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GENERAL CONDITIONS AND STIPULATIONS 1. Definitions The following terms when used in this policy mean: (a) "land": The land described, specifically or by reference, in Schedule ,A, and improvements affixed thereto which by law constitute real property. (b) "public records": Those records which impart constructive notice of matters relating to the land. (c) "knowledge": Actual knowledge, not constructive knowledge or notice which may be imputed to the Insured by reason of any public records. (d) "date": The effective date, including hour if specified. (e) "insured": The Insured named in Schedule A and, subject to any rights or defenses the Company may have had against the named Insured or any person or entity who succ'eeds to the interest of such named Insured by operation of law as distinguished from purchase, any person or entity who succeeds to the interest of such named Insured by operation of law as distinguished from purchase including but not limited to the following: (j) heirs, devisees, distributees, executors and administrators; (ii) the successOrS in interest to a corporation resulting from merger or consolidation or the distribution of the assets of such corporation upon partial or complete liquidation; (iii) the partnership successors in interest to a general or lim ited partnership which dissolves but does not term inate; (iv) the successors in interest to a general or limited partner- ship resulting from the distribution of the assets of such general or limited partnership upon partial or complete liquidation; (v) the successors in interest to a joint venture resulting from the distribution of the assets of such joint venture upon partial or complete liquidation; (vi) the successor or substitute trustee of a trustee named in a written trust instrument; or (vii) the successors in interest to a trustee or trust resulting from the distribution of all or part of the assets of such trust to the beneficiaries thereof. 2. Exclusions from the Coverage of this Policy THE POLICY DOES NOT INSURE AGAINST LOSS OR DAM- AGE BY REASON OF THE FOLLOWING: (e) LACK OF ADEQUATE TITLE IN THE INSURED PROP- ERTY TO ALLOW IT TO BE USED, SOLD, TRANSFERRED, LEASED OR MORTGAGED FOR ANY PURPOSE INTENDED BY THE INSURED NOR LOSS OF OPPORTUNITY OR ECONOMIC EXPECTATION. (b) Governmental rights of police power or eminent domain unless notice of the exercise of such rights appears in the public records at the date hereof; and the consequences of any law, ordinance or governmental regulation including, but not limited to, building and zoning ordinances. (c) Any titles or rights asserted by anyone including, but not limited to, persons, corporations, governments or other entities to tidelands, or lands comprising the shores or beds of navigable or perennial rivers and streams, lakes, bays, gulfs or oceans, or to any land extending from the line of mean low tide to the line of vegetation, or to lands beyond the line of the harbor or bulkhead lines as established or changed by any government, or to filled-in lands,or artificial islands, or to riparian rights, or the rights or interests of the State of Texas or the public generally in the area extending from p,e line of mean low tide to the line of vegation or their right of access thereto, or right of easement along and across the same. (d) Defects, liens, encumbrances, adverse claims; or other matters (1) created, suffered, assumed or agreed to by the Insured; (2) not known to the Company and not shown by the public records but known to the Insured either at the date of this policy or at the date the Insured acquired an estate or interest insured by this policy and not disclosed in writing by the Insured to the Company prior to the date such Insured became an Insured hereunder; (3) resulting in no loss or damage to the Insured; (4) attaching or created subsequent to the date of this policy; (5) resulting in loss or damage which would not have been sustained if the Insured had paid value for the estate or interest insured by this policy; or (6) the homestead or community property or survivorship rights, if any, of any spouse ohny Insured. 3. Defense and Prosecution of Actions (a) In all cases where this policy provides for the defense of any action or proceeding, the Insured shall secure to the Company the right to so provide defense in such action or proceeding, and all appeals therein, and permit it to use, at its option, the name of the Insured 'for such purpose. (b) The Company shall have the right to select counsel of its own choice whenever it is required to defend any action or proceeding, and such counsel shall have complete control of said defense. (el The Company shall have the right at its own cost to institute and without undue delay prosecute any action or proceeding or to do any other act which in its opinion may be necessary or desirable to establish the title to the estate or interest as insured, and the Company may take any appropriate action under the terms of the policy, whether or not it shall be liable thereunder, and shall not thereby concede liability or waive any provision of this policy. When, after the date of the policy, the Insured notifies the Company as required herein of a lien, encumbrance, adverse claim or other defect in title to the estate or interest in the land insured by this policy which is not excluded or excepted from the coverage of this policy, the Company shall promptly investigate such charge to deter- mine whether the lien, encumbrance, adverse claim or defect is valid and not barred by law or statute. The Company shall notify the Insured in writing, within a reasonable time, of its determination as to the validity or invalidity of the Insured's claim or charge under the policy. If the Company concludes that the lien, encumbrance, adverse claim or defect is not covered by this policy, or was other- wise addressed in the closing of the transaction in connection with which this policy was issued, the Company shall specifically advise the Insured of the reasons for its determination. If the Company concludes that the lien, encumbrance, adverse claim or defect is valid, the Company shall take one of the following actions: (l) institute the necessary proceedings to clear the lien, encumbrance, adverse claim or defect from the title to the estate as insured; (2) indemnify the Insured as provided in this policy; (3) upon payment of appropriate premium and charges therefor, issue to the current Insured or to a subsequent owner, mortgagee or holder of the estate or interest in the land insured by this policy, a policy of title insurance without exception for the lien, encumbrance, adverse claim or defect, said policy to be in an amount equal to the current value of the property or, if a mortgagee policy, the amount of the loan; (4) indemnify another title insurance company in connection with its issuance of a policy(ies) of title insurance without exception for the lien, encumbrance, adverse claim or defect; (5) secure a release or other document discharging the lien, encumbrance, adverse claim . or defect; or (6) undertake a combination of 1. through 5. herein. (d) Whenever the Company shall have brought an action or interposed a defense as required or permitted by the provisions of this policy, the Company may pursue any such litigation to final determination by a court of competent jurisdiction and expressly reserv"s the right, in its sole discretion, to appeal from any adverse judgment or order. (e) Whenever requested by the Company, such insured shall give the Cbmpany all reasonable aid in any such action or proceeding, in effecting settlement, securing evidence, obtaining witnesses, or prosecuting or defending such action or proceeding, and the Company shall reimburse such insured for any expense so incurred. (f) Any action taken by the Company for the defense of the Insured or to establish the title as insured, or both, shall not be con- strued as an admission of liability, and the Company shall not thereby be held to concede liability or waive any provision of this policy. 4. Payment of Loss (a) No claim shall arise or be maintainable under this policy for liability voluntarily assumed by the Insured in settling any claim or suit without written consent of the Company. (b) All payments under this policy, except payments made for costs, attorney fees and expenses, shall reduce the amount of the insurance pro tanto; and the amount of this policy shall be reduced by any amount the Company may pay under any policy insuring the validity or priority of any lien excepted: to herein or any instrument ll,ereafter executed by the Insured which is a charge or lien on the