Common use of Defect Value Clause in Contracts

Defect Value. In determining which portions of the properties are Defective Interests, it is the intent of the parties to include, to the extent possible, only that portion of the affected Asset (whether a Well, unit or leasehold interest, as applicable) materially and adversely affected by the defect or basis for such property being treated as a Defective Interest. The Defect Value shall not exceed the Allocated Value of the Asset and shall be determined by the parties in good faith taking into account the Title Deductible per Title Defect and all relevant factors, including, but not limited to, the following: (1) The Allocated Value of the affected property; (2) The potential or actual reduction in the warranted NRI of the Defective Interest, or the potential or actual increase in the warranted WI to the extent such increase is not accompanied by a corresponding increase in NRI; (3) If the Title Defect represents only a possibility of title failure, the probability that such failure will occur; (4) The legal effect of the Title Defect; and (5) If the Title Defect is a lien or encumbrance on the property, the cost of removing such lien or encumbrance; provided however, there shall be no Title Deductible for a Title Defect which is a lien.

Defect Value. In determining which portions portion of the properties are a Asset is a Defective InterestsInterest, it is the intent of the parties Parties to include, to the extent possible, only that portion of the affected Asset (whether a Well, unit or leasehold interest, as applicable) materially and adversely affected by the defect or basis for such property Asset being treated as a Defective Interest. The Defect Value shall may not exceed the Allocated Value of the Asset and shall be determined by the parties Parties in good faith taking into account the Title Deductible per Title Defect and all relevant factors, including, but not limited toincluding without limitation, the following: (1) The Allocated Value of the affected propertyAsset; (2) The potential for or actual reduction in the warranted NRI of the Defective Interest, or the potential for or actual increase in the warranted WI to the extent such increase is not accompanied by a corresponding increase in NRI; (3) The present value of the future income expected to be produced therefrom, as set forth in Exhibit B and Exhibit B-1; (4) If the Title Defect represents only a possibility of title failure, the probability that such failure will occur; (45) The legal effect of the Title Defect; and; (56) If the Title Defect is a lien or encumbrance on the property, the cost of removing such lien or encumbrance; provided howeverand (7) Whether Seller has received proceeds of production from the Defective Interest, there shall be no consistent with the NRI set forth on Exhibit B or B-1, for the last two years without interruption or challenge based on the Title Deductible for a Title Defect which is a lienDefect.