THE NET REVENUE INTEREST
APPLICABLE TO SUCH WARRANTY WELL OR LEASE); AND
(III)
EXCEPT WITH RESPECT TO ANY WARRANTY WELL OR LEASE, IS DEFENSIBLE;
AND
(IV)
IS FREE AND CLEAR OF ALL LIENS EXCEPT PERMITTED ENCUMBRANCES.
(2)
"PERMITTED ENCUMBRANCES" MEANS:
(A)
LIENS FOR TAXES WHICH ARE NOT YET DELINQUENT OR WHICH ARE BEING
CONTESTED IN GOOD FAITH AND FOR WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED ON
THE BALANCE SHEET;
(B)
NORMAL AND CUSTOMARY LIENS OF CO-OWNERS UNDER OPERATING
AGREEMENTS, UNITIZATION AGREEMENTS, AND POOLING ORDERS RELATING TO THE
PROPERTIES, WHICH OBLIGATIONS ARE NOT YET DUE AND PURSUANT TO WHICH NEITHER THE
COMPANY NOR ANY SUBSIDIARY IS IN DEFAULT;
56
(C)
MECHANIC'S AND MATERIALMAN'S LIENS RELATING TO THE PROPERTIES,
WHICH OBLIGATIONS ARE NOT YET DUE AND PURSUANT TO WHICH NEITHER THE COMPANY NOR
ANY SUBSIDIARY IS IN DEFAULT;
(D)
MINOR DEFECTS AND IRREGULARITIES IN TITLE OR OTHER RESTRICTIONS ON
THE USE OR OWNERSHIP OF PROPERTY (WHETHER CREATED BY OR ARISING OUT OF JOINT
OPERATING AGREEMENTS, FARM-OUT AGREEMENTS, LEASES AND ASSIGNMENTS, CONTRACTS FOR
PURCHASES OF HYDROCARBONS OR SIMILAR AGREEMENTS, OR OTHERWISE IN THE ORDINARY
COURSE OF BUSINESS) THAT ARE OF THE NATURE CUSTOMARILY ACCEPTED BY PRUDENT
PURCHASERS OF OIL AND GAS PROPERTIES AND DO NOT DECREASE THE NET REVENUE
INTEREST SET FORTH ON COMPANY SCHEDULE 4.19, INCREASE THE WORKING INTEREST
(WITHOUT A PROPORTIONATE INCREASE IN THE CORRESPONDING NET REVENUE INTEREST) SET
FORTH ON COMPANY SCHEDULE 4.19 OR MATERIALLY AFFECT THE VALUE OF ANY PROPERTY
ENCUMBERED THEREBY;
(E)
ALL RIGHTS TO CONSENT BY, REQUIRED NOTICES TO, FILINGS WITH, OR
OTHER ACTIONS BY GOVERNMENTAL ENTITIES IN CONNECTION WITH THE SALE OR CONVEYANCE
OF OIL AND GAS LEASES OR INTERESTS THEREIN IF THE SAME ARE CUSTOMARILY OBTAINED
ROUTINELY AND SUBSEQUENT TO SUCH SALE OR CONVEYANCE;
(F)
PREFERENTIAL RIGHTS TO PURCHASE AND REQUIRED THIRD PARTY CONSENTS
TO ASSIGNMENTS AND SIMILAR AGREEMENTS:
(I)
IF THE SAME ARE NOT TRIGGERED BY THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN; OR
(II)
WITH RESPECT TO WHICH, PRIOR TO CLOSING, (X) WAIVERS OR CONSENTS
ARE OBTAINED FROM THE APPROPRIATE PARTIES, (Y) THE APPROPRIATE TIME PERIOD FOR
ASSERTING SUCH RIGHTS HAS EXPIRED WITHOUT AN EXERCISE OF SUCH RIGHTS, OR
(Z) ARRANGEMENTS CAN BE MADE ON TERMS SATISFACTORY TO BUYER TO ALLOW BUYER TO
RECEIVE SUBSTANTIALLY THE SAME ECONOMIC BENEFITS AS IF ALL SUCH WAIVERS AND
CONSENTS HAD BEEN OBTAINED;
(G)
EASEMENTS, RIGHTS-OF-WAY, SERVITUDES, PERMITS, SURFACE LEASES AND
OTHER RIGHTS IN RESPECT OF SURFACE OPERATIONS, PIPELINES, GRAZING, LOGGING,
CANALS, DITCHES, RESERVOIRS OR THE LIKE; AND EASEMENTS FOR STREETS, ALLEYS,
HIGHWAYS, PIPELINES, TELEPHONE LINES, POWER LINES, RAILWAYS AND OTHER EASEMENTS
AND RIGHTS-OF-WAY, ON, OVER OR IN RESPECT OF ANY OF THE PROPERTIES TO THE EXTENT
SUCH MATTERS DO NOT MATERIALLY INTERFERE WITH OPERATIONS ON THE PROPERTIES;
(H)
RIGHTS RESERVED TO OR VESTED IN ANY MUNICIPALITY OR GOVERNMENTAL,
STATUTORY OR PUBLIC AUTHORITY TO CONTROL OR REGULATE ANY OF THE PROPERTIES IN
ANY MANNER, AND ALL APPLICABLE LAWS, RULES AND ORDERS OF ANY GOVERNMENTAL
ENTITY; AND
(I)
CONVENTIONAL RIGHTS OF REASSIGNMENT NORMALLY ACTUATED BY AN
INTENT