INTEREST OR PERCENTAGE OWNERSHIP STATED ON
EXHIBIT 1.2(B) AND EXHIBIT 1.2(C);
(IV)
IF THE TITLE DEFECT REPRESENTS AN OBLIGATION,
ENCUMBRANCE, BURDEN OR CHARGE UPON OR OTHER DEFECT IN TITLE TO THE TITLE DEFECT
PROPERTY OF A TYPE NOT DESCRIBED IN SUBSECTIONS (I), (II) OR (III) ABOVE, THE
TITLE DEFECT AMOUNT SHALL BE DETERMINED BY TAKING INTO ACCOUNT THE ALLOCATED
VALUE OF THE TITLE DEFECT PROPERTY, THE PORTION OF THE TITLE DEFECT PROPERTY
AFFECTED BY THE TITLE DEFECT, THE LEGAL EFFECT OF THE TITLE DEFECT, THE
POTENTIAL ECONOMIC EFFECT OF THE TITLE DEFECT OVER THE LIFE OF THE TITLE DEFECT
PROPERTY, THE VALUES PLACED UPON THE TITLE DEFECT BY PURCHASER AND SELLER AND
SUCH OTHER FACTORS AS ARE NECESSARY TO MAKE A PROPER EVALUATION; AND
(V)
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS ARTICLE 3, THE AGGREGATE TITLE DEFECT AMOUNTS ATTRIBUTABLE TO THE EFFECTS
OF ALL TITLE DEFECTS UPON ANY TITLE DEFECT PROPERTY SHALL NOT EXCEED THE
ALLOCATED VALUE OF THE TITLE DEFECT PROPERTY.
(H)
THE TITLE BENEFIT AMOUNT FOR ANY TITLE BENEFIT SHALL BE THE PRODUCT
OF THE ALLOCATED VALUE OF THE AFFECTED UNIT OR WELL MULTIPLIED BY A FRACTION,
THE NUMERATOR OF WHICH IS THE NET REVENUE INTEREST INCREASE AND THE DENOMINATOR
OF WHICH IS THE NET REVENUE INTEREST STATED ON EXHIBIT 1.2(B) AND
EXHIBIT 1.2(C).
(I)
SELLER AND PURCHASER SHALL ATTEMPT TO AGREE ON ALL TITLE DEFECT
AMOUNTS AND TITLE BENEFIT AMOUNTS PRIOR TO CLOSING. IF SELLER AND PURCHASER ARE
UNABLE TO AGREE BY
16
THAT DATE AND IN THE EVENT SELLER HAS NOT ELECTED TO PROCEED UNDER
SECTION 3.4(D)(II), (III) OR (IV), THE TITLE DEFECT AMOUNTS AND TITLE BENEFIT
AMOUNTS IN DISPUTE SHALL BE EXCLUSIVELY AND FINALLY RESOLVED BY ARBITRATION
PURSUANT TO THIS SECTION 3.4(I).
THERE SHALL BE A SINGLE ARBITRATOR, WHO SHALL
BE A TITLE ATTORNEY WITH AT LEAST 10 YEARS EXPERIENCE IN OIL AND GAS TITLES IN
THE STATE OF TEXAS AS SELECTED BY MUTUAL AGREEMENT OF PURCHASER AND SELLER
WITHIN 15 DAYS AFTER THE END OF THE CURE PERIOD OR, ABSENT SUCH AGREEMENT OF
PURCHASER AND SELLER, SELECTED BY THE HOUSTON OFFICE OF THE AMERICAN ARBITRATION
ASSOCIATION (THE "TITLE ARBITRATOR"). THE ARBITRATION PROCEEDING SHALL BE HELD
IN HOUSTON, TEXAS AND SHALL BE CONDUCTED IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION TO THE EXTENT SUCH
RULES DO NOT CONFLICT WITH THE TERMS OF THIS SECTION.
THE TITLE ARBITRATOR'S
DETERMINATION SHALL BE MADE WITHIN 20 DAYS AFTER SUBMISSION OF THE MATTERS IN
DISPUTE AND SHALL BE FINAL AND BINDING UPON BOTH PARTIES, WITHOUT RIGHT OF
APPEAL. IN MAKING HIS DETERMINATION, THE TITLE ARBITRATOR SHALL BE BOUND BY THE
RULES SET FORTH IN SECTIONS 3.4(G) AND 3.4(H) AND MAY CONSIDER SUCH OTHER
MATTERS AS IN THE OPINION OF THE TITLE ARBITRATOR ARE NECESSARY OR HELPFUL TO
MAKE A PROPER DETERMINATION. ADDITIONALLY, THE TITLE ARBITRATOR MAY CONSULT WITH
AND ENGAGE DISINTERESTED THIRD PARTIES TO ADVISE THE ARBITRATOR, INCLUDING
WITHOUT LIMITATION PETROLEUM ENGINEERS. THE TITLE ARBITRATOR SHALL ACT AS AN
EXPERT FOR THE