacle SEC Reports, as of the date of this Agreement, Pinnacle and its Subsidiaries have good and defensible title to all Oil and Gas Properties forming the basis for the reserves reflected in the reserve reports of Netherland, Sxxxxx & Associates, Inc. (“NSAI”) relating to Pinnacle interests referred to therein as of December 31, 2006 and in the internal reserve reports prepared by Pinnacle and furnished to Quest (the “Pinnacle Reserve Reports”), and in each case as attributable to interests owned by Pinnacle and its Subsidiaries, free and clear of any liens, except: (a) liens reflected in the Reserve Reports or in Pinnacle SEC Documents filed prior to the date of this Agreement, and (b) such imperfections of title, easements, liens, government or tribal approvals or other matters and failures of title as, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. Except as has not had and is not reasonably likely to have, individually or in the aggregate, a Pinnacle Material Adverse Effect, all material proceeds from the sale of hydrocarbons produced from the Oil and Gas Properties of Pinnacle and its Subsidiaries are being received by them in a timely manner and are not being held in suspense for any reason. To Pinnacle’s knowledge, the gross and net undeveloped acreage of Pinnacle and its Subsidiaries as most recently reported in a Pinnacle SEC Report was correct in all material respects as of the date of such Pinnacle SEC Report, and there have been no changes in such gross and net undeveloped acreage since such date which have had or are reasonably likely to have a Pinnacle Material Adverse Effect. (d) The leases and other agreements pursuant to which Pinnacle and its Subsidiaries lease or otherwise acquire or obtain operating rights affecting any real or personal property given value in Pinnacle Reserve Reports are in good standing, valid and effective, and the rentals due by Pinnacle or any of its Subsidiaries to any lessor of any such oil and gas leases have been properly paid, except in each case as, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. Pinnacle and its Subsidiaries have paid all royalties, overriding royalties and other burdens on production due by Pinnacle and its Subsidiaries with respect to their Oil and Gas Properties, except for any non- payment of which, individually or in the aggregate, has not had and is not reasonably likely to have a Pinnacle Material Adverse Effect. (e) For the purposes of this Agreement, “good and defensible title” means title that is free from reasonable doubt to the end that a reasonable person engaged in the business of purchasing and owning, developing, and operating producing oil and gas properties in the geographical areas in which they are located, with knowledge of all of the material facts and their legal bearing, would be willing to accept the same in a transaction involving interests of comparable magnitude to those of Pinnacle or Quest reflected in Pinnacle Reserve Reports or the Quest Reserve Reports, respectively, taken as a whole, which title (i) entitles Pinnacle or Quest, as the case may be (or their respective Subsidiaries), to receive a percentage of the hydrocarbons produced, saved and marketed from the respective oil, gas and mineral lease, unit or well throughout the duration of the productive life of such lease, unit or well, which is not less than the “net revenue interest” shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, for such lease, unit or well, except for decreases in connection with those operations in which Pinnacle or Quest (or their respective Subsidiaries), as applicable, may be or hereafter become a non-consenting co-owner; (ii) obligates Pinnacle or Quest (or their respective Subsidiaries), as the case may be, to bear a percentage of the costs and expenses associated with the ownership, operation, maintenance and repair of any oil, gas and mineral lease, unit or well which is not greater than the “working interest” shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, with respect to such lease, unit or well, without increase throughout the life of such lease, unit or well other than (x) increases accompanied by at least a proportionate interest in the net revenue interest, (y) increases reflected in the Pinnacle Reserve Report or the Quest Reserve Report, as applicable, and (z) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements that are accompanied by at least a proportionate increase in the net revenue interest. (f) All information (excluding assumptions and estimates but including the statement of the percentage of reserves from the oil and gas wxxxx and other interests evaluated therein to which Pinnacle or its Subsidiaries are entitled and the percentage of the costs and expenses related to such wxxxx or interests to be borne by Pinnacle or its Subsidiaries) supplied to NSAI, in each case relating to Pinnacle interests referred to in Pinnacle Reserve Reports as of December 31, 2006, by or on behalf of Pinnacle and its Subsidiaries that was material to such firms’ estimates of proved oil and gas reserves attributable to the Oil and Gas Properties of Pinnacle and its Subsidiaries in connection with the preparation of Pinnacle Reserve Reports was (at the time supplied or as modified or amended prior to the issuance of Pinnacle Reserve Reports) to Pinnacle’s knowledge accurate in all material respects and Pinnacle has no knowledge of any material errors in such information that existed at the time of such issuance. (g) Except as has not had and is not reasonably likely to have, individually or in the aggregate, a Pinnacle Material Adverse Effect, all Oil and Gas Properties operated by Pinnacle or its Subsidiaries have been operated in accordance with reasonable, prudent oil and gas field practices and in compliance with the applicable oil and gas leases and applicable law. (h) Neither Pinnacle nor any of its Subsidiaries has produced hydrocarbons from its Oil and Gas Properties in excess of regulatory allowables or other applicable limits on production that could result in curtailment of production from any such property, except any such violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. (i) Except as set forth in Section 5.27(i) of the Pinnacle Disclosure Letter, none of the material Oil and Gas Properties of Pinnacle or any of its Subsidiaries is subject to any preferential purchase, consent or similar right which would become operative as a result of the transactions contemplated by this Agreement. (j) None of the Oil and Gas Properties of Pinnacle or any of its Subsidiaries are subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code. (k) Attached as Section 5.27(k) of the Pinnacle Disclosure Letter is a schedule of all remaining costs and expenses for the plugging and abandonment by Pinnacle of wxxxx for which Pinnacle is liable pursuant to any Applicable Law or contract, which schedule is true and correct as of its date.

Properties; Oil and Gas Matters. (a) All major items of operating equipment owned or leased by the Company Pinnacle or its subsidiaries Subsidiaries in connection with the operation of its Oil and Gas Properties are, in the aggregate, in a state of repair so as to be adequate in all material respects for reasonably prudent operations in the areas in which they are operated, except as would nothave not had and are not reasonably likely to have, individually or in the aggregate, have a Company Pinnacle Material Adverse Effect. (b) Except for goods and other property sold, used or otherwise disposed of since the dates of the respective Company Pinnacle Reserve Reports (defined in clause (c) below) in the ordinary course of business or reflected as having been sold, used or otherwise disposed of in the Company Pinnacle SEC Reports, as of the date hereofof this Agreement, the Company Pinnacle and its subsidiaries Subsidiaries have good and defensible title to, or valid leases or contractual rights to, all equipment and other personal property used or necessary for use in the operation of its Oil and Gas Properties in the manner in which such properties were operated prior to the date hereof. For purposes of this Agreement, “"Oil and Gas Properties” " means direct and indirect interests in and rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-working interests and non-operating interests; all interests in rights with respect to oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons (collectively, “"Hydrocarbons”") and other minerals or revenues therefrom, all contracts in connection therewith and claims and rights thereto (including all oil and gas leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions; all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and all interests in equipment and machinery (including xxxxx, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing. (c) Except for property sold or otherwise disposed of since the dates of the respective Pinnacle Reserve Reports in the ordinary course of business or reflected as having been sold or otherwise disposed of in Pinnacle SEC Reports, as of the date of this Agreement, Pinnacle and its Subsidiaries have good and defensible title to all Oil and Gas Properties forming the basis for the reserves reflected in the reserve reports of Netherland, Xxxxxx & Associates, Inc. ("NSAI") relating to Pinnacle interests referred to therein as of December 31, 2006 and in the internal reserve reports prepared by Pinnacle and furnished to Quest (the "Pinnacle Reserve Reports"), and in each case as attributable to interests owned by Pinnacle and its Subsidiaries, free and clear of any liens, except: (a) liens reflected in the Reserve Reports or in Pinnacle SEC Documents filed prior to the date of this Agreement, and (b) such imperfections of title, easements, liens, government or tribal approvals or other matters and failures of title as, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. Except as has not had and is not reasonably likely to have, individually or in the aggregate, a Pinnacle Material Adverse Effect, all material proceeds from the sale of hydrocarbons produced from the Oil and Gas Properties of Pinnacle and its Subsidiaries are being received by them in a timely manner and are not being held in suspense for any reason. To Pinnacle's knowledge, the gross and net undeveloped acreage of Pinnacle and its Subsidiaries as most recently reported in a Pinnacle SEC Report was correct in all material respects as of the date of such Pinnacle SEC Report, and there have been no changes in such gross and net undeveloped acreage since such date which have had or are reasonably likely to have a Pinnacle Material Adverse Effect. (d) The leases and other agreements pursuant to which Pinnacle and its Subsidiaries lease or otherwise acquire or obtain operating rights affecting any real or personal property given value in Pinnacle Reserve Reports are in good standing, valid and effective, and the rentals due by Pinnacle or any of its Subsidiaries to any lessor of any such oil and gas leases have been properly paid, except in each case as, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. Pinnacle and its Subsidiaries have paid all royalties, overriding royalties and other burdens on production due by Pinnacle and its Subsidiaries with respect to their Oil and Gas Properties, except for any non-payment of which, individually or in the aggregate, has not had and is not reasonably likely to have a Pinnacle Material Adverse Effect. (e) For the purposes of this Agreement, "good and defensible title" means title that is free from reasonable doubt to the end that a reasonable person engaged in the business of purchasing and owning, developing, and operating producing oil and gas properties in the geographical areas in which they are located, with knowledge of all of the material facts and their legal bearing, would be willing to accept the same in a transaction involving interests of comparable magnitude to those of Pinnacle or Quest reflected in Pinnacle Reserve Reports or the Quest Reserve Reports, respectively, taken as a whole, which title (i) entitles Pinnacle or Quest, as the case may be (or their respective Subsidiaries), to receive a percentage of the hydrocarbons produced, saved and marketed from the respective oil, gas and mineral lease, unit or well throughout the duration of the productive life of such lease, unit or well, which is not less than the "net revenue interest" shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, for such lease, unit or well, except for decreases in connection with those operations in which Pinnacle or Quest (or their respective Subsidiaries), as applicable, may be or hereafter become a non-consenting co-owner; (ii) obligates Pinnacle or Quest (or their respective Subsidiaries), as the case may be, to bear a percentage of the costs and expenses associated with the ownership, operation, maintenance and repair of any oil, gas and mineral lease, unit or well which is not greater than the "working interest" shown on the Pinnacle Reserve Report or the Quest Reserve Report, as the case may be, with respect to such lease, unit or well, without increase throughout the life of such lease, unit or well other than (x) increases accompanied by at least a proportionate interest in the net revenue interest, (y) increases reflected in the Pinnacle Reserve Report or the Quest Reserve Report, as applicable, and (z) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements that are accompanied by at least a proportionate increase in the net revenue interest. (f) All information (excluding assumptions and estimates but including the statement of the percentage of reserves from the oil and gas xxxxx and other interests evaluated therein to which Pinnacle or its Subsidiaries are entitled and the percentage of the costs and expenses related to such xxxxx or interests to be borne by Pinnacle or its Subsidiaries) supplied to NSAI, in each case relating to Pinnacle interests referred to in Pinnacle Reserve Reports as of December 31, 2006, by or on behalf of Pinnacle and its Subsidiaries that was material to such firms' estimates of proved oil and gas reserves attributable to the Oil and Gas Properties of Pinnacle and its Subsidiaries in connection with the preparation of Pinnacle Reserve Reports was (at the time supplied or as modified or amended prior to the issuance of Pinnacle Reserve Reports) to Pinnacle's knowledge accurate in all material respects and Pinnacle has no knowledge of any material errors in such information that existed at the time of such issuance. (g) Except as has not had and is not reasonably likely to have, individually or in the aggregate, a Pinnacle Material Adverse Effect, all Oil and Gas Properties operated by Pinnacle or its Subsidiaries have been operated in accordance with reasonable, prudent oil and gas field practices and in compliance with the applicable oil and gas leases and applicable law. (h) Neither Pinnacle nor any of its Subsidiaries has produced hydrocarbons from its Oil and Gas Properties in excess of regulatory allowables or other applicable limits on production that could result in curtailment of production from any such property, except any such violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Pinnacle Material Adverse Effect. (i) Except as set forth in Section 5.27(i) of the Pinnacle Disclosure Letter, none of the material Oil and Gas Properties of Pinnacle or any of its Subsidiaries is subject to any preferential purchase, consent or similar right which would become operative as a result of the transactions contemplated by this Agreement. (j) None of the Oil and Gas Properties of Pinnacle or any of its Subsidiaries are subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code. (k) Attached as Section 5.27(k) of the Pinnacle Disclosure Letter is a schedule of all remaining costs and expenses for the plugging and abandonment by Pinnacle of xxxxx for which Pinnacle is liable pursuant to any Applicable Law or contract, which schedule is true and correct as of its date.

Properties; Oil and Gas Matters. (a) All major items of operating equipment owned or leased by any QRC Entity in connection with the Company or operation of its subsidiaries Oil and Gas Properties are, in the aggregate, in a state of repair so as to be adequate in all material respects for reasonably prudent operations in the areas in which they are operated, except as would nothave not had and are not reasonably likely to have, individually or in the aggregate, have a Company QRC Material Adverse Effect. (b) Except for goods and other property sold, used or otherwise disposed of since the dates date of the respective Company QRC Reserve Reports (defined in clause (c) below) Report in the ordinary course of business or reflected as having been sold, used or otherwise disposed of in the Company SEC QRC Reports, as of the date hereofof this Agreement, the Company and its subsidiaries QRC Entities have good and defensible title to, or valid leases or contractual rights to, all equipment and other personal property used or necessary for use in the operation of its their Oil and Gas Properties in the manner in which such properties were operated prior to the date hereof. For purposes of this Agreement, “Oil and Gas Properties” means direct and indirect interests in and rights with respect to oil, gas, mineral, and related properties and assets of any kind and nature, direct or indirect, including working, leasehold and mineral interests and operating rights and royalties, overriding royalties, production payments, net profit interests and other non-non- working interests and non-operating interests; all interests in rights with respect to oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons (collectively, “Hydrocarbons”) and other minerals or revenues therefrom, all contracts in connection therewith and claims and rights thereto (including all oil and gas leases, operating agreements, unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements, and in each case, interests thereunder), surface interests, fee interests, reversionary interests, reservations, and concessions; all easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing; and all interests in equipment and machinery (including xxxxx, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing, and storage facilities (including tanks, tank batteries, pipelines, and gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, refineries, and other tangible personal property and fixtures associated with, appurtenant to, or necessary for the operation of any of the foregoing.