Title and Environmental Defects. 5.3.1 BUYER will review title to the Property prior to Closing and notify SELLER in writing of any title defect or environmental defect (collectively, a "Defect") it discovers as soon as reasonably practicable after its discovery, but in no event less than ten (10) business days prior to the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will be deemed to have conclusively waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence. 5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have thirty (30) days after the Closing Date to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of that portion of the Property affected by those Defects. Notwithstanding the foregoing provisions of this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured by Seller or waived by BUYER, together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement. (a) For the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3. (b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.
Appears in 1 contract
Title and Environmental Defects. 5.3.1 BUYER The Purchase Price will review be (a) decreased for any uncured Title Defects and uncured Environmental Defects in excess of the respective Individual Defect Thresholds and the Aggregate Defect Threshold and (b) increased for Title Benefits, in each case, in accordance with this Section 2.
1. The Buyer may conduct, at its sole cost and expense, such title examination or investigation, and other examinations and investigations (provided that the Buyer will not conduct any Phase II environmental investigations or examinations with respect to any of the Properties without the prior written consent of the Sellers, which consent may be granted or withheld by the Sellers in their sole discretion, provided that, if the Sellers do not consent to the conduct of a Phase II environmental investigation or examination requested by the Buyer with respect to any Property, then at the Buyer’s option such Property prior will not be sold by the Sellers to Closing the Buyer at the Closing, will constitute an “Excluded Asset” for all purposes of this Agreement and notify SELLER the Purchase Price will be reduced by an amount equal to the Allocated Value thereof), as it may in writing its sole discretion choose to conduct with respect to the Properties in order to determine whether any Title Defects or Environmental Defects exist. The Buyer agrees to release, indemnify, defend and hold harmless the Sellers Indemnified Parties from and against all liabilities, damages, costs, losses and expenses arising from or related to the activities of the Buyer or its employees, agents, contractors and other representatives in connection with such examinations or investigations except to the extent caused by the gross negligence or willful misconduct of any title Sellers Indemnified Party. The Buyer must deliver to the Sellers, on or before May 31, 2013 (the “Defect Notice Date”), one or more written notices specifying each defect associated with the Properties that the Buyer asserts constitutes a Title Defect or environmental defect (collectivelyan Environmental Defect, a "Defect") it discovers as soon as specific description of each such Title Defect or Environmental Defect and the basis for such assertion under the terms of this Agreement, the amount of the adjustment to the Purchase Price that the Buyer asserts based on such Title Defect or Environmental Defect and its method of calculating such adjustment, together with data and information reasonably practicable after its discoverynecessary for the Sellers to verify the existence of the alleged Title Defect or Environmental Defect (a “Defect Notice”). Any matters that may otherwise constitute Title Defects or Environmental Defects, but of which the Sellers have not been specifically notified by the Buyer by such date in no event less than ten (10) business days prior to accordance with the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will foregoing, shall be deemed to have conclusively been waived any title defect about which it fails by the Buyer for all purposes. All adjustments to notify SELLER the Purchase Price based on Title Defects will be based on the Allocated Values attributable to the affected Properties. Upon timely delivery of a Defect Notice under this Section 2.1, the Buyer and the Sellers will in writing within good faith negotiate the applicable period specified in validity of the preceding sentence.
5.3.2 If BUYER properly notifies SELLER claim and the amount of any material Defectadjustment to the Purchase Price using the following criteria:
2.1.1 No single Title Defect shall be taken into account unless the value of such defect is determined to be more than Twenty-Five Thousand Dollars ($25,000.00) and no single Environmental Defect shall be taken into account unless the value of such defect is determined to be more than Fifty Thousand Dollars ($50,000.00) (each, BUYER shall have the option to either (i) waive the an “Individual Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this AgreementThreshold”), in which case event the full amount of such defect shall be taken into account from the first dollar.
2.1.2 No adjustment will be made to the Purchase Price for either uncured Title Defects or uncured Environmental Defects except to the extent that the total of all individual adjustments for uncured Title Defects and uncured Environmental Defects that exceed the respective Individual Defect Thresholds exceed (after offsetting any Title Benefits) an amount equal to One Million Dollars ($1,000,000.00) (the “Aggregate Defect Threshold”). If the Aggregate Defect Threshold is exceeded, after offsetting Title Benefits, by the net total of asserted uncured Title Defects and uncured Environmental Defects, each of which exceeds the applicable Individual Defect Threshold, the Purchase Price will be reduced by the amount of such excess, after offsetting the amount of all Title Benefits, above the Aggregate Defect Threshold. In no event will the aggregate amount of Title Defect adjustments with respect to a Property exceed the Allocated Value of such Property. With respect to any Title Defects for which an adjustment equal to the entire Allocated Value of the excluded affected Property. , or the entire pro-rata Allocated Value of a segregated area of or entire separate legal interest included in the Property, is made to the Purchase Price hereunder, at the Sellers’ option, as a condition precedent to such adjustment, the Buyer will execute and deliver to the respective Seller(s) an assignment (in substantially the same form as the Assignment) of the Property (or segregated area thereof or interest therein) for which the entire Allocated Value has been credited to the Buyer.
2.1.3 If BUYER asks SELLER the adjustment to cure the Purchase Price is based on a material DefectSeller owning a Net Revenue Interest in a Well or Real Property Interest which is less than that shown for such Seller and Property on Exhibit “A”, then the downward adjustment to the Purchase Price shall be calculated by multiplying the Allocated Value shown for such Seller and Property on Exhibit “A” by a fraction, the numerator of which is an amount equal to the Net Revenue Interest shown for such Seller and Property on Exhibit “A” less the Net Revenue Interest for such Property to which such Seller is actually entitled taking such Title Defect into account, and SELLER agrees the denominator of which is the Net Revenue Interest shown for such Seller and Property on Exhibit “A”.
2.1.4 If the adjustment to attempt the Purchase Price is based on a Seller owning a Working Interest in a Well that is larger than the Working Interest shown for such Seller and Property on Exhibit “A”, but without a proportionate increase in such Seller’s Net Revenue Interest for such Property, then the downward adjustment to cure the DefectPurchase Price shall be calculated by determining the effective Net Revenue Interest that results from such larger Working Interest, determining what the Net Revenue Interest would be using such effective Net Revenue Interest and the Working Interest shown for such Seller and Property on Exhibit “A” and then calculating the adjustment in the manner set forth in Section 2.1.3.
2.1.5 If the adjustment to the Purchase Price is based on a Seller owning fewer Net Acres in a Real Property Interest than those shown for such Seller and Property on Exhibit “A”, then the downward adjustment to the Purchase Price shall be calculated by multiplying the Allocated Value shown for such Seller and Property on Exhibit “A” by a fraction, the Closing with respect numerator of which is the number of Net Acres shown for such Seller and Property on Exhibit “A” minus the actual Net Acres owned by such Seller within such Property, and the denominator of which is the number of Net Acres shown for such Seller and Property on Exhibit “A”.
2.1.6 If the adjustment to the affected Purchase Price is based on a Lien upon a Seller’s Real Property only will be deferred and SELLER will have thirty (30) days after Interest or Well that is liquidated in amount, then the Closing Date to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure downward adjustment to the reasonable satisfaction Purchase Price is the lesser of BUYERthe amount necessary to remove such Lien from such Property or the Allocated Value of such Property.
2.1.7 If the adjustment to the Purchase Price is based on a liability to remediate or otherwise cure an Environmental Defect related to a Real Property Interest, BUYER may rescind its purchase of then the downward adjustment to the Purchase Price is that portion of the amount necessary to remediate or otherwise cure such Environmental Defect in a manner that does not materially interfere with the use or operation of such Real Property affected by those Defects. Notwithstanding Interest and in the foregoing most cost effective manner reasonably available and consistent with applicable Environmental Law and common and prudent industry practices for which the Buyer would be liable after Closing.
2.1.8 If the adjustment to the Purchase Price is based on an obligation, burden or liability upon a Real Property Interest or Well for which the Buyer’s economic detriment is not liquidated but can be estimated with reasonable certainty, then, subject to the other provisions hereof, the downward adjustment to the Purchase Price is the lesser of this Section 5.3.2, if the amount necessary to compensate the Buyer at Closing for the adverse economic effect on the Closing Date affected Property or the Allocated Value of the Property affected by all uncured material Defects Property.
2.1.9 If a Title Defect or an Environmental Defect is reasonably susceptible of which SELLER has been properly notified being cured or remediated, then the respective Sellers will have the right to cure such defect on or before sixty (60) days after the Defect Notice Date (the “Cure Period”). Upon Sellers’ reasonable prior notice, the Buyer shall provide the Sellers, and which have not been cured by Seller or waived by BUYERtheir representatives, together reasonable access to the Properties, and Records after Closing in connection with the Allocated Value Sellers’ efforts to cure alleged defects.
2.1.10 If a Seller determines that the ownership of portions any Well entitles such Seller to a larger Net Revenue Interest or a smaller Working Interest (without a proportionately smaller Net Revenue Interest) than that shown for such Seller and Well on Exhibit “A”, or that the ownership of any Real Property Interest entitles such Seller to a larger Net Revenue Interest or more Net Acres than that shown for such Seller and Real Property Interest on Exhibit “A” (each, a “Title Benefit”), then CELLC shall notify the Buyer of such Title Benefit in writing on or before the Defect Notice Date, describing in such notice with reasonable detail each alleged increase it has discovered and a reasonable estimate of the Property for which preferential purchase rights have been exercised, exceeds twenty percent value attributable to each (20%) a “Benefit Notice”). CELLC shall provide to Buyer such data and information in its possession with respect to the existence of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement.
(a) For the purpose alleged Title Benefit. The amount of this Agreement, a material title defect ("Defective Interest") each Title Benefit shall be any matter that, determined in the opinion of BUYER, would cause the title to the Property to fail to qualify same manner as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged provided in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3.
(b) For purposes of this Agreement, a material environmental defect 2.1 with respect to Title Defects. The Sellers shall be any circumstance on or related deemed to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.have conclusively
Appears in 1 contract
Samples: Purchase and Sale Agreement
Title and Environmental Defects. 5.3.1 BUYER will review “Title Defect” shall mean a defect exists that (A) causes Seller to not have Defensible Title to the Oil and Gas Properties and (B) for which a Defect Notice has been timely and otherwise validly delivered. Notwithstanding any other provision in this Agreement to the contrary, the following matters shall not constitute, and shall not be asserted as, a Title Defect: (1) defects or irregularities arising out of lack of corporate or other entity authorization or variation in corporate or entity name; (2) defects or irregularities that have been cured or remedied by the applicable statutes of limitation or statutes for prescription, including adverse possession and the doctrine of laches or which have existed for more than twenty (20) years and no affirmative evidence shows that another Person has asserted a superior claim of title to the Property prior Properties; (3) defects or irregularities in the chain of title consisting of the failure to Closing and notify SELLER recite marital status in writing documents or omissions of heirship proceedings; (4) the absence of any lease amendment or consent by any royalty interest or mineral interest holder authorizing the pooling of any leasehold interest, royalty interest or mineral interest, and the failure of Exhibit A to reflect any lease or any unleased mineral interest where the owner thereof was treated as a non-participating co-tenant during the drilling of any xxxxx; (5) any defect arising out of lack of survey or lack of metes and bounds descriptions, unless a survey is expressly required by Applicable Law; (6) any gap in the chain of title unless affirmative evidence shows that there is a superior chain of title as evidenced by an abstract of title, title opinion or xxxxxxx’x title chain or runsheet; (7) any defect arising from prior oil and gas leases relating to the lands burdened by the Leases that are terminated but are not surrendered or environmental defect released of record; (collectively8) future adjustments in acreage, Working Interest and Net Revenue Interest as a "Defect"result of pooling or unitization of the Leases; (9) it discovers references in the chain of title to unrecorded agreements, unless affirmative evidence shows that there is a superior chain of title as soon as reasonably practicable after its discoveryevidenced by an abstract of title, but in no event less than ten title opinion or xxxxxxx’x title chain or runsheet; and (10) business days prior to Permitted Encumbrances. Notwithstanding the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will foregoing, no Title Defect may be deemed to have conclusively waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing asserted with respect to the affected Property only will be deferred and SELLER will have thirty (30) days after the Closing Date to correct the DefectProperties listed on Exhibit G, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of extent that portion any such Title Defect arises from the failure of the Property affected by those Defects. Notwithstanding Company to hold record title to such Properties in accordance with the foregoing provisions of this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured by Seller or waived by BUYER, together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement.
(a) For the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that joint operating agreements set forth on Exhibit AG. Notwithstanding the foregoing, Part II attached hereto. Neither with respect to each Title Defect that is not cured on or before the environmental condition of Closing (other than a Title Defect caused by Seller or the Property nor any failure to obtain Consents Company), there shall be no adjustment to the transfer number of Related Contracts will Parent Shares to be considered a title defect under this Section 5.3.3.
issued at Closing, if the Title Defect Amount does not exceed $150,000 (b) For purposes the “Title Defect Threshold”), it being expressly understood that if any single Title Defect Amount exceeds the Title Defect Threshold, the entire amount of this Agreement, a material environmental defect such Title Defect Amount shall be included in the calculation of any circumstance on or related applicable adjustment to the Property which, in the opinion number of BUYER, constitutes an Environmental Obligation (as defined in Parent Shares to be issued at Closing pursuant to Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations8.8(a).
Appears in 1 contract
Samples: Membership Interest Purchase and Sale Agreement (RSP Permian, Inc.)
Title and Environmental Defects. 5.3.1 BUYER The Purchase Price will review be decreased for any Title Defects and Environmental Defects pursuant to this Section 2.1. The Buyer may conduct, at its sole cost and expense, such title examination or investigation, and other examinations and investigations (provided that the Buyer will not conduct any phase II environmental investigations or examinations with respect to any of the Properties without the prior written consent of the Sellers), as it may in its sole discretion choose to conduct with respect to the Property prior Properties in order to Closing determine whether any Title Defects or Environmental Defects exist. The Buyer agrees to release, indemnify, defend and notify SELLER hold harmless the Seller Indemnified Parties from and against all liabilities, damages, costs, losses and expenses arising from or related to the activities of the Buyer or its employees, agents, contractors and other representatives in writing of any title connection with such examinations or investigations. On or before March, 29, 2010, the Buyer must deliver to the Sellers a written notice specifying each defect associated with the Properties that the Buyer asserts constitutes a Title Defect or environmental defect (collectivelyan Environmental Defect, a "description of each such Title Defect or Environmental Defect") it discovers as soon as reasonably practicable after , the amount of the adjustment to the Purchase Price that the Buyer asserts based on such Title Defect or Environmental Defect and its discoverymethod of calculating such adjustment, together with all data and information in the Buyer’s possession or control bearing thereon (a “Defect Notice”). Any matters that may otherwise constitute Title Defects or Environmental Defects, but of which the Sellers have not been specifically notified by the Buyer by such date in no event less than ten (10) business days prior to accordance with the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will foregoing, shall be deemed to have conclusively been waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case Buyer for all purposes. All adjustments to the Purchase Price based on Title Defects will be based on the Allocated Values attributable to the affected Properties. Upon timely delivery of a notice of a Title Defect or Environmental Defect under this Section 2.1, the Buyer and the Sellers will in good faith negotiate the validity of the claim and the amount of any adjustment to the Purchase Price using the following criteria:
2.1.1 If the requested adjustment for a Title Defect is based on the Sellers owning a Net Revenue Interest for a Well which is less than that shown in Exhibit “A,” then a downward adjustment shall be calculated by multiplying the Allocated Value set forth for such Well on Exhibit “A” by a fraction: (a) the numerator of which is an amount equal to the Net Revenue Interest shown on Exhibit “A” for such Well less the decimal share to which the Sellers would be entitled as a result of its ownership interest in such Well which is unaffected by such Title Defect; and (b) the denominator of which is the Net Revenue Interest shown for such Well on Exhibit “A”.
2.1.2 If the adjustment is based on Sellers owning a Working Interest in a Well that is larger than the Working Interest shown on Exhibit “A”, but without a proportionate increase in Sellers’ Net Revenue Interest in such Well, then the downward adjustment is calculated by determining the effective Net Revenue Interest that results from such larger Working Interest, determining what the Net Revenue Interest would be using such effective Net Revenue Interest and the Working Interest shown on Exhibit “A” and then calculating the adjustment in the manner set forth in Section 2.1.1.
2.1.3 If the requested adjustment is based on the Sellers owning Real Property Interests collectively having a weighted average Net Revenue Interest of less than eighty percent (80%), then, in such case, the Purchase Price shall be adjusted downward as follows: the adjustment of the Purchase Price shall equal the product of the total net acres acquired multiplied by $100 multiplied by the difference between the aggregate weighted average Net Revenue Interest and eighty percent (80%). For example, if the total net acres acquired is 109,000 and the weighted average Net Revenue Interest is 79.5%, then the adjustment would be $5,450,000.00 (109,000 * 100 * (80 — 79.5)).
2.1.4 If the adjustment for a Title Defect is based on Sellers owning fewer Net Mineral Acres in the Real Property Interests, there shall be a downward adjustment equal to the amount determined by multiplying the Allocated Value for such Real Property Interests listed on Exhibit “A-1” by a fraction (a) the numerator of which is an amount equal to the number of Net Mineral Acres for such Real Property Interests shown on Exhibit “A-1” less the total Net Mineral Acres actually determined to exist for such Real Property Interests and (b) the denominator of which is the number of Net Mineral Acres shown for such Real Property Interests on Exhibit “A-1”.
2.1.5 If the adjustment is based on a Lien or other monetary charge upon a Property that is liquidated in amount, then the adjustment is the lesser of the amount necessary to remove such Lien or other monetary charge from the affected Property or the Allocated Value of the affected Property.
2.1.6 If the adjustment is based on a liability to remediate or otherwise cure an Environmental Defect related to a Property that is liquidated in amount, then the adjustment is the amount necessary to remediate or otherwise cure such Environmental Defect in the most cost effective manner reasonably available and consistent with common industry practices.
2.1.7 If the adjustment is based on an obligation, burden or liability upon a Property for which the Buyer’s economic detriment is not liquidated but can be estimated with reasonable certainty, then, subject to the other provisions hereof, the adjustment is the amount reasonably necessary to compensate the Buyer at Closing for the adverse economic effect on the affected Property; provided, however, that such adjustment with respect to a Title Defect shall not exceed the Allocated Value of the affected Property.
2.1.8 If a Title Defect or an Environmental Defect is reasonably susceptible of being cured, the Buyer and the Sellers agree that the Sellers will have the right, but not the obligation, to cure such defect for a period of up to ninety (90) days after the Closing Date. In the event any of the Real Property Interests and/or Xxxxx is subject to a consent to transfer which has not been obtained or waived before Closing and likewise not representing a Permitted Encumbrance hereunder, or a preferential right to purchase (or similar right), wherein the holder has not made an election and the response time has not elapsed, then, the affected Property shall be retained by the Sellers and not sold to the Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value of the excluded Propertytherefor. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have thirty Within five (305) days after such Title Defect is cured by obtaining a consent or waiver, the Closing Date Sellers will deliver to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of Buyer an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of that portion Assignment of the Property affected by those Defects. Notwithstanding such Title Defect upon receipt of payment by the foregoing provisions of this Section 5.3.2, if on the Closing Date the Allocated Value Sellers of the Property affected by all uncured material Defects of which SELLER amount withheld from the Purchase Price with respect to such Property. The Buyer shall provide the Sellers and their representatives access to the Properties, books and records after Closing in connection with the Sellers’ efforts to cure the alleged defect. If, post-Closing, the Parties dispute whether such Title Defect or an Environmental Defect has been properly notified and which have not been cured by Seller or waived by BUYERcured, together with then the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreementmatter shall be resolved in a manner described in Section 2.1.10.
(a) For 2.1.9 If the purpose of this AgreementSellers notify the Buyer in writing no later than March 16, a material title defect ("Defective Interest") shall be any matter that2010, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that their ownership (i) a reasonable and prudent person engaged exceeds 37,050 Net Mineral Acres in the business of the ownershipXxxxxx/Shawnee Area, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, and/or (ii) exceeds 69,929 Net Mineral Acres in the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; Non-Xxxxxx/Shawnee Areas (Items (i) and (iiiii) defects asserting a change being “Excess Net Mineral Acres”), then, in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit Asuch case, Part II attached hereto. Neither upon Buyer confirming the environmental condition existence of such Excess Net Mineral Acres, the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3.
(b) For purposes of this Agreement, a material environmental defect Purchase Price shall be any circumstance on or related to the Property which, adjusted upward by $1025.00 for each Excess Net Mineral Acre located in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof Xxxxxx/Shawnee Area and which might, under such laws, require BUYER to expend in excess of $25,000 125.00 for any single Environmental Obligation or $100,000 for all Environmental Obligations each Excess Net Mineral Acre located in the aggregate. For purposes of this Section 5.3Non-Xxxxxx/Shawnee Areas, obligations described in Section 8.2 as applicable, provided, however, unless the Parties otherwise agree, Buyer shall not be considered Environmental Obligationshave the obligation to acquire more than 3,000 Excess Net Mineral Acres in the Non-Xxxxxx/Shawnee Areas.
Appears in 1 contract
Title and Environmental Defects. 5.3.1 BUYER The Purchase Price will review title be (a) decreased for the value, determined as provided herein, of uncured Title Defects and unremedied and unindemnified Environmental Defects that are in excess of the respective Individual Defect Thresholds and the Aggregate Defect Threshold and (b) increased for Title Benefits, in each case, in accordance with this Section 2.1. The Buyer may deliver to CELLC, on or before the Defect Notice Date, one or more written notices specifying each defect associated with the Properties that the Buyer asserts constitutes a Title Defect or an Environmental Defect, a specific description of each such defect and the basis for such assertion under the terms of this Agreement, the amount of the adjustment to the Purchase Price that the Buyer asserts based on such defect and its method of calculating such adjustment, together with all data and information evidencing the Buyer’s review of public record or other information proving the existence of such defect reasonably necessary for CELLC to verify the existence of the alleged Title Defect or Environmental Defect (“Defect Notice”). Any matters that may otherwise constitute Title Defects or Environmental Defects, but of which CELLC has not been so notified in writing by the Buyer by the Defect Notice Date, shall be deemed to have been waived by the Buyer for all purposes. All adjustments to the Purchase Price based on Title Defects will be based on the Allocated Values attributable to the affected Properties. Upon timely delivery of a Defect Notice, the Parties will in good faith negotiate the validity of the claim and the amount of any adjustment to the Purchase Price using the following criteria. PURCHASE AND SALE AGREEMENT 13
2.1.1 No single Title Defect may be asserted by the Buyer hereunder unless the value of the defect is determined to be more than Ten Thousand Dollars ($10,000.00), and no single Environmental Defect may be asserted by the Buyer hereunder unless the value of the defect is determined to be more than Fifty Thousand Dollars ($50,000.00) (each an “Individual Defect Threshold”), in which event the full value of such defect shall be taken into account for purposes of this Section 2.1.
2.1.2 No adjustment will be made to the Purchase Price for either uncured Title Defects or unremedied and unindemnified Environmental Defects except to the extent that the total value of all such defects that exceed the respective Individual Defect Thresholds exceeds two percent (2%) of the Purchase Price in the aggregate (the “Aggregate Defect Threshold”). If the Aggregate Defect Threshold is so exceeded after offsetting Title Benefits, then the Purchase Price will be decreased by the amount of such excess. With respect to any uncured Title Defects for which an adjustment equal to the entire Allocated Value of the affected Property, or the entire pro-rata Allocated Value of a segregated area of or entire separate legal interest included in the Property, is made to the Purchase Price hereunder, at the Sellers’ option, as a condition precedent to such adjustment, (a) if the Closing has not yet occurred, then the affected Property prior shall be excluded from the Properties conveyed to the Buyer at the Closing and thereafter shall become an Excluded Asset, or (b) if the Closing has occurred, then the Buyer will execute and deliver to the respective Seller(s) an assignment (in substantially the same form as the Assignment) of the Property (or segregated area thereof or interest therein) for which the entire Allocated Value has been credited to the Buyer.
2.1.3 If the Title Defect is based on Sellers owning an NRI in a Real Property Interest or Well which is less than that shown on Exhibit “A” for such Property, then the downward adjustment is an amount equal to the Allocated Value for such Property on Exhibit “A”, multiplied by a fraction, the numerator of which is an amount equal to the NRI shown on Exhibit “A” for such Property less the NRI to which the respective Seller is actually entitled, and the denominator of which is the NRI shown on Exhibit “A” for such Property.
2.1.4 If the Title Defect is based on a Working Interest in a Well that is larger than the Working Interest shown on Exhibit “A”, but without a proportionate increase in the NRI for such Well, then the downward adjustment is calculated by (a) determining the NRI in such Well to which the respective Seller would be entitled if the NRI shown on Exhibit “A” for such Well had increased in proportion to such increase in the Working Interest, (b) calculating the NRI to which the respective Seller is actually PURCHASE AND SALE AGREEMENT 14 entitled, and (c) then calculating the adjustment in the manner set forth in Section 2.1.3, where the numerator of the fraction used in such calculation is equal to the NRI calculated as provided in clause (a) above less the NRI calculated as provided in clause (b) above, and the denominator is the NRI calculated as provided in clause (a) above.
2.1.5 If the Title Defect is based on a Real Property Interest covering fewer Net Acres than the number of Net Acres set forth on Exhibit “A”, then the downward adjustment is an amount equal to such Net Acre deficiency, multiplied by the price per Net Acre used to calculate the Allocated Value for such Real Property Interest on Exhibit “A”.
2.1.6 If the Title Defect is based on a Lien upon a Real Property Interest or Well that is liquidated in amount, then the downward adjustment is the lesser of the amount necessary to remove such Lien from such Property or the Allocated Value of such Property.
2.1.7 If the adjustment is based on a liability to remediate or otherwise cure an unremedied and unindemnified Environmental Defect, then the downward adjustment is the amount necessary to remediate or otherwise cure such Environmental Defect in the most cost-effective manner reasonably available and consistent with applicable Environmental Law and prudent industry practices. Notwithstanding anything herein to the contrary, at the Seller’s option, in lieu of an adjustment to the Purchase Price in respect of an unremedied Environmental Defect, the Seller may enter into an indemnity in favor of the Buyer in substantially the form attached as Exhibit “E” indemnifying the Buyer from any and all claims, liabilities, obligation or expenses with respect to such Environmental Defect. Any Environmental Defect covered by such an indemnity agreement shall not be taken into account in determining whether the Aggregate Defect Threshold has been achieved.
2.1.8 If a Title Defect or an Environmental Defect is reasonably susceptible of being cured or remedied, then the Sellers will have the right to cure or remedy such defect for a period of up to sixty (60) days after the Defect Notice Date (the “Cure Period”). After Closing, the Buyer shall provide the Sellers and their representatives access to the affected Properties, and all books and records related thereto, in connection with the Sellers’ efforts to cure alleged defects.
2.1.9 If a Seller determines that the ownership of any Real Property Interest or Well entitles such Seller to a larger NRI, a smaller Working Interest or a greater number of Net Acres than that set forth on Exhibit “A” for such Property (each, a “Title Benefit”), then CELLC shall notify SELLER the Buyer of such Title Benefit in writing on or before the Defect Notice Date, which notice shall include a description of any title defect or environmental defect (collectivelysuch Title Benefit, a "Defect") it discovers as soon as reasonably practicable after its discovery, but in no event less than ten (10) business days prior the Dollar value that CELLC asserts is attributable to such Title Benefit and CELLC’s PURCHASE AND SALE AGREEMENT 15 method of calculating the amount. The upward adjustment to the Closing Date Purchase Price in respect of a Title Benefit shall be determined in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defectsame manner as for Title Defects. BUYER will The Sellers shall be deemed to have conclusively waived any title defect about Title Benefit of which it CELLC fails to notify SELLER the Buyer in writing within in the applicable period manner and by the date specified in the preceding sentencethis Section.
5.3.2 2.1.10 If BUYER properly notifies SELLER there is a dispute between the Sellers and the Buyer as to the existence of any material Title Defects, Environmental Defects, Title Benefits, the cure of a Title Defect or the remediation of an Environmental Defect, BUYER shall have or the option value attributable to either (i) waive or the Defect and close, (ii) request SELLER adjustment to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by in respect of) Title Defects, Environmental Defects, or Title Benefits, then the Allocated Value Sellers or the Buyer may submit the dispute to an expert for determination as provided in this Section 2.1.10 until the date ninety (90) days after the end of the excluded PropertyCure Period. The initiating Party shall deliver written notice to the other Party that it is initiating dispute resolution in accordance with this Section 2.1.10, such notice to describe in reasonable detail the nature and specifics of the dispute. The dispute shall be submitted to a mutually agreed title attorney practicing in the State of Texas, in the case of a Title Defect or Title Benefit, or to a mutually agreed environmental expert, in the case of an Environmental Defect (each such title attorney or environmental expert hereinafter, a “Consultant”). If BUYER asks SELLER the Parties are unable to cure agree on a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have single Consultant within thirty (30) days after receipt of the initiating notice, then the Sellers on the one hand and the Buyer on the other hand will each appoint one Consultant and the two Consultants so appointed will thereafter promptly appoint a third Consultant, and the three Consultants so appointed will resolve such matter. The costs and expenses of each Consultant shall be paid fifty percent (50%) by the Sellers and fifty percent (50%) by the Buyer. The Sellers and the Buyer shall each present to the Consultant(s), with a simultaneous copy to the other Party, a single written statement of its position on the defect, benefit or dispute in question, together with a copy of this Agreement and any supporting material that such Party desires to furnish, not later than ten (10) Business Days after appointment of the Consultant(s). In making their determination, the Consultant(s) shall be bound by the terms of this Agreement and, without any additional or supplemental submittals by either Party, may consider available legal and industry matters as in their opinion are necessary or appropriate to make a proper determination. Additionally, any Consultant may consult with and engage disinterested Third Parties to advise him, including petroleum engineers or environmental engineers. The governing Law for any dispute resolved under this Section 2.1.10 shall be the Law of the State of Texas, without regard to conflicts of law principles. Within sixty (60) days following the submission of such written statements to the Consultant(s), applying the principles set forth in this Section 2.1, the Consultant(s) shall make a determination of the matter submitted based solely on the single written statement of each Party. The decision of the Consultant(s) shall be in writing and conclusive and binding on the Sellers and the Buyer and shall PURCHASE AND SALE AGREEMENT 16 be enforceable against the Parties in any court of competent jurisdiction. Any amount owing by one Party as a result of such determination by the Consultant(s) will be paid as provided in Section 2.10. The Consultant(s) shall act as experts for the limited purpose of determining the specific dispute presented to them, shall not act as arbitrators, and may not award damages, interest, costs, or penalties to either Party.
2.1.11 If, on or before the date that is five (5) Business Days prior to the Closing Date to correct Date, (a) the Buyer delivers a Defect Notice for a Title Defect, (b) the Sellers elect not to cure such defect, and (c) the Parties agree, or there has been a final determination in accordance with the provisions of Section 2.1.10, that such defect requires an adjustment to the Purchase Price, then the Purchase Price shall be so adjusted at the Closing. Except as set forth in the case of a title defectpreceding sentence, or one hundred twenty (120) days all Purchase Price adjustments attributable to Title Defects and Environmental Defects shall be made after the Closing in accordance with the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of that portion of the Property affected by those Defects. Notwithstanding the foregoing preceding provisions of this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured by Seller or waived by BUYER, together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement2.1.
(a) For the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3.
(b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.
Appears in 1 contract
Samples: Purchase and Sale Agreement (Energy & Exploration Partners, Inc.)
Title and Environmental Defects. 5.3.1 BUYER The Purchase Price will review title to be decreased for uncured Title Defects (net of Title Benefits) and Environmental Defects that exceed, individually, the Property prior to Closing and notify SELLER in writing of any title defect or environmental defect (respective Individual Defect Thresholds and, collectively, a "Defect") it discovers as soon as reasonably practicable after its discoverythe Aggregate Defect Threshold, in accordance with this Section 1.1. Buyer may deliver to Seller, on or before the Defect Notice Date, one or more Defect Notices. Any matters that may otherwise constitute Title Defects or Environmental Defects, but in no event less than ten (10) business days prior with respect to which Seller has not received a Defect Notice from Buyer by the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will Defect Notice Date, shall be deemed to have been conclusively waived any title defect about which it fails to notify SELLER in writing within by Buyer for all purposes except the applicable period specified special warranty contained in the preceding sentence.
5.3.2 Assignment. All adjustments to the Purchase Price based on Title Defects will be based on the Allocated Values attributable to the affected Properties. In no event will the aggregate amount of Title Defect adjustments with respect to a Property exceed the Allocated Value of such Property. If BUYER properly notifies SELLER the aggregate of all adjustments to the Purchase Price required under this Agreement in respect of any material DefectProperty would equal or exceed the entire Allocated Value of such Property, BUYER shall have then at Seller’s option and in lieu of such adjustment, Seller may PURCHASE AND SALE AGREEMENT 1 exclude such Property from the option purchase and sale hereunder or, if already assigned to either Buyer, Buyer will execute and deliver to Seller an assignment (i) waive the Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the form of the Assignment) of such Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the and in each such case such Property affected by the defect from the transaction under this Agreement, in which case shall be an Excluded Asset and the Purchase Price will be reduced in an amount equal to the entire Allocated Value of such Property (subject to repayment of any Purchase Price adjustments having been in respect thereof, if any). Upon timely delivery of a Defect Notice under this Section 1.1, Buyer and Seller will in good faith negotiate the validity of the claim and the amount of any adjustment to the Purchase Price using the following criteria:
1.1.1 No single Title Defect or Title Benefit shall be taken into account unless the value of such defect or benefit is determined to be more than Twenty Five Thousand Dollars ($25,000), and no single Environmental Defect shall be taken into account unless the value of such defect is determined to be more than Fifty Thousand Dollars ($50,000) (each an “Individual Defect Threshold”).
1.1.2 No adjustment will be made to the Purchase Price for either uncured Title Defects or for uncured Environmental Defects unless the total of all individual adjustments for such Title Defects and Environmental Defects that exceed the respective Individual Defect Thresholds exceeds one and one-half percent (1.5%) of the unadjusted Purchase Price, after first offsetting any Title Benefits against the Title Defects that, in each case, exceed the Individual Defect Threshold for Title Benefits and Title Defects (the “Aggregate Defect Threshold”). In the event that the aggregate amount of all such individual adjustments for uncured Title Defects and uncured Environmental Defects exceeds the Aggregate Defect Threshold after offsetting any Title Benefits, the adjustment to the Purchase Price shall only be for the amount by which the total of all such individual adjustments for uncured Title Defects and uncured Environmental Defects exceeds the Aggregate Defect Threshold after offsetting any Title Benefits.
1.1.3 If the adjustment is based on Seller owning an NRI in a Real Property Interest or Well which is less than that shown on Exhibit A for such Property, then the downward adjustment shall be calculated by multiplying the Allocated Value shown on Exhibit A for such Property by a fraction, the numerator of which is an amount equal to the excluded Property. If BUYER asks SELLER NRI shown on Exhibit A for such Property less the NRI to cure a material Defectwhich Seller is actually entitled taking such Title Defect into account, and SELLER agrees to attempt to cure the Defectdenominator of which is the NRI shown on Exhibit A for such Property.
1.1.4 If the adjustment is based on a Seller owning a Working Interest in a Well which is larger than the Working Interest for such Seller on Exhibit A, but without a proportionate increase in such Seller’s NRI for such Property, then the downward adjustment shall be calculated by determining the effective NRI that results from such larger Working Interest, determining PURCHASE AND SALE AGREEMENT 2 what the NRI would be using such effective NRI and the Working Interest shown for such Seller and Property on Exhibit A and then calculating the adjustment in the manner set forth in Section 1.1.3.
1.1.5 If the adjustment is based on Seller owning fewer Net Acres in a Real Property Interest than those shown on Exhibit A for such Property, then the downward adjustment shall be calculated by multiplying the Allocated Value shown on Exhibit A for such Property by a fraction, the Closing with respect numerator of which is the number of Net Acres shown on Exhibit A for such Property minus the number of Net Acres actually owned by Seller in such Property, and the denominator of which is the number of Net Acres shown on Exhibit A for such Property.
1.1.6 If the adjustment is based on a Lien upon a Real Property Interest or Well that is liquidated in amount, then the downward adjustment is the amount necessary to remove such Lien from the affected Property.
1.1.7 If the adjustment is based on a liability to remediate, resolve or otherwise cure an Environmental Defect related to a Real Property only will be deferred and SELLER will have thirty (30) days after Interest or Well, then the Closing Date to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of downward adjustment is that portion of the Property affected by those Defectsamount necessary to remediate, resolve or otherwise cure such Environmental Defect in the most cost effective manner reasonably available and consistent with common industry practices for which Buyer would be liable after Closing.
1.1.8 Seller may notify Buyer of Title Benefits in writing on or before the Defect Notice Date, which notice shall include a reasonably detailed description of such Title Benefit. Notwithstanding The upward adjustment to the foregoing provisions Purchase Price in respect of a Title Benefit shall be determined using the same principles as provided in this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured by Seller or waived by BUYER, together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement.
(a) For the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3.
(b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.1.1
Appears in 1 contract
Samples: Purchase and Sale Agreement (Mdu Resources Group Inc)
Title and Environmental Defects. 5.3.1 BUYER will review (a) Purchaser may conduct, at its sole cost, such title examination, regarding whether the Company or any of the Subsidiaries has Defensible Title, or investigation, and other examinations and investigations, as it may in its sole discretion choose to conduct with respect to the Property prior Company’s Oil and Gas Interests in order to Closing and notify SELLER determine whether any Title or Environmental Defects exist. Purchaser must deliver to the Company in writing on or before May 1, 2006, a written notice specifying each defect associated with the Company’s or any Subsidiary’s Oil and Gas Interests that it asserts pursuant to this Section 5.12 or Sections 3.2.19 or 3.2.35 (a “Title or Environmental Defect”), a description of each such Title or Environmental Defect, the amount of the adjustment to the Base Purchase Price that it asserts based on such defect and its method of calculating such adjustment. If such notice is not timely submitted, Purchaser will be deemed to have waived its basis for a Base Purchase Price adjustment based on Section 3.2.19, Section 3.2.35 and this Section 5.12, as well as waived its basis for any claim or other assertion of rights or damages based on such provisions.
(b) Upon timely delivery of a notice under Section 5.12(a), Purchaser and Seller will in good faith negotiate the validity of the claim and the amount of any title adjustment to the Base Purchase Price using the following criteria.
(i) No single Title Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than the greater of (i) $5,000 or environmental (ii) three percent (3%) of the Allocated Value of such property and no single Environmental Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than the greater of (collectivelyi) $5,000 or (ii) three percent of the Allocated Value of such property (the “Individual Defect Threshold”).
(ii) No adjustment will be made to the Base Purchase Price under this Section 5.12 unless the net total of all individual adjustments that exceed the Individual Defect Threshold under this Section 5.12 exceeds three percent (3%) of the Base Purchase Price in the aggregate and only by the amount exceeding three percent (3%) of the Base Purchase Price (the “Aggregate Defect Threshold”); by way of example, if the net total of all individual adjustments that exceed the Individual Defect Threshold equals four percent (4%) of the Base Purchase Price, then an adjustment of one percent (1%) of the Base Purchase Price may, subject to Section 5.12(d), be made to the Base Purchase Price.
(iii) If the requested adjustment is based on the Company or any of the Subsidiaries owning a "net revenue interest for a well, unit rights or leasehold rights less than that shown in the Disclosure Schedule, then a downward adjustment shall be calculated by multiplying the Allocated Value set forth for such well, unit rights or leasehold rights on the Disclosure Schedule by a fraction (A) the numerator of which is an amount equal to the net revenue interest shown on the Disclosure Schedule for such well, unit rights or leasehold rights less the decimal share to which the Company or the Subsidiaries would be entitled as a result of its ownership interest in such well, unit rights or leasehold rights which is unaffected by such Title Defect and (B) the denominator of which is the net revenue interest shown for such well, unit rights or leasehold rights on the Disclosure Schedule. Any downward adjustments requested by Purchaser in subsections (i) and (ii) above may be offset by upward adjustments if it is determined by Purchaser and the Company that the Company’s or the Subsidiaries’ net revenue interest for all or part of the Oil and Gas Interests of the Company is greater than that shown on the Disclosure Schedule.
(iv) If the adjustment is based on the Company or the Subsidiaries owning a working interest that is larger than the working interest shown on the Disclosure Schedule, but without a proportionate increase in the Company’s or the Subsidiaries’ net revenue interest, then the adjustment is calculated by determining the effective net revenue interest that results from such larger working interest, determining what the net revenue interest would be using such effective net revenue interest and the working interest shown on the Disclosure Schedule and then calculating the adjustment in the manner set forth in clause (iii) preceding.
(v) If the adjustment is based on a Lien or other monetary charge upon an Oil and Gas Interest of the Company or a liability to remediate or otherwise cure an Environmental Defect related to an Oil and Gas Interest of the Company that is liquidated in amount, then the adjustment is the amount necessary to remove such Lien or other monetary charge from or a liability to remediate or otherwise cure an Environmental Defect relating to, the affected Oil and Gas Interest of the Company.
(vi) If the adjustment is based on an obligation, burden or liability upon the affected Oil and Gas Interest for which Purchaser’s economic detriment is not liquidated but can be estimated with reasonable certainty, then the adjustment is the amount necessary to compensate Purchaser at Closing for the adverse economic effect on the affected Oil and Gas Interest.
(c) If the value of a Title or Environmental Defect that remains uncured by Closing and, consequently, the adjustment to the Base Purchase Price cannot be determined based on the above criteria or if the Parties cannot otherwise agree on the amount of an adjustment, then Purchaser shall select one of the following options to resolve the impasse:
(i) The Base Purchase Price shall be reduced by an amount determined by a Third Party agreed to by Seller and Purchaser as being the value of such Title or Environmental Defect", taking into consideration the Allocated Value of the affected property, the portion of the affected property subject to such Title or Environmental Defect, the legal affect of such Title or Environmental Defect on the affected property and any other factor reasonably relevant to the value of the Title or Environmental Defect, as determined in the reasonable discretion of the Third Party
(ii) it discovers Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after its discoveryClosing, but in no event less not later than ten (10) business days prior to six months from the Closing Date in the case of a title defect Date, cure or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will be deemed to have conclusively waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the remove such Title or Environmental Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have thirty (30) days after the Closing Date to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYERa Third Party to be agreed on by Seller and Purchaser and the value of any such Title or Environmental Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Title or Environmental Defect is so cured; or
(iii) Purchaser may exclude the affected Oil and Gas Interest, BUYER may rescind its purchase of that portion of in which event the Property affected Oil and Gas Interest shall be deleted from this Agreement and the Base Purchase Price shall be reduced by those Defects. Notwithstanding the foregoing provisions of this Section 5.3.2, if on the Closing Date an amount equal to the Allocated Value of such affected property. In the Property event such affected property is excluded from this Agreement, Seller shall indemnify Purchaser for any expenses incurred in connection with the inspection of the affected property provided however that such indemnification shall not apply to any liability that arises or is incurred as a result of the willful misconduct or gross negligence of the Purchaser.
(d) If the Aggregate Defect Threshold is exceeded by all uncured material the net total of asserted Title and Environmental Defects which each exceeds the Individual Defect Threshold and therefore the Base Purchase Price would be decreased by adjustments made pursuant to this Section 5.12, Purchaser may at its sole option and upon its written notice to Seller, do any of which SELLER has been properly notified and which have not been cured the following or a combination thereof:
(i) The Base Purchase Price shall be reduced by an amount determined by a Third Party agreed to by Seller or waived by BUYERand Purchaser as being the value of the asserted Title and Environmental Defects, together with taking into consideration the Allocated Value of portions each affected property, the portion of each affected property subject to such Title or Environmental Defects, the legal affect of such Title or Environmental Defects on each affected property and any other factor reasonably relevant to the value of the Property Title or Environmental Defects, as determined in the reasonable discretion of the Third Party;
(ii) Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after Closing, but not later than six months from the Closing Date, cure or remove some or all of such Title or Environmental Defects to the reasonable satisfaction of a Third Party to be agreed upon by Seller and Purchaser and the value of any such Title or Environmental Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Title or Environmental Defect is so cured; or
(iii) Purchaser may exclude any affected property, in which event the affected property selected by Purchaser shall be deleted from this Agreement and the Base Purchase Price shall be reduced by an amount equal to the Allocated Value of such selected affected property. In the event such affected property is excluded from this Agreement, Seller shall indemnify Purchaser for which preferential purchase rights have been exercised, exceeds twenty any expenses incurred in connection with the inspection of the affected property provided however that such indemnification shall not apply to any liability that arises or is incurred as a result of the willful misconduct or gross negligence of the Purchaser.
(e) If the total amount of Title and/or Environmental Defects is ten percent (2010%) of the Base Purchase PricePrice or more, either BUYER then Seller or SELLER Purchaser may terminate this AgreementAgreement upon written notice to the other on or before May1, 2006, and neither party will have this Agreement shall be void and of no further force or effect, except for the provisions of Sections 2.2 (with respect to Xxxxxxx Money), 4.7 (with respect to indemnification), 5.2(b) (but only to the extent of the confidentiality and indemnification provisions), 5.5 (with respect to the indemnification provisions) and 5.7 (regarding payment of expenses) and the Confidentiality Agreement. Seller shall be free to immediately enjoy all rights of ownership and to sell, transfer, encumber or otherwise dispose of the Shares or any further rights or obligations of the Company’s Oil and Gas Interests to any Party without any restriction under this Agreement. Notwithstanding the above, Purchaser may waive the Title or Environmental Defect amount over ten percent (10%) of the Base Purchase Price and close the transaction contemplated by this Agreement in which case Seller shall have no further liability to Purchaser for any such waived Defects.
(af) For The Company and Purchaser will reasonably cooperate, at Seller’s expense, with Seller after the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title Closing to the Property cure Title and Environmental Defects that Seller has elected to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3cure.
(b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.
Appears in 1 contract
Title and Environmental Defects. 5.3.1 BUYER The Purchase Price will review title be (a) decreased only for those uncured Title Defects and uncured Environmental Defects that exceed, individually, the respective Individual Defect Thresholds and, collectively with all other uncured Title Defects and Environmental Defects that exceed the applicable Individual Defect Thresholds, the Aggregate Defect Threshold and (b) increased for Title Benefits, in each case, in accordance with this Section 2.1. Buyer may deliver to Seller, on or before the Property prior to Closing and notify SELLER Defect Notice Date, one or more Defect Notices (each meeting all of the requirements set forth in writing of any title the definition thereof) specifying each defect associated with the Properties that Buyer asserts constitutes a Title Defect or environmental defect (collectively, a "an Environmental Defect") it discovers as soon as reasonably practicable after its discovery. Any matters that may otherwise constitute Title Defects or Environmental Defects, but in no event less than ten (10) business days prior of which Seller has not been notified by Buyer pursuant to a valid Defect Notice by the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will Defect Notice Date, shall be deemed to have conclusively been waived any title defect about which it fails by Buyer for all purposes. The term “Defect Notice Date” means 5:00 p.m. Central Time on September 15, 2016. All adjustments to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value based on Title Defects and/or any breach of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure special warranty contained in the Defect, the Closing Assignment (other than with respect to a Lien l (other than a Permitted Encumbrance) created by Seller that is liquidated in amount and constitutes a breach of Seller’s special warranty title contained in the Assignment) will be based on the Allocated Values attributable to the affected Property only will Properties. The defect amount with respect to a Title Defect shall be deferred and SELLER will have thirty (30) days after the Closing Date to correct the Defectdetermined without duplication of any costs or losses included in another defect amount for Title Defects hereunder, or for which Buyer otherwise receives credit in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of that portion of the Property affected by those Defects. Notwithstanding the foregoing provisions of this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured by Seller or waived by BUYER, together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) calculation of the Purchase Price, either BUYER or SELLER may terminate this 27242226 18 Asset Purchase Agreement, and neither party will have any further rights or obligations under this Agreement.
(a) For the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3.
(b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.
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Title and Environmental Defects. 5.3.1 BUYER will review (a) Purchaser may conduct, at its sole cost, such title examination, regarding whether the Company has Defensible Title, and other examinations and investigations, as it may in its sole discretion choose to conduct with respect to the Property prior Company’s Oil and Gas Interests in order to Closing and notify SELLER determine whether any Title or Environmental Defects exist. Purchaser must deliver to the Company in writing on or before July 21, 2008, a written notice specifying each defect associated with the Company’s Oil and Gas Interests that it asserts causes the Company not to have Defensible Title to any of the Company’s Oil and Gas Interests (a “Title Defect”) or constitutes a breach of or inaccuracy in the representations and warranties set forth in Section 3.2.18, with the qualification therein as to knowledge being ignored (an “Environmental Defect”), a description of each such Title or Environmental Defect, the amount of the adjustment to the Base Purchase Price that it asserts based on such defect and its method of calculating such adjustment. If such notice is not timely submitted, Purchaser will be deemed to have waived its basis for a Base Purchase Price adjustment based on Section 3.2.18 and this Section 5.13, as well as waived its basis for any claim or other assertion of rights or damages based on such provisions.
(b) Upon timely delivery of a notice under Section 5.13(a), Purchaser and Seller will in good faith negotiate the validity of the claim and the amount of any title adjustment to the Base Purchase Price using the following criteria.
(i) No single Title Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than $50,000 and no single Environmental Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than $50,000 (the “Individual Defect Threshold”).
(ii) No adjustment will be made to the Base Purchase Price under this Section 5.13 unless the net total of all individual adjustments that exceed the Individual Defect Threshold under this Section 5.13 exceeds $1,500,000 in the aggregate and only by the amount exceeding said amount (the “Aggregate Defect Threshold”); by way of example, if the net total of all individual adjustments that exceed the Individual Defect Threshold equals $5,000,000, then an adjustment of $3,500,000 may, subject to Section 5.13(d), be made to the Base Purchase Price.
(iii) If the requested adjustment is based on the Company owning a net revenue interest for a well, unit rights or environmental defect leasehold rights less than that shown in Schedule 1.1, then a downward adjustment shall be calculated by multiplying the Allocated Value set forth for such well, unit rights or leasehold rights on Schedule 1.1 by a fraction (collectivelyA) the numerator of which is an amount equal to the net revenue interest shown on Schedule 1.1 for such well, unit rights or leasehold rights less the decimal share to which the Company would be entitled as a "result of its ownership interest in such well, unit rights or leasehold rights which is unaffected by such Title Defect and (B) the denominator of which is the net revenue interest shown for such well, unit rights or leasehold rights on Schedule 1.1. Any downward adjustments requested by Purchaser may be offset by upward adjustments if it is determined by Purchaser and the Company that the Company’s net revenue interest for all or part of the Oil and Gas Interests of the Company is greater than that shown on Schedule 1.1.
(iv) If the adjustment is based on the Company owning a working interest that is larger than the working interest shown on Schedule 1.1, but without a proportionate increase in the Company’s net revenue interest, then the adjustment is calculated by determining the effective net revenue interest that results from such larger working interest, determining what the net revenue interest would be using such effective net revenue interest and the working interest shown on Schedule 1.1 and then calculating the adjustment in the manner set forth in clause (iii) preceding.
(v) If the adjustment is based on a Lien or other monetary charge upon an Oil and Gas Interest of the Company or a liability to remediate or otherwise cure an Environmental Defect related to an Oil and Gas Interest of the Company that is liquidated in amount, then the adjustment is the amount necessary to remove such Lien or other monetary charge from or a liability to remediate or otherwise cure an Environmental Defect relating to, the affected Oil and Gas Interest of the Company.
(vi) If the adjustment is based on an obligation, burden or liability upon the affected Oil and Gas Interest for which Purchaser’s economic detriment is not liquidated but can be estimated with reasonable certainty, then the adjustment is the amount necessary to compensate Purchaser at Closing for the adverse economic effect on the affected Oil and Gas Interest.
(c) If the value of a Title or Environmental Defect that remains uncured by Closing and, consequently, the adjustment to the Base Purchase Price cannot be determined based on the above criteria or if the Parties cannot otherwise agree on the amount of an adjustment, then Seller shall select one of the following options to resolve the impasse:
(i) The Base Purchase Price shall be reduced by an amount determined by a Third Party agreed to by Seller and Purchaser as being the value of such Title or Environmental Defect", taking into consideration the Allocated Value of the affected property, the portion of the affected property subject to such Title or Environmental Defect and the legal affect of such Title or Environmental Defect on the affected property;
(ii) it discovers With respect to a Title Defect, Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after its discoveryClosing, but in no event less not later than ten (10) business days prior to six months from the Closing Date in the case of a title defect Date, cure or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will be deemed to have conclusively waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the remove such Title Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have thirty (30) days after the Closing Date to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYERa Third Party to be agreed on by Seller and Purchaser and the value of any such Title Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Title Defect is so cured; or
(iii) With respect to an Environmental Defect, BUYER Seller may rescind its purchase of that portion of elect as follows: (A) exclude the Property affected property, in which event the affected property shall be deleted from this Agreement and treated as an Excluded Asset and the Base Purchase Price shall be reduced by those Defects. Notwithstanding the foregoing provisions of this Section 5.3.2, if on the Closing Date an amount equal to the Allocated Value of such affected property; or (B) Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after Closing, but not later than six months from the Property affected by all uncured material Defects Closing Date, cure or remove such Environmental Defect to the reasonable satisfaction of which SELLER has been properly notified and which have not been cured a Third Party to be agreed on by Seller and Purchaser and the value of any such Environmental Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Environmental Defect is so cured.
(d) If the Aggregate Defect Threshold is exceeded by the net total of asserted Title and Environmental Defects which each exceeds the Individual Defect Threshold and therefore the Base Purchase Price would be decreased by adjustments made pursuant to this Section 5.13, Seller may elect in accordance with the following provision to do any of the following or waived a combination thereof:
(i) The Base Purchase Price shall be reduced by BUYERan amount determined by a Third Party agreed to by Seller and Purchaser as being the value of the asserted Title and Environmental Defects, together with taking into consideration the Allocated Value of portions each affected property, the portion of each affected property subject to such Title or Environmental Defects and the legal affect of such Title or Environmental Defects on each affected property;
(ii) With respect to a Title Defect, Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after Closing, but not later than six months from the Closing Date, cure or remove some or all of such Title to the reasonable satisfaction of a Third Party to be agreed upon by Seller and Purchaser and the value of any such Title Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Title is so cured; or
(iii) With respect to an Environmental Defect, Seller may elect as follows: (A) exclude the affected property, in which event the affected property shall be deleted from this Agreement and treated as an Excluded Asset and the Base Purchase Price shall be reduced by an amount equal to the Allocated Value of such affected property; or (B) Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after Closing, but not later than six months from the Closing Date, cure or remove such Environmental Defect to the reasonable satisfaction of a Third Party to be agreed on by Seller and Purchaser and the value of any such Environmental Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Environmental Defect is so cured.
(e) If the total amount of Title and/or Environmental Defects is an amount equal to 20 percent of the Property for which preferential purchase rights have been exercisedBase Purchase Price or more, exceeds twenty percent (20%) of the Purchase Price, either BUYER then Seller or SELLER Purchaser may terminate this AgreementAgreement upon written notice to the other on or before July 21, 2008, and neither party will have this Agreement shall be void and of no further force or effect, except for the provisions of Sections 2.2 (with respect to the Letter of Credit), 4.7 (with respect to indemnification), 5.2(b) (but only to the extent of the confidentiality and indemnification provisions), 5.6 (with respect to the confidentiality provisions) and 5.8 (regarding payment of expenses) and the Purchaser Confidentiality Agreement. Seller shall be free to immediately enjoy all rights of ownership and to sell, transfer, encumber or otherwise dispose of the Shares or any further rights or obligations of the Company’s Oil and Gas Interests to any Person without any restriction under this Agreement. Notwithstanding the above, Purchaser may waive the Title or Environmental Defect amount over 20 percent of the Base Purchase Price and close the transaction contemplated by this Agreement in which case Seller shall have no further liability to Purchaser for any such waived Title or Environmental Defects.
(af) For The Company and Purchaser will reasonably cooperate with Seller after the purpose of this Agreement, a material title defect Closing to cure Title and Environmental Defects that Seller has elected to cure.
("Defective Interest"g) shall be any matter that, in the opinion of BUYER, would cause the title Seller may request an upward adjustment to the Property Purchase Price by notifying Purchaser of any net revenue interest in any of the Company’s Oil and Gas Interests that is greater than that shown on Schedule 1.1 for such Ownership Interest (each, an “Interest Addition”), provided such adjustment is requested on or before the date set forth in Section 5.13(a). Any such notice shall set forth Seller’s basis for the assertion of such Interest Addition and Seller’s proposed adjustment to fail the Purchase Price on account thereof. Anything herein to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that contrary notwithstanding: (i) a reasonable and prudent person engaged Seller may not assert any Interest Addition after the date set forth in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the PropertySection 5.13(a), (ii) the title is free and clear from liens and encumbrances that would materially reducethis Section 5.13 sets forth Seller’s sole remedy for Interest Additions, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that any Interest Additions shall be subject to the same thresholds and limitations as Title Defects as set forth on Exhibit Ain this Section 5.13, Part II attached hereto. Neither and (iv) the environmental condition of the Property nor any failure to obtain Consents Purchase Price may only be adjusted for one or more Interest Additions to the transfer extent the cumulative amount of Related Contracts will be considered upward adjustments to the Purchase Price on account thereof is less than or equal to the cumulative amount of downward adjustments to the Purchase Price on account of Title Defects. Upon timely delivery of a title defect under notice by Seller of an Interest Addition, Purchaser and Seller shall meet and use commercially reasonable efforts to agree on the validity thereof and the amount of any required adjustment to the Purchase Price. If, within 10 days after the date set forth in Section 5.13(a), Purchaser and Seller have not agreed on the validity of one or more Interest Additions asserted in accordance with this Section 5.3.3.
(b5.13(g) For purposes or on the amount of this Agreement, a material environmental defect shall be any circumstance on or related an adjustment to the Property whichPurchase Price on account thereof, with respect to each such Interest Addition, Seller may proceed in the opinion of BUYER, constitutes an Environmental Obligation (as defined in accordance with Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations5.13(b).
Appears in 1 contract
Title and Environmental Defects. 5.3.1 BUYER will review “Title Defect” shall mean a defect exists that (A) causes Seller to not have Defensible Title to the Oil and Gas Properties and (B) for which a Defect Notice has been timely and otherwise validly delivered. Notwithstanding any other provision in this Agreement to the contrary, the following matters shall not constitute, and shall not be asserted as, a Title Defect: (1) defects or irregularities arising out of lack of corporate or other entity authorization or variation in corporate or entity name; (2) defects or irregularities that have been cured or remedied by the applicable statutes of limitation or statutes for prescription, including adverse possession and the doctrine of laches or which have existed for more than twenty (20) years and no affirmative evidence shows that another Person has asserted a superior claim of title to the Property prior Properties; (3) defects or irregularities in the chain of title consisting of the failure to Closing and notify SELLER recite marital status in writing documents or omissions of heirship proceedings; (4) the absence of any lease amendment or consent by any royalty interest or mineral interest holder authorizing the pooling of any leasehold interest, royalty interest or mineral interest, and the failure of Exhibit A to reflect any lease or any unleased mineral interest where the owner thereof was treated as a non-participating co-tenant during the drilling of any xxxxx; (5) any defect arising out of lack of survey or lack of metes and bounds descriptions, unless a survey is expressly required by Applicable Law; (6) any gap in the chain of title unless affirmative evidence shows that there is a superior chain of title as evidenced by an abstract of title, title opinion or xxxxxxx’x title chain or runsheet; (7) any defect arising from prior oil and gas leases relating to the lands burdened by the Leases that are terminated but are not surrendered or environmental defect released of record; (collectively8) future adjustments in acreage, Working Interest and Net Revenue Interest as a "Defect"result of pooling or unitization of the Leases; (9) it discovers references in the chain of title to unrecorded agreements, unless affirmative evidence shows that there is a superior chain of title as soon as reasonably practicable after its discoveryevidenced by an abstract of title, but in no event less than ten title opinion or xxxxxxx’x title chain or runsheet; and (10) business days prior to Permitted Encumbrances. Notwithstanding the Closing Date in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will be deemed to have conclusively waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defectforegoing, BUYER shall have the option to either (i) waive the Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have thirty (30) days after each Title Defect that is not cured on or before the Closing Date to correct the Defect, in the case of (other than a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of that portion of the Property affected by those Defects. Notwithstanding the foregoing provisions of this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured Title Defect caused by Seller or waived by BUYERthe Company), together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement.
(a) For the purpose of this Agreement, a material title defect ("Defective Interest") there shall be no adjustment to the number of Parent Shares to be issued at Closing, if the Title Defect Amount does not exceed $150,000 (the “Title Defect Threshold”), it being expressly understood that if any matter thatsingle Title Defect Amount exceeds the Title Defect Threshold, the entire amount of such Title Defect Amount shall be included in the opinion calculation of BUYER, would cause the title any applicable adjustment to the Property number of Parent Shares to fail be issued at Closing pursuant to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.38.8(a).
(b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.
Appears in 1 contract
Samples: Membership Interest Purchase and Sale Agreement (RSP Permian, Inc.)
Title and Environmental Defects. 5.3.1 BUYER The Purchase Price will review title be (a) decreased for the value, determined as provided herein, of uncured Title Defects and unremedied and unindemnified Environmental Defects that are in excess of the respective Individual Defect Thresholds and the Aggregate Defect Threshold and (b) increased for Title Benefits, in each case, in accordance with this Section 2.1. The Buyer may deliver to CELLC, on or before the Defect Notice Date, one or more written notices specifying each defect associated with the Properties that the Buyer asserts constitutes a Title Defect or an Environmental Defect, a specific description of each such defect and the basis for such assertion under the terms of this Agreement, the amount of the adjustment to the Purchase Price that the Buyer asserts based on such defect and its method of calculating such adjustment, together with all data and information evidencing the Buyer’s review of public record or other information proving the existence of such defect reasonably necessary for CELLC to verify the existence of the alleged Title Defect or Environmental Defect (“Defect Notice”). Any matters that may otherwise constitute Title Defects or Environmental Defects, but of which CELLC has not been so notified in writing by the Buyer by the Defect Notice Date, shall be deemed to have been waived by the Buyer for all purposes. All adjustments to the Purchase Price based on Title Defects will be based on the Allocated Values attributable to the affected Properties. Upon timely delivery of a Defect Notice, the Parties will in good faith negotiate the validity of the claim and the amount of any adjustment to the Purchase Price using the following criteria.
2.1.1 No single Title Defect may be asserted by the Buyer hereunder unless the value of the defect is determined to be more than Ten Thousand Dollars ($10,000.00), and no single Environmental Defect may be asserted by the Buyer hereunder unless the value of the defect is determined to be more PURCHASE AND SALE AGREEMENT 12 than Fifty Thousand Dollars ($50,000.00) (each an “Individual Defect Threshold”), in which event the full value of such defect shall be taken into account for purposes of this Section 2.1.
2.1.2 No adjustment will be made to the Purchase Price for either uncured Title Defects or unremedied and unindemnified Environmental Defects except to the extent that the total value of all such defects that exceed the respective Individual Defect Thresholds exceeds two percent (2%) of the Purchase Price in the aggregate (the “Aggregate Defect Threshold”). If the Aggregate Defect Threshold is so exceeded after offsetting Title Benefits, then the Purchase Price will be decreased by the amount of such excess. With respect to any uncured Title Defects for which an adjustment equal to the entire Allocated Value of the affected Property, or the entire pro-rata Allocated Value of a segregated area of or entire separate legal interest included in the Property, is made to the Purchase Price hereunder, at the Sellers’ option, as a condition precedent to such adjustment, (a) if the Closing has not yet occurred, then the affected Property prior shall be excluded from the Properties conveyed to the Buyer at the Closing and thereafter shall become an Excluded Asset, or (b) if the Closing has occurred, then the Buyer will execute and deliver to the respective Seller(s) an assignment (in substantially the same form as the Assignment) of the Property (or segregated area thereof or interest therein) for which the entire Allocated Value has been credited to the Buyer.
2.1.3 If the Title Defect is based on Sellers owning an NRI in a Real Property Interest which is less than that shown on Exhibit “A” for such Property, then the downward adjustment is an amount equal to the Allocated Value for such Property on Exhibit “A”, multiplied by a fraction, the numerator of which is an amount equal to the NRI shown on Exhibit “A” for such Property less the NRI to which the respective Seller is actually entitled, and the denominator of which is the NRI shown on Exhibit “A” for such Property.
2.1.4 If the Title Defect is based on a Real Property Interest covering fewer Net Acres than the number of Net Acres set forth on Exhibit “A”, then the downward adjustment is an amount equal to such Net Acre deficiency, multiplied by the price per Net Acre used to calculate the Allocated Value for such Real Property Interest on Exhibit “A”.
2.1.5 If the Title Defect is based on a Lien upon a Real Property Interest that is liquidated in amount, then the downward adjustment is the lesser of the amount necessary to remove such Lien from such Property or the Allocated Value of such Property.
2.1.6 If the adjustment is based on a liability to remediate or otherwise cure an unremedied and unindemnified Environmental Defect, then the downward adjustment is the amount necessary to remediate or otherwise cure such PURCHASE AND SALE AGREEMENT 13 Environmental Defect in the most cost-effective manner reasonably available and consistent with applicable Environmental Law and prudent industry practices. Notwithstanding anything herein to the contrary, at the Seller’s option, in lieu of an adjustment to the Purchase Price in respect of an unremedied Environmental Defect, the Seller may enter into an indemnity in favor of the Buyer in substantially the form attached as Exhibit “E” indemnifying the Buyer from any and all claims, liabilities, obligation or expenses with respect to such Environmental Defect. Any Environmental Defect covered by such an indemnity agreement shall not be taken into account in determining whether the Aggregate Defect Threshold has been achieved.
2.1.7 If a Title Defect or an Environmental Defect is reasonably susceptible of being cured or remedied, then the Sellers will have the right to cure or remedy such defect for a period of up to sixty (60) days after the Defect Notice Date (the “Cure Period”). After Closing, the Buyer shall provide the Sellers and their representatives access to the affected Properties, and all books and records related thereto, in connection with the Sellers’ efforts to cure alleged defects.
2.1.8 If a Seller determines that the ownership of any Real Property Interest entitles such Seller to a larger NRI, a smaller Working Interest or a greater number of Net Acres than that set forth on Exhibit “A” for such Property (each, a “Title Benefit”), then CELLC shall notify SELLER the Buyer of such Title Benefit in writing on or before the Defect Notice Date, which notice shall include a description of any title defect or environmental defect (collectivelysuch Title Benefit, a "Defect") it discovers as soon as reasonably practicable after its discovery, but in no event less than ten (10) business days prior the Dollar value that CELLC asserts is attributable to such Title Benefit and CELLC’s method of calculating the amount. The upward adjustment to the Closing Date Purchase Price in respect of a Title Benefit shall be determined in the case of a title defect or ten (10) business days prior to the Closing Date in the case of an environmental defectsame manner as for Title Defects. BUYER will The Sellers shall be deemed to have conclusively waived any title defect about Title Benefit of which it CELLC fails to notify SELLER the Buyer in writing within in the applicable period manner and by the date specified in the preceding sentencethis Section.
5.3.2 2.1.9 If BUYER properly notifies SELLER there is a dispute between the Sellers and the Buyer as to the existence of any material Title Defects, Environmental Defects, Title Benefits, the cure of a Title Defect or the remediation of an Environmental Defect, BUYER shall have or the option value attributable to either (i) waive or the Defect and close, (ii) request SELLER adjustment to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by in respect of) Title Defects, Environmental Defects, or Title Benefits, then the Allocated Value Sellers or the Buyer may submit the dispute to an expert for determination as provided in this Section 2.1.9 until the date ninety (90) days after the end of the excluded PropertyCure Period. The initiating Party shall deliver written notice to the other Party that it is initiating dispute resolution in accordance with this Section 2.1.9, such notice to describe in reasonable detail the nature and specifics of the dispute. The dispute shall be submitted to a mutually agreed title attorney practicing in the State of Texas, in the case of a Title Defect or Title Benefit, or to a mutually agreed environmental expert, in the case of an Environmental Defect (each such title attorney or PURCHASE AND SALE AGREEMENT 14 environmental expert hereinafter, a “Consultant”). If BUYER asks SELLER the Parties are unable to cure agree on a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have single Consultant within thirty (30) days after receipt of the initiating notice, then the Sellers on the one hand and the Buyer on the other hand will each appoint one Consultant and the two Consultants so appointed will thereafter promptly appoint a third Consultant, and the three Consultants so appointed will resolve such matter. The costs and expenses of each Consultant shall be paid fifty percent (50%) by the Sellers and fifty percent (50%) by the Buyer. The Sellers and the Buyer shall each present to the Consultant(s), with a simultaneous copy to the other Party, a single written statement of its position on the defect, benefit or dispute in question, together with a copy of this Agreement and any supporting material that such Party desires to furnish, not later than ten (10) Business Days after appointment of the Consultant(s). In making their determination, the Consultant(s) shall be bound by the terms of this Agreement and, without any additional or supplemental submittals by either Party, may consider available legal and industry matters as in their opinion are necessary or appropriate to make a proper determination. Additionally, any Consultant may consult with and engage disinterested Third Parties to advise him, including petroleum engineers or environmental engineers. The governing Law for any dispute resolved under this Section 2.1.9 shall be the Law of the State of Texas, without regard to conflicts of law principles. Within sixty (60) days following the submission of such written statements to the Consultant(s), applying the principles set forth in this Section 2.1, the Consultant(s) shall make a determination of the matter submitted based solely on the single written statement of each Party. The decision of the Consultant(s) shall be in writing and conclusive and binding on the Sellers and the Buyer and shall be enforceable against the Parties in any court of competent jurisdiction. Any amount owing by one Party as a result of such determination by the Consultant(s) will be paid as provided in Section 2.9. The Consultant(s) shall act as experts for the limited purpose of determining the specific dispute presented to them, shall not act as arbitrators, and may not award damages, interest, costs, or penalties to either Party.
2.1.10 If, on or before the date that is five (5) Business Days prior to the Closing Date to correct Date, (a) the Buyer delivers a Defect Notice for a Title Defect, (b) the Sellers elect not to cure such defect, and (c) the Parties agree, or there has been a final determination in accordance with the provisions of Section 2.1.9, that such defect requires an adjustment to the Purchase Price, then the Purchase Price shall be so adjusted at the Closing. Except as set forth in the case of a title defectpreceding sentence, or one hundred twenty (120) days all Purchase Price adjustments attributable to Title Defects and Environmental Defects shall be made after the Closing in accordance with the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYER, BUYER may rescind its purchase of that portion of the Property affected by those Defects. Notwithstanding the foregoing preceding provisions of this Section 5.3.2, if on the Closing Date the Allocated Value of the Property affected by all uncured material Defects of which SELLER has been properly notified and which have not been cured by Seller or waived by BUYER, together with the Allocated Value of portions of the Property for which preferential purchase rights have been exercised, exceeds twenty percent (20%) of the Purchase Price, either BUYER or SELLER may terminate this Agreement, and neither party will have any further rights or obligations under this Agreement2.1.
(a) For the purpose of this Agreement, a material title defect ("Defective Interest") shall be any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect under this Section 5.3.3.
(b) For purposes of this Agreement, a material environmental defect shall be any circumstance on or related to the Property which, in the opinion of BUYER, constitutes an Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental Obligations.
Appears in 1 contract
Samples: Purchase and Sale Agreement (Energy & Exploration Partners, Inc.)
Title and Environmental Defects. 5.3.1 BUYER will review (a) Purchaser may conduct, at its sole cost, such title examination regarding whether Company or Subsidiary has Defensible Title or investigation, and other examinations and investigations, as it may in its sole discretion choose to conduct with respect to the Property prior Company Oil and Gas Interests in order to Closing and notify SELLER determine whether any Title or Environmental Defects (as defined below) exist. Purchaser must deliver to Company in writing on or before February 21, 2005 a written notice specifying each defect associated with the Oil and Gas Interests of that it asserts constitutes a violation of the representations set forth in this Section 5.12 or in Section 3.2.19 (a “Title or Environmental Defect”), a description of each such Title or Environmental Defect, the amount of the adjustment to the Base Purchase Price that it asserts based on such defect and its method of calculating such adjustment. If such notice is not timely submitted, Purchaser will be deemed to have waived its basis for a Base Purchase Price adjustment based on a violation of the representations set forth in Section 3.2.4, 3.2.18 and this Section 5.12, as well as waived its basis for any claim or other assertion of rights or damages based on a breach of such representations.
(b) Upon timely delivery of a notice under Section 5.12(a), Purchaser, Sellers and Company will in good faith negotiate the validity of the claim and the amount of any title adjustment to the Base Purchase Price using the following criteria.
(i) no single Title Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than $50,000 and no single Environmental Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than $50,000 (the “Individual Defect Threshold”).
(ii) no adjustment will be made to the Base Purchase Price under this Section 5.12 unless the net total of all individual adjustments that exceed the Individual Defect Threshold under this Section 5.12 exceed $500,000 in the aggregate and only by the amount exceeding said $500,000 (the “Aggregate Defect Threshold”); by way of example, if the net total of all individual adjustments that exceed the Individual Defect Threshold under this Section 5.12 equals $550,000, then an adjustment of $50,000 may, subject to subsection (d) of this Section 5.12, be made to the Base Purchase Price.
(iii) If the requested adjustment is based on Company or environmental defect Subsidiary owning a net revenue interest for a well, unit rights or leasehold rights less than that shown in Schedule 1.1, then a downward adjustment shall be calculated by multiplying the Allocated Value set forth for such well, unit rights or leasehold rights on Schedule 1.1 by a fraction (collectivelyA) the numerator of which is an amount equal to the net revenue interest shown on Schedule 1.1 for such well, unit rights or leasehold rights less the decimal share to which Company or Subsidiary would be entitled as a "result of its ownership interest in such well, unit rights or leasehold rights which is unaffected by such Title Defect and (B) the denominator of which is the net revenue interest shown for such well, unit rights or leasehold rights on Schedule 1.1. Any downward adjustments requested by Purchaser may be offset by upward adjustments if it is determined by Purchaser and Company that Company’s or Subsidiary’s net revenue interest for all or part of the Oil and Gas Interests of Company or Subsidiary is greater than that shown on Schedule 1.1.
(iv) If the adjustment is based on Company or Subsidiary owning a working interest that is larger than the working interest shown on Schedule 1.1, but without a proportionate increase in Company’s or Subsidiary’s net revenue interest, then the adjustment is calculated by determining the effective net revenue interest that results from such larger working interest, determining what the net revenue interest would be using such effective net revenue interest and the working interest shown on Schedule 1.1 and then calculating the adjustment in the manner set forth in clause (iii) preceding.
(v) If the adjustment is based on a Lien or other monetary charge upon an Oil and Gas Interest or a liability to remediate or otherwise cure an Environmental Defect related to an Oil and Gas Interest that is liquidated in amount, then the adjustment is the amount necessary to remove such Lien or other monetary charge from or a liability to remediate or otherwise cure an Environmental Defect relating to, the affected Oil and Gas Interest.
(vi) If the adjustment is based on an obligation, burden or liability upon the affected Oil and Gas Interest for which Purchaser’s economic detriment is not liquidated but can be estimated with reasonable certainty, then, the adjustment is the amount necessary to compensate Purchaser at Closing for the adverse economic effect on the affected Oil and Gas Interest.
(c) If the value of a Title or Environmental Defect that remains uncured by Closing and, consequently, the adjustment to the Base Purchase Price cannot be determined based on the above criteria or if the parties cannot otherwise agree on the amount of an adjustment, then Seller shall select one of the following options to resolve the impasse:
(i) The Base Purchase Price shall be reduced by an amount determined by a third party agreed to by Sellers and Purchaser as being the value of such Title or Environmental Defect", taking into consideration the Allocated Value of the affected property, the portion of the affected property subject to such Title or Environmental Defect and the legal affect of such Title or Environmental Defect on the affected property;
(ii) it discovers Sellers and Purchaser will enter into a separate written agreement whereby Sellers will as soon as reasonably practicable after its discoveryClosing, but in no event less not later than ten six (106) business days prior to months from the Closing Date in the case of a title defect Date, cure or ten (10) business days prior to the Closing Date in the case of an environmental defect. BUYER will be deemed to have conclusively waived any title defect about which it fails to notify SELLER in writing within the applicable period specified in the preceding sentence.
5.3.2 If BUYER properly notifies SELLER of any material Defect, BUYER shall have the option to either (i) waive the remove such Title or Environmental Defect and close, (ii) request SELLER to cure the Defect, but SELLER will have no obligation to cure any Defects in the Property, or (iii) if SELLER declines to cure a material Defect, exclude the portion of the Property affected by the defect from the transaction under this Agreement, in which case the Purchase Price will be reduced by the Allocated Value of the excluded Property. If BUYER asks SELLER to cure a material Defect, and SELLER agrees to attempt to cure the Defect, the Closing with respect to the affected Property only will be deferred and SELLER will have thirty (30) days after the Closing Date to correct the Defect, in the case of a title defect, or one hundred twenty (120) days in the case of an environmental defect. With respect to all such material Defects that SELLER fails to cure to the reasonable satisfaction of BUYERa third party to be agreed to by Sellers and Purchaser and the value of any such Title or Environmental Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Title or Environmental Defect is so cured; or
(iii) Sellers may exclude the affected property, BUYER may rescind its purchase of that portion of in which event the Property affected property shall be deleted from this Agreement and the Base Purchase Price shall be reduced by those Defects. Notwithstanding the foregoing provisions of this Section 5.3.2, if on the Closing Date an amount equal to the Allocated Value of such affected property.
(d) If the Property affected Aggregate Defect Threshold is exceeded by all uncured material the net total of asserted Title and Environmental Defects which each exceeds the Individual Defect Threshold and therefore the Base Purchase Price would be decreased by adjustments made pursuant to this Section 5.12, Company and Subsidiary may at their sole option and upon their written notice to Purchaser, do any of which SELLER has been properly notified the following or a combination thereof:
(i) The Base Purchase Price shall be reduced by an amount determined by a third party agreed to by Sellers and which have not been cured by Seller or waived by BUYERPurchaser as being the value of the asserted Title and Environmental Defects, together with taking into consideration the Allocated Value of portions each affected property, the portion of each affected property subject to such Title or Environmental Defects and the Property for legal affect of such Title or Environmental Defects on each affected property;
(ii) Sellers and Purchaser will enter into a separate written agreement whereby Sellers will as soon as reasonably practicable after Closing, but not later than six (6) months from the Closing Date, cure or remove some or all of such Title or Environmental Defects to the reasonable satisfaction of a third party to be agreed upon by Sellers and Purchaser and the value of any such Title or Environmental Defect shall be withheld from the Base Purchase Price and deposited with the Escrow Agent until the Title or Environmental Defect is so cured; or
(iii) Sellers will retain any affected property, in which preferential purchase rights have been exercised, exceeds twenty percent event the affected property selected by Sellers shall be deleted from this Agreement and the Base Purchase Price shall be reduced by an amount equal to the Allocated Value of such selected affected property.
(20%e) If the total amount of the Purchase Price, either BUYER Title and/or Environmental Defects is $3,000,000 or SELLER more then Sellers or Purchaser may terminate this Agreement upon written notice to the other on or before February 24, 2005 and the Agreement shall be void and of no further force or effect except for the provisions of Sections 2.2 (with respect to Xxxxxxx Money), 3.2.21 (with respect to indemnification), 4.7 (with respect to indemnification), 5.2(b) (but only to the extent of the confidentiality and indemnification provisions), 5.5 (with respect to the indemnification provisions) and 5.7 (regarding payment of expenses) and the Confidentiality Agreement. Sellers shall be free to immediately enjoy all rights of ownership and to sell, transfer, encumber or otherwise dispose of the Shares or any of the Oil and neither Gas Interests to any party will have without any further rights or obligations restriction under this Agreement. Notwithstanding the above, Purchaser may waive the Title or Environmental Defect amount over $3,000,000, close the transaction contemplated by this Agreement and Sellers, Company and Subsidiary shall have no further liability to Purchaser for any such waived Defects.
(af) For Company and Purchaser will reasonably cooperate with Sellers after the purpose of this AgreementClosing to cure Title and Environmental Defects that Sellers have elected to cure. If after the 90th day following Closing, the parties are unable to satisfactorily resolve a material title defect ("Defective Interest") shall be Title or Environmental Defect with respect to any matter that, in the opinion of BUYER, would cause the title to the Property to fail to qualify as marketable title. Marketable title shall mean a title that can be deduced from the applicable county, state affected Oil and federal records and is such that (i) a reasonable and prudent person engaged in the business of the ownership, development and operation of oil and gas properties with the knowledge of all the facts and their legal bearing would be willing to accept title to the Property, (ii) the title is free and clear from liens and encumbrances that would materially reduce, impair or prevent BUYER from receiving payment from the purchasers of production, or which would materially impair or reduce the economic benefit BUYER could reasonably expect from acquiring the Property; and (iii) defects asserting a change in working interest or net revenue interest wherein SELLER's working interest is increased or SELLER's net revenue interest is decreased from that set forth on Exhibit A, Part II attached hereto. Neither the environmental condition of the Property nor any failure to obtain Consents to the transfer of Related Contracts will be considered a title defect Gas Interest under this Section 5.3.3.
(b) For purposes of this Agreement5.12 that Sellers have elected to cure, a material environmental defect shall be any circumstance on or related then Sellers will promptly refund to Purchaser an amount equal to the Property which, in adjustment proposed by Purchaser for the opinion of BUYER, constitutes an Title or Environmental Obligation (as defined in Section 8.3) requiring remediation, control or other response under environmental laws as in effect on the date hereof and which might, under such laws, require BUYER to expend in excess of $25,000 for any single Environmental Obligation or $100,000 for all Environmental Obligations in the aggregate. For purposes of this Section 5.3, obligations described in Section 8.2 shall not be considered Environmental ObligationsDefect.
Appears in 1 contract
